Thailand eyeing tighter restrictions on foreign businesses

[webfact]

Thailand eyeing tighter restrictions on foreign businesses
By Cod Satrusayang, dpa

Image source: File photo

Bangkok (dpa) - Proposed changes to the Foreign Business Act in Thailand have alarmed foreign investors and chambers of commerce.

Under the current law foreigners and foreign businesses are not allowed to own more than a 49-per-cent stake in local companies.

Businesses have long circumvented such restrictions by issuing preferred and common stock options, with preferred shares enjoying more voting rights.

Now a draft law put forward by the Ministry of Commerce would restrict foreign firms from being able to use preferred stock to retain control of their businesses.

"This proposed change would have far-reaching ramifications that would affect thousands of existing firms here, big and small, and would certainly deter future foreign investment," said Marcus Burtenshaw, executive director of real estate consultancy Knight Frank Thailand.

"My business is one that you can run from literally anywhere. We registered in Thailand because we like the lifestyle here," said Chris Roberts, who did not provide his real name out of fear of a possible backlash.

Roberts runs a small IT firm that specializes in software engineering. His company employs only four foreigners but has over 20 Thai staff.

He says that while he has Thai partners who own the majority of the company, they do not have executive authority on the direction of the company.

"If [the government] is going to make it difficult for me to run my business, then I have no problems about packing up and moving somewhere else."

The resistance from foreign officials and businesses has prompted internal reviews and assurances from officials from the Ministry of Commerce that any changes to the law would be made after consultations with all parties.

A source from the ministry said that any changes are still preliminary and that all changes would have to go through both the legislative assembly and the cabinet.

The source added that compromises with foreign businesses could be made, as a reworked Foreign Business Act could allow foreigners to own a majority share in certain sectors.

The current law forbids foreign majority ownership in sectors where Thai businesses are deemed not ready to compete with foreign companies.

Those include accountancy, legal services, architecture, engineering, brokerages, advertising, hotel operations, food and beverages and "other service businesses."

The ministry said some restrictions may be relaxed as a compromise for limiting the use of preferred stock options. Yet foreign companies say that is not enough.

"Imposing tighter restrictions would be seen and felt as a step backwards at a time when foreign direct investment levels are low and Thailand's neighbours are becoming increasingly open for business," said Burtenshaw.

The various chambers of commerce agree with such sentiments. When rumours circulated about the proposed changes, the American Chamber of Commerce quickly pointed out that the last time such restrictions were discussed in 2007, the stock market dropped 15 per cent in one day as a result.

Stanley Kang, chairman of the Joint Foreign Chambers of Commerce, said erecting more protectionist barriers would be going against the tide of increasingly freer trade.

"With the ASEAN Economic Community due to be implemented next year, there is going to be more competition in the region, so we want to see more liberalization of the economy."

Sources within the Ministry of Commerce said the committee overseeing the draft law is resolute in the belief that it is vital to protect Thai interests.

"To them, this is not about chasing away foreign businesses but protecting Thai ones. More transparency and fewer loopholes can only be a good thing," one official said on condition of anonymity.

For others, however, the proposed changes come at a bad time. As Thailand's economy slowly recovers from a decade of political instability and the world comes to grips with the country's new military government, any changes that rock the boat could only worsen the situation.

"Thailand faces a choice," British Ambassador Mark Kent wrote in a blog post circulated by the British Chamber of Commerce.

"It can choose to seize the initiative again and make itself the most attractive destination for foreign investment ... or it can choose a different path."

Source: http://www.dpa-international.com/news/asia/43355767

-- dpa international 2014-11-20

[Tatsujin]

I'll also be off somewhere else if they make it ANY harder to run my business here ... no great loss to Thailand I'm sure, but those (made up) employment figures are gonna rise sharply if they continue with this shit.

[peptidebomber]

This should of happened a long time ago. All these farangs taking money off hard working Thais!

Thailand has long been the country of innovation and self sustainability! Western nations should be grateful to be allowed to business at all in the Kingdom, they try to learn the Thai's business practices, customer service, law enforcement, in which all fields Thais lead the world.

555

[Thai at Heart]

Are they seriously going to do this?

I mean seriously? The economy is tanking, the world economy isn't exactltbrosy and they want to risk chasing people away?

[Pib]

A source from the ministry said that any changes are still preliminary and that all changes would have to go through both the legislative assembly and the cabinet.

Well, if the changes get blessed by the cabinet then getting through the current legislative assembly will be a piece of cake, a rubber stamp action.

[whybother]

The current law forbids foreign majority ownership in sectors where Thai businesses are deemed not ready to compete with foreign companies.

Those include accountancy, legal services, architecture, engineering, brokerages, advertising, hotel operations, food and beverages and "other service businesses."

Why can't Thai business compete in these areas?

[Ceruhe]

Didn't we just last week have a headline to make investing more, eh what was the word, attractive?

[jaltsc]

"Imposing tighter restrictions would be seen and felt as a step backwards at a time when foreign direct investment levels are low and Thailand's neighbours are becoming increasingly open for business...To them, this is not about chasing away foreign businesses but protecting Thai ones. More transparency and fewer loopholes can only be a good thing..."

How can it be a good thing when "Mai Pen Rai" is the foundation of the work ethic here and half the workers don't show up to work because...(fill in any dumb excuse you have ever heard)?

Thailand, The Hub of Stone Age Business Logic.

Edited November 20, 2014 by jaltsc

[Katipo]

A move like this could be the nail in Thailand's financial coffin. The impact, both in the short and long term, would be dire. It seems Thailand is oblivious to the emerging markets on it's door step, Myanmar in particular.

[ramrod711]

Now a draft law put forward by the Ministry of Commerce would restrict foreign firms from being able to use preferred stock to retain control of their businesses.

"This proposed change would have far-reaching ramifications that would affect thousands of existing firms here, big and small, and would certainly deter future foreign investment," said Marcus Burtenshaw, executive director of real estate consultancy Knight Frank Thailand.

And just 3 days ago;

Special Report: Thailand welcomes all investors

[TheSiemReaper]

The current law forbids foreign majority ownership in sectors where Thai businesses are deemed not ready to compete with foreign companies.

Those include accountancy, legal services, architecture, engineering, brokerages, advertising, hotel operations, food and beverages and "other service businesses."

Why can't Thai business compete in these areas?

They can't compete in any area of business which doesn't involve "being able to speak Thai" as its premium selling point. The tragedy of Asia is that their nations still aren't producing the creative and dedicated types that are required to be world class business people. Look to education, face culture and general disinterest for the reasons why and then blame foreigners. This is the Asia of tomorrow.

[A1Str8]

But at the same time it welcomes foreign investors.

[uel1968]

"Imposing tighter restrictions would be seen and felt as a step backwards at a time when foreign direct investment levels are low and Thailand's neighbours are becoming increasingly open for business...To them, this is not about chasing away foreign businesses but protecting Thai ones. More transparency and fewer loopholes can only be a good thing..."

How can it be a good thing when "Mai Pen Rai" is the foundation of the work ethic here and half the workers don't show up to work because...(fill in any dumb excuse you have ever heard)?

Thailand, The Hub of Stone Age Business Logic.

I agree 100%,yes Fred and Barny are always at hand in Thailand.

[Prbkk]

...suicidal lunacy...

[zaphod reborn]

Easy to understand Thai thinking here. Give Thai directors a majority decision-making authority in all foreign businesses invested in Thailand, so that the Thai directors can walk off with the money. Greed and corruption will be the downfall of this nation.

"The current law forbids foreign majority ownership in sectors where Thai businesses are deemed not ready to compete with foreign companies. Those include accountancy, legal services, architecture, engineering, brokerages, advertising, hotel operations, food and beverages and 'other service businesses.'"

Aren't some of these industries the exact ones that are supposed to be opened up under ASEAN to allow foreign competition? Isn't the government now admitting that Thailand is not ready to compete with foreigners? Exactly what I predicted, that the response to AEC economic integration would be protectionism.

Edited November 20, 2014 by zaphod reborn

[DM07]

Now a draft law put forward by the Ministry of Commerce would restrict foreign firms from being able to use preferred stock to retain control of their businesses.

"This proposed change would have far-reaching ramifications that would affect thousands of existing firms here, big and small, and would certainly deter future foreign investment," said Marcus Burtenshaw, executive director of real estate consultancy Knight Frank Thailand.

And just 3 days ago;

Special Report: Thailand welcomes all investors

Right hand...meet left hand! Now inform each other about what you are doing!

[NCC1701A]

I love the kaos and uncertainty of Thailand. Never a dull moment and always good for a laugh.

[harryfrompattaya]

This should of happened a long time ago. All these farangs taking money off hard working Thais!

Thailand has long been the country of innovation and self sustainability! Western nations should be grateful to be allowed to business at all in the Kingdom, they try to learn the Thai's business practices, customer service, law enforcement, in which all fields Thais lead the world.

555

Yes they come here and use poor women as fronts

You can see how much money they make in Go Go and beer bars using women nad gay men as fronts

Also many resturant are run the same way

[ezzra]

Classic case of the left hand doesn't know whet the right hand is doing, one minuet they encourage

people from all over the world to come to invest in Thailand and the next they come out with new

draconian masseurs how to stuff it all up... too many bureaucrats are spoiling the broth here...

[Suffinator]

Question ... What moron would invest 100% of their money and then hand over 51% to greedy and often corrupt individuals?

The current restrictions are only in place because they know they cannot compete in an open market - who's fault is that? With education being almost non-existent how does Thailand and it's rulers expect it's economy to move forward in a positive way.

Of course at the previous military coup they also examined the possibility of changing the Foreign Business Act but it became all too apparent that doing so and including more restrictions would almost certainly bankrupt the economy.

What the Thais really want is to have their cake and eat it and get others to pay for it whilst they are at it. Joining ASEAN with the current mindset won't do Thailand any good.

Seriously I don't care if you run a bar or a car manufacturing plant ... doing so in Thailand is an investment with severe complications coupled with a risk factor that sends sane people running for the hills.

The only sensible solution to foreign investment is either to allow 100% ownership or nothing at all and nothing at all would mean no foreign investment. Didn't some Thai professor recently announce that Thailand could stand on it's own without foreign investment ... well let them change the FBA and let's see just how far they get without foreign investment.

[yellowboat]

That is what happens when your leaders are unelected. The current leaders only care about the Thai elites. The move will hurt the average Thai but not those at the top. It is utterly shameful.

Hope the surrounding countries will act accordingly, becuase there will be opportunities missed by Thailand.

[cms22]

This government wants complete isolation from the rest of the world. Why make it even more difficult to invest here. Liberal business rules in Singapore have shown what positive impact this can have on society. Does this "government" not want Thailand to develop? (Of course not)

[konying]

Hence the reason why American, Australian and German firms expressed "real' desire to expand and invest in Thailand.

I am really unsure if anyone in the current government has any brain cells at all, with ASEAN months away, and this retarded proposal, they do not think many if not all giants might pack up and go

[whybother]

That is what happens when your leaders are unelected. The current leaders only care about the Thai elites. The move will hurt the average Thai but not those at the top. It is utterly shameful.

Hope the surrounding countries will act accordingly, becuase there will be opportunities missed by Thailand.

These changes have been on the cards for over 12 months.

[Suffinator]

The current law forbids foreign majority ownership in sectors where Thai businesses are deemed not ready to compete with foreign companies.

Those include accountancy, legal services, architecture, engineering, brokerages, advertising, hotel operations, food and beverages and "other service businesses."

Why can't Thai business compete in these areas?

You really need to ask? With an education system that doesn't educate but rather hands out diplomas and degrees like candy to students unable to pass tests this should come as no surprise.

[brucec64]

This initiative comes at a very bad time. WIth just 1% GDP growth this year, and some very soft numbers showing 2.5 to 3.5% growth next year, implemeting this could be the shock that sends Thailand into a recession. Not all foreign investment will cease, but it will result in a decline, and that will be enough.

A country under martial law that required 51% domestic ownership will quickly find itself removed from foreign company investment short lists, and neighbouring countries will benefit.

As one of the previous posters stated - potential political suicide.

[monkeycountry]

Stockmarket crashing 15%. Sounds like an excellent buying opportunity to me

[PoorSucker]

Stockmarket crashing 15%. Sounds like an excellent buying opportunity to me

Just don't buy to much or you'll pass the 49% ownership.

[GAZZPA]

The country is run by absolute buffoons. This has to be the best one this year (I think) for the most stupid, ill conceived, badly informed piece of proposed legislation.

The country is so backward it is almost going back in time. This will mean serious loss of foreign investment and a serious loss due to business moving out,, absolutely no doubt about it, how is that protecting Thailand?

How will it make any sense whatsoever for any foreign investor to come here if they have to give over half their investment away in shares AND they are not able to hold executive decision making in their own company? What total complete and utter <deleted>,,,

If this goes through we will all hear a very definite thud of the last nail in the coffin for the economy. If this happens I am off, in fact because they have made this statement (even if they don't do it this time) it demonstrates how volatile it is to invest here so maybe its time to hop over the boarder where the arms are open wide anyway..

Thailand, what can I say, your xenophobia knows no bounds and you get what you deserve in the end.

[TechnikaIII]

I think it's time for the ex-General to begin clearing his desk. He has done a lot of good things, but now we

need a prime minister who can see the folly of these new regulations, and move the country forward.