Legal Doubts Stall Progress And Development; Thai Telecom

[webfact]

EDITORIAL

Legal doubts stall progress and development

By The Nation

Wrangling over the nationality of investors in Thai telecom firms, and in other sectors, is making the country look like an unattractive prospect

All heads shook in disbelief following True Move's action against Total Access Communication (Dtac). One camp supports the company's show of patriotism to reclaim the genuine rights of Thais over the air waves. The other foresees associated risks if this issue is not carefully dealt with.

The nationality of companies that are associated with major foreign companies (which in Dtac's case is Telenor Group - a state enterprise of Norway) has been questioned all along. In the telecom industry, Dtac is not singled out for suspicion. The nationality of Shin Corp, the parent company of Advanced Info Service, was also in question after Shin Corp's takeover by Singapore's investment arm, Temasek Holdings, in 2006. Indeed, queries on Dtac's nationality came into the spotlight along with that of 15 other companies, following the Surayud interim government's threats to deal with Shin Corp's share ownership issues. Five years on, the issue has gone nowhere, much to the relief of many other companies, including Japanese firms.

At one time, the nationality issue was considered a political tool, given that Shin Corp was created by ousted former prime minister Thaksin Shinawatra's family. It is easy to be convinced that it is now being used as a corporate weapon, given the legal wrangling between True Move and Dtac.

Dtac's case on the alleged illegitimacy of True Move's deal with state-agency CAT Telecom is now pending for the Central Administrative Court's decision. Although True Move has been allowed to proceed with the deal - which gives it a head start in the 3G business in Thailand - the outlook is hanging in the balance pending the court's judgement. Telenor indeed became a major shareholder of Dtac, formerly owned by the Benjarongkul family, in 2007. It is interesting why True Move, the only wholly Thai telecom company after the painful pullout by Orange, decided to act now.

Does all this commotion stem from the lack of clarity in the Foreign Business Act?

When Shin Corp's case first sprang up, a legal expert commented that it was all about interpretation. A Thai company remains a Thai company when the direct foreign shareholding is 49 per cent or below, he said. In that case, indirect holdings - through subsidiaries that are established in Thailand as Thai entities - are not counted, based on the legal assumption that benefits from those entities will be shared by Thai and foreign partners according to their stakeholding.

The law indeed stipulates that any Thai acting as a foreign company's nominee in setting up entities in the Kingdom is liable to punishment. In effect, it is hard to determine when anyone commits such an act. This has been witnessed in the years-long investigation into Kularb Kaew, a Thai entity believed to be a nominee for Temasek Holdings.

More importantly, the shareholding issue will become less important given global integration, which facilitates the free flow of investment. Soon, as part of Asean regional integration, Asean companies in the service sector, with telecommunications included, will be allowed to take up to 70 per cent shareholdings in Thai companies. In a globalised world, where everyone is chasing new investment, it is just a matter of when this privilege will be extended to non-Asean entities.

Legal wrangling in the Thai telecom industry has dragged on for years, holding up national progress and depriving consumers of new service developments. Aside from the shareholding issue, many other legal issues are proceeding, culminating in the long delay in the rollout of the 3G service at a time when the country is in need of better data services to improve education and boost overall competitiveness.

More importantly, the nationality issue does not involve only telecom companies. It should not be exploited for the sake of patriotism, as this could have repercussions on those in other industries that contribute hugely to the economy through the number of jobs created.

If this issue drags on, the Council of State's involvement is necessary to clear the problem once and for all. The new government should bear in mind that foreign investment can be taken elsewhere, as long as investors are assured of profits and clear rules to govern their activities.

-- The Nation 2011-06-16

[woodyleonhard]

Accurate and succinct. Well said.

[Kilgore Trout]

Yup, give Thailand a gun and a foot and see what happens