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Cablegate: Parliament Withdraws Foreign Business Act Amendments,

VZCZCXRO1808
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHBK #4442 2280946
ZNR UUUUU ZZH
R 160946Z AUG 07
FM AMEMBASSY BANGKOK
TO RUEHC/SECSTATE WASHDC 8961
RUCNASE/ASEAN MEMBER COLLECTIVE
RUCPDOC/USDOC WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS BANGKOK 004442

SIPDIS

SENSITIVE

SIPDIS

STATE FOR EAP/MLS
STATE PASS USTR
USDOC FOR 4430/EAP/MAC/OKSA
SINGAPORE FOR TREASURY ATTACHE BAKER

E.O. 12958:N/A
TAGS: ECON EINV ETRD TH

SUBJECT: PARLIAMENT WITHDRAWS FOREIGN BUSINESS ACT AMENDMENTS,
UNCLEAR WHEN IT WILL REAPPEAR

1. (U) Summary: The National Legislative Assembly (NLA) last week
withdrew proposed amendments to the Foreign Business Act that
foreign investors fear would further restrict investment in the Thai
economy. Before withdrawing the bill, the NLA succeeded in
expanding the definition of foreigner to include not just majority
shareholding and majority voting rights, but also management
control. In ensuing debate over grandfathering provisions and
waivers for existing businesses in restricted sectors, the NLA
withdrew the bill at the request of the Minister of Commerce. While
the NLA has returned the amendments to committee for review and
revision, and it is unclear if they will resurface, there clearly
remains a chilling effect on the investment environment. End
Summary.

2. (U) On August 8, the NLA deliberated on amendments to the
Foreign Business Act (FBA) that the Cabinet had submitted in late
April. The original version of the amendments included a provision
that expanded the definition of foreigner to include majority voting
rights in addition to majority equity ownership. In a 76-64
decision the NLA approved a further expansion of the definition to
include management control, including power to appoint or remove
directors and the power to direct business affairs.

3. (U) During ensuing debate on Section 10 of the amendments that
provide for grandfathering and waivers for existing businesses, NLA
members raised a host of questions regarding the control of assets
and land belonging to newly defined foreign firms. Realizing that
NLA support was flagging in the face of the questioning, Minister of
Commerce Krirk-krai requested and the NLA granted that the bill be
withdrawn. The bill returns to committee for further review and
revision. Krirk-krai declined to say when the bill could be again
returned for a vote, but intimated that it might not pass during the
current government.

4. (SBU) Discussion in the investor community has speculated that
the NLA's additions to the FBA were a deliberate attempt to sabotage
the amendments, creating an Act so strict as to be unpalatable to
other NLA members. Somchai Sakulsurarat, vice-chair of the NLA
committee on the FBA and considered the architect of the changes to
the amendments, claimed that while he is liberal toward foreign
investment, sabotage was not the motivation. In a conversation with
the EU economic counselor, Somchai insisted that he and other NLA
supporters were seeking only to clarify the law on foreign
ownership. Somchai said he planned to offer foreign investors a
package deal: stricter definitions of foreign control together with
greater liberalization of the lists of restricted business sectors.
(Note: Embassies and business chambers are arranging a further
meeting with Somchai to flesh out his proposal.)

5. (SBU) The newly approved definition of foreigner is unlikely to
impact U.S. companies if an amended FBA passes through parliament.
Investment privileges through the Treaty of Amity and Economic
Relations that provides national treatment to U.S. investors have
insulated most U.S. business from the proposed amendments. Only a
relative handful of U.S. companies would likely be affected.
Nevertheless, the proposed amendments have had a chilling effect on
the overall business and investment environment.
BOYCE

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