MAIL BAG [email protected]
Restricting Foreign Ownership: Amendments to the FBA
The Thai government has recently announced plans to make Thailand the
financial capital of Southeast Asia. This was later followed up with an
announcement that the Ministry of Commerce is reviewing whether to further
tighten the definition of a foreign owned business in the Foreign Business
Act. This set off alarms among many Thai-Foreign joint ventures in Thailand,
international bodies, and foreign nations. They feared that the Thai
government is attempting to turnover control of these joint ventures to Thai
The Foreign Business Act of 1999 is an all-encompassing protectionist
legislation that restricts foreign business from operating in large segments
of the Thai economy including a broadly worded “other service businesses.”
Under the Foreign Business Act, foreign investors can bypass the
restrictions by creating a joint venture with Thai nationals with the Thai
nationals holding a majority shares of the entity. The current reading of
this requirement does not prevent foreigners from having majority control of
the board of directors or owning superior voting shares. This has allowed
foreign investors to keep control of the joint venture even when they owned
less than 50% of company.
The Ministry of Commerce is looking at closing the loophole because they
believe that allowing foreign nationals to control a Thai company takes
advantage of the majority Thai shareholders. The proposed amendments would
look at who controls the entity to determine whether an entity is Thai owned
or foreign owned. This will affect many joint ventures formed in Thailand
where foreign investors have submitted large amounts of capital, technology,
and reputation. The Japanese government stated that the change will affect
45% of existing Japanese investments in Thailand.
The Ministry of Commerce’s purpose for amending the Thai Business Act might
be reasonable however its actions will have a significant impact on
investment in Thailand. While Thailand is the second largest economy in
South East Asia, Thailand is still a developing country that needs
investment. Thailand is in competition with its neighbors for foreign
investment. Indonesia, Vietnam, Malaysia, and Myanmar are liberalizing their
economies to attract foreign investment.
For more developed countries such as South Korea and Taiwan, Thailand may
face retaliatory measures that prevent Thais from investing and owning
businesses abroad. The European Union which is the second largest investor
in Thailand has already issued a warning that any further restrictions to
foreign ownership rights in Thailand will have detrimental effects on future
technology, knowledge, and equity investment in Thailand from Europe.
If Thailand wants to be the financial hub of Southeast Asia, it should open
up its business operations and services to foreign ownership to attract
foreign investment. The potential amendment to the Foreign Business Act will
scare away foreign investment during a period where Thai economy has
stagnated. Government economic policies should recognize that Thailand
exists in a competitive environment. Countries that border Thailand are
opening their doors to foreign investment to raise the standard of living of
their people. Thailand should do the same.
Siam Legal International
Burning season never ends
I made the move out to the country for clean air and the peace of the
countryside. Well, that has turned out to not be true. My neighbors burn year
round, even during the rainy season amazingly. The puyaiban does nothing, the
police do nothing. In fact, nobody seems to care or notice that this is a
When is the government’s education campaign going to be seen in the countryside?
Smoked out in Doi Saket
Christmas decorations already
I was stunned to see Christmas decorations going up in the middle of November, a
full six weeks before the day. Stunned and rather appalled to be honest. This is
far too early for such nonsense in a country that doesn’t even traditionally
celebrate the holiday. In fact, it is not even a holiday here so I can only
assume the real reason for this is crass commercialism.
It really is a pity that what used to be such a beautiful, family oriented
holiday is now just a means to sell more stuff.
I am not normally a Scrooge but the prospect of 6 weeks of endless inane
Christmas carols are enough to send me around the bend.
I would have hoped that the malls would see some sense and postpone the
decorations and music until after they had finished celebrating a far more
important holiday for Thai people; that of HM the King’s birthday and Father’s
So, a call to all retailers; please celebrate Father’s Day first, then you can
put up the meaningless Christmas decorations and the inane music.
Do you know who I am?
I was at a government office recently where a man tried to jump the queue
actually using the phrase, “Do you know who I am?” I was rather stunned by his
behavior since it seemed nobody knew who he was.
However, his belligerent attitude only helped to further delay the officials
dealing with his case, thus slowly everything down for everyone who came after
him. The office did actually have a queue number system, which this man clearly
felt he was too important to use.
I was quite heartened by the Thai response to this arrogant behavior as people
refused to be intimidated and politely but firmly informed the man he had to
So, kudos to those officials for standing firm.