Thursday, January 18, 2007

Thailand's Consideration of New Law Upsets Foreign Investors

Sources: Foreign Investors Seek Thai Investment Rethink, 'Aliens' No Longer, Thailand Tightens Foreign Investment Laws

On Monday, Thailand's overseas business community urged the military-installed government to reconsider the proposed revisions to foreign investment laws, which they predict will have serious negative consequences on investors, both present and future. Bankok is about to make a move to clamp down on its definition of a "foreign-owned company." Previously, Thailand law looked loosely at shareholding structures to determine whether or not a company is Thai-owned or foreign-owned. This loose structure allowed international companies to use special voting rights to control Thai-owned subsidiaries. Now, the government may change to considering not only voting rights, but also actual control to make the same determination. This change will mean that many companies that had been deemed "Thai-owned" would now be considered foreign, and thus would be operating illegally.
The Thai government would give foreign companies operating in violation of the new law a one-year grace period to reduce their holdings to rectify the company's qualification under the new definition. This grace period has not quelled much of both foreign and domestic investors' fear and anger regarding the new definition, especially if the new definition were to apply retroactively. In addition, the Thai government has been facing pressure to amend the law quickly since it has been installed following the military coup in September, which was partially motivated by the controversial take-over by Singapore's Temasek Holdings of Shin Corp, a temecoms company founded by the ousted prime minister, Thaksin Shinawatra.

1) Should the Thai government take its time in making this decision despite the political pressures to change the laws?
2) What do you think may be the worst-case scenario if/when the law is passed?
3) Who will benefit the most from such a law?

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