Thailand's military-installed government has decided to reduce the ability of foreigners to control Thai companies. The decision, whose details have yet to be finalized, followed warnings by foreign businessmen that it could have a severe negative impact on the economy. As Ron Corben reports from Bangkok, the immediate effect was to send the Thai stock market tumbling.
Share prices on the Thai stock market fell 2.7 percent after the decision on foreign ownership of companies was announced.
Investors were already jittery after the interim government suddenly introduced controls on foreign capital last month. In that case, the stock market tumbled 15 percent. A military coup in September, and a series of bombings in Bangkok on New Year's Eve, have added to a general sense of insecurity.
The details of the new rules are still to be worked out, but initial word is that foreign investors will be allowed to hold no more than 50 percent of the voting rights in Thai companies. Foreign businessmen had warned the government against such a move, and were highly critical of it.
Foreign ownership in Thailand has always been limited in principle, but investors have typically gotten around the rules - with government consent - by giving a nominal majority of shares to Thai citizens, while retaining majority voting power for themselves. The new rules seek to close that loophole.
Finance Minister Pridiyathorn Devakul told reporters that investors holding more than a 50 percent stake in a company, or more than half the voting rights, would have up to two years to reduce their holdings.
Gary Woolacott, president of the Australian-Thai Chamber of Commerce, says foreign investors will now be expected to seek alternatives to Thailand, such as Vietnam and Malaysia, major rivals for foreign investment funds.
"The worry is foreign investors will find that Thailand becomes a marginal opportunity for investment," he said. "I have heard already of one Australian company that is delaying its plans to invest in Thailand. I suspect other companies will be similarly having to consider whether they come to Thailand."
Military-installed Prime Minister Surayud Chulanont told reporters the Council of State, the government's panel of legal advisers, would now work on the details of the law, "to ensure precision and transparency." He said it would be some time before the law took effect.
Analysts say the change appears to stem from the controversial sale last year by then-Prime Minister Thaksin Shinawatra of his family's shares in the telecommunications company Shin Corp.
Singapore's Temasek Holdings, which paid $3.8 billion for Shin Corp., was able to take control with nominee-owned companies of the type now being outlawed.
The Thaksin family paid no tax on its windfall profit from the sale, and the deal was highly unpopular with the public. The September coup was aimed primarily at Mr. Thaksin, and the military leadership has vowed to investigate alleged corruption by him and his cronies.
An examination of the Shin-Temasek deal, it is believed, led the government to look into foreign ownership of companies in general.