Thailand's finance minister tried yesterday to reassure foreign investors about proposed new rules limiting foreign ownership of Thai companies, saying that many foreign firms would be exempt from the rules and that the details of the government's plan could be flexible.
Finance Minister Pridiyathorn Devakula said that the government would stand by the main framework of a planned amendment to the Foreign Business Act, which would limit foreigners' shareholding and voting rights in telecommunications companies and other sectors deemed vital to national security to less than 50 percent.
The draft law, which still needs parliamentary approval, mainly applies to service industries, while most foreign companies are in industrial and export sectors, he said.
Retailers would be exempt from the law, though they will still be required to report foreign shareholding and voting rights to the government. Banks, securities firms and tourism companies are governed by separate laws with varying rules on foreign participation.
The plan unveiled on Tuesday called for a two-year grace period to comply with the proposed rules, which would be retroactive, meaning they would apply to pre-existing conditions.
Asked whether the two-year deadline could be extended to three to five years, Pridiyathorn said: "I don't know. We've got to talk reasonably."
"There could be some minor adjustments in implementation" of the plan, he said during a morning interview that was broadcast live on radio and television.
But he added: "We cannot entirely cancel the voting rights rule because that is the main principle -- and foreign companies have been using that to skirt the law all along."
Under the existing law, many foreign investors have used nominee shareholders with limited voting rights to retain control of local companies while staying within limits on shareholding.
The Cabinet on Tuesday approved plans that call for major foreign investors in telecommunications companies and other sectors deemed vital to national security to sell off shareholdings that exceed 50 percent and give up voting right in excess of 50 percent.
Critics say the new rules have cast fresh doubts on the current government's commitment to attract foreign investment, following much-criticized capital controls it imposed last month to curb the baht's appreciation.
Investors have also been spooked by a string of New Year's Eve bombings in Bangkok that killed three people and prompted a brief sell-off.
Thai shares fell as much as 1.3 percent at yesterday's opening on heavy selling of energy and telecommunications blue-chips, but then recovered some to post a morning decline of 0.6 percent at 613.28 points.
The market dropped 2.7 percent on Tuesday.
The government has not said why it is pushing the latest measure to limit foreign ownership.
But the move is widely perceived as a reaction to the controversial Shin Corp deal in January last year, in which ousted Prime Minister Thaksin Shinawatra's family sold a majority stake in the telecommunications company to a Singapore state-owned enterprise.
The Shin sale drew widespread protests in Thailand because it placed strategic assets, including communications satellites, in the hands of foreigners, and because the deal was structured so that Thaksin's family did not have to pay capital gains taxes on it.
Thaksin was ousted in a coup in September.
The current government was installed by coup leaders and is expected to govern until elections scheduled for October.
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