Thailand: Foreign Business Act
Published 11 December 2014
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This article is no longer current. Please refer to Overseas Business Risk – Thailand
Summary
British and other foreign businesses are relieved as Thai Prime Minister Prayuth publicly rules out any amendment to the Foreign Business Act that would deter foreign investment..
Detail
The Thai Foreign Business Act (FBA) of 1999 outlaws foreign investment in sectors considered strategic in Thailand, such as agriculture. It also limits foreign ownership to 49% in much of the service sector. 100% ownership is permitted in manufacturing as long as it is registered through the Thai Board of Investment. Japanese investment in the automotive industry has followed this route.
Parts of the Ministry of Commerce want to amend the FBA. In particular, they want to close the loophole which allows foreign companies to use preferential shares to retain control of their business in Thailand despite not having the majority shareholding. Such an amendment would negatively affect thousands of foreign businesses in Thailand, including British.
The Ministry of Commerce tried to introduce this amendment in 2007, but failed to secure parliamentary approval before the assembly was dissolved. They tried and failed again in 2014. On 4 December, Prime Minister Prayuth announced publicly in an address to the membership of the Joint Foreign Chambers of Commerce that there would be no amendment to the FBA if the result deters rather than attracts foreign investment. The audience of 800 foreign companies, trade associations and embassies applauded.
PM Prayuth’s statement followed a period of intense public and private lobbying by like-minded embassies and chambers of commerce. The Japanese, as the largest investors in Thailand, were prominent and vocal. Together with the British Chamber of Commerce, we have taken a similarly prominent position.
Comment
The FBA runs against economic trends in South East Asia, where the majority of ASEAN members are liberalising restrictions on investment. Once the darling of foreign investors, Thailand now risks falling seriously behind the regional competition. This is not what Thailand’s economy needs in the short-term, or in the long-term if it is to achieve its ambition of becoming a high income country. Thailand needs technology transfer, investment in R&D, and to attract high calibre executives and expertise in the knowledge economy. Foreign investors bring this with them.