Thursday, January 18, 2007

Thailand Passes New Laws Redefining "Foreign-Owned" Businesses

Sources: Thais Change Law on Business Ownership, Thailand Braced for Business Clampdown, Thailand Imposes Limits on "Vital Sectors"

On Tuesday, Thailand's military-installed government officially enacted the changes to the foreign investment laws it had been considering. Under the new law, Thais must have fifty-one percent or more of the shares of a company for it to be considered "Thai" rather than foreign. The purpose of the changes are to close loopholes that had permitted multinational companies to oeprate local subsidiaries in businesses that were technically supopsed to be reserved for Thais. It seems, however, that the primary purpose of the changes was to get Temasek Holdings of Singapore to reduce its ninety-six percent holdings in Shin Corp, the telecomm corporation founded by Thaksin Shinawatra, the ousted prime minister. Many incumbent companies which previously would have been deemed Thai but will now be considered foreign-owned under the new changes, will nonetheless be permitted to operate in sectors reserved for Thai businesses. In addition, the Thai Stock Exchange stated that at most, fifteen listed companies would have to adjust their shareholding structure under the new law.

Despite the Cabinet's confidence that the new law will improve investor confidence by setting out a clear policy in Thailand, some analysts maintain, however, that the new law will still have a dampening effect on new foreign investment. Some think that in an atmosphere where many other countries in this region are inviting foreign investment, Thailand's narrowing of the rules of the game in this manner has sent a mixed signal to investors.

1) Do you think that Thailand has sent the wrong signal to foreign investors by passing this new law?
2) Could Thailand addressed the problem presented by Temasek Holdings in another way that would have less of an effect on foreign investors' confidence?
3) How will Thais benefit from this changed law?

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