(UPDATE JUNE 2008 :
The battle is over. We won. For now. 
“All revisions to Thailand’s Foreign Business Act (FBA), which would have brought tighter rules for outside investors, have been scrapped, Commerce Minister Mingkwan Sangsuwan said.”
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Here is a special “dossier” about the Foreign Business Act (version 1 and 2, the amended version that the Junta pushed last year).
My goal is clear : to help people understand what is really FBA (1 and 2), how it is really working and what are the dangers of the version 2.
Many people don’t have a clear understanding of this issue, and/or are misleaded. There is unfortunately a lot of disinformation around, because it’s a rather sensitive issue for the thai authorities.
Stay tuned. Don’t hesitate to send me your comments, and/or other datas so I can enrich the content. - > email - > cthai2 (at) yahoo.com
SUMMARY
- FBA 2 IS WORSE THAN VERSION 1
- WHY THE THAI GVT IS FUNDAMENTALLY WRONG
- WHY ANY SANE INVESTOR HAD TO AVOID FBA 1
- WHAT WERE THE SYSTEMS TO AVOID FBA 1
Click here to follow the lastest news about FBA.
My wife and I are Canadian and we are planning to buy a house/villa on Koh Samui in the very near future and we have some questions and concerns we hope someone on this forum can address.
We recently meet with developers and the real estate agent of a high-end villa development on Samui to discuss the purchase a beachfront home. We understand the concept of circumventing the existing laws against foreign ownership by setting up a Thai company whereby a 49%-51% ownership, with majority voting shares in our favour is arranged, but our concern is with the proposed amendment to the FBA and what that will mean for foreigner home owners. I understand that the voting rights will change with the new amendments and that the current arrangements, as they now stand, will change.
Is it for certain these amendments will be made into law thereby altering the FBA forever? And if so, will the government either force foreigners to sign over to lease-hold 30-year agreements or will those who bough be allowed “grandfather” clauses to keep the current property arrangements?
How will this affect those who bough homes prior to the new Act?
We do not want to purchase a home which will depreciate in value as the end of the 30 year lease near but do you think is is wise to wait for the new government to decide the fate of these amendments?
We also hear that many foreigners are selling their luxury villas on Samui and elsewhere, is this true? If so, that is not a good sign.
If anyone can shed some light on this situation before we buy, it would be appreciated.
Thanks
Several issues there Tom.
-LAND / HOUSE
Foreigners can’t own land. But they can of course buy… a house. That’s a classic scheme : the thai wife buys the land, then the spouses build the house, and then a 30 years lease is given to the foreign husband (for security).
In your case, maybe the developper wants to sale you just the house, along with a long lease for the land.
If it’s land + house with the thai company scheme, then watch out. Of course, maybe people did it and continue to do it. But I mean it’s not a valid reason.
We shall repeat : it’s against the laws (for the land ownership and the nominees issues with the company [FBA] ).
-GRANDFATHERING
Because, again, it’s against the laws.
It would be rather strange to claim a “grandfathering” clause to “keep the current property arrangement”.
-FBA AMENDEMENT (or FBA 2)
If you read the time line, you’ll see that FBA 2 was NOT VOTED by the NLA. Therefore, the current law is still FBA 1 (with the ownership of shares and majority rule as the only criteria to define a company as thai or foreign).
To this date, as I wrote in introduction, we have absolutly no information regarding this project. The new government will push it again ? Or drop it ? Or change it (again) ? If yes, how long it will take ?
It’s really impossible to know. Thai politics is so volatile now, and the current government has, I think, many other burning issues to solve (included its own survival…
before to take care of FBA.
My bet : nothing will happen on short and mid term. Status quo. Even though status quo means uncertainty.
-KOH SAMUI
I’ve got no specific information regarding the market over there.
We just know that the FBA 2 circus + the Coup made a lot of foreigners nervous, and therefore the market has slowed.
Thank you for your quick and detailed reply.
I figure if the likes of David Beckham and large hotel chains like the Four Seasons have had confidence to invest recently, then the situation cannot be all bad moving forward. I am certain they have done their due dilegence, complete with high-priced lawyers and research into risk analaysis, and they have still decided to put considerable amounts to capital (much more that we plan to) into real estate holdings. Were they not worried?
Nevertheless, we will look further into this matter with our Bangkok-based lawyer and decide accordingly.
Thaicrisis, have you heard of any situations where these Thai company “arrangements” involving real estate has gone bad?
Thanks again!
I would advise you to read this piece… about -large- western companies who made obviously some mistakes…
http://thaicrisis.wordpress.com/2008/04/05/2-european-investors-sale-their-shares-in-padeang-industry-because-they-cant-secure-control
As for DB and Four Seasons… I mean you don’t know what were the schemes they used, how they’ve invested, how much, with who etc.
I never said that it was impossible to invest in Thailand. Far from it.
As for your last question : no. I don’t have first hand stories.
I just want to emphasize : what you call “arrangements”… are exactly that : arrangements.
It means they can turn bad, because they are on the wrong side of regulations if I may say…
You can win, and surely many people did. But you can loose.
Furthermore, foreigners can invest (direct, and/or via loans) as minority shareholders. Sure, it’s possible to find good thai partners.
As for myself, however, it goes against the very basic rule of business : control.
Some people are ready to put their money into something they don’t control… fair enough. Not me. Therefore, I need to follow regulations… Therefore this is how I took interest into FBA. Therefore this is why I don’t trust lawyers who say always “sure it’s possible no problem”.