Kularb Kaew - the 'glass rose' thorn in the Shin deal
A rose is a rose by any name. But what about Kularb Kaew (glass rose)? The person who planted Kularb Kaew might think the rose needs extra protection, because its thorns are not sharp enough.
The glass on the leaves of the rose is probably intended to provide an additional shield against the many people in this country who are suspicious of their neighbours.
If that is the case, then Kularb Kaew was not real from the outset, but does that matter? Only in Singapore can a glass rose grow.
Officials from the Commerce Ministry are afraid that Kularb Kaew might cut their fingers. They are still figuring out the legal status of Kularb Kaew Co Ltd. Is Kularb Kaew a Thai company or an alien company? If it were to be proven that Kularb Kaew violated the alien business law, then the whole Shin Corp deal could fall apart.
A preliminary probe by the Commerce Ministry reportedly found that Kularb Kaew violated the alien business law. Shin Corp, through its subsidiaries, owns concessions or licences from the government - from a television station (iTV), a mobile-phone service provider (Advanced Info Services), a satellite company (ShinSat), to a commercial aviation firm (AirAsia).
Only majority Thai-owned companies are entitled to hold these concessions or licences, which would otherwise be revoked. Temasek of Singapore set up Kularb Kaew as part of its attempt to take over Shin Corp, worth around Bt140 billion. To qualify as a Thai company, Pong Sarasin and Suphadej Poonpipat were invited in as Thai shareholders controlling a 51 per cent stake in Kularb Kaew, with Cypress Holdings, controlled by Temasek, holding the remaining 49 per cent.
Later, following the controversy surrounding the legal status of Kularb Kaew, Surin Upatkoon moved in to buy 58 per cent of Kularb Kaew. He claimed in a recent interview that he was not acting as a nominee for Singapore.
Cypress Holdings and Kularb Kaew hold, in turn, 49 per cent and 41.1 per cent respectively in Cedar Holdings. Siam Commercial Bank holds the remaining 9.9 per cent.
Cedar Holdings bought 38.9 per cent of Shin Corp from the Shinawatra and Damapong families, while 10.97 per cent was purchased by Aspen Holdings, also controlled by Temasek, in the deal worth Bt73.3 billion.
Both companies later tendered for 100 per cent of Shin on the stock market, eventually racking up the overall value of the deal to nearly Bt140 billion.
A political crisis was set off shortly after the Shinawatra and Damapong families sold control of Shin in January this year. Prime Minister Thaksin Shinawatra was accused of selling Thai assets to Singapore. The growing uproar led to the dissolution of Parliament the following month and a snap election held on April 2. But the Constitution Court later nullified the poll and Thailand has been drifting in a political void ever since, with the prime minister fighting for this political survival.
The Shin Corp deal has highlighted the use of nominees in Thailand. Nominees are common in Thai businesses. They are used to circumvent the ownership requirements under Thai law. Nominees are not all good or bad. At any given time, the foreign shareholding structure in Kasikornbank could breach the 50 per cent barrier as the bank's stocks are traded freely on the stock market. Foreign holdings, at times held by nominees, in Kasikornbank, can also dip below 50 per cent at any time depending on the sentiment of foreign investors toward the Thai market as a whole.
Thai law governing land ownership permits only a Thai national or a majority Thai-owned company to own land. If Thai shareholders in a Thai-owned company sell their stakes in a company that owns land in Thailand to foreigners, the law requires the director-general of the Land Department to put that piece of land up for sale within one year. But if, during that year, foreign investors are able to find Thai partners to buy into the company so that it is once again majority Thai-owned, then there is no need to auction the plot of land. This one-year timeframe provides a cooling period for all parties to conform to the law.
In Phuket, Samui and Hua Hin, foreigners freely buy luxury homes, although legally they are barred from owning land in this country. Real estate developers have circumvented the law by setting up companies using Thai nominees. The foreigners who buy these homes own the land through nominees. They may own a 49-per-cent stake in the nominee firm, but in reality they have 100 per cent control.
The case Kularb Kaew is rather complicated due to the political crisis, with the prime minister in the spotlight. Although Thai shareholders on paper hold a majority interest in Kularb Kaew, more than 90 per cent of the voting rights belong to Singaporean shareholders. This, along with other dubious issues, such as the sources of funding used to set up the company, has raised questions as to whether Kularb Kaew is a Thai or an alien firm. If Kularb Kaew were to be deemed an alien company, what would happen then? The Shin Corp deal is also sensitive because the company holds concessions and licences, which normally would not be awarded to a foreign company. Television stations, satellite companies, mobile-phone operators and the aviation companies are all identified as strategic industries with ties to national security. A Thai just can't go to Australia or the US to ask for a licence to operate a television network. The US recently barred a company from the United Arab Emirates from buying into its ports. The mobile-phone concession, the budget airline's licence, the satellite concessions and the TV concession were awarded to the subsidiaries of Shin Corp on the understanding they were Thai-owned companies. But when the Shinawatra and Damapong families, and other minority shareholders, sold Shin Corp to Temasek via the stock market, the ownership status of Shin changed overnight and it became a foreign-owned firm.
How are the authorities going to resolve this complex issue of ownership and nominees involving the freewheeling stock market? I can only raise the question at this point, and don't have the answer yet.
But at the end of the day, Thailand must define businesses that are of concern to the security of the nation so that Thai nationals or Thai interests control these crucial entities. We may get it right or wrong while controlling these businesses, but as a country it is inevitable that we will have a policy on national security as it relates to certain businesses.