Business Law Act Change Will Not Hit Confidence

[george]

Business law act change will not hit confidence: Krirkkrai

BANGKOK: -- Commerce Minister Krirkkrai Jirapaet Monday pledged the amended Foreign Business Act would not affect foreign investors' confidence or obstruct foreign investment in the Kingdom.

He said his ministry would make amendments to the Act, ensuring fair practice and clarity for both local and foreign investors.

A ministry committee studying suitable amendments to the Act will report their conclusions to Krirkkrai on Thursday.

One objective of the amendฌments is to provide a clearer definition of "nominees" and their voting rights. The committee is also considering amendments to annex III of the Act to allow foreign investors to conduct business in more sectors.

Krirkkrai said the amended law should not cause foreign investors to withdraw their capital investment from the Kingdom.

"I don't believe that foreigners will divert their investment to other countries," Krirkkrai said, adding it depended on their conฌsiderations.

-- The Nation 2006-12-26

[OlRedEyes]

We wait with bated breath

[cclub75]

We wait with bated breath

Well... the work of the committee is finished. And it's crystal clear.

http://www.bangkokpost.com/Business/27Dec2006_biz28.php

-new definition of "foreign" company : by voting right (before it was only % of shares)

-keep the lists 1, 2 and 3 (activities forbidden to foreigners, or under conditions)

-create a new administrative monster : the "foreign" company who is working under list 3, could continue but would have to "register" to the minister (so it's not a "thai" company, not a "foreign" company, it's another type)

-and create further complexity with specific laws for some special activities (like insurance, tourism etc.)

-and regarding the time table, so foreign companies can change the structure of their shareholding to comply with new regulations : it would be... now without delay, or 1 or 2 years.

So now it's time for the Commerce Minister to talk. But obviously he can't seriously say that those proposals (if choosen) wouldn't hit the confidence...

On the contrary : it would be another -serious- blow to foreign business and investors community in Thailand.

[Chang_paarp]

Are these the same financial geniuses who told all and sundry that the capital inflow provisions would not affect business confidence?

I look forward to someone hopping around with a bullet hole in their foot.

[cclub75]

Are these the same financial geniuses who told all and sundry that the capital inflow provisions would not affect business confidence?

I look forward to someone hopping around with a bullet hole in their foot.

Thoses are the proposals of the "working committee". So we need to wait for the minister's decisions.

The bottom line is : crippled with their obsession of "thainess", race, and the scandal of Shin (with the "nominees" issue) now they are prisonners. They must be able to qualify a thai company :

-pure thai

-or "foreign"

Which of course, in a global world, makes absolutly no sense.

It could make sense however for "sensitive" activities, related to national security for instance (weaponery, telecommunications, energy etc.) or specific cultural activities (Boudha sculpture, rice culture for instance= list 1).

But if you look at the list 3, it's a joke dated from the last century (services, distribution, engineering, architecture etc.) This list was created in the 70's ! I mean, if thais are still not ready after 30 years to compete with foreigners... then it's hopeless. The whole country is hopeless.

A normal investor naturally wants to keep the control of his money. Period.

You invest a large sum in a company, you want to control that company.

Before, everybody was happy with the nominee issue.

Now, thai authorities will be traped if they continue on this path with the voting rights rule.

[womble]

I think you are missing out that many of those making decisions are chinese, they do not want to allow westerners in to take over businesses that they took from Thai's 50 years ago when they still had chinesse names.

[cclub75]

I think you are missing out that many of those making decisions are chinese, they do not want to allow westerners in to take over businesses that they took from Thai's 50 years ago when they still had chinesse names.

It could be an explaination yes.

And anyway, on the long term, Thailand will be the backyard of China, a colony nothing more nothing else.

But... but... I still continue to think that all this circus is not part of a "great plan". But rather, a cocktail of incompetence, short sighted nationalism, pride, fear...

An admiral, member of the National Legislative Assembly, was vitising Thai Airways offices at Suva. He said... like a fart in the morning : "Thai Airways should delisted from SET, buyout shares of foreigners, in order to restore pride among Thais and support growth"...

Even the staff was... shocked.

http://www.bangkokpost.com/Business/27Dec2006_biz32.php

Voila. He's like a symbol. Thoses people, very old guard, are in power. And you can bet that their small brains won't allow them to draw some great plan. They are just hopeless.

On the economic ground, the chinese are much smarter, subtil, than that. Even inside the WTO they have found many ways to curb the foreign influence... And the big difference : they can do do it because we allow them to do so, because we are like the wolf in front of their huge domestic market. They are playing with us.

Anyway. Like said before : we are waiting with great impatience the decisions of the commerce minister now. it's going to be tasty i'm sure.

[womble]

The sooner these old incompetent leaders are replaced by an elected government the better. Ok corruption may well be lower, but the financial damage being done to the economy through missmanagement probobally outwieghs 10 fold what was lost through corruption during the Thaksin era.

[~G~]

BANGKOK: -- Commerce Minister Krirkkrai Jirapaet Monday pledged the amended Foreign Business Act would not affect foreign investors' confidence or obstruct foreign investment in the Kingdom.

Anyone knows when should this "reassuring" Act be published? (not being impatient, just need to make sure I will have spare time to run to the Bank )

[cclub75]

A very good reader's comment published today in Bangkok Post.

Good because :

-the time line : the foreign business law was... created in 72...

-this issue is much more important on the long term than the capital control drama

-Thailand... is not a large country and can't afford to loose FDI.

FDI will depend on new Alien Business Law

Whatever view one takes of last week's one-day crash in the Thai stock market and the capital control measures that led to it, the confidence of foreign investors has clearly taken a severe jolt.

Now their eyes are all on the Commerce Ministry to see what form its proposed amendments to the Alien Business Law will eventually take. The new law has potentially far greater ramifications for long-term foreign investment than the temporary capital controls.

First enacted in 1972 as a revolutionary decree by the Thanom-Prapass military dictatorship, the Alien Business Law was broadly intended to protect Thai businesses until they could become strong enough to compete with foreign businesses on an equal footing, although no time horizon was set.

This did not create much of a stir in the early '70s when war was still raging in Indochina and other Asian countries such as China, India and South Korea were virtually closed to foreign investment. Even in many European countries protectionism was still the norm at that time.

Today the world has moved on and Thailand now boasts its own world-class businesses in many sectors. Meanwhile, the previously lesser developed Asian countries enacted their own much more liberal foreign investment laws in the '90s and are now either in the process of outstripping Thailand's economic competitiveness, or have already done so.

Surely there is now a strong case for the unconditional removal of foreign ownership restrictions in all sectors that are not deemed either strategic or traditional Thai crafts, without imposing special registrations and approvals?

New foreign direct investments that would provide jobs for thousands of Thais are now on hold awaiting clarity on foreign ownership laws and, of course, the end of the new capital controls which effectively prevent the financing of investments through inter-company loans from offshore.

Most multinationals today will simply not invest in countries where they cannot own and control their businesses, but they have many countries to choose from. Thailand is now uncompetitive as a manufacturing base in nearly all sectors except autos, and is also a rather small domestic market compared to the opportunities available in China and India.

In short, most multinationals do not really need to be here and many will not bother to spend management time on minority investments in Thailand they don't control.

If the new Foreign Business Law creates a climate that is inhospitable to foreign direct investment, there will be no circuit breakers triggered as there were last Tuesday in the stock market, and no easy second chance to fix mistakes. Foreign direct investors will just retreat in an orderly manner or not come at all, and it will take some time before the damage to the Thai economy and Thai people becomes obvious. But let's hope the government gets it right the first time.

GEORGE MORGAN

[Chang_paarp]

A well reasoned piece. I wonder if anyone who matters will see it let alone take note of the message.

[womble]

If they kept list 1 and 2 and said anything in list 3 was ok for foreigners and 100% foriegn ownership it would be great, but that won't happen.

Best case scenario I reckon is that they say business with foriegn shareholder voting over 49% already operating in list 3 can continue to do so in a legal grey area, but they still won't be given any absolute rights.

[Arkady]

If they kept list 1 and 2 and said anything in list 3 was ok for foreigners and 100% foriegn ownership it would be great, but that won't happen.

Best case scenario I reckon is that they say business with foriegn shareholder voting over 49% already operating in list 3 can continue to do so in a legal grey area, but they still won't be given any absolute rights.

Seems like that is exactly what the cabinet has just approved. Foreign controlled companies can continue as they are for an unspecified period in list 3 as long as they as they report their improper shareholder structures to the Ministry of Commerce within 90 days. Presumably new companies would have to be fully compliant and existing companies will not necessarily want to report their nominee structures (particularly if they own land which is of course another issue). It may help some large unlisted companies with a foreign majority through pref shares that give lower dividend voting rights to Thai shareholders. But this seems a very weak concession and no reason for Pridyathorn to suggest that most foreign investors would like it.

[bendix]

Once again, we over-react to the tone of a law change, without considering what it really means.

Firstly, this is no more than the closing of the nominee loophole. Big deal.

Secondly, the vast majority of 'foreign' companies are exempt from the change - it doesnt apply to manufacturing companies, for instance.

Thirdly, it only applies to service companies in a few key industries important to national security, most notably airlines and telecommunications.

Must we over-react to everything without taking time to explore it properly?

[Mid]

Once again, we over-react to the tone of a law change, without considering what it really means.

Firstly, this is no more than the closing of the nominee loophole. Big deal.

Secondly, the vast majority of 'foreign' companies are exempt from the change - it doesnt apply to manufacturing companies, for instance.

Thirdly, it only applies to service companies in a few key industries important to national security, most notably airlines and telecommunications.

Must we over-react to everything without taking time to explore it properly?

if you could provide cites , I'd be interested ........................

[PeaceBlondie]

Must we over-react to everything without taking time to explore it properly?

Yes, sir, we must over-react. It's written on my visa, in invisible Sanskrit: "farang come to Thailand must whinge and whine and complain and over-react. Those who do not over-react will be deported."

[Arkady]

Once again, we over-react to the tone of a law change, without considering what it really means.

Firstly, this is no more than the closing of the nominee loophole. Big deal.

Secondly, the vast majority of 'foreign' companies are exempt from the change - it doesnt apply to manufacturing companies, for instance.

Thirdly, it only applies to service companies in a few key industries important to national security, most notably airlines and telecommunications.

Must we over-react to everything without taking time to explore it properly?

I have never been involved in manufacturing or industry here but I think that there is a lot of red tape involved in being a foreign company involved in manufacturing or industry. My understanding is that in practice it is mainly only BOI promoted companies that have appliled for that status i.e. it has only been considered worth the hassle, if you could get tax privileges too. Then you are quite restricted in what you can do, as the definition of services is very broad. That probably leaves a lot of the SME Japanese support businesses that the large Japanese companies rely on in the lurch. Many smaller foreign manufacturing/industrial concerns have just set up one company and bought land for their plant.

National security related sectors are in Annex 2 but Annex 3 prohibits virtually all types of service that are not specifically permitted to foreigners. Only financial services and retail is specifically permitted under certain conditions but it looks as if retail might now get the axe.

To make matters worse for Americans their treaty has not been renewed because it was supposed to be replaced by the FTA which George Bush now cannot negotiate with a non-democratically elected government and his authority from Congress to sign it expires this July. This may well place Americans in the same position as other foreigners, as the Commerce Ministry has extended a grace period on registering new treaty companies just for a limited period.

The bigger picture is that a lot multinationals will be discouraged from investing here even in manufacturing and industry because they regard the Thai government as hostile to foreign investment and likely to move the goal posts once they have got their money.

[churchill]

If they kept list 1 and 2 and said anything in list 3 was ok for foreigners and 100% foriegn ownership it would be great, but that won't happen.

Best case scenario I reckon is that they say business with foriegn shareholder voting over 49% already operating in list 3 can continue to do so in a legal grey area, but they still won't be given any absolute rights.

Seems like that is exactly what the cabinet has just approved. Foreign controlled companies can continue as they are for an unspecified period in list 3 as long as they as they report their improper shareholder structures to the Ministry of Commerce within 90 days. Presumably new companies would have to be fully compliant and existing companies will not necessarily want to report their nominee structures (particularly if they own land which is of course another issue). It may help some large unlisted companies with a foreign majority through pref shares that give lower dividend voting rights to Thai shareholders. But this seems a very weak concession and no reason for Pridyathorn to suggest that most foreign investors would like it.

Does the 90 days start now ? or when this law is eventually passed ?

and those companies that have been set up to own land and house will be allowed to continue or not ?

If not can the share structure be changed now within the 90 days so the farang shareholder has a holding of less than 50 %

I have a Thai wife and daughter - can my daughter hold shares in my company ?

[BKK90210]

Ok I will do this duplicate reply again, which I just posted in the news clipping forum

For List #3

All I can find is this - from today Jan-10 - news from “Thairath News” thai newspaper

“สำหรับกรณีที่เป็นบริษัทไทย แต่คนต่างด้าวให้คนไทยถือหุ้นแทน (นอมินี) จะต้องมาแจ้งภายใน 90 วัน และปฏิบัติให้ถูกต้องตามกฎหมายภายใน 1 ปี

สำหรับธุรกิจค้าปลีก-ค้าส่ง บริการทางบัญชี บริการทางกฎหมาย บริการทางสถาปัตยกรรม-วิศวกรรม เป็นต้น ส่วนใหญ่ต่างด้าวจะถือหุ้นไม่เกิน 49.99% แต่มีสิทธิออกเสียงเกิน เมื่อกฎหมายใหม่มีผลบังคับใช้ ก็จะต้องมาแจ้งภายใน 1 ปี โดยไม่จำเป็นต้องปรับลดสิทธิออกเสียง เว้นแต่ว่า ธุรกิจใดมีนอมินี ก็จะเข้าเงื่อนไขที่จะต้องมาแจ้งภายใน 90 วัน และปรับโครงสร้างให้ถูกต้องภายใน 1 ปี”

Translations....

Retailing-Wholesaling

Accounting service business

Law service business

Architecture service business

Engineering service business

So basically it says….With the above companies, You still can not have shares more than 49.99% , but you can have more than 49.99% of the voting rights. However you still have to report this within 1 yr.

***Except those nominee companies, in which you have only 90 days to report and 1 yr to change the structure to comply with the new regulations***

And I'm in engineering business, so Yippi Yippi for me this time!

[Arkady]

If they kept list 1 and 2 and said anything in list 3 was ok for foreigners and 100% foriegn ownership it would be great, but that won't happen.

Best case scenario I reckon is that they say business with foriegn shareholder voting over 49% already operating in list 3 can continue to do so in a legal grey area, but they still won't be given any absolute rights.

Seems like that is exactly what the cabinet has just approved. Foreign controlled companies can continue as they are for an unspecified period in list 3 as long as they as they report their improper shareholder structures to the Ministry of Commerce within 90 days. Presumably new companies would have to be fully compliant and existing companies will not necessarily want to report their nominee structures (particularly if they own land which is of course another issue). It may help some large unlisted companies with a foreign majority through pref shares that give lower dividend voting rights to Thai shareholders. But this seems a very weak concession and no reason for Pridyathorn to suggest that most foreign investors would like it.

Does the 90 days start now ? or when this law is eventually passed ?

and those companies that have been set up to own land and house will be allowed to continue or not ?

If not can the share structure be changed now within the 90 days so the farang shareholder has a holding of less than 50 %

I have a Thai wife and daughter - can my daughter hold shares in my company ?

Any other deadlines would apply from when the legislation is enacted through publication in the Royal Gazette which will probably take some months.

Land ownership is under the Land Code which is not being amended. Therefore Annex 2 companies that declare themselves as foreign owned and/or controlled through nominees/preference shares will be simultaneously be reporting that they are in breach of the Land Code which will force the Land Dept to take action against them.

Your Thai wife and daughter can hold shares in your company but could be considered as nominees for you, if they can't demonstrate that they had sufficient assets or salary history to have invested in the company without your help. Your wife and daughter would still be better than nominees you don't know but you might be better off either getting some relatively well off Thais as nominees or transferring the property to your wife or daughter and leasing the land use rights or the house to yourself for 30 years. If you keep on the company, it would be advisable for the company to have some income and employees.

The TRT move to crack down on foreigners owning land through nominee companies seemed to get put on hold while the new govt revised the definition of foreign companies. When the FBA amendments are finalized, we should expect that to get going again. Since the government and CNS seem incapable of pleasing the Bkk people by dealing decisively with TRT elements or providing security, they seem to be going for foreigners as a soft target in a desparate play to nationalistic sentiment. They seem incapable of realising or caring that they will hurt the Thai economy as a whole. So don't expect them to hold back.