Govt Opens The Door To More Foreign Investors

[george]

REGULATIONS EASED

Govt opens the door to more foreign investors

Rental, operations and financial leasing, factoring will be allowed to have majority foreign ownership

BANGKOK: -- Four additional restricted businesses - rental, operations leasing, financial leasing and factoring - will be made more open to foreign ownership this week.

"For these four businesses, it will be easier to hold more than 50 per cent in the company," Kanissorn Navanugraha, director-general of the Business Development Department, said last week.

The department has already provided clearer conditions for representative offices, regional representatives, government-related service agencies, and groups consulting for foreign investors.

The contract-manufacturing business will be next to be relaxed under the Foreign Business Act, followed by the brokerage, internal trade involving agricultural goods, advertising agency, hotel operating, beverage and food retailing, seed development, computer service, warehouse control service, pawnshop, school and entertainment businesses.

All of them will still be listed in Annex III of the Foreign Business Act, but will receive more flexible conditions to operate here.

The move is apparently the government's efforts in demonstrating its commitment to opening up for foreign investment.

Commerce Minister Ming-kwan Sangsuwan on Friday assured Japanese investors that all obstacles would be cleared. During their meeting, the investors raised a number of issues, particularly the FBA.

Presently, foreigners who want to operate an Annex III business have to ask for approval from the Foreign Business Act committee. As the new conditions go into effect, foreign investors will no longer be required to ask for the committee's permission. The application procedure and approval process will be predictable and more transparent.

Under the former procedure to allow foreign investors to operate protected businesses in Annex III, the Foreign Business Act committee last week approved requests received this month for foreigners to hold more than 50 per cent in 29 companies in several industries. The main ones are agency offices, government-related service agencies, subsidiaries of foreign firms and logistics management firms.

Deputy Commerce Minister Banyin Tangpakorn has instructed the department to set up a committee to come up with a concrete plan on whether to amend the act by next month.

The new amendment should be friendlier to foreign investors, while still ensuring the survival of local enterprises, as the last version was too strict in controlling foreign investors, he said.

-- The Nation 2008-03-31

[jts-khorat]

Since a vast number of businesses with foreigners working in them here on Phuket seem to fall into the mentioned categories to be relaxed in the future (currently operating somehow in the rather grey area of "consulting") this could potentially have huge implications.

But then again, TiT, as this would be the first significant positive step towards foreign control of really lucrative business, I doubt that there will not be the one or other little devil hidden in the detail.

Anybody has any ideas which 'real-world application' those changes have?

[A_Traveller]

The key here is that the businesses will remain in Annexe III of the act, therefore much of this must be viewed as window dressing.

Regards

[Naam]

The key here is that the businesses will remain in Annexe III of the act, therefore much of this must be viewed as window dressing.

that might well be. but it's the new government's positive attitude that counts.

[sangfroid]

The economy is usually going through a rough patch when Thai governments announce such changes, when the economy picks up again there is a good chance that these regulations will be "reviewed"

[jts-khorat]

I guess I over-read this little fact; I should read more slowly and carefully the next time before jumping to conclusions :-)

Would have been extremely nice though for once to read some really forward-pointing and positive news regarding the Thai business climate here on Thai Visa...

Still, a small step is still progress.

[pjallittle]

The key here is that the businesses will remain in Annexe III of the act, therefore much of this must be viewed as window dressing.

that might well be. but it's the new government's positive attitude that counts.

This may be an encouraging development for Thailand should the Government broaden their policy to take more positive steps toward relaxing residency laws, allowing persons investing in Thailand the opportunity to remain in residence and thus open the doors just a little wider for foreigners who would then be more willing to make a long term financial and personal committment.

[xerostar]

It would appear that this has been in the pipeline for a while.

Have you seen the number of new Toyota and Kubota outlets being installed all around Thailand?

The Japanese (and a lot of others) are very keen to invest here.

Once the Thais see all the advantages of allowing easier foreign investment there should be no turning back.

[cclub75]

The key here is that the businesses will remain in Annexe III of the act, therefore much of this must be viewed as window dressing.

that might well be. but it's the new government's positive attitude that counts.

Economy is not attitude. Many foreign investors are fed up witj the thai attitude : one step forward, one step and half on the side, a quarter of step behind...

Regulations, principles, this... is not the Ministry Of Silly Walks of the Monty Python...

FBA is an outdated law, totally bypassed by thousands of companies (nominees and dual shares system, from the SMEs to top global companies). We know it, they know it. Everybody know it.

So it's time to cut the thai crap.

They should remove items of this list 3 (hotels ! retailing ! even food and beverage !). Just to remind you : this list is supposed to contain "businesses which Thai nationals are not yet ready to compete with foreigners". What an irony...

They should open -really- their service sector. Period.

Instead... we have "attitude"...

Before you need to ask a "licence" to operate a business in the list 3. Now, you will have an "approval process" !

Great.

And wait : right now, it's just a committee, that will present a "concrete plan".

So relax guys : as usual, the title of the thread is misleading.

[thetravellingcat]

I am encouraged by the change in attitude.

Yes more could be done to make it easier to foreign investment but have you taken a look at the {transcribed} national anthem recently?

[BEENTHEREDONETHAT]

I immagin we will see a very large number of computer service centers (in their home). It seems like a good move if they let it work.

[A_Traveller]

For those with short memories, here's a quick review.

1. Thaksin's governments were no more investor friendly than others before. in fact compared to Barnham they were less welcoming. I'm not going to argue about the corruption issue here, just the 'investment friendly' aspects.

2. The junta were also investor aware but their presentation was unappealing, and a number of governments didn't want to be seen 'dealing with the military', so they put pressure on companies to wait for elections, which after all were promised by the junta virtually on day one.

3. The Japanese investment here has been nearly always on the basis of non {or minimal} technology transfer arrangements going back for decades.

4. There has been no attempt to liberalise the FBA in any manner since the last incarnation, which by the by was then announced as both a liberalisation and simplification. What it really did was further codify the protectionist perspective and made a number of businesses more difficult, not less. However, it did provide the 'apply for a license' approach, which was then more structured than previously. Unfortunately, the issuance of said licenses has been few and far between, and there is no evidence to show that this position is about to change.

5. On another point mentioned in the piece, the creation and enforcement of onerous requirements for banking {non Thai, of course} institutions was put in place by the Thaksin administration, and was very carefully crafted in a form to avoid direct contention with WTO, though not in accordance with the spirit of same.

6. I would be happier, and considerably wealthier, if the regulations were eased, but this is, according to people familiar with the situation in conversation with your correspondent, very unlikely. PR activity notwithstanding.

Regards

/edit clarity //

Edited March 31, 2008 by A_Traveller

[freitag1]

The key here is that the businesses will remain in Annexe III of the act, therefore much of this must be viewed as window dressing.

So what does that mean?

[A_Traveller]

^ A} See above, and B} whilst the Act remains as it is any licence provision is in the 'gift' of the authorities. It has been show repeatedly that such decisions are, at best opaque, and at worst arbitrary.

Regards

(3) Foreigners shall be prohibited from operating the businesses prescribed in Annex III in which Thai nationals are not ready to compete unless permitted by the Director-General with the approval of the Committee.

/edit to add quote from FBA 1999 //

Edited March 31, 2008 by A_Traveller

[cclub75]

The key here is that the businesses will remain in Annexe III of the act, therefore much of this must be viewed as window dressing.

So what does that mean?

Explanation of what is List 3 and how it works. here.

[younghusband]

For those with short memories, here's a quick review.

1. Thaksin's governments were no more investor friendly than others before. in fact compared to Barnham they were less welcoming. I'm not going to argue about the corruption issue here, just the 'investment friendly' aspects.

2. The junta were also investor aware but their presentation was unappealing, and a number of governments didn't want to be seen 'dealing with the military', so they put pressure on companies to wait for elections, which after all were promised by the junta virtually on day one.

3. The Japanese investment here has been nearly always on the basis of non {or minimal} technology transfer arrangements going back for decades.

4. There has been no attempt to liberalise the FBA in any manner since the last incarnation, which by the by was then announced as both a liberalisation and simplification. What it really did was further codify the protectionist perspective and made a number of businesses more difficult, not less. However, it did provide the 'apply for a license' approach, which was then more structured than previously. Unfortunately, the issuance of said licenses has been few and far between, and there is no evidence to show that this position is about to change.

5. On another point mentioned in the piece, the creation and enforcement of onerous requirements for banking {non Thai, of course} institutions was put in place by the Thaksin administration, and was very carefully crafted in a form to avoid direct contention with WTO, though not in accordance with the spirit of same.

6. I would be happier, and considerably wealthier, if the regulations were eased, but this is, according to people familiar with the situation in conversation with your correspondent, very unlikely. PR activity notwithstanding.

Regards

RE Point 2 and your "investment aware" junta (and its incompetent puppet government) come off it mate.This is just rewriting history since there has been no administration more hostile to foreign investment in Thailand's past.Once again a blatant untruth taints an argument or in this case a summary which might otherwise have been quite credible.

P.s Sorry for messing up your quotation marks!

Edited March 31, 2008 by george

[A_Traveller]

^ No not rewriting history, simply truth experienced first hand.

Regards

PS No problem I'm always editing to get quotes in the 'right' place.

Edited March 31, 2008 by A_Traveller

[avalonmick]

This government is desperately looking for things to do that look positive and vote grabbing. This is a chnage you have when you don't want anything to change - least off all increasing competition in small business area.

Any government that believes handing out large sums of cash to rural villages without any form accountability or control will stimulate economic growth is floundering, trying to look competent while at the same time beating up its opponents behind the scenes by moving or sacking bureaucrats appointed by the previous government.

This populist policy by press release at its very best.

[Seneque]

We heard it all before ... there is no way (whatever they claim) that Thais are going to allow non-thais to own businesses here. Start with allowing foreigners to own land (how you built a factory 51% farang owned on a 100% thai own land ? ... OK except if you invest zillions and you are allowed only restricted areas), get your custom services in order ... and we can perhaps start talking

Been here 25 years and it has been a policy of one step forward, two steps backwards all the way ...(my wife calls it a grandma way of doing things!)

I don't really care anymore as i only live here and operate my business in another country ... but i would really be thankful to live here and operate from here (even costs of production here are going to the roof - compare to most other asian nations).

The whole system needs a revamp and we are from it. The Bkk elite will for ever keep their way to make money at the expense of the nation as a whole.... business as usual

By the way I just wonder why the WTO is so compacent with Thailand ... this would really be a real subject to investigate.

[yumidesign]

The key here is that the businesses will remain in Annexe III of the act, therefore much of this must be viewed as window dressing.

So what does that mean?

It means that its all just talk and posturing to con outsiders to send money into Thailand. The fact remains that the act has not been changed, so if the government wants they can apply the act at anytime pulling the rug out from under investors from outside of The Kingdom

[distortedlink]

If foreigners are going to be allowed to own the lions share of a factoring company, does this mean that they will have ultimate control on Thailand's debtors and that for those in Thailand who owe money either for goods or services may be directly accountable to foreign investors (factoring companies) for their payments of debt owed.

For example, a Thai purchases some land with a bank loan. The Thai for whatever reason cannot complete payment of the loan, so the bank sells the debt to a majority foreign owned factoring company. The end result is that the land falls into the ownership of a foreign owned company.

Wasn't this the same scenario why Mr Thaksin was thrown out of office in the first place?

OK, can someone please tell me if I have got the above correct or not?

Edited March 31, 2008 by distortedlink

[Khun Jean]

After this topic and the other 'Military-style Camoflage Clothing A New Taboo' George will have a hard time to make up a story that sound true but is not. After this an april fools joke is so much harder.

[A_Traveller]

... For example, a Thai purchases some land with a bank loan. The Thai for whatever reason cannot complete payment of the loan, so the bank sells the debt to a majority foreign owned factoring company. The end result is that the land falls into the ownership of a foreign owned company.

No, since the bank would not be able to sell the liability underpinned as it is in this hypothesis, by land, on to a foreign controlled entity. This was, and remains, the reason for the TAMC {Thai Asset Management Corporation}.

In addition, any foreign factoring entity, would be placed in the position of trying to ascertain value of an asset which, by definition, would have to be classed as having restricted liquidity, i.e. land can only be sold to a Thai entity thereby reducing asset disposition options {and having to deal with an internalised market}. This, of course, presupposes that any entity would be successful in applying for such a license, which to be honest I sincerely doubt. especially after someone thinks through the ramifications. This is rather like Thaksin's announcement to reduce taxation for Foreign representative offices, to create a regional HQ hub, which then disappeared in about 24 hours once the impact on the taxation base was calculated, e.g. foreigners pay taxes...

Regards

[thedude]

If foreigners are going to be allowed to own the lions share of a factoring company, does this mean that they will have ultimate control on Thailand's debtors and that for those in Thailand who owe money either for goods or services may be directly accountable to foreign investors (factoring companies) for their payments of debt owed.

For example, a Thai purchases some land with a bank loan. The Thai for whatever reason cannot complete payment of the loan, so the bank sells the debt to a majority foreign owned factoring company. The end result is that the land falls into the ownership of a foreign owned company.

Wasn't this the same scenario why Mr Thaksin was thrown out of office in the first place?

OK, can someone please tell me if I have got the above correct or not?

i think factoring applies to businesses with an ongoing revenue stream which sells its rights to the revenue stream for some cash upfront, with a discount rate factored into the upfront payment. the factoring company essentially buys the accounts receivables and are taking a risk on the business and quality of its debtors. factoring applies to trading concerns, whereas for property deals, a similar type of fund raising would involve asset securitisation whereupon the funding party would hold a sort of mortgage on the entire asset with an unrealised income stream, like a sort of mezzanine financing, and this would require it to have other banking/finance licenses which is actually an entirely different kettle of fish.

[Tony121]

what business's would come under rental ?

[thaigene2]

Yes, it's a small step, but the big shoe to drop is loosening the whole idea that Thais must control the company. That little phantom is still lurking out there and hasn't been dealt with.

These lists are there to protect the rich oligarch families from foreign competition - have no doubt. You must have a Thai "partner".

If you are Sheraton or Hilton or whomever and you want to open a big hotel, what are you going to do? You go to the rich 'hotel' family. If you want to open a chain of fast-food restaurants you go to the rich 'restaurant' family. Now a way around this is to do what Heneke did - become a Thai Citizen, then YOU become the rich Thai family. Of course to do that I reckon you have to do a deal with the rich family that controls 'Citizenship'!

[Gravelrash]

Does seem to be a lttle positive movement. I don't currently have 4 employees for my work permit, which would ususally entail going out of country for only a 3 month non B. My lawyer rang today and said that isn't being checked any more and that I can make a 12 month non B in Thailand.

Also if I read it correctly the company director structure is being changed soon that also has some interesting implications.

As for this post, certainly better than nothing happenning. They can only BS investors for so long before needing to come up with some positive action.

[A_Traveller]

^ Yes on a positive note, there are changes to the company structure, though not yet gazetted(?), which will simplify matter going forward. I'm not 100% sure if they will be retrospective, or if to take advantage one as to reform a company. Key is the reduction in sponsors from 7 to 3, {though no change in 51/49 of course} and associated approvals for the issuance of work permits to those holding 'retirement' visas.

Regards

[cclub75]

^ Yes on a positive note, there are changes to the company structure, though not yet gazetted(?), which will simplify matter going forward. I'm not 100% sure if they will be retrospective, or if to take advantage one as to reform a company. Key is the reduction in sponsors from 7 to 3, {though no change in 51/49 of course} and associated approvals for the issuance of work permits to those holding 'retirement' visas.

As I wrote in another thread, this "good news" do not solve the problem. At all.

Before, you had 6 thai shareholders with 51 % (+ you at 49), after you will have... 2, but with still 51 %.

Basically, you just decrease the number of nominees... Improvement ? I'm not sure.

[A_Traveller]

^ Only from the point of view of simplification & presumably on-going management costs.

Regards