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Cablegate: Foreign Business Act Amendments Still Up in the Air

VZCZCXRO6091
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHBK #6074/01 3410923
ZNR UUUUU ZZH
R 070923Z DEC 07
FM AMEMBASSY BANGKOK
TO RUEHC/SECSTATE WASHDC 0995
RUCNASE/ASEAN MEMBER COLLECTIVE
RUCPDOC/USDOC WASHINGTON DC

UNCLAS SECTION 01 OF 02 BANGKOK 006074

SIPDIS

SIPDIS

SENSITIVE

STATE PASS USTR
USDOC FOR 4430/EAP/MAC/OKSA

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

SUBJECT: FOREIGN BUSINESS ACT AMENDMENTS STILL UP IN THE AIR

REF: A) BANGKOK 4588; B) BANGKOK 4442

1. (SBU) Summary: MP Somchai Sakulsurarat told a diplomatic and
business group that his committee is still debating amendments to
the Foreign Business Act but is confident it would report the bill
out to the full assembly next week. Committee debate is focused on
whether to grandfather foreign businesses operating in restricted
business sectors. Somchai was unable to add another amendment to
require a revision of restricted sectors, but believed that the
political parties contesting upcoming elections were in favor of a
full review and would do so after forming a government early next
year. End Summary.

2. (SBU) Embassy and joint chambers of commerce representatives met
over dinner on December 6 with Mr. Somchai Sakulsurarat, the
National Legislative Assembly's deputy chair of a committee
reviewing proposed amendments to Thailand's 1999 Foreign Business
Act. The meeting followed on an earlier dinner with Somchai in late
August (see ref A). Somchai's committee has been reviewing the
amendments since early August after the full NLA made further
changes to the law and returned the bill to committee (ref B). Only
a relatively few U.S. investors would be affected by the proposed
amendments thanks to protection by a bilateral investment treaty
with Thailand, but concern remains among the U.S. business community
that the law could prolong the current pall over the current
business climate.

3. (SBU) Somchai told the group that current discussion in the
committee revolved around the extent that the law would grandfather
the operations in restricted areas by businesses that would be
considered foreign under the new amendments. The current version
requires restructuring of ownership for firms operating in areas
covered in the FBA's List One and List Two which detail business
areas that are in national security or culturally sensitive, though
not for those in the less restrictive List Three which covers most
other service sectors. Somchai said that "our group" in the
committee wants a complete grandfathering for businesses in all
three lists, with the exception of media, of which foreign ownership
is prohibited in the new Constitution. Somchai did not say how big
"our group" was, and said others in the committee disagreed with his
approach and debate continued on how to proceed. He clarified that
grandfathered businesses would not be capped on expanding their
operations, but would not necessarily be allowed to expand into new
lines of business.

4. (SBU) Somchai said he was also pushing for a revision of the
three lists of restricted areas for foreign investors. He said he
had tried to include a provision in the amendments that would have
required a revision, but regretted that the amendments would only
make a recommendation for the government to review the lists.
Somchai said the political parties vying in upcoming elections had
made statements in favor of reviewing the restricted sectors in the
FBA and believed they would follow through after one had formed a
government.

5. (SBU) Somchai chided the foreign representatives for focusing
too much on the new definition of foreigner in the amendments and
not enough on pushing for a review of the lists. An embassy
representative countered that the current FBA required an annual
review of the lists, but that no changes had ever been made, and
asked why it would be expected to take place in the next government.
Somchai replied that the FBA amendments would tighten loopholes and
a new government would therefore feel comfortable making changes to
the lists. He discounted the possibility that Thai business
interests would block any review that would bring foreign
competition, saying that foreign businesses were already operating
in restricted sectors and there had not been push back from local
business.

6. (SBU) Somchai also expounded on the revised definition of
"foreigner" that the committee had agreed upon, expanding it to
include "management control" in addition to majority share
ownership. The committee has not released the language of the new
definition, but Somchai explained that companies with foreign
shareholder control over key business decisions would be considered
foreign. The three decision areas would be an increase or decrease
in capital; merger and acquisition; and changes to the company's
articles of association. Somchai said the amendments would focus
only on foreign control at the board level and not on management.

7. (SBU) Somchai is confident that the NLA committee would complete
its review of the amendments at its next meeting on December 11, and
would be able to schedule the bill for a final vote as early as
December 19. He said, however, that the NLA is prepared to continue
considering bills after December 23 elections and through the end of
January when he expected a new Assembly would be seated. A U.S.

BANGKOK 00006074 002.2 OF 002


business representative gamely attempted to convince Somchai to put
off consideration of the bill until the next government, but Somchai
rejected the idea, saying the amendments had been in the works for
nearly a year and would not be delayed further.

8. (SBU) Comment: Somchai is perhaps overly optimistic about the
likelihood of the FBA amendments' prospects for passage, and also
that the next government would make a concerted effort to open
additional business sectors to foreign ownership. There are doubts
that there is enough time to resolve the remaining controversies in
time for passage by this government. It is still not clear whether
the NLA will continue to pass legislation after the election. As
well, while the political parties have expressed support for foreign
business during campaigning, they have not made explicit promises to
revise the lists.
BOYCE

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