Govt eyes change to Foreign Business Act

Rebalance sought to improve investment

The government is considering amending the Foreign Business Act, particularly regarding the definition of “foreigners” to tackle the nominee problem.

The amendment to the act will focus on a new definition of foreigners, nominees, and the penalties for nominee offences. The current law limits foreign ownership in Thai businesses at 49% and prohibits Thais from becoming nominees for foreigners.

Kulanee Issadisai, director–general of the Business Development Department, said the amendment aims to strike a balance between protecting Thai investors and promoting foreign investment in the country.

Ms Kulanee said a study needs to compare the act with similar laws in the United States, Japan, the European Union, Asia and neighbouring countries.

Plans to amend the Foreign Business Act (FBA) of 1999 have resurfaced after three years of silence, with the Business Development Department vowing yesterday to improve the law, particularly with regard to a new definition of “foreigner” to tackle the nominee problem.

Kulanee Issadisai, the department’s director-general, said the amendment aims to bring the FBA in line with changing economic conditions and strike a balance between protecting Thai investors and promoting foreign investment.

The current FBA limits foreign share- holding to 49% of a business and has three lists of work for which foreign participation may be prohibited or restricted.

Activities in List 1 are designated as “businesses not permitted for foreigners to operate due to special reasons”. Foreign companies are completely restricted from engaging in these activities.

Activities in List 2 are designated as “businesses related to national safety or security, or affecting arts and culture, traditional and folk handicraft, or natural resources and environment”. Foreign companies may only engage in these activities upon cabinet approval.

Activities in List 3 are designated as “businesses in which Thai nationals are not yet ready to compete with foreigners”. Foreign companies must apply for and obtain a foreign business licence before taking part in these activities.

About three years ago, the Commerce Ministry proposed improvements in the FBA to tackle the nominee issue, but attempts were shelved after many groups of foreign companies operating in Thailand came out to oppose the ideas to regulate foreign business ownership. The improvements were meant to keep foreigners from controlling Thai companies.

Ms Kulanee said the amendments will take into account the national benefits and security for all dimensions, adding that the study needs to be compared with existing similar laws in the US, Japan, the EU, Asia and neighbouring countries.

FBA amendment is unlikely to affect investment, she said, adding that the effort aims to clarify the definition of “foreign” and careers still reserved for Thai people.

“The new definition of foreigner will also take into account the management control or voting rights,” Ms Kulanee said. “The department is studying a new definition for the term ‘foreign’, and comparing it with similar laws in other countries and the model law from the United Nations Commission for International Trade Law.”

She said the department is studying revisions for penalties under the new act, noting that the existing act delivers a relatively serious penalty for petty offences.

In addition, she said the department is considering withdrawing certain service businesses from List 3.

“Plans to amend the FBA are likely to finish in April or May before being submitted to the Commerce Minister for approval,” she said. “Once approved by the minister, the proposed amendment will be submitted to the cabinet and the Council of State, and then the National Legislative Assembly.”

Kalin Sarasin, chairman of the Thai Chamber of Commerce, said the time is not right to amend any part of the FBA, because most existing foreign businesses in Thailand worry about the nominee rules and definitions for “foreigner”.

“Nominees are a sensitive issue that may affect the current investment climate,” he said. “Amending the FBA should not be a top priority for the government. Ease of doing business should be the priority when trying to attract foreign investment.”

The private sector has also asked the Business Development Department to have discussions with the Thai Chamber of Commerce and foreign chambers of commerce before making further amendments to the FBA.

“Thailand is trying its best to draw foreign direct investment to the Eastern Economic Corridor,” Mr Kalin said. “The government should not do anything that makes the investment atmosphere more precarious.”