Cabinet approves Business Act amendments

BANGKOK (The Nation): The Cabinet has approved the revised amendments to the Foreign Business Act, but it remains uncertain whether the bill will pass the National Legislative Assembly.

The NLA will debate the amendments on April 18. Some 50 of its members have railed against the changes, saying they jeopardize foreign investment.

Commerce Minister Krirk-Krai Jirapaet has said he is ready to present the amendments to the NLA.

The Cabinet approved the new draft of the Foreign Business Law after the Commerce Ministry agreed to revise it to make it friendlier to foreign investment. The Cabinet rejected an earlier draft in February.

There are six key amendments.

First, the new draft will focus on the voting rights of foreign shareholders. If a company is 49% foreign owned but foreigners hold more than 50% of its voting rights, the company will be defined as foreign.

Second, it will remove more businesses covered under Annex III. This will allow these businesses, such as insurance and non-commodity futures market, to be covered by specific laws.

Third, the new draft will remove the amnesty for those violating the nominee law.

Fourth, the draft will increase the penalties for violating the Foreign Business Law. Maximum jail terms will be increased from three to five years, and fines of between 100,000 and one million baht will be increased to between 500,000 and five million baht.

Fifth, it will expand the period from two to three years for foreign companies operating in Annex I and Annex II to revise their ownership structure to conform to the new law. Foreign companies in Annex III must inform the Commerce Ministry within one year that they have foreign ownership status before continuing to operate as normal.

Sixth, a 17-member committee will be formed to rule whether a company is Thai or foreign owned in case of a dispute.

The Commerce Ministry says the amendments create more transparency by clearly defining foreign ownership and delineating the types of businesses that are open to foreigners.

It is also aiming to make it clear that using nominees to circumvent foreign-ownership caps is prohibited.

The draft is a compromise between an earlier version from the Commerce Ministry and those of the Council of State and the NLA.

The NLA has the power to reject the draft and introduce its own.

However, the Commerce Ministry insists that its draft is better than those from the NLA and the Council of State.

The ministry’s new draft takes into account key concerns raised by the Cabinet and the foreign business community, said Skol Harnsuthivarin, Secretary to Commerce Minister Krirk-Krai.

The draft maintains the clause on voting rights, which is a major concern of the Thai government.

However, the draft will not focus on management control, as the Council of State suggested, as the government considers that it would be too stringent for foreign investors, K. Skol said.

The new draft removes the amnesty clause because it would like to create fairness for Kularb Keaw, now under police investigation over allegations it acted as nominee for Singapore’s Temasek Holdings in the Shin Corp takeover.

Another 14 companies are also facing a complaint that they might have used nominees to circumvent the foreign business law. They are now being investigated by the Commerce Ministry.

Pramon Suthivong, chairman of the Board of Trade of Thailand and Thai Chamber of Commerce, said most businesses affected would find the latest draft more appeasing but there would be some who might be unhappy with it.

“It is impossible to satisfy all parties, particularly foreign investors. But since it is necessary to amend the law, the government has to go ahead and do it,” K. Pramon said.

Asked about the impact of the new draft on foreign investors’ confidence, K. Pramon said he believed they would not withdraw from Thailand. All existing businesses will be able to operate freely under the new draft, but new businesses might need time to study it more closely, he said.

Board of Trade Deputy Secretary-General Pornsilp Patcharintanakul said the private sector was delighted with the government’s move to put all companies on an equal footing.

Keisuke Matsumoto, Secretary-General of the Japanese Chamber of Commerce in Bangkok, said Japanese investors were still concerned about voting rights as the change would force many to restructure their companies.

However, Mr Matsumoto said Japanese investors expected the government to become more flexible and hold discussions with them before implementing the new rules.