Foreign investors grill Thailand on ownership http://today.reuters.com/news/articlebusiness.aspx?type=ousiv&storyID=2006-11-10T090601Z_01_BKK58132_RTRIDST_0_BUSINESSPRO-ECONOMY-THAILAND-DC.XML&from=business
Fri Nov 10, 2006
By Vithoon Amorn
BANGKOK (Reuters) - Foreign business leaders grilled Thailand's post-coup leaders on Friday about a review of ambiguous foreign ownership rules some fear could undermine the basis of investment in the country.
"Over 100,000 foreign companies here are being affected by this issue. A lot of them are very, very upset," Richard Watson, a financial adviser based on the Thai tourist island of Phuket, told Reuters.
Thailand's Foreign Business Act is under scrutiny after graft investigators suggested the sale in January of telecoms firm Shin Corp (SHIN.BK: Quote, Profile, Research) by the family of ousted Prime Minister Thaksin Shinawatra to Singapore's Temasek may have broken the law.
The Act bars foreigners from owning majority stakes in most Thai businesses, but in practice gray areas have allowed non-Thais to invest with confidence since the 1970s.
Watson, who advises foreigners on buying Thai property, was among hundreds of foreign investors, analysts and executives who attended a forum to hear Thai economic ministers explain their plans for the next year.
Finance Minister Pridiyathorn Devakula said post-coup Thailand would be a model of good governance and foreigners need fear no big change in investment policies.
In a speech aimed a quelling concerns about the interim government's "sufficiency economy" policy, Pridiyathorn said the goal was sustainable growth without the excesses that plunged Thailand into the 1997 Asian financial crisis.
"We would like to reassure non-resident investors that we will maintain the existing practice of allowing the free flow of capital, which has been a policy of Thailand all along," he said.
The former central bank governor also played down new measures aimed at discouraging speculation on the baht, Asia's fastest-rising currency against the dollar this year.
On Tuesday, the Bank of Thailand asked banks to cooperate by not issuing or selling bills of exchange to non-residents. The measures take effect from November 15.
"The measure is not for limiting free capital flow, but to prevent certain financial houses taking advantage of this very thin foreign exchange market in Thailand in trying to corner the baht exchange rate," Pridiyathorn said.
WORRIED INVESTORS
But the issue uppermost in the minds of many guests was the foreign ownership law.
Under the law, foreigners wanting to invest simply have to set up a series of Thai holding companies with Thais as majority shareholders but with reduced voting rights, meaning they have no control.
Using wealthy Thais as investment partners means that a clause in the law barring the use of local nominees would be difficult to prove in court. However, Temasek's $3.8 billion deal for Shin Corp, which fueled street protests against Thaksin that led to the September 19 coup, put the spotlight on the foreign ownership issue.
"Among big companies in Thailand, how many of them have got genuine Thai shareholders? Temasek and Shin have brought this to the surface," Watson said.
Commerce Minister Krik-Krai Jirapaet said on Tuesday a committee reviewing the Foreign Business Act would deliver its recommendations in 60 days. "There is no simple solution to this issue," he said.
Thailand was committed to an open economy, but at the same time Thais needed help to compete against foreigners, he said.
"The question is how to strike a balance."
© Reuters 2006. All Rights Reserved.