Foreign business dismayed by new Thailand guidelines

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Bangkok, Jan 10 : Foreign businesses reacted with dismay on Wednesday to Thailand’s proposed stricter law on company ownership, saying it may force them to sell shares worth millions of dollars and deter future investment.

A day after announcing tighter rules on share ownership and voting rights, the military-appointed government said it would have a “minimal” impact on 1,300 companies affected and bolster investor confidence by clarifying the Foreign Business Act.

But amid confusion over what the draft law would mean in practice, foreign business groups said the restrictions appeared to be onerous enough to force a rethink of investment plans.

“One of the things definitely that is going to cost is forced divestitures,” said Peter Van Haren, head of the Joint Foreign Chambers of Commerce in Thailand, a coalition of 28 national business groups representing 10,000 companies.

Van Haren, who led a business delegation to finance minister Pridiyathorn Devakula, said the government had agreed to a “dialogue” but aimed to enact the law “as quickly as possible”.

The new rules would probably affect retailers, telecoms firms and the property market, Van Haren said.

At the moment, Thailand’s 49 percent limit on foreign ownership is defined only by shareholdings. Voting rights are not capped.

This meant Thais could have majority shareholdings without a voting majority, ensuring control was in foreign hands and forming the unofficial basis for most overseas investment in Thailand for the last 30 years .

The amended law, which requires royal and parliamentary approval, sets a one-year deadline for foreign investors and their Thai nominees to reduce their holdings to 49%.

“All companies will be forced to divest shares currently held by nominees,” the British Chamber of Commerce in Thailand said, according to its interpretation of the draft law.

The draft law also sets a two-year deadline for firms to bring foreign voting rights below 50%, although some firms — mainly in service sectors — would be allowed to keep voting rights in favour of foreign shareholders, Pridiyathorn said.

Redefining foreign ownership in terms of voting rights rather than the proportion of shares held was key to closing a grey area on foreigners’ use of Thai nationals as proxies, he said.