in wake of Shinawatra scandal, Thailand creates vague new rules to inhibit foreign investment

from the Bangkok Post:

Foreign firms uneasy about new venture funding rules

Foreign investors have expressed concern over new regulations requiring joint ventures to declare their source of funds.

Members of the Joint Chambers of Commerce, which represents foreign businesses, plan to seek clarification of the new corporate registration rules and of regulations regarding nominee shareholders.

The president, Peter Van Haren, said foreign businesses were concerned about how the new rules would be applied.

"We need the Commerce Ministry to explain it more," he said yesterday.

The Business Development Department last month announced that from Aug 15 Thai partners in all new companies with foreign shareholdings over 40% must declare their source of funds. Companies with at least one alien director must also make full disclosure of their funding.

The rule requires each partner or shareholder to identify bank documents or other evidence showing the source of funds.

The regulatory change comes amid an investigation by the Commerce Ministry into Kularb Kaew, an indirect holding vehicle in Shin Corp. Authorities are looking to determine whether Kularb Kaew is a nominee for Singapore's Temasek Holdings to bypass the 49% foreign shareholding limit under the Foreign Business Act and the Telecommunications Act.

Mr Van Haren said it remained uncertain how the new rules would be applied.

"For new foreign investors, the concern is that the new application process may create red tape as more documents are needed," he said. "Existing investors are concerned that if they need to restructure their financial or management structure, will they need to make new declarations. [ed. the red tape involved in setting up even a Board of Investment approved company in Thailand is already ridiculous by international standards-- the rules change from clerk to clerk and are often contradictory, there are long delays in processing and afternoons spent sitting on plastic chairs as officials eat noodles, lots of irrelevant questions etc. You have to really fight the 'cannot do' attitude of the government officials to get your company set up legally]

"The bottom line is, we absolutely support legislation, but would rather see an efficient system in place."

Foreign chamber representatives also discussed a new "nominee-monitoring" rule proposed by the Securities and Exchange Commission to force shareholders holding more than 5% in any listed company to disclose their identity.

Mr Van Haren said tighter regulations could affect foreign investment, but long-term investors were unlikely to be affected.

"Even among Asean countries, Thailand has many rivals. Foreign investors are increasingly talking about Vietnam. Investors are always looking for convenience, incentives, stability and good infrastructure," he said. "Tighter restrictions will cause many to think more carefully.