Beth Jinks and Haslinda Amin, Bloomberg
Bangkok: Thailand’s proposed tighter laws on foreign ownership are “too extreme” and should be “weakened,” Finance Minister Chalongphob Sussangkarn said.
Amendments to the Foreign Business Act, which restricts overseas investment, voting rights in companies and the use of local nominees to circumvent limits, are being revised and should affect fewer sectors, Chalongphob said.
“My own position is that this act is too extreme,” he said in an interview in Bangkok. “We need to make sure that when we pass this Foreign Business Act it should be weakened more than when it was introduced.”
Investors have been spooked by recent government and central bank rule changes, including tightening foreign ownership limits, capital controls and shareholder probes. The military-installed government and regulators are reviewing economic policies after consumer confidence slid to a six-month low and foreign direct investment slumped.
“People’s concern reflects growing economic nationalism and that could affect future policy decisions,” said Sriyan Pietersz, head of research at JPMorgan Securities (Thailand) Ltd. “It’s important for Thailand to dispel those impressions.”
Chalongphob joined Thailand’s junta-backed Cabinet earlier this month after his predecessor, Pridiyathorn Devakula, quit. Pridiyathorn backed the initial proposed changes to Thailand’s Foreign Business Act.
The Council of State, which reviews the legality of legislation, has sent the Foreign Business Act amendments back to the Cabinet for clarifications, and further softening is probable before it is passed by the National Legislative Assembly into law, Chalongphob said.
“There’s a recognition among policymakers that they do need to be careful about Thailand’s image abroad,” said James McCormack, head of Fitch Ratings’ Asian sovereign ratings group. “Rightly or wrongly, from an international investor’s perspective it has been tarnished, and I think policymakers are aware of that.”
The government “was under social pressure” to crack down after the sale of Shin Corp. to investors led by Singapore’s Temasek Holdings Pte, he said. Rather than toughening the Foreign Business Act, which affects “a very broad base of businesses,” the administration could have simply tightened the Telecom Act and avoided scaring away investors.
“Many people within the National Legislative Assembly also feel the same way, that this law may be giving the wrong impression and it may impact our business environment in the medium to long term,” he said. “Foreigners looked at this and they’re very worried because they think Thailand is now not welcoming foreigners.”
Temasek, a Singapore state-owned investment company, led investors last year to acquire 96% of Shin, a telecommunications holding company, from investors including the family of former Prime Minister Thaksin Shinawatra. The deal aggravated street protests and deepened a political crisis that culminated in Thaksin’s ouster in a coup in September.
Army chief Sondhi Boonyarataklin, who led the coup, said on 16 February he wants the nation to regain control of Thai assets acquired by Temasek. Sondhi in January said that Singapore may use Shin Corp.’s mobile-phone network and satellites for spying, which the city-state and companies involved have denied.
The government can clarify “a few clauses” of the Telecom Act to resolve ownership and security concerns related to Shin Corp., Chalongphob said. It can also reduce the number of sectors affected by the Foreign Business Act.
“Thailand’s friendliness to foreign businesses and foreign people in general is one of our main strengths,” Chalongphob said. “We don’t want to throw away our main strength just because we had to deal with something that happened because of the last government.”
— With reporting by Liza Lin in Singapore and Anuchit Nguyen in Bangkok