ASEAN KEY DESTINATIONS
New act may trigger WTO fight
The law, which represents a major tightening of the restrictions on foreign ownership of companies, will be enacted only when signed by King Bhumibol Adulyadej, a formality that could take anywhere between one and 90 days.
However, foreign embassies were already preparing a challenge in the World Trade Organization (WTO), arguing that Bangkok would have shifted its foreign investment goalposts from those used during its entry negotiations in the 1990s, diplomats said.
"This would be one step closer to formal action being taken on the WTO front," one diplomatic source told Reuters.
At face value, revision of the law stemmed from probes into the dealings of ousted Prime Minister Thaksin Shinawatra, most notably his family's $1.9 billion sale of their controlling stake in the Shin Corp telecoms empire to Singapore.
However, it is also about Bangkok's old business elite -- many of whom supported the September coup against Thaksin -- getting payback for having to sell their family firms to foreigners after the 1997 Asian financial crisis, analysts say.
Another diplomat said it was clear that ministers were declaring the new law to be WTO-compliant as part of a plan to allow the interim post-coup government to pass the law during its one-year term, which ends with elections slated for December.
Its successor will then have to deal with the fallout.
"The law will take a few months to be enacted by the King, so it will be the next government who will have to face the problem of international liabilities," the second diplomat said.
"But they don't care. This is only a political game to satisfy some influential power or families who just want to get revenge for the cheap sales they had to make during the 1997 crisis. They want to get control back."
For the last 35 years, Thailand's rules on foreign investment have been defined only in terms of share ownership, allowing foreigners to own just 49% of a company's equity but maintain control through preferential voting rights.
The revised law makes this illegal, forcing new outside investors to have only 49% equity and 49% voting rights, provisoes likely to dent the southeast Asian nation's reputation as a sound international investment destination.
The restrictions apply to highly sensitive sectors such as broadcasting, agriculture and armaments, as well as a wide range of services, including finance, retailing, telecommunications and hotels and tourism.
The National Legislative Assembly, a rubber-stamp parliament appointed after the coup, debates the bill on August 8 and is expected to pass it late in the day.
Reaction on the stock market -- which could be harsh if foreign investors see it as another sign of nationalism taking hold of policymaking since the coup -- will be delayed until August 9.
Foreign businessmen in Thailand have complained about being shut out of all consultations on the revisions, which finally emerged from vetting by a parliamentary subcommittee on August 6.
Despite their appeals, the committee refused to water down any of the major proposals in a draft approved by the cabinet.
One concession was to give foreign-controlled companies in the sensitive media, agricultural, mining and logistics sectors three years, rather than two, to adjust their share structure -- or "hand over the keys to Thais", as the second diplomat put it.
Existing companies in the service sector will be allowed to keep their shareholding structure under an amnesty clause. Reuters