Thailand Among Most Restrictive For Foreign Ownership

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WORLD BANK

Thailand among most restrictive for foreign ownership

By The Nation

Thailand's restrictions on foreign equity ownership are among the most stringent in 87 countries, according to a World Bank report.

The Investing Across Borders 2010 report said the majority of the 33 industrial sectors measured by the indicators are subject to restrictions on foreign equity participation.

The Foreign Business Act BE2542/1999 sets out a comprehensive list of sectors and business activities in which foreign capital is limited to a less-than-50 per cent stake. In some of these sectors, the law offers the option to increase the foreign share capital with prior governmental approval.

For example, a company wanting to invest in the electricity industry in Thailand will be subject to the 49 per cent foreign ownership limit. However, in East Asia and the Pacific, the average limit is 75.8 per cent, which is close to the global average of 87.6 per cent.

In addition to this general "negative list," certain sector-specific laws impose additional restrictions. For example, foreign ownership in the telecommunications sectors (fixed-line and mobile/wireless infrastructure and services) is restricted to a maximum of 49 per cent by the Telecommunication Act BE 2544/2001. Sectors that are fully open to foreign capital participation in Thailand include light manufacturing, pharmaceutical, and food products.

The indicators measure the degree to which domestic laws allow foreign companies to establish or acquire local firms. The indicators track restrictions on foreign-equity ownership in 33 sectors, aggregated into 11 sector groups, including primary sectors, manufacturing, and services.

The indicators are designed to identify good practices that offer governments concrete tools for improving their investment climates in the policy areas measured by the indicators.

Globally, "Most of the 87 economies measured by IAB have FDI-specific restrictions that hinder foreign investment. For example, almost 90 per cent of economies limit foreign companies' ability to participate in some sectors of their economies," the report said.

"A fifth of the economies surveyed require foreign companies to go through a foreign investment-approval process before proceeding with investments in light manufacturing. Nearly 10 per cent of IAB economies do not have special statutes for commercial arbitration," the World Bank said.

In Angola and Haiti excessive red tape means it can take half a year to establish a subsidiary of a foreign company. In Canada, Georgia, and Rwanda, this can be done in less than a week. Leasing industrial land in Nicaragua and Sierra Leone typically requires half a year as opposed to less than two weeks in Armenia, the Republic of Korea, and Sudan. In Pakistan, the Philippines, and Sri Lanka it can take up to two years to enforce an arbitration award.

Table: Indicators of foreign ownership restrictions

Sector Group/IAB country score/regional average/global average

Mining, oil & gas/49/75.7/92

Agriculture & forestry/ 49/82.9/95.9

Light manufacturing /87.3/86.8/96.6

Telecom/49/64.9/88

Electricity/49/75.8/87.6

Banking/49/76.1/91

Insurance/49/80.9/91.2

Transport/49/63.7/78.5

Media/27.5/36.1/68

Construction, tourism & retail/66/91.6/98.1

Healthcare & waste management/49/84.1/96

Source: World Bank

-- The Nation 2010-07-09

[carnac]

OK

[Robby nz]

After seeing what has happened in New Zealand with "Foreign investment" looks to me like the Thai way is better.

[geriatrickid]

After seeing what has happened in New Zealand with "Foreign investment" looks to me like the Thai way is better.

Please explain, because the reality is that foreign investment has allowed the residents to maintain a comfortable lifestyle and modernize. It's a country with an insignificant population of 4 million or so, That is hardly the critical mass that can fund the hydroelectric development that in turn frees the population from an addiction to oil. New Zeland's life is sustained by its exports to Australia, the USA, China and Japan. Unless it had foreign investment it would not be able to keep up its highly profitable export sector. The New Zealand strategy is sound, and I suggest to you that it is Thailand that could learn from tiny New Zealand. New Zealand does not discriminate when it comes to foreign investment Thailand discriminates. Its not as if the NZ OIO does this willy nilly: Investments that would control 25% or more of businesses or property worth more than NZ $100 million have to be reviewed by the OIO and if it is not in national interest, the investment is not approved. That's a heck of a lot better than the Thai approach that favours MNEs that aren't subject to proving the benefit of the investment activity.

[wasabi]

Soros is to blame!

[givenall]

By restricting the ownership, Thailand industry will fall behind very fast for lack of modernization. Looking at some of the industry they are still using the 19^th and 20^th century technique and technology. Unless relax these restriction the foreigner will not invest in this county any more since they can go to Vietnam, Malaysia, Cambodia, etc.

The Thai People alone are not able to advance in this new globalized world

[Robby nz]

Foreign investment in any country is only done for what the investors can get out of it not for some warm fuzzy feeling of helping out an other country. Profit is the only thing that matters and with foreign investment that profit leaves the country.

I lived in a rural part of NZ and watched overseas interests come in and buy up land in large chunks and as a consequence of this many locals lost jobs. If there had been rules in place like no overseas owenership of land then this could not have happened.

Also watched local companies be bought up (ie Watties) to have their operation shut down and move overseas. Other NZ companies have moved out also like Fisher and Paykel recently to Thailand, then there are all the NZ banks that were sold off and now all the profits go overseas (1 left TSB).

Nope the TL way is better.

[anotheruser]

Most people here have known that for quite some time.

[Thai at Heart]

Cue politician standing up saying "No we are not. What does the World Bank know anyway".

As for people really believing that the profits are exported out of a country such as New Zealand. How do you expatriate bank profits? By suitcase. They pay their taxes just like everyone else.

As for protecting for example the Thai food industry from foreign investment, one would have to wonder how many hundreds of millions of dollars have been transfer priced out of the country (by Thais) over the years and sit in glorious isolation in Singapore. Don't wonder too long about liberalising the banks over here, the families are UNTOUCHABLE and will do whatever they need to remain so.

Thailand trumpets unemployment rates of 1.5%, and they don't want to make it any easier for foreign companies to come here. One would have to believe that the politicians are more than happy with 8500 USD per head, and really don't want it to be too much more anytime soon, and certainly not by increasing FDI in the country.

[Portlandstone]

If you want to see restrictive, try Vietnam. Have said it before, people go on the internet to criticize every thing they can about Thailand but when Vietnam comes up they portray it as heaven. No problem there, it's warranted as they are tired of all the inefficiencies and lack of progress in Thailand, but they are very misguided in thinking Vietnam is better. I lived there over four years. The deceit and overall strategy to screw foreigners every which way they can is worse in Vietnam.

[rubl]

Correct me if I'm wrong, but weren't those restrictions put in place to protect the fledgling Thai economy and society and give them a chance to get their own act together. The idea being to guide and control foreign investment and influence till the Thai industry could compete (more-or-less) on it's own ? Seems nothing really progressed since 30 odd years ago if the restrictions are still needed.

[anotheruser]

If you want to see restrictive, try Vietnam. Have said it before, people go on the internet to criticize every thing they can about Thailand but when Vietnam comes up they portray it as heaven. No problem there, it's warranted as they are tired of all the inefficiencies and lack of progress in Thailand, but they are very misguided in thinking Vietnam is better. I lived there over four years. The deceit and overall strategy to screw foreigners every which way they can is worse in Vietnam.

It is more or less most countries in this region that do it. Thailand just gets more criticism here because this is a Thailand forum.

[ScienceGuy]

Why would anyone want to start a business or invest in a corrupt country where they have no rights and are despised? The only businesses that come to mind are ones that want cheap labour without all the hassle of human rights and loose environmental laws. That's the real reason Thailand hasn't made much progress in 30 years. If they allowed entrepreneurs to come and establish themselves they'd have much more FDI. Instead they have homogeneous sectors with no choices for consumers. You can buy either Leo beer or Chang beer. Same crap, different label. No German beers, good luck finding affordable wine, etc.

[Jingthing]

Yeah, for sure, something is rotten in the state of Thaimark. No news here.

[Globalhot]

<br>Why would anyone want to start a business or invest in a corrupt country where they have no rights and are despised? The only businesses that come to mind are ones that want cheap labour without all the hassle of human rights and loose environmental laws. That's the real reason Thailand hasn't made much progress in 30 years. If they allowed entrepreneurs to come and establish themselves they'd have much more FDI. Instead they have homogeneous sectors with no choices for consumers. You can buy either Leo beer or Chang beer. Same crap, different label. No German beers, good luck finding affordable wine, etc.<br>

<br><br>Short answer:  No way most people would choose to invest.

<div><br></div><div>This has been going on for 30 years or more.</div><div><br></div><div>Had Thailand  not embraced extreme protectionists measures, it would look more like Singapore or Korea or Japan today.</div><div><br></div><div>These old and misguided policies have cost Thailand good jobs.</div><div> </div><div>Relatedly, because of their negative impact on the economy, social problems (simmering violence) abound.</div><div><br></div><div>People need to realize that small scale businesses create most jobs worldwide.  </div><div><br></div><div>Thailand needs to open its doors (via its investment policies and immigration rules) to small scale business entrepreneurs........that will inject the economy with much-needed innovation and capital.</div><div><br></div><div><br></div>

Is it possible for the IT person at Thai Visa to correct your script problem? I am seeing this in many posts and not just mine.

Edited July 9, 2010 by Globalhot

[Globalhot]

Is it possible for the IT person at Thai Visa to correct your script problem? I am seeing this in many posts and not just mine.

[donmac]

does the world bank want a piece of thailand.

[Jimi007]

Why would anyone want to start a business or invest in a corrupt country where they have no rights and are despised? The only businesses that come to mind are ones that want cheap labour without all the hassle of human rights and loose environmental laws. That's the real reason Thailand hasn't made much progress in 30 years. If they allowed entrepreneurs to come and establish themselves they'd have much more FDI. Instead they have homogeneous sectors with no choices for consumers. You can buy either Leo beer or Chang beer. Same crap, different label. No German beers, good luck finding affordable wine, etc.

Short answer: No way most people would choose to invest.

This has been going on for 30 years or more. Had Thailand not embraced extreme protectionists measures, it would look more like Singapore or Korea or Japan today. These old and misguided policies have cost Thailand good jobs. Relatedly, because of their negative impact on the economy, social problems (simmering violence) abound. People need to realize that small scale businesses create most jobs worldwide. Thailand needs to open its doors (via its investment policies and immigration rules) to small scale business entrepreneurs........that will inject the economy with much-needed innovation and capital.

Is it possible for the IT person at Thai Visa to correct your script problem? I am seeing this in many posts and not just mine.

It's not that hard, use preview post and then go back and delete the <br> etc. But it does seem to happen quite a bit. But I'm not an IT person, just a geek member...

[Tropicalevo]

<br>

<br>If you want to see restrictive, try Vietnam. Have said it before, people go on the internet to criticize every thing they can about Thailand but when Vietnam comes up they portray it as heaven. No problem there, it's warranted as they are tired of all the inefficiencies and lack of progress in Thailand, but they are very misguided in thinking Vietnam is better. I lived there over four years. The deceit and overall strategy to screw foreigners every which way they can is worse in Vietnam.<br>

<br><br>It is more or less most countries in this region that do it. Thailand just gets more criticism here because this is a Thailand forum.<br>

As a famous person wrote - "nuff said" Edited July 9, 2010 by Tropicalevo

[thaihome]

Why would anyone want to start a business or invest in a corrupt country where they have no rights and are despised? The only businesses that come to mind are ones that want cheap labour without all the hassle of human rights and loose environmental laws. ...

Thought for a minute there you were talking about Vietnam or Cambodia...

TH

[rubl]

Is it possible for the IT person at Thai Visa to correct your script problem? I am seeing this in many posts and not just mine.

The problem seems to have started with the last upgrade of this forum about a month ago. mind you not all seem to have the problem. maybe its related to the browser or other input program you use. I don't have the problem (yet?) and use Opera 10.60.

[overhaul38]

I'm sure you would hear a loud outcry if Thais living in other countries were prohibited from owning more than 49% of a company or pay extra at parks and facilities because they are Thai.

It would be interesting to see how Thailand would be if they weren't so xenophobic and more open.

Protect mine while we all share yours.

Edited July 9, 2010 by overhaul38

[gemini81]

Thanks for the article Captain Obvious, I hadn't the slightest clue.

[gemini81]

By restricting the ownership, Thailand industry will fall behind very fast for lack of modernization. Looking at some of the industry they are still using the 19^th and 20^th century technique and technology. Unless relax these restriction the foreigner will not invest in this county any more since they can go to Vietnam, Malaysia, Cambodia, etc.

The Thai People alone are not able to advance in this new globalized world

True indeed, its already headed that way. There are a lot of things Thailand is lacking, and that doesn't help. They've already been surpassed by Vietnam in terms of exports. Its so arrogant that I dont invest here, but rather abroad. I know its good to protect one's motherland from exploitation, but they have gone overboard to say the least. It'll continue to cost them. Outside countries have offered thailand a lot of solutions to a lot of problems, but I guess they don't listen. One being the solutions to traffic jams in bangkok, but I guess they don't want outside help too much. Prices to be paid for being so ethnocentric.

[TechnikaIII]

And thanks to ex prime minister of Australia, John Howard, who's greatest skill as an accountant was balancing the books, he sold off most of it. Australians no longer own many of it's assets and infrastructure. Maybe Thailand is a bit tight, but I'm not keen on the senario Downunder.

[MB1]

And thanks to ex prime minister of Australia, John Howard, who's greatest skill as an accountant was balancing the books, he sold off most of it. Australians no longer own many of it's assets and infrastructure. Maybe Thailand is a bit tight, but I'm not keen on the senario Downunder.

My My how bad eh, you think you have it bad, have a look at what the UK sold off over the years, most of our national assets, jeez we even sold London Bridge to the yanks and it's now in Arizona..

[Pakboong]

Correct me if I'm wrong, but weren't those restrictions put in place to protect the fledgling Thai economy and society and give them a chance to get their own act together. The idea being to guide and control foreign investment and influence till the Thai industry could compete (more-or-less) on it's own ? Seems nothing really progressed since 30 odd years ago if the restrictions are still needed.

The restrictions are in place to insure capitalist Chinese immigrants have no competition in Thai business affairs. The vast majority of ethnic Thais couldn't care less about such matters.

[asiawatcher]

Thai ownership restrictions are in a lot of cases, a fallacy. If you want to own things here you can - you just need to talk with, engage the right people and get it right. I have land - yes the type with clods of dirt, businesses, buildings here and all totally legal. I pay taxes and I employ Thai's by the hundreds. SME's are well under the radar if you look closely and larger businesses DO become targets of acquisition, but make sure you have the back up of the right visa, the work permit and the proof of monthly taxes and annual audit and certificates to show when they come around - and they certainly do. There are zonings as well here such as purple and BOI that allows ownership. Most of the 'bleatings' here are from people who are not business owners in Thailand. Thailand offers some great options over the over-governed and over-taxed Western societies alternatives. I gave up my country at 34% company tax and 60% personal. It was not rocket science!

[thaibkk]

in thailand you have the right to bring in a big fortune and leave with a small one, or empty pockets

[ScienceGuy]

Thai ownership restrictions are in a lot of cases, a fallacy. If you want to own things here you can - you just need to talk with, engage the right people and get it right. I have land - yes the type with clods of dirt, businesses, buildings here and all totally legal. I pay taxes and I employ Thai's by the hundreds. SME's are well under the radar if you look closely and larger businesses DO become targets of acquisition, but make sure you have the back up of the right visa, the work permit and the proof of monthly taxes and annual audit and certificates to show when they come around - and they certainly do. There are zonings as well here such as purple and BOI that allows ownership. Most of the 'bleatings' here are from people who are not business owners in Thailand. Thailand offers some great options over the over-governed and over-taxed Western societies alternatives. I gave up my country at 34% company tax and 60% personal. It was not rocket science!

Hmmm, let's see: the right visa=150,000THB/year, work permit=5000THB/year, office=120,000THB/year

So to open shop legally in Thailand you need a minimum of 275,000THB($8500). Of course, your business will be half-owned by total strangers and they'll expect a cut for having their name on the business. If you get land you won't own it and if you try to sell it you have to go find the person whose name is on it to get them to sign. I'm sure he/she'll want a cut. You won't be allowed to compete with the Thais in certain sectors like: selling food on the street, tourism, banking, communications, etc.

After you spend all this money and put property in other people's names, you have to live here for 3 years before you can get residency and that'll cost you another 100,000THB. You can probably never get citizenship. Anything you try to import will be held at customs until you pay the extortionary taxes.

Not exactly entrepreneur-friendly if you ask me.