National Legislative Assembly members vote overwhelmingly for ministry's FBA draft

Source: The Nation April 26 2007

Foreign Business Act amendments. How to define a partly foreign owned company in Thailand foreign

The National Legislative Assembly yesterday voted with an absolute majority to amend the Foreign Business Act (FBA) based on the Commerce Ministry's draft, after spending one hour debating whether to adopt the draft of the ministry or that of a subcommittee of the NLA which was more liberal.

NLA members also agreed - by 135 votes of the 136 NLA members attending the meeting - to amend the Act to ensure the protection of certain businesses for locals. Only the chairman abstained from voting.

The NLA agreed to go ahead with the amendment plan, in spite of some earlier calls to delay the amendment of the law until the next government. The NLA also set up a new committee to be responsible for revising certain aspects of the legislation.

NLA members however have not yet seen eye to eye on some details of the drafted foreign business law, including extending the power to control management through voting rights.

The new committee, consisting of five representatives from the government and 22 representatives from amongst NLA members, will compare the ministry draft with the proposed draft of the NLA and work out details.

The panel has been assigned to make some changes and present the draft back to the NLA within seven days.

The move marks a compromise between the NLA and the ministry. Thus, it lifts the chances of the introduction of the amended act by the interim government, despite opposition from foreign investors who have protested against some of the more stringent regulations.

However, NLA member Kamnoon Sittisamarn argued that the current draft by the government was not fully effective in protecting Thai businesses. He suggested the government expand the law on the control of company management to ensure protection of sensitive Thai businesses.

Deputy Commerce Minister Oranuj Osathananda said control of voting rights was needed to protect Thai businesses. However, she acknowledged that the expansion of management control in this way would affect foreign investor confidence.

The committee will debate details of the scope of the Act and which details are to be amended.

She said the law should be amended in order to increase transparency and good governance. The government will also create equal treatment for all foreign investors, she added.

NLA member Pramon Suthi-vong, who is also chairman of the Board of Trade of Thailand, said the draft by the government created better conditions for Thai and foreign investors.

The foreign business laws of many countries - including Australia, Japan and Taiwan - also control voting rights. Most investors should accept the extension of the law to cover voting rights, but he said if expanding control of company management were too stringent, it might harm foreign investor confidence.

Somchai Sakulsurat, a member of the NLA, said the current Act had been in place since 1999 and needed to be amended.

Many foreign investors had used loopholes to control businesses that were protected for Thais. For instance, some had used nominees to hold shares on their behalf to enable them to hold more than the limit set by the government. The current law should be amended quickly to create clear and effective regulations to protect Thai businesses from unfair practices, he said.

Under the government's draft, the new legislation will also punish any legal consultant that advises foreign investors to breach the law.

Bodin Asavanich, NLA member and senior vice chairman of the Federation of Thai Industries, added that the government should include a provision to ensure the fair appropriation of dividends to Thai and foreign shareholders. He said the current Act was ineffective in balancing fair benefits for Thai and foreign investors.

Keisuke Matsumoto, secretary-general of the Japanese Chamber of Commerce in Bangkok, said that although the NLA had resolved to amend the current foreign business law, Japanese investors still needed to discuss with the government issues of concern, particularly the control of voting rights.

He said there were many types of voting rights in Japanese companies based in Thailand. The government must set clear and reasonable regulations to balance the benefits for all involved.

Petchanet Pratruangkrai



Cabinet exempts telecoms, retail, hotel businesses from FBA

Source:Bangkok Post April 11 2007


Foreign companies using illegal nominees could face five years in jail under a plan to toughen foreign ownership rules. Cabinet ministers yesterday endorsed the revisions to the Foreign Business Act, which also increases fines by five-fold to up to five million baht, according to Commerce Minister Krirk-krai Jirapaet.

''The cabinet agreed to raise the penalty for violations, both in terms of fines and prison terms,'' he said.

The original FBA draft approved by the cabinet on Jan 9 called for maximum sentences of three years and fines of up to one million baht.

The government also scrapped a proposed amnesty that would allow foreign-controlled businesses operating in List 3 sectors to maintain minority voting rights.

The Council of State, the government's legal advisory body, noted that the ''grandfather'' clause was unfair to other companies.

But companies will be given three years instead of two to comply with the law.

Critically, the cabinet yesterday exempted businesses in the telecommunications, retail and hotel sectors from the FBA rules, under the principle that these businesses operated under their own separate laws.

Companies in these sectors can continue to operate with foreigners holding majority voting rights until they cease operations.

The 1999 FBA outlines 43 types of businesses restricted to foreign companies. List 1 represents businesses banned to foreigners, including media and rice farming. List 2 sectors, which include firearms production and transport, are restricted for national security reasons, while List 3 covers most service sectors.

Pramon Sutivong, the chairman of the Thai Chamber of Commerce, cautioned that the latest changes did not necessarily represent the final version of the final law, as the National Legislative Assembly was likely to set up a separate panel to consider the draft.