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Cablegate: Cabinet Sends Investment Bill to Legislature

VZCZCXRO9442
PP RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHBK #2071 1001006
ZNR UUUUU ZZH
P 101006Z APR 07
FM AMEMBASSY BANGKOK
TO RUEHC/SECSTATE WASHDC PRIORITY 6168
INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY
RUEHBY/AMEMBASSY CANBERRA PRIORITY 7002
RUEHUL/AMEMBASSY SEOUL PRIORITY 2988
RUEHKO/AMEMBASSY TOKYO PRIORITY 9135
RUEHCHI/AMCONSUL CHIANG MAI PRIORITY 3414
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY

UNCLAS BANGKOK 002071

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EB AND EAP/MLS

E.O. 12958: N/A
TAGS: ECON PREL PGOV EINV TH
SUBJECT: CABINET SENDS INVESTMENT BILL TO LEGISLATURE

REF: A. BANGKOK 2008 (RETAILING IN THAILAND)

B. BANGKOK 883 (FOREIGN MISSIONS RESPOND TO THE FBA)
C. BANGKOK 581 (RESPONDING TO CHANGES IN THAI FBA)

1. (U) On April 10 the Thai cabinet approved the revised
version of proposed amendments to the Foreign Business Act
(FBA). The first version, approved by cabinet on January 9,
was revised somewhat after review by the Council of State
(RTG lawyers) and efforts by the Ministry of Commerce to
incorporate a version of the FBA proposed by some members of
the National Legislative Assembly (NLA). With this second
cabinet approval, the bill now goes to the NLA for
consideration.

2. (SBU) That the cabinet considered and approved the FBA
bill today was a surprise, not least to ministers other than
the Minister of Commerce. We were told by the Finance
Minister's key advisor that her Minister (Chalungphob) spoke
to the Commerce Minister (Krirk-Krai) the previous evening to
ask if there was any possibility the FBA would be tabled at
the following day's weekly cabinet session. He reportedly was
assured that the bill was not ready. At the cabinet meeting,
Krirk-Krai presented the new version of the bill, announced
that it was subject to "emergency consideration" due to the
importance of the legislation, and a vote was duly taken. Our
Finance Ministry contact believes the "emergency" aspect of
the bill was to get it through cabinet before the Prime
Minster returned to work from his current indisposition. (He
is in the hospital, officially for a "routine check-up.
Septel provides more detail.)

3. (SBU) The Commerce Minister is selling the new version of
the FBA as a "softer" version of the original. He is also
reportedly saying that the new version takes into account
comments made by members of the foreign business community at
a meeting held on April 9 to discuss the FBA with members of
the NLA and academics in front of members of the press. The
outcome of the seminar was the foreigners saying the bill
"was terrible and should be scrapped" and the NLA members
responding that the bill was going through in any case and
the foreigners should suggest ideas to "make the bill better"
rather than just criticize. While a copy of the latest bill
has not been made public, we understand that the new version
has four key changes from the January 9 edition.
- Companies in sectors under lists 1 and 2 of the three
lists of proscribed industries will have three years rather
than two to sell down their shareholdings to below 50 percent
voting rights and equity.
- Penalty for non-compliance increased from up to 3 years
imprisonment to up to 5 years.
- Definition of a "foreign company" is expanded to
include not only majority equity ownership and majority
foreign voting rights but also foreign management control.
- There are conflicting reports that companies may apply
to a committee within the Ministry of Commerce to allow them
to maintain their current share structure if the company can
demonstrate the necessity of doing so and prove that the Thai
stockholders are not acting as nominees.

4. (SBU) Comment: Efforts by the Prime Minister to exert
control over some aspects of economic policy as evidenced by
the recent knocking back of the proposed Retail Act (reftel)
have produced mixed results, to the continued consternation
of foreign investors. Given the continuing decline of the
Thai economy because of a lack of confidence in the political
and policy outlook, the rush to pass this bill - which has
been particularly contentious and fraught - is remarkable. In
the meantime, we will continue to work with like-minded
embassies to lobby the NLA.
BOYCE

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