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withdrawn.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