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Cablegate: Time Running Out for Foreign Business Act

VZCZCXRO9118
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHBK #4588/01 2361057
ZNR UUUUU ZZH
R 241057Z AUG 07
FM AMEMBASSY BANGKOK
TO RUEHC/SECSTATE WASHDC 9162
RUCNASE/ASEAN MEMBER COLLECTIVE
RUCPDOC/USDOC WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 02 BANGKOK 004588

SIPDIS

SENSITIVE

SIPDIS

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: TIME RUNNING OUT FOR FOREIGN BUSINESS ACT

REFTEL: BANGKOK 4442

1. (SBU) Summary: Key MP Somchai Sakulsurarat assured foreign
embassies August 23 that controversial amendments to the Foreign
Business Act were unlikely to be reintroduced in the Assembly before
end-of-year elections. He further stated that a revised version of
the amendments would only pass if the number of restricted sectors
for foreign investment were slashed. Foreign investors have high
hopes that coming elections will usher in a business-friendly
government more disposed to easing ownership restrictions. End
Summary.

2. (SBU) Somchai Sakulsurarat, vice-chair of the National
Legislative Assembly's (NLA) ad hoc Committee on the Foreign
Business Act (FBA), met with representatives from six foreign
embassies over dinner on August 23 to discuss earlier deliberations
on the FBA amendments and the prospects for their eventual passage.
The legislation had been withdrawn during debate on August 8 at the
request of Minister of Commerce Krirk-krai Jirapaet (see reftel).
The bill has been returned to committee for review and revision.

3. (SBU) Somchai said that the FBA amendments had little chance of
making it through the current Assembly before December elections,
and it would be up to a new government whether to pick up the baton
and pursue passage. Somchai explained that the NLA had begun
deliberations on a number of key organic laws related to the
upcoming elections that would occupy the Assembly's time for some
time to come, and that other bills on the agenda were higher
priorities for the remainder of the NLA's current session. He
acknowledged that Minister Krirk-krai, chair of the FBA committee
and lead proponent of the bill, could reconvene the committee within
one or two months and present a revised bill. Nevertheless, he
considered it unlikely that the full NLA would take up consideration
of the bill before elections.

4. (SBU) Somchai said that the NLA would only accept a revised bill
if it included a package of changes, combining an expanded
definition of foreigner to include management control, along with
fewer business sectors restricted to foreign ownership. In
addition, Somchai said he wanted grandfathering provisions that
would exempt all businesses currently operating in restricted
sectors from complying with the new regulations. He insisted that
despite the NLA's expansion of the definition of foreigner, he and
other NLA members "are not protectionists at all". He explained
that the NLA wanted foreign investors to compete freely and legally,
but that the rules had to be as clear and transparent as possible.
Of importance to the NLA was elimination of the usage of "nominees",
Thais holding shares for foreigners to evade ownership restrictions.


5. (SBU) Somchai recounted the NLA's deliberations on the
amendments on August 8, saying that without his addition to the
definition of foreigner the bill would almost certainly have passed.
However, he insisted that his goal in expanding the definition was
not to sabotage the bill's prospects for passage. Somchai again
assured embassy representatives that the bill would not "come out
half-done", with an expanded definition of foreigner but without
significant changes to restricted sectors.

6. (SBU) In a seminar on the FBA at Chulalongkorn University on
August 22, former Deputy PM Pridiyathorn Devakula lambasted the new
NLA version of the amendments, predicting that the revised version
would drive away foreign investors. Critics of expanding the
definition of foreigner to include management control have
questioned how this new criteria would be defined and how
authorities could precisely determine control within a business. A
Thai-owned business employing a foreigner in a management role could
potentially be considered foreign-owned. Somchai admitted that the
definition of management control was vague and would need to be
better clarified, but said regulations would focus on management
control exercised by board members. Critics have also said that the
original version of the amendment's inclusion of majority voting
rights to the definition of foreigner was sufficient to eliminate
most abuses of the FBA, and that any further expansion would have an
unacceptably broad impact on foreign investment.

7. (SBU) Comment: Somchai's observations of NLA proceedings and
his assurances that amendments would only be considered with relaxed
restrictions were welcomed by the Embassy attendees. The investment
community's preferred option has always been deferral of the
amendments for consideration by a new, elected, and hopefully more
business-friendly government. Democrat Party members have already
made clear they favor a broad revision of the FBA to allow foreign
investment into restricted sectors; spin-off parties from former PM

BANGKOK 00004588 002 OF 002


Thaksin's Thai Rak Thai party would also likely concur. End
Comment.
BOYCE

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