BANGKOK (dpa) – Proposed changes to the Foreign Business Act in Thailand have alarmed foreign investors and chambers of commerce.
Under the current law foreigners and foreign businesses are not allowed to own more than a 49-per-cent stake in local companies. Businesses have long circumvented such restrictions by issuing preferred and common stock options, with preferred shares enjoying more voting rights.
Now a draft law put forward by the Ministry of Commerce would restrict foreign firms from being able to use preferred stock to retain control of their businesses.
“This proposed change would have far-reaching ramifications that would affect thousands of existing firms here, big and small, and would certainly deter future foreign investment,” said Marcus
Burtenshaw, executive director of real estate consultancy Knight Frank Thailand. “My business is one that you can run from literally anywhere. We registered in Thailand because we like the lifestyle here,” said Chris Roberts, who did not provide his real name out of fear of a possible backlash.
Roberts runs a small IT firm that specialises in software engineering. His company employs only four foreigners but has over 20 Thai staff. He says that while he has Thai partners who own the majority of the company, they do not have executive authority on the direction of the company.
“If (the government) is going to make it difficult for me to run my business, then I have no problems about packing up and moving somewhere else.”
The resistance from foreign officials and businesses has prompted internal reviews and assurances from officials from the Ministry of Commerce that any changes to the law would be made after consultations with all parties.
A source from the ministry said that any changes are still preliminary and that all changes would have to go through both the legislative assembly and the cabinet.
The source added that compromises with foreign businesses could be made, as a reworked Foreign Business Act could allow foreigners to own a majority share in certain sectors.
The current law forbids foreign majority ownership in sectors where Thai businesses are deemed not ready to compete with foreign companies.
Those include accountancy, legal services, architecture, engineering, brokerages, advertising, hotel operations, food and beverages and “other service businesses.”
The ministry said some restrictions may be relaxed as a compromise for limiting the use of preferred stock options.
Yet foreign companies say that is not enough.
“Imposing tighter restrictions would be seen and felt as a step backwards at a time when foreign direct investment levels are low and Thailand’s neighbours are becoming increasingly open for business,” said Burtenshaw.
The various chambers of commerce agree with such sentiments. When rumours circulated about the proposed changes, the American Chamber of Commerce quickly pointed out that the last time such restrictions were discussed in 2007, the stock market dropped 15 per cent in one day as a result.
Stanley Kang, chairman of the Joint Foreign Chambers of Commerce, said erecting more protectionist barriers would be going against the tide of increasingly freer trade.