The Nation: Finance Ministry to press ahead with foreign business laws

[Nicke]

Finance Ministry has vowed to press ahead with legal change that could overhaul the way foreign companies do business here despite warnings of potentially disastrous economic fallout.

More...

[ATMwalking]

And the fun begins...

[K2]

So right ATM .... this is very BIG news - final details not released yet but will need to read the small print ..

"Pridiyathorn said he had consulted some foreign investors about the changes to the Foreign Business Act and more than half of them had found the new rules acceptable."

No mention of the the ones which did not like the changes.

[Nicke]

They also mention they want prevent Thai nominees in foreign subsidiaries, why would foreign multi national companies establish and invest in Thailand if they cant control their company?

Well, most foreign companies owned by foreigners is setup this way, will they crackdown on already exisiting companies too?

[K2]

Originally Posted by Nicke

They also mention they want prevent Thai nominees in foreign subsidiaries, why would foreign multi national companies establish and invest in Thailand if they cant control their company?

Well, most foreign companies owned by foreigners is setup this way, will they crackdown on already exisiting companies too?

Ratings agencies have issued warning and THB is weaker by 20 satang this AM - offshore forwards very soft (excess THB liquidity), SET weaker by 2% - I doubt it will affect small business - this is largely to resolve Temasek/SHIN Corp issue but the detial needs to be gone through carefully - what with coup, captitol controls fiasco and the NYE bombings - the last thing Thai economy needs is new rules negatively affecting FDI.

[ATMwalking]

Originally Posted by Nicke

Well, most foreign companies owned by foreigners is setup this way, will they crackdown on already existing companies too?

Yes, no grandfathering.

Foreign companies are asking for 6 months before the new rules take effect. They want to cut and run. Honda, hotels, property companies could all pull-out in short order. All the foreign chamber of commerce have joined together to protest this.

This baby could unwind things in a way that makes the 30%-holdback/SET-crash look like a joke.

They other way to look at it is what % of foreign companies do not use nominees. Close to zero.

Even if you thought you had freehold on your condo, the actually condo corp could be found to be invalid. Then what? Who will service your car. AIS could shut down. Bye bye Tesco Lotus.

There is a lot of room for things to get really ugly. There simply isn't enough thai money to legally buy up the 51% of all these companies.

For the sake of Thai people, I really hope they back track on this.

Keep your eyes on this one.

[ATMwalking]

Originally Posted by K2

this is largely to resolve Temasek/SHIN Corp issue but the detial needs to be gone through carefully .

"All appear to have been linked to the disillusionment with the prior administration and have turned local sentiment against foreign investors," S&P noted.

Strangest shotgun approach to not taking responsibility I have ever seen. Basically blame every foreign company for the actions of one thai individual. But yes, that is the motivator.


S&P basically said stop this or we will cut your rating. Response from the official was if foreigners don't like it...tough because "This is Thailand".

"Why should we withdraw it? They have not yet seen the details. If they had seen the details, I am sure that they would be happy," Pridiyathorn said.

"Why should we postpone it when we have worked on it for three months. This is Thailand," he added.

Why would they create these laws in secret?

Malaysia and Vietnam are going to rock on this crazy stuff.

"Furthermore, if these rules are applied retroactively ... many investors have told us that they will view such action as compulsory divestiture, no matter what grace period is offered for them to come into compliance," he said.

The JFCCT, whose members represent more than 10,000 companies, said that any action to restrict investment would only erode confidence in the country.

"Thailand has been the destination for foreign direct investment for decades but all this is being threatened by such moves. I have companies that are looking to invest in Vietnam, which is welcoming us with open arms. Some are looking at Malaysia and Singapore, while awaiting clarity from Thailand," said the head of one chamber.

[Nicke]

Crazy and scary... and the comments from officials is a joke.

[ATMwalking]

I think until the job loss leads to an increase in violent crime, Thailand will still be a good vacation place.

But for a place for living...hate to say everyday I get closer to warming up plan B.

[LivinLOS]

I have been following this in the morning and wading through the TV threads now..

This is huge.. All companies that were 'controlled' via voting shares are now no longer controlled..

The 1000's of people who have land under the voting non voting control method now dont control the land thier homes are on..

Those same pieces of land cannot be sold to any other farang as new companies cant be made..

Who would buy anyway..

What farang in thier right mind would bring anything into the country to invest in a company (read start it and do everything) that they cannot control or own..

If they wanted to start a real estate crisis, a housing collapse, a plunge in investor confidence, a massive withdrawal of foriegn equity, a complete stalling of any inward investment. Well this is how they could go about it.

I am ending up with less and less respect for them.. They are like children.. No planning, no thought.. Turning this place into more and more of a Banana republic by the day.

[LivinLOS]

Just a snip from a Bloomberg piece..

Thailand's investment climate is worsening amid political instability, foreign ownership probes and recent capital control policies, Standard & Poor's said in a report yesterday. There is a ``very strong'' chance the company will lower its outlook on the Southeast Asian nation's credit rating, S&P's Singapore-based analyst Kim Eng Tan said today.

``A lot of previous investments that have gone into Thailand will have to be restructured and even if not a lot of them pull out there will be some pull out,'' Tan said in an interview before the rule changes were announced. ``You are going to see less investment coming in.''

The scene with the 30% withholding introduced then about tuirned made the Junta look like the 3 stooges.. Now this.. On the global stage they are going to be made a laughing stock basically.. Burma here they come..

Malaysia, Vietnam, even Cambodia dont act like this.. This is serious stuff for the country as a whole.. Sure not for BM's beach holidays but for anyone even considering having a business here, or investing here.

[ATMwalking]

Originally Posted by LivinLOS

Those same pieces of land cannot be sold to any other farang as new companies cant be made..

If they wanted to start a real estate crisis, a housing collapse, a plunge in investor confidence, a massive withdrawal of foriegn equity, a complete stalling of any inward investment. Well this is how they could go about it.

I am ending up with less and less respect for them.. They are like children.. No planning, no thought.. Turning this place into more and more of a Banana republic by the day.

Lease is still an option for some.

Well said.

Just the mere threat of this type of action, will cool the heels of a Toyota or a hotel chain for many years. Even if they do a full reverse again, they have really scared off the foreign business community for many years to come.

The thing I find funny is, despite thailand's corruption rank getting worse every year, they honestly think foriegn companies will give up control.

I once heard a story that Starbucks sold Thai rights to a local company. They changed things to serve more food to be like a Black Canyon. Luckily Starbucks was able to buy back the rights and change things back to how it is all over the world. True or not, this is the very reason foreign companies will not give up control here.

I have been trying to think of what else they could do to really tank the country. I am guessing they will introduce more controls to make it even harder to get your money back out of the country.

I think we need a new thread to debate where we all move to next. Get the party started somewhere else...

[K2]

Steady on a minute .. read the text!

""Foreign investors who altogether hold more than a 50 per cent stake in a company must lower their stake within a year," Pridiyathorn Devakula said after a cabinet meeting.

"Foreign investors who hold more than 50 per cent of voting rights must also reduce their voting rights within two years,"he added.

The 50-per cent cap will only apply to companies that deal with areas considered important to national security, or that have an impact on natural resources or Thai culture, he said."

As yet to see what the definition of companies dealing with national security, natural resources or Thai culture but that is a quite narrow group. Easy to get hysterical but THB is only 1% weaker at 36.00 (to the USD) and SET closed down 2.7%. A ratings downgrade would hit the credit market hard and spill over to the THB but this announcement is within expectations - still I'd like to see the fine print before saying much further.

[LivinLOS]

Thats being debated over on TV.. If thats the case then they have very much miss stated this to the entire worlds business community..

Also what has an impact on Thai culture ?? pretty vague statement !!

[ATMwalking]

Originally Posted by LivinLOS

Sure not for BM's beach holidays but for anyone even considering having a business here, or investing here.

Maybe not this year or next, but this type of action will effect every part of the economy in the coming years. Part of the appeal of tourism in Thailand is the foreign owned businesses. From the Hilton to the Mai Thai Bar. It is safe harbor for many tourists. Things could revert back to the backpack crowd.

It is such a deep cut they are making...you just have to know they haven't thought this one out.

You can't overstate how deep and widespread this will effect the country.

[K2]

From BKK Post:

"A maximum of 15 Thai-listed companies will be affected by the tighter foreign business ownership rules, Stock Exchange of Thailand President Patareeya Benjapolchai said."

Bangkok Post: Top Stories

Await the detail - trying to be pre-emptive before knowing the details is sensationalism - reaction in capital markets is within expectations in my experience.

[ATMwalking]

Originally Posted by K2

Steady on a minute .. read the text!

I don't buy it. That just came out today after a lot of pressure.

If this was only about certain sectors, then would have always been about revising just that one section of the foreign business act.

There is worst stuff to come. They never come straight out with the bad stuff. They will sneak that in later.

[ATMwalking]

Originally Posted by K2

From BKK Post:

"A maximum of 15 Thai-listed companies

Few foriegn companies are listed anyway.

from the same article

"Companies that already invest and use the nominee structure will have to liquidate or find a partner within one year," said Ekachai Chongvisal, who helps oversee the equivalent of $2 billion at Tisco Asset Management Co in Bangkok.

"Given the strict timeframe of 12 months I doubt many Thai investors will be able to absorb all this liquidation."

If it was only a handful of companies, then they could flip ownership without much worry.

K2, with respect, if this was such a small deal then the local foreign business community wouldn't be reacting they way they are. Maybe they have better insight into the workings here than foreign forex traders.

I agree we have to wait. I think it won't be good news. Thailand should be moving toward liberalization and true foreign ownership.

[ATMwalking]

Looks like they flip-flopped on this one as well. Including telecom.

Glad to be wrong on dire predictions.

Maybe now they will try something positive regarding outside money.