TIME RUNNING OUT FOR FOREIGN BUSINESS ACT

UNCLAS SECTION 01 OF 02 BANGKOK 004588 SIPDIS SENSITIVE SIPDIS STATE PASS USTR USDOC FOR 4430/EAP/MAC/OKSA SINGAPORE FOR TREASURY ATTACHE BAKER E.O. 12958:N/A TAGS: ECON EINV ETRD TH SUBJECT: TIME RUNNING OUT FOR FOREIGN BUSINESS ACT REFTEL: BANGKOK 4442 ¶1. (SBU) Summary: Key MP Somchai Sakulsurarat assured foreign embassies August 23 that controversial amendments to the Foreign Business Act were unlikely to be reintroduced in the Assembly before end-of-year elections. He further stated that a revised version of the amendments would only pass if the number of restricted sectors for foreign investment were slashed. Foreign investors have high hopes that coming elections will usher in a business-friendly government more disposed to easing ownership restrictions. End Summary. ¶2. (SBU) Somchai Sakulsurarat, vice-chair of the National Legislative Assembly's (NLA) ad hoc Committee on the Foreign Business Act (FBA),met with representatives from six foreign embassies over dinner on August 23 to discuss earlier deliberations on the FBA amendments and the prospects for their eventual passage. The legislation had been withdrawn during debate on August 8 at the request of Minister of Commerce Krirk-krai Jirapaet (see reftel). The bill has been returned to committee for review and revision. ¶3. (SBU) Somchai said that the FBA amendments had little chance of making it through the current Assembly before December elections, and it would be up to a new government whether to pick up the baton and pursue passage. Somchai explained that the NLA had begun deliberations on a number of key organic laws related to the upcoming elections that would occupy the Assembly's time for some time to come, and that other bills on the agenda were higher priorities for the remainder of the NLA's current session. He acknowledged that Minister Krirk-krai, chair of the FBA committee and lead proponent of the bill, could reconvene the committee within one or two months and present a revised bill. Nevertheless, he considered it unlikely that the full NLA would take up consideration of the bill before elections. ¶4. (SBU) Somchai said that the NLA would only accept a revised bill if it included a package of changes, combining an expanded definition of foreigner to include management control, along with fewer business sectors restricted to foreign ownership. In addition, Somchai said he wanted grandfathering provisions that would exempt all businesses currently operating in restricted sectors from complying with the new regulations. He insisted that despite the NLA's expansion of the definition of foreigner, he and other NLA members "are not protectionists at all". He explained that the NLA wanted foreign investors to compete freely and legally, but that the rules had to be as clear and transparent as possible. Of importance to the NLA was elimination of the usage of "nominees", Thais holding shares for foreigners to evade ownership restrictions. ¶5. (SBU) Somchai recounted the NLA's deliberations on the amendments on August 8, saying that without his addition to the definition of foreigner the bill would almost certainly have passed. However, he insisted that his goal in expanding the definition was not to sabotage the bill's prospects for passage. Somchai again assured embassy representatives that the bill would not "come out half-done", with an expanded definition of foreigner but without significant changes to restricted sectors. ¶6. (SBU) In a seminar on the FBA at Chulalongkorn University on August 22, former Deputy PM Pridiyathorn Devakula lambasted the new NLA version of the amendments, predicting that the revised version would drive away foreign investors. Critics of expanding the definition of foreigner to include management control have questioned how this new criteria would be defined and how authorities could precisely determine control within a business. A Thai-owned business employing a foreigner in a management role could potentially be considered foreign-owned. Somchai admitted that the definition of management control was vague and would need to be better clarified, but said regulations would focus on management control exercised by board members. Critics have also said that the original version of the amendment's inclusion of majority voting rights to the definition of foreigner was sufficient to eliminate most abuses of the FBA, and that any further expansion would have an unacceptably broad impact on foreign investment. ¶7. (SBU) Comment: Somchai's observations of NLA proceedings and his assurances that amendments would only be considered with relaxed restrictions were welcomed by the Embassy attendees. The investment community's preferred option has always been deferral of the amendments for consideration by a new, elected, and hopefully more business-friendly government. Democrat Party members have already made clear they favor a broad revision of the FBA to allow foreign investment into restricted sectors; spin-off parties from former PM BANGKOK 00004588 002 OF 002 Thaksin's Thai Rak Thai party would also likely concur. End Comment. BOYCE