Archive for the 'FBA' Category

Joke of the day : 17 types of business protected by FBA… liberalised ? Maybe. But later. Or preferably never.

The Commerce Ministry is considering liberalising up to 39 businesses under the protected list of the Foreign Business Act (FBA) in order to improve business conditions and promote foreign investment.

“The plan to liberalise businesses under the FBA is part of the government’s strategy to encourage foreign investment during the world economic downturn, as well as provide more flexible conditions to improve Thailand’s business environment,” said Kanissorn. (Nation)

You say : “Great. At last”. And you add : “They are pragmatic. That’s really good. We have a crisis, they’re reacting, in order to attract foreign businesses. Good”.

And then you continue to read the article…

The department has hired the Fiscal Research Policy Office to study which businesses under the FBA’s protection lists should be liberalised and which need more time for adjustment.

Ah… politicians have asked… bureaucrats… Hum.. To make a study. Hum… And within the “liberalisation” idea there is the idea… of protection. 😉

But you have a good mood, so you continue to read.

Seventeen types of businesses under consideration are engineering, construction, brokerages, retail agencies, wholesale, advertising, hotels, food and beverage retailing, computer services, warehouse control and domestic transportation, business consultancy, schools, entertainment, auction and sale brokers, pawnshops, and plant cultivation and propagation.

For these 17 types, the Commerce Ministry’s Foreign Business Act committee will consider the adjustment period needed before they are opened up – three years, four to six years, or longer.

Now you are laughing out loud, like the young people like to say. You knew there would be a trick. 😉

Of course.

Let me rephrase so you can understand the issue here : thanks to the Foreign Business Act (and the infamous List 3), businesses like restaurant, bar, tourist guide ARE FORBIDDEN to foreigners (unless a special licence is granted) because “Thai nationals are not yet ready to compete with foreigners“.

I repeat : thais are unable to compete with foreigners because they are so stupid (I don’t say that, the thai government does) for :

-Selling food or beverages
-Production of lime
-Hotel business, except for hotel management service.
-Plant cultivation and propagation business.
-Legal service business.
-Accounting service business etc.

The list is not over (read here, end of the page).

It would be hilarious if it wasn’t tragic.

So to summarize : another totally empty and idiotic statement from a thai official who thinks, genuinely, that he can fool those bloody foreigners. Us.

Well mister Kanissorn you’ve missed. You are a clown. And, worse, you insult your own people, over and over, by defending the List 3 of the FBA.

I’ve got another satisfaction. I know, it’s petty. The global crisis is going to crunch the haughtiness of those bureaucrats who think they’re smart.

All those clowns are going to be wiped out. Direct into History’s garbage can, where they belong.

[To know everything about the Foreign Business Act circus, the history, how it works, how the thai authorities are playing with it… read my special dossier]

Abhisit : “no change to Foreign Business Act”

At last. At last the new Prime Minister gives something, a bone, to the foreign business community. No change to the FBA.

The lunatic Junta wanted to amend this law… They almost did. You can follow this epic fight in my special dossier.

We had a great fun… And eventually this bunch of nationalist conservators were defeated. Badly.

Anyway. I think it’s fair to add that Abhisit had no choice. He was certainly not in a position to amend this law… 😉

Particularly when the economy is tanking and when the thai goverment is going to beg and borrow money outside Thailand (more on this issue, later).

We could regret that Abhisit didn’t take the opportunity… on the contrary… to relax the FBA… and its obsolete and ridiculous 3 lists (read here).

I’m speaking of course about the third list… “the business which Thai nationals are not yet ready to compete with foreigners“… from accounting, to hotel, to tour guide, restaurants, bars, retailing…

Apparently the thai government is not ashamed to present its citizen like dumb people who are unable to run a restaurant, a bar, a hotel or… to do accounting work (in thai…).

Most of this list is totally absurd and is an insult to thais.

Anyway.

But the reality of this mediocre government is : don’t ask too much… 😉 And don’t expect too much.

Prime Minister Abhisit Vejjajiva last night reassured the foreign business community his administration would not amend or modify the Foreign Business Act, because it wanted to maintain an investment-friendly atmosphere.

He spoke at a dinner hosted by the American Chamber of Commerce in Thailand (Amcham).

The premier told the gathering of more than 600 US and other foreign business people Thailand would continue to pursue a path of democracy and free-market economics while seeking to restore domestic harmony and international confidence in the Kingdom. (Nation)

FBA : 40,000 companies with foreign shareholdings will be investigated

Knock ! Knock ! Who is back ? The Foreign Business Act of course !

This famous Thai Saga (between the Benny Hill Show and Monthy Python) continues to excite the politicians. It’s a never ending story. Here is the latest episode.

The department will stringently investigate some 40,000 companies that have foreign shareholdings of from 40-49 per cent for possible violations of the FBA.

The department will randomly investigate them to make sure that no foreign investors have taken advantage of any loophole in the act to hold more than 49 per cent in firms on the protected list.

Asked about an investigation of whether 12 companies had breached the act as alleged in complaints to the ministry since 2006 , Kanissorn said some cases had been passed to the police for withholding evidence.

Twelve firms under investigation are UCOM, BoleroTak Wu Holdings, Telenor, Hutchison CAT Wireless Multimedia, Asia Aviation (Thai Air Asia), Thai Sky Airline, Cen Car (Carrefour), EkChai Distribution System (TescoLotus), Siam City Cement, DHL Logistics (Thailand), event organiser Izumi Zenkosha (Thailand), and real estate agent Burapa Lumpini Land. (Nation)

The Junta started in 2006 an inane amendement process of the law (read my special dossier here) before to back off. Humiliated.

This story of the “40 000 companies to be investigated” is not new.

In september 2007, they’ve made a similar announcement.

“The Business Development Department is in the process of inspecting as many as 40,000 companies to see if they have used nominee structures to hold shares for foreign investors _ a practice prohibited by the Foreign Business Act. (read my article)

It came just after the decision from the government to withdraw the amendement… Face saving exercise I asked at that time.

So one year later they start again, even though it’s a new government. Who is going to believe them ?

That’s the problem with the Thai Dramas. Eventually, they lost all credibility… 😉

As to repeat that Carrefour, Lotus and DHL are still under investigation (since 2006 !)… it’s of course laughable…

They just can’t attack 3 MAJOR international companies (even though in Thailand they use local… “partners”).

The thai government should understand this, and stop making ridicule of itself.

It becomes… embarrasing.

FBA : “it’s not possible for the government to touch the law”

Good news. The will to amend the Foreign Business Act (long story, read my special dossier) is vanishing… victim of the current tricky and highly volatile politicial situation.

But it might be temporary. Governements change quickly in Thailand… 😉

The Foreign Business Act (FBA) amendments proposed by the previous military-backed government will not be pursued by the current administration, said Suwit Khunkitti, the deputy prime minister and industry minister.

Mr Suwit offered the reassurance in an address to the Asia and Europe Partnership and Opportunities luncheon held yesterday by the Belgian-Luxembourg/Thai Chambers of Commerce.

He said the Samak Sundaravej government would do everything to ensure convenience for foreign investors.

The confirmation came in response to concerns voiced by European chambers, EU ambassadors and foreign businessmen, who were unclear on the Samak government’s stance on the FBA.

The FBA amendments would create unfavourable investment conditions in Thailand, and it is not possible for the government to touch the act when it wants foreign investors to help GDP growth reach the 6% target,” Mr Suwit said.

The previous government had sought to toughen the FBA and its enforcement because of what it saw as abuses of loopholes through the use of Thai nominees by foreign businesses.

The amendments, which died when the government’s term expired, could have forced thousands of foreign companies to restructure their business ownership, which prompted widespread frustration in the foreign business community. (Bangkok Post)

But still, it’s a confirmation that everybody know that there are -big- loopholes (nominees, dual shares system, read here).

The issue will come back. Probably.

But later. 😉

Another statement, this time from the Commerce Minister (via Bangkok Pundit).

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 on Friday.

“Why close the door to foreign investment? That’s why I don’t bring it back,” he told Reuters, referring to the controversial revisions which have been in legislative limbo since last year.

“Don’t worry. No more. Finished,” he said. (Reuters)

Because of the “performances” of the Commerce Minister, particularily with the prices controls policy (read here), I don’t trust him… He has also some totally idiotic ideas (to patent… the “full moon party” !)… I mean this guy is a living joke. And apparently, he’s in a weak position versus Samak (about the rice problem).

So I repeat a basic rule in Thailand : what is true today… can change tomorrow. 😉

Tesco Lotus : journalists want to investigate compliance with Foreign Business Act

Tesco Lotus went too far ? After libel suits against 2 journalists and a politician with insane claims from 100 millions THB to 1,1 billion (!)… there could be a serious backfire for the supermarkets operator…

Consider this :

The Thai Journalists Association (TJA) will play a major role in investigating the business operations of Tesco Lotus and its Thai operator, Ek-Chai Distribution Systems (Thailand).

The move is aimed at determining whether the operations comply with the Foreign Business Act (FBA).

The decision was announced yesterday after discussions about Tesco Lotus’s libel suits against Krungthep Turakij senior editor Nongnart Harnvilai, Krungthep Turakij columnist Kamol Kamoltrakul and Jit Siratranont, a former MP who is now vice general secretary of the Thai Chamber of Commerce.” (Nation)

To fully understand the threat… you need to read my special dossier about Foreign Business Act…

According to this law, a company owned by foreigners (more than 50 % of shares) can’t operate a retail business (List 3 of the FBA, unless a special licence is asked for).

But Ek-Chai Distribution Systems is a thai company. It means that foreign shareholders (if there are any, I don’t know) have less than the majority (otherwise, the company would be labelled as “foreign”, and then the FBA’s provisions would apply… do you follow ? 😉 )

In my dossier, I say that (from my point of view) only a fool would accept to invest, to put large amount of money… in a company that he doesn’t control. Again from my point of view, it’s a basic principle of business (however, there are exceptions of course).

The thai journalists want now to investigate this issue, in a kind of retaliation.

I think we should fully support such move. A very, very powerfull company that tries apparently to impress individuals, and especially journalists, by threatening them with label suits linked to insane amounts of money… doesn’t deserve any respect.

Tesco Lotus has been doing a great job in Thailand. The people, obviously, like to shop in those supermarkets (Carrefour too). So the company should be able to keep its nerves and must accept that some people do not agree, or are against its expansion. Where is the problem ?

With these libel suits the company appears… weak… and afraid of something, or willing to hide something. In Asia, it’s always bad to appear weak…

Anyway. On the other hand, we can think that such investigation will lead… nowhere.

Thailand is a country where the police and several official agencies… are still unable to say, yes or no, if nominees were used in the Shin Deal (The Deal of the Century, january 2006, when Thaksin sold his group to Temasek). 😉

I should add that the current issue is even hotter and sensitive, because supermarkets operators are under fire too with the… Retail Law (basically, lot of small shops owners are complaining about the expension of large supermarkets in Thailand. The previous government tried to reactivate a new Retail Law… without success).

So the situation is getting… rather complicated. 😉 Like always in Thailand.

[my previous articles about the Retail Law, here, here and there]

2 european investors sell their shares in Padeang Industry, because they can’t secure control

Umicore and Nyrstar divested a combined 46.9 per cent in Thai zinc producer Padaeng Industry for Bt6.45 billion, due mainly to the foreign-shareholding limit.

Our minority interest in Padaeng meant we had limited influence over the company and due to Thai regulations would not have been able to secure control. Our decision to sell releases additional capital that can be better deployed elsewhere,” said Paul Fowler, chief executive officer of UK-based Nyrstar.

With 24.6 per cent, Nyrstar had no management control. Any increase in its holding beyond 25 per cent would trigger a mandatory tender offer for the remaining shares, but Thai regulations restrict foreign ownership of natural resources to less than 50 per cent. (Nation)

Padaeng, which was founded in 1981 and operates a silicate zinc mine and smelter in Tak, reported 2007 profits of 930.37 million baht on revenues of 12.16 billion, down from 2006 profits of 1.76 billion on revenues of 10.39 billion. Paid-up capital for the company is 2.26 billion baht.

Other major shareholders of Padaeng include the Finance Ministry at 13.81% and Bangkok Bank at 3.23%. “(Bangkok Post)

Umicore made a net capital gain of some 3 millions.

But Nyrstar took a loss of 16 million “from the drop in Padaeng’s share price since last August 31, as well as the decrease in the value of the baht against the euro“.

This story is a cas d’ecole. Due to the Foreign Business Act, foreign investors can’t own the majority in many businesses (read here). With no majority, no control.

It’s important to remember that minority shareholders can be well protected in Europe and USA… And if there is a conflict between shareholders, it’s always possible to rely on an efficient judicial system… But in Thailand ? It can be different, very different. 😉

At worst, a minority shareholder is just a “picture” on the wall and the thai owners can do whatever they want (watch out : I don’t say that it was the case at Padaeng Industry).

-Control = majority. This is a basic rule of business.

-Majority is impossible in many cases because of the Foreign Business Act (unless cheating)…

-Ergo : any foreign investors must understand this before to put his money at risk.

Last word : the statement of Paul Fowler (“due to Thai regulations we would not have been able to secure control“) is rather strange.

There is nothing new here. The FBA was enacted in 1999. And before that, mining business was also forbidden to foreigners. So ? They had wrong information ? They thought that regulations would change ?

That’s the problem with FBA : in many aspects, it’s a virtual law… But it can become very real… against you.

FBA : new amendment and modifications of List 3 ?

He’s back ! Who ? The Foreign Business Act of course.

To follow the saga, please visit my special FBA Dossier (the most comprehensive source of infos about this law).

Okay, let’s try to decipher the article of the Nation.

Four additional restricted businesses – rental, operations leasing, financial leasing and factoring – will be made more open to foreign ownership this week.

“For these four businesses, it will be easier to hold more than 50 per cent in the company,” Kanissorn Navanugraha, director-general of the Business Development Department, said last week.

Great. But the List 3 has 21 entries. And “easier” doesn’t mean “automatic“.

The contract-manufacturing business will be next to be relaxed under the Foreign Business Act, followed by the brokerage, internal trade involving agricultural goods, advertising agency, hotel operating, beverage and food retailing, seed development, computer service, warehouse control service, pawnshop, school and entertainment businesses.

All of them will still be listed in Annex III of the Foreign Business Act, but will receive more flexible conditions to operate here.

Here we go… Previously, with the FBA 2 project, the idea was to remove some items of this famous list 3 (to compensate the fact that FBA 2 was much harder).

This list (“businesses which Thai nationals are not yet ready to compete with foreigners”, basically all the services related businesses) is nothing less than a national shame.

Apparently, the thais are not ashamed to put on this list… “guided tour“, “selling food or beverages“… or “retailing“, “hotels“… and even “production of lime” ! 😉

Plus the famous joker, the item # 21 : “(21) Other categories of service business except that prescribed in the ministerial regulations.” It means… all other services ! Convenient, isn’it ?

You don’t believe it ? Check the text of FBA 1 (here).

So now, the government seems to take another route : no change to the core criteria of FBA (how to define a company as foreign or thai), but some cosmetics changes about the content of the list… and the way the list 3 is working. Hum…

Presently, foreigners who want to operate an Annex III business have to ask for approval from the Foreign Business Act committee. As the new conditions go into effect, foreign investors will no longer be required to ask for the committee’s permission. The application procedure and approval process will be predictable and more transparent.

What does it mean ? No need anymore to ask for a licence, but there would be still “an approval process“… ?

Deputy Commerce Minister Banyin Tangpakorn has instructed the department to set up a committee to come up with a concrete plan on whether to amend the act by next month.

The new amendment should be friendlier to foreign investors, while still ensuring the survival of local enterprises, as the last version was too strict in controlling foreign investors, he said.

Several points.

First : it’s very good, they officially aknowledge that FBA 2 was a totally lunatic project.

Second : watch out, we are here in a “thai calendar”. A committee is going to be set up. Then, this committee will submit a “concrete plan“… The process will of course take more than one month.

Third : I’m afraid that we are going to see the perfect thai compromise…

I mean a status quo disguised, once again.

Friendlier to foreign investors“… and meanwhile “ensuring the survival of thais companies“… They need to understand that those 2 aims are antinomic ! 😉

The only solution that would put foreign investors at ease would be to clean up the list 3 and remove many items of it. Period.

Thailand must -officially- open its services sector and stop playing with words (the famous section 8 of FBA, related to List 3 : forbidden, “unless permitted by the Director-General with the approval of the Committee“).

To replace a “licence” with an “approval process” is… like replacing water by ice cubes…

Eventually, the fog of war will remain… Keeping the doors open for corruption, favoritism, and protectionism. Some project will be approved, other not. And we need to look at the criterias.

Anyway : let’s wait and see.


Thailand Crisis

Coup, Economic slowdown, Terror In the South... The situation is worsening in Thailand. Bumpy road like often before.

But this time, it's different.

The key to understand the present turmoil is the inevitable... succession of King Bhumibol.