Thailand Vows To Clarify Foreign Ownership Laws

[Jai Dee]

Thailand vows to clarify foreign ownership laws

Thailand’s military-installed government plans to clarify the country’s ambiguous foreign ownership laws but has not indicated whether it will liberalise or tighten existing ownership restrictions as it wrestles with the damage inflicted by the controversial Shin Corp takeover.

The outcome will have a significant impact on many foreign companies in Thailand, including Norway’s Telenor, retail giants Tesco and Carrefour, and cement maker Holcim – all now operating in what has become a legal grey area.

However, Pridiyathorn Devakula, deputy prime minister and finance minister, said at a seminar this week that all foreign companies operating in Thailand would be given “grace periods” to comply with the clarified rules if their local holdings exceeded the legal limits.

Mr Pridiyathorn acknowledged that Thailand’s foreign investment climate had been unsettled by the highly politicised furore over the takeover by Singapore’s Temasek Holdings of Shin Corp, the telecommunications empire founded by Thaksin Shinawatra, the former prime minister.

He said the new government – installed after a military coup ousted Mr Thaksin in September – aimed to restore investor confidence by making the rules more explicit, though he offered no further details.

Thailand’s Foreign Business Act currently defines a “foreign company” as any venture with more than 49 per cent foreign equity, and it bars such firms from engaging in many areas of the economy, particularly service sector businesses.

Yet for decades, pragmatic Thai authorities disting-uished between nominal equity ownership and actual control of companies – a loophole that let multi- national firms, operating via complex, multilayered shareholding structures, preserve an aura of Thai ownership over companies they controlled.

But after acquiring Shin Corp that way Temasek was accused of violating Thai foreign ownership laws, a controversy whipped up by Mr Thaksin’s political enemies. Prodded to investigate, commerce ministry bureaucrats concluded the deal was illegal, forwarding the case to police. Separately, a court is considering whether three Shin subsidiaries should lose their licences for exceeding foreign ownership limits.

The messy, still unresolved episode has left Thailand’s foreign investment framework in tatters, shattering confidence in what had long been seemingly acceptable local practices facilitated by legal ambiguity, and regulatory forbearance.

Source: The Financial Times - 4 November 2006

[chechoie]

Yes, very good.

I'm sure the clarification will be as clear as mud.

In all likelyhood it will be back to turning a blind eye.

Regards,

Edited November 4, 2006 by chechoie

[Steph1012]

Yes, very good.

I'm sure the clarification will be as clear as mud.

In all likelyhood it will be back to turning a blind eye.

Regards,

That or wave goodbye to billions of baht of foreign inverstment, and years on loss of confidence. Few years of that and a couple more rules to protect thai compaines will also further decrease their ability to compete. Add to that half their English teachers fleeing this year and we should soon be on an equal footing with mighty nations such as East Timor, Zimbabwe, Sudan etc.

Any big retail companies that get stitched will just pull the plug on Thai produce and the lesson that Carlesberg learned will be taken more seriously in future by the investment community at large.

This was in the FT and thats serious news for Thailand.

Edited November 4, 2006 by Steph1012

[kmart]

Yes, very good.

I'm sure the clarification will be as clear as mud.

In all likelyhood it will be back to turning a blind eye.

Regards,

That or wave goodbye to billions of baht of foreign inverstment, and years on loss of confidence. Few years of that and a couple more rules to protect thai compaines will also further decrease their ability to compete. Add to that half their English teachers fleeing this year and we should soon be on an equal footing with mighty nations such as East Timor, Zimbabwe, Sudan etc.

Any big retail companies that get stitched will just pull the plug on Thai produce and the lesson that Carlesberg learned will be taken more seriously in future by the investment community at large.

This was in the FT and thats serious news for Thailand.

Agreed. Its about time this country started sending out some positive messages to investors, instead of the nationalistic cant spouted out to appease uneducated simpletons.

I miss Carlsberg.

[chownah]

Yeah, they need to clarify the loopholes.

Chownah

[ovenman]

He said the new government – installed after a military coup ousted Mr Thaksin in September – aimed to restore investor confidence by making the rules more explicit, though he offered no further details.

Knowing what is generally meant 'round here by making the rules more explicit, this would seem to be a contradiction in terms. The only confidence foreign investors will be expressing is that they are confident they want to drop as little money into Thailand as possible.

[Dakhar]

He said the new government – installed after a military coup ousted Mr Thaksin in September – aimed to restore investor confidence by making the rules more explicit, though he offered no further details

Errr? I don't have an MBA, but I don't think a coup inspires investor confidence.

[sting01]

He said the new government – installed after a military coup ousted Mr Thaksin in September – aimed to restore investor confidence by making the rules more explicit, though he offered no further details

Errr? I don't have an MBA, but I don't think a coup inspires investor confidence.

I think you wrong, the military coup in Latin amricas (Stroessner, Videla, Pinocher .... all the good guys backed by CIA) were followed by huge investements from 'friendly' '''''''foreign''''' companies (read US companies).

So yes a coup can inspires investor confidence , in some cases.

[Dakhar]

I am trying to think of an economic power house in Latin America.... can't do it. Maybe they need more coups?

[mpdkorat]

Yeah, they need to clarify the loopholes.

Chownah

Yes I agree. They should create more loopholes, that should work......

[Thaising]

Those ministries that propose or impose foreign ownership laws need to think very carefully and move fast to clarified the rules. If the answers are unclear, there wouldn’t be any foreign investment money. In this globalization and competitive world, direct investment business opportunities won’t come easily, especially in these regions where everyone is competing for foreign direct investment money.

[Indifferent]

Hmmmm. Whilst I applaud the fact that the Shin deal is under scruitiny. It does seem to be a case of curing the symptoms not the problem.

The problem (as least as I see it) was that a corrupt Thai national in a position of power saw the possibilty to make an obscene amount of money without paying a cent to Thailand. I'm sure if the tax was due, this may have been a less attractive proposition and a less bitter pill to swallow for Thailand.

[younghusband]

Hmmmm. Whilst I applaud the fact that the Shin deal is under scruitiny. It does seem to be a case of curing the symptoms not the problem.

The problem (as least as I see it) was that a corrupt Thai national in a position of power saw the possibilty to make an obscene amount of money without paying a cent to Thailand. I'm sure if the tax was due, this may have been a less attractive proposition and a less bitter pill to swallow for Thailand.

So you are suggesting that Thailand impose a capital gains tax on the sale of listed shares? This is a reasonable position to take but it is not in fact the law.I agree that it might make sense to change this given that Thailand has moved beyond the emerging economy category.But you can hardly censor Thaksin for undertaking a transaction that was, from the tax perspective, entirely legal.There are plenty of other grounds for attacking Thaksin, and I speak as one who has no time for him at all, but the tax angle aint it.

But what do you mean by an obscene amount of money.Would your problem with financial success still be there even if the transaction was entirely legal?

[teletiger]

So you are suggesting that Thailand impose a capital gains tax on the sale of listed shares? This is a reasonable position to take but it is not in fact the law.I agree that it might make sense to change this given that Thailand has moved beyond the emerging economy category.But you can hardly censor Thaksin for undertaking a transaction that was, from the tax perspective, entirely legal.There are plenty of other grounds for attacking Thaksin, and I speak as one who has no time for him at all, but the tax angle aint it.

But what do you mean by an obscene amount of money.Would your problem with financial success still be there even if the transaction was entirely legal?

These shares didn't belong to Thaksin. As keeper of the Thai purse, it was his duty to protect monies due to Thailand. He put the importance of his families fortunes above those of Thailands. Those tax laws for the stockmarket were introduced to encourage Joe Blow to invest in it. If PAD had owned those shares.......new tax laws next day. Thaksin is a crook, pure and simple. Greedy to boot.

Regards

[younghusband]

So you are suggesting that Thailand impose a capital gains tax on the sale of listed shares? This is a reasonable position to take but it is not in fact the law.I agree that it might make sense to change this given that Thailand has moved beyond the emerging economy category.But you can hardly censor Thaksin for undertaking a transaction that was, from the tax perspective, entirely legal.There are plenty of other grounds for attacking Thaksin, and I speak as one who has no time for him at all, but the tax angle aint it.

But what do you mean by an obscene amount of money.Would your problem with financial success still be there even if the transaction was entirely legal?

These shares didn't belong to Thaksin. As keeper of the Thai purse, it was his duty to protect monies due to Thailand. He put the importance of his families fortunes above those of Thailands. Those tax laws for the stockmarket were introduced to encourage Joe Blow to invest in it. If PAD had owned those shares.......new tax laws next day. Thaksin is a crook, pure and simple. Greedy to boot.

Regards

Sorry this doesn't make any sense.How exactly didn't shares belonging to Thaksin not belong to him? How did Thailand lose out anyway through the sale of shares to Temasek, particularly given the requirement to reinvest in Thailand assets?If you don't like capitalism just say so and join that crowd.I don't like Thaksin much either particularly for rigging the system in favour of his own business interests.That's where he's vulnerable.But to sell what belongs to him to Temasek, possibly politically inept, but not by any means illegal or even immoral.If there is a similar muddled way of thinking in the attempt to nail Thaksin, he'll get off scot free.

[sbk]

These shares didn't belong to Thaksin. As keeper of the Thai purse, it was his duty to protect monies due to Thailand. He put the importance of his families fortunes above those of Thailands. Those tax laws for the stockmarket were introduced to encourage Joe Blow to invest in it. If PAD had owned those shares.......new tax laws next day. Thaksin is a crook, pure and simple. Greedy to boot.

Regards

Sorry this doesn't make any sense.How exactly didn't shares belonging to Thaksin not belong to him? How did Thailand lose out anyway through the sale of shares to Temasek, particularly given the requirement to reinvest in Thailand assets?If you don't like capitalism just say so and join that crowd.I don't like Thaksin much either particularly for rigging the system in favour of his own business interests.That's where he's vulnerable.But to sell what belongs to him to Temasek, possibly politically inept, but not by any means illegal or even immoral.If there is a similar muddled way of thinking in the attempt to nail Thaksin, he'll get off scot free.

Thaksin evaded the conflict of interest laws upon first gaining the PM's seat by putting his shares in his wife's name, his children's names, his driver's name and his housekeeper's name. So, technically, they didnt' belong to him anymore. But of course, this is completely against the spirit of the law, it just goes to show he was abusing the system from the get go.

[Johpa]

Agreed. Its about time this country started sending out some positive messages to investors, instead of the nationalistic cant spouted out to appease uneducated simpletons.

I miss Carlsberg.

Yea, who needs colonies when you can convince small countries like Thailand to open their "markets". We all know how countries like the US and the UK, and their associated simpletons, grew without the need for any protectionist legislation. It is just so much cleaner to let the corporations do the colonizing.

Chaiyo to all you neo-sahibs

He said the new government – installed after a military coup ousted Mr Thaksin in September – aimed to restore investor confidence by making the rules more explicit, though he offered no further details

Errr? I don't have an MBA, but I don't think a coup inspires investor confidence.

I think you wrong, the military coup in Latin amricas (Stroessner, Videla, Pinocher .... all the good guys backed by CIA) were followed by huge investements from 'friendly' '''''''foreign''''' companies (read US companies).

So yes a coup can inspires investor confidence , in some cases.

In these coups and many like them, investor confidence is but a euphemism for large western based mulitnational corporations to maximize the profits they can take out of the target country while leaving the least amount of money in the local coffers, which is why, as a later poster noted, you do not see many economic powerhouses in Latin America. Investor confidence does not always bode well for the citizens of a country, even a country like Thailand.

[sting01]

In these coups and many like them, investor confidence is but a euphemism for large western based mulitnational corporations to maximize the profits they can take out of the target country while leaving the least amount of money in the local coffers, which is why, as a later poster noted, you do not see many economic powerhouses in Latin America. Investor confidence does not always bode well for the citizens of a country, even a country like Thailand.

I fully agree on it, and this why the actual situation (and by actual I mean since some years, not only related to the coup) in Thailand is so difficult to understand from abroad.

We have on the same time a very nationalistic situation (comparable to the one existing in France) officialised by a set a very nationalistic laws, and on the same time you have an official policy (attract foreign capital ----not only investissors, but namely foreign capital---) that is opposite to those laws and situation. The situation is comparable to the implementation of Daewoo in France, and still with the same failure than this implementation. A society able to put billions in a market will not do it because they want to please a country or the locals, but simply because they suppose it will be quickly a return on the investment. If not, the society will simply leave for somewhere else.

Here what is critical is the local are not backed up by their social system (jobless allocation? social security?) So there is no real way for a responsible governement to refuse firms to be implemented in Thailand on the ground it will somehow hurt some nationalistic feelings. Honestly, even if Carrefour or Big C are not thai, they use thai people, by so have an impact on the life by the salaries they pay. Start to bother Big C or Carrefour, and believe me they will close all very quickly (currently in discussion in France).

For what I know from those societies (I have good insight there in both of them), Thailand is actually considered as a risky place for LONG TERM strategies. As rules are susceptible to change at any time. What the rules are can be handled, but changes of the rules, changes on how rules are understood, changes on how rules are enforced is what world class firms fear the most. The 2 firms I named (because I know them) are not looking to buy thailand or part of thailand. They are looking for market part . If to get those market parts they have to control fully a local company they will do it, atthe opposite if they have to be minority share holders they will do it to. They play by therules simply (As mostly all companies) but they need clear rules. They are not looking for a raw number (we earned 100 billions of bht) because raws numbers are nothing, they are looking for percentage ( we have 33% of the marker of retailers in SEA). So nominees, direct control, or minority share holding , both are okie as long as they are clear. Uncertainity is the plague that global business want to avoid.

[chechoie]

Quote:

However, Pridiyathorn Devakula, deputy prime minister and finance

minister, said at a seminar this week that all foreign companies operating

in Thailand would be given “grace periods” to comply with the clarified rules

if their local holdings exceeded the legal limits.

If this is true then perhaps it’s not so bad.

Depends on what the clarification says I suppose.