Bangkok urged to scrap law on foreign investments

The Straits Times, April 13, 2007


BANGKOK - THAILAND's top trading nations yesterday urged the country's army-backed government to scrap a new investment law that limits foreign ownership and punishes violators with jail terms.

The ambassadors from the United States and Japan, the country's largest export market and biggest investor respectively, held talks with a senior government official and warned that the new law would affect foreign investment.

'They have expressed their concern that the new law will not do any good and will affect investment,' Mr Prasit Kovilaikool, the minister attached to the Prime Minister's Office, told reporters after the one-hour meeting.

'But we don't have to surrender to their demands,' he pointed out.

Apart from the US and Japanese representatives, officials from the European Union, Canada, South Korea and several other key trading nations also attended the meeting to urge the government to scrap the new law.

On Tuesday, the government said violators of the law could face up to five years in prison, with a fivefold increase in penalty up to five million baht (S$235,000).

The new investment law is already unpopular among foreign businesses in Thailand as it will effectively limit foreigners to having 49 per cent of the shares and the voting rights in companies in the country.

Under the current system, international companies often use Thai proxies to get around the limit, but the government, which came to power after a coup last September, vowed to crack down on what it sees as business loopholes.

The latest draft of the law still needs approval by the military-installed Parliament before taking effect.

Meanwhile, a university survey released yesterday showed that Thai consumer confidence hit a five-year low last month because of high oil prices, a strong baht and domestic political instability, and is likely to remain weak over the next few months.

The confidence index fell for the fifth straight month to 72.8 in March from 73.4 in February, the University of Chamber of Commerce said in a statement.

'Consumption is likely to slow further in the second quarter as all confidence indices remain under a normal level,' it said.

A reading below 100 indicates relatively weak consumer confidence compared with sentiment before the Asian economic crisis of 1997-98.

AGENCE FRANCE-PRESSE, REUTERS