The amendment of the Foreign Business Act (FBA) has once again caused government debate in Thailand.
FBA Debate |Article and info Courtesy of Property Report
The amendment of the Foreign Business Act (FBA) has once again caused government debate. Many high-level officials believe that serious changes are still needed before the bill is passed and that the contentious ´list 3´ should be removed with immediate effect in order to avoid a mass exodus of foreign investors.
Khun Pridiyathorn Devakula, the former finance minister and central bank governor who was a keen proponent of the original revised FBA, now believes the act is unworkable. “All I can do is to advise ministers, and hope that the government drags its feet and lets the bill die its own death,” he said. “At the very least they should revise ´List 3´ down to zero or near zero´´.
Speaking at a seminar on the FBA at the Sasin Institute of Business Administration at Chulalongkorn University, Khun Pridiyathorn said he felt the latest draft version of the FBA would scare investors away, especially in the services sector where Thailand continues to need the expertise of foreign partners. ´´If these laws are passed by the NLA,” he said, “we could see a lot of companies in Thailand close and move out. Those who proposed the new amendments are living in a different world, thinking that by closing Thailand they can still attract nvestments,
but the on-the-ground realities are different.”
Although the FBA was approved by the cabinet, further approval is required from NLA members, and this has been slow to come because some members want a more regimented version of the bill. On Aug 8th the majority of the NLA voted in favour of expanding the bill to include factors such as the power to appoint or remove a majority of directors, the power to determine the company´s future position, and in the case of a multi-tier holding company structure, a proposal to categorise each tier in the structure as foreign.
´´We want to make sure that one single case cannot be used as a benchmark to disturb the entire legal structure”, said Deepak Mittal, Vice-Chairman of the Joint-Foreign Chambers of Commerce. “If the Commerce Ministry wants to, it can still use the existing rules and regulations to punish and catch those who are breaking the law.”
Kanissorn Navanugraha, a Commerce Ministry official noted that manufacturing, export and some other industries were not affected by the changes to the FBA and said investors should not become alarmed. According to him, the laws were being adapted to create greater comprehensibility and accountability.
Companies already operating in Thailand are not under scrutiny, the official affirmed, and most could seek to ‘grandfather’ their operations by applying for a permit from the ministry within a year of the new law being passed. This would allow them full reconstruction of their operations over a two- year period. cHowever, even this concession has caused friction amongst some officials, who believe that applying for the ‘grandfather’ clause would mean a
company admitting it had violated the law.
With new elections set for December, Mr. Kanissorn said that his ministry is already working to alter the FBA rules once more, but he was not sure if it
would be passed in time. ´´What we are drafting is legislation that would give fair treatment to both Thai and foreign investors, and thus create a level
playing field for all parties,´´ he said.
Kittipong Urapeepatanapong, a partner at Baker & McKenzie, recently contested the new FBA, arguing that the majority of companies listed on the Stock Exchange of Thailand would need restructuring should it be passed. He also pointed out that no other country in the region had such restrictive laws. Other countries such as China, India, Vietnam, Malaysia, and Indonesia have all relaxed their foreign investment policies in recent years and investors now enjoy
a much wider choice of options in Asia than previously.
posted by Wayne at 12:03 AM
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