Foreign investors worry about Thai junta's moves


Mon, Feb 19, 2007 - Page 5

Thailand's move to expand its generic drug program has jolted the pharmaceutical sector, but has also sparked fears among investors that the government could now change the rules for other industries, analysts said.

The army-installed government decided last month to allow imports of cheaper, copycat versions of a top-selling heart disease drug and an AIDS drug from India.

The move was hailed by charity Doctors Without Borders as an encouraging precedent for developing countries. Thailand offers universal health care and has been credited by the UN as having one of the best anti-AIDS programs.

Pharmaceutical firms have voiced outrage but some economists said the impact could reach beyond the drug industry.

"This is not just for pharmaceutical companies, but other investors outside the pharmaceutical industry see this and wonder whether the investment environment in Thailand is changing for [the] worse," said Bob Broadfoot, managing director of the Political and Economic Risk Consultancy in Hong Kong.

"They are worried this could happen to their industries," he said, adding that major foreign-owned businesses such as car makers and electronics firms have also become worried about the government's recent policy shifts.

Since the September coup the junta has made a host of miscues, including currency rules that have battered the stock market, leaving investors weary of its economic management.

"Foreign [business] communities in Thailand have been trying to have a dialogue with the government for months on issues like the generic drugs, but the government is not listening. I don't know why," Broadfoot said.

Thailand's top pharmaceutical industry group warned it might take legal action.

"It was a quite big shock to us. The decision was made unilaterally without any consultation," said Teera Chakajnarodom, president of the Pharmaceutical Research and Manufacturers' Association of Thailand. "Since this government is not elected, they may think that they can do whatever drastic things they want."

Teera expected the government to break the patents of an additional 11 drugs, including treatments for AIDS and cancer. The health ministry declined to confirm Teera's claim, but said its action was legal under the WTO.

But Albin Liew, a senior economist at United Overseas Bank, in Singapore, said foreign businesses outside the pharmaceutical industry were worried about how the issue was handled.

"The motive for their action is good, but the decision was made so unilaterally. Now big industries like auto, high-tech and textiles are concerned about sudden changes of business rules," Liew said.