FOREIGN BUSINESS ACT AMENDMENTS MAY PASS BY END OF MONTH

UNCLAS BANGKOK 005799

SIPDIS

SIPDIS

STATE PASS USTR
USDOC FOR 4430/EAP/MAC/OKSA

E.O. 12958:N/A
TAGS: ECON EINV TH

SUBJECT: FOREIGN BUSINESS ACT AMENDMENTS MAY PASS BY END OF MONTH

REF: A) BANGKOK 4442; B) BANGKOK 4588


1. Summary: Thailand's National Legislative Assembly is set to
again consider controversial amendments to the Foreign Business Act
that would further restrict foreign ownership. Last week, an ad hoc
committee approved a clarification of the definition of foreigner,
removing a barrier that had earlier prevented the amendments'
passage in August. The committee is still reviewing provisions that
might grandfather companies that would be redefined as foreign under
the new rules. Minister of Commerce Krirk-krai Jirapaet, who also
chairs the ad hoc committee, hopes to submit the amendments for a
vote by the full Assembly as early as November 28. End Summary.


2. A National Legislative Assembly (NLA) committee made a key
revision to proposed amendments to the 1999 Foreign Business Act
(FBA) that could allow the amendments to be considered by the full
assembly by the end of November. On November 6, a working group
from the NLA's ad hoc Committee on the FBA submitted its
recommendation to the Committee for a clarified definition of
"foreigner" as it relates to foreign ownership of companies in
Thailand. The NLA had earlier expanded the definition of foreigner
to include "management control" during August debate on the
amendments (reftel A). However, management control was not defined.
Minister Krirk-krai withdrew the amendments during debate and
returned them to committee for review and revision.


3. The Committee has refused to disclose its new definition for
management control, but a story in local newspaper Prachachart
Thurakit indicated that the definition appears to be quite loose.
According to the paper's source, a company with minority foreign
shareholders who have complete management control would be
considered foreign; however, if Thai partners have a voice in
management decisions and concur with the views of the foreign
shareholder, the company would be considered Thai.


4. At the Committee meeting to approve the definition of
management control, Minister Krirk-krai detailed a new working group
to review section 10 of the amendments which concern the status of
companies that would be redefined as foreign under the new rules.
The section as currently written would require companies in certain
restricted areas to divest majority ownership within three years.
The Committee aims to complete this most recent review and resubmit
the amendments to the NLA floor on November 28.


5. At a meeting on November 9, members of the Joint Foreign
Chambers of Commerce said they were concerned that the NLA would
pass the FBA amendments quickly and without debate. Although the
loose definition of management control could allow foreign companies
to exploit loopholes and continue business in Thailand, businessmen
at the meeting said it could also allow the RTG to arbitrarily force
divestiture. The ambiguity, even for grandfathered companies, would
make it difficult for company headquarters to authorize any new
investments. Chamber members also voiced doubts that the lists of
industries restricted from foreign participation will be pared back,
as the lists protect industries in which prominent families,
influential with the current interim government, have financial
stakes.


6. In a November 13 call on Ministry of Commerce Permanent
Secretary Siripol Yodmuangcharoen by Econ and FCS Counselors, we

SIPDIS
noted the foreign business community's frustration that the latest
revisions to the FBA amendments have not been made public. Econ
Counselor continued that foreign investors are very concerned that
the amendments' provisions apparently would require some businesses
to divest their holdings and give up management control. Siripol
said he would pass on the concerns, but said that what Thailand will
be proposing in the new law is in line with definitions of foreign
companies in other countries.


7. Comment: Somchai Sakulsurarat, deputy chair of the ad hoc
Committee, had earlier assured foreign businesses and embassies that
the FBA amendments would not pass during this current government
without major revisions. He said that any bill that passed would
allow current businesses to continue operations, and also pare down
the lists of restricted sectors (reftel B). Somchai has recently
cut back his contacts with the foreign business community; many
believe he is doing so as he sees he will be unable to follow
through on his previous commitment. End Comment.
BOYCE