FINANCE LIBERALISATION: Cabinet baulks on alien law changes
Published on October 18, 2005
Amendments to enable foreign competition taken off agenda. Commerce Minister Somkid Jatusripitak said yesterday that proposed amendments to the Alien Business Act would not be presented to the Cabinet today, apparently because of growing public resentment about further opening up the country to foreign investors.
Somkid did not elaborate on why he had backtracked. The proposal was pencilled in for today’s Cabinet meeting agenda.
Academics and opposition politicians over the weekend assailed the proposed amendments, which came to light at the same time as the government is negotiating a free-trade deal with the United States. One of the sectors that Thailand has been asked to open up further under the FTA is the financial sector. Many quarters believe that Thai companies would be at a disadvantage to foreign players who have stronger financial bases and advanced information-technology systems.
But, according to an official at the ministry’s Business Development Department, the amendments have been under review for some time and the Juridical Council has even approved them.
“It has nothing to do with the Thai-US FTA. We are doing this to reduce redundancy. To operate the necessary services, they need licenses and they would come to us only for approval to register new companies. The amendments say that they do not need our approval, but they still need business licenses,” said the official, who asked for anonymity.
The amendments cover 20 businesses: banking, lending, insurance, securities companies, securities trading, warehouses, schools, theatres, underwriting, investment advisory services, mutual funds, private fund management, provident fund managers, securities borrowing & lending, securities-related lending, public offering advisory services, securities agents, securities registrars, mutual fund trustees, and bondholder custodians. If the amendments take effect, all of the businesses can be operated entirely by foreigners.
The Bank of Thailand currently governs the banking business, while the Securities and Exchange Commission (SEC) oversees securities-related businesses. Both carry out their regulatory roles under particular laws that define the foreign ownership of each business, the Commerce Ministry official said.
Bank of Thailand Governor MR Pridiyathorn Devakula yesterday brushed aside fears over foreign domination. “Foreigners can’t compete with Thais. Thais are talented,” he said.
Meanwhile, Nataya Niyamanusorn, director of SEC secretary-general’s office, said that neither the proposed amendments, nor the trade pact with the US would have much of an influence on the Thai securities industry, which has already been opening up.
She noted that under current law, foreigners can already own 100 per cent of mutual fund and securities companies.
“Still, we’re cautious about letting foreign companies raise funds in Thailand. We have to discuss this with the central bank,” she said.
A source at the Finance Ministry said that the proposed amendments are meant to speed up the next round of Thai-US trade talks, which should take place in December or January.
“We are not being forced to open the financial sector because the US understands that we need more time to improve local players. They just want to know the exact timeframe for when Thailand will be ready for foreign penetration,” he said.
While Thailand may need to open up its financial sector, it stands to benefit from the expected increase in exports of food, textiles, footwear and shrimp to the US, he said.
Democrat MP Kiat Sitthi-Amorn said that before further opening up the financial sector, the authorities should be fully certain of Thailand’s competitiveness in those areas, particularly in the insurance business as well as securities lending.
“If this is to be done under the FTA framework, the government should better inform the public of the advantages and disadvantages,” he said.
Senator Niran Phitakwatchara also voiced his concern over the proposed legal amendments and said that the Senate Committee on social development and human security would today discuss the issue.
“I’m not sure if the prime minister’s recent overseas trips are meant to attract foreign investors and give them a chance to take over Thai businesses,” he said.