VZCZCXRO5680
PP RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHBK #5741/01 2610856
ZNR UUUUU ZZH
P 180856Z SEP 06
FM AMEMBASSY BANGKOK
TO RUEHC/SECSTATE WASHDC PRIORITY 1709
INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY
RUEHCHI/AMCONSUL CHIANG MAI PRIORITY 2450
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEAWJA/DEPT OF JUSTICE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY

UNCLAS SECTION 01 OF 02 BANGKOK 005741 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EB/CIP, EAP/MLS 
JUSTICE FOR STUART CHEMTOB 
COMMERCE FOR EAP/MAC/OKSA 
TREASURY FOR OASIA 
STATE PASS TO USTR FOR WEISEL AND MCHALE 
 
E.O. 12958: N/A 
TAGS: ETRD ECPS EINV TH
SUBJECT: EU PROPOSING WTO ARGUMENT AGAINST THAI TELECOM REGS 
 
REF: BANGKOK 115 
 
BANGKOK 00005741  001.2 OF 002 
 
 
¶1. This is an action request, see paragraph 8. 
 
¶2. Jean-Jacques Bouflet, Minister-Counselor for Economic 
Affairs at the EU Mission to Bangkok, called representatives 
from the Australian, Singapore, Japanese, Norwegian and US 
embassies for a meeting on September 18 seeking joint or 
coordinated action on draft regulations by the National 
Telecommunications Commission (NTC) prohibiting the takeover 
of Thai telecoms businesses by non-Thai entities. The NTC is 
expected to release the third draft of its proposed 
regulations within the next few weeks and will be seeking 
public comment. 
 
¶3. Bouflet explained that on April 5 the EU Ambassador sent a 
letter to the NTC Chair indicating significant concerns with 
the draft regulations and the likelihood that they 
contravened Thai WTO obligations. On August 4, the Director 
General of the EU Directorate-General for Trade, Agular 
Machado, sent a follow-up letter (faxed to EAP/MLS) further 
outlining EU concerns and noting that "As foreign investors 
made their investments in telecommunications enterprises in 
Thailand on the basis of its existing WTO trade commitments, 
the adoption of a legislation modifying considerably such 
commitments through the introduction of new prohibitions 
unforeseen at the time when the investments were made could 
seriously harm foreign businesses already established in 
Thailand." No response to either letter was received by the 
EU. 
 
¶4. The Thai actions are related to the controversy 
surrounding the selling of PM Thaksin's family company, Shin 
Corp, to Singapore's Temasek. While the political opposition 
clearly intended for regulatory action to be taken only 
against the PM's transaction, the Ministry of Commerce has 
now become involved and is scrutinizing the share structures 
of 16 large firms with complicated corporate structures and 
significant foreign ownership. This is seen by many as a 
political response to the opposition's action against Shin 
Corp, indicating a willingness to disrupt broad areas of the 
economy if the Shin transaction is unwound. 
 
¶5. While no US company currently has any equity interests in 
Thailand's telecom sector, nor, so far as we know, is 
anticipating such investments, the prohibition against 
foreign majority ownership in the sector clearly limits the 
potential for US investment in this area. The Treaty of Amity 
and Economic relations between the US and Thailand, which 
covers most other areas of bilateral investment, specifically 
excludes telecom, so US legal rights in this sector are 
identical to those of the EU. 
 
¶6. Bouflet, until recently a litigator at the WTO, argued to 
us that Thailand's horizontal commitments at the WTO includes 
a carve-out only for a maximum of 49 percent foreign equity 
participation, but makes no mention of foreign control. 
Since, in Bouflet's WTO experience, any limitations on market 
access must be very narrowly defined, the Thai effort to 
rewrite its regulations to make them more restrictive 
effectively violates both the spirit and the letter of its 
WTO commitment. Bouflet added "when Thailand took its WTO 
commitment, it was accepted based on a minimalist 
interpretation and legitimate expectations based on historic 
Thai practice; this is now being changed.".  Bouflet 
indicated that the EU will seriously consider bringing this 
matter to WTO dispute resolution if the Thai continue on 
their current course. 
 
¶7. Comment: We are concerned that in the current political 
battle in Thailand, both sides are playing a game of chicken 
in which foreign investors are caught in the middle. Recent 
actions to investigate long-established holding company 
structures, foreign ownership of land and small hotels, new 
visa regulations and limits on expansion of large retail 
stores are most likely all part of the political game in the 
run-up to elections later this year. The risk is that some 
real, albeit unintentional, economic damage is done as both 
sides keep upping the ante. 
 
¶8. Action Request: The EU's contention that the NTC's 
proposed regulations may constitute a nullification or 
impairment of WTO signatories' rights is a new, potentially 
 
BANGKOK 00005741  002.2 OF 002 
 
 
significant development, one that provides a firmer legal 
grounding for concerns over the direction of Thai telecoms 
investment policy. We request Washington agencies' views on 
the validity of the EU's legal argument, as well as views on 
how best to approach the RTG on this issue. While we are not 
necessarily opposed to joint or coordinated action with the 
EU and others in Bangkok, we are mindful of other channels, 
e.g., the WTO, that might have advantages. We await 
Washington's guidance on how to proceed. 
BOYCE