"Now that the draft law has been approved, I would like to ask the government for measures to facilitate foreign investment," JFCCT chairman Peter van Haren said yesterday.

He reiterated his statement on Monday by warning that the amended law might hinder future foreign investment because it would become protective. He asked the government to delay the amendment to restore foreign investor confidence in Thailand.

However, foreign firms would "have to respect the government's decision", he said.

The Cabinet yesterday approved the draft amendments to the Foreign Business Act, which received a mixed reception from both local and foreign investors.

Some said the draft law, which will be forwarded to the National Legislative Assembly for enactment, turned out to be less hostile than feared. "While we still await further details on the proposed changes, first indications are that the revision is somewhat less stringent than initially expected. The amendment brings the Thai direct investment regime broadly in line with international practice," said Frederic Neumann of HSBC Markets (Asia) Ltd.

Sources said most Japanese companies would likely be untouched by the new law because they are in manufacturing

and have received promotional privileges from the Board of Investment.

The US service firms that had been operating under the Treaty of Amity between Thailand and the US would longer enjoy benefits granted by the Treaty's investment clause. Free-trade talks, designed to supersede the investment clause in the treaty, have stalled. The revised law would put these US investors on the same playing field as other nationals.

Yoichi Kato, president of the local branch of the Japan External Trade Organisation, refused to comment on the law before seeing the actual draft.

"This government should guarantee transparency in policy formation. This is an obligation of the new government," he said.

Keisuke Matsumoto, secretary-general of Japan Chamber of Commerce Bangkok, said investors might have to rethink their plans. "Any change will affect investor confidence."

The chamber plans to form a special committee soon to discuss the direction of investment in Thailand after a series of incidents.

"The change of law shows that the government has 'unliberalised' to restrict foreign investors. So foreign investors feel uneasy about re-investing here," he said.

The amended act is likely to directly affect the telecommunications industry. Sigve Brekke, CEO of Total Access Communication (DTAC) and United Communication Industry (Ucom), said that whatever the change, the group is ready to comply.

The government earlier drew up a list of 13 companies, including Thai Telco and Kularb Kaew, to investigate for possibly violating the foreign business law by acting as nominees for foreign investors.

Thai Telco now owns 42.4 per cent of Ucom, while Telenor Asia holds 47 per cent. Ucom owns 43.1 per cent of DTAC, while Telenor Asia owns 32.6 per cent. Telenor Asia also owns 49 per cent of Thai Telco.

Recently a source close to Ucom said Telenor is seeking local partners for Thai Telco in the hope that they would make Ucom safe from the controversy surrounding foreign nominees.

A telecom source said the amended law gives only a couple of years for foreign shareholders to reduce their stakes. "Potential share buyers will have the upper hand to bargain for low prices as they know that you have to sell out the excess shares within one or two years to comply with the law," he said.

Darmp Sukontasap, senior vice president of Tesco Lotus, said it would be difficult to comment on how the amended Foreign Business Act would affect business until he gets hold of the actual draft.

"However, we are confident that our shareholding structure is in full compliance with existing laws and regulations. Our concern is more about the effect the amended law will have on the confidence of foreign investors and the Thai economy as a whole," he said.

"It has taken the Thai economy 10 years to be where we are now after the economic crisis of 1997. It would be a shame if we were to reverse all that we have accomplished," he said.

The supercentre chain operator has not seen the draft Retail Business Act either.

"Earlier we were assured that the final details of the draft would be shared with us. However, the next thing we learned was that it was all ready to be submitted to the Cabinet for approval and no details were forthcoming," Darmp said.

Somkiat Tangkitvanich, an economist with the Thailand Development Research Institute, described the draft act as a "step backward".

"It would affect foreign investors' decisions because it tightens the supervision on foreign businesses and barely gives any flexibility to investors. Besides, the government doesn't open up more sectors to foreigners. No new business is included in Annex 3, which is the most liberal category under the Foreign Business Law," he said.

Somchai Jitsuchon, another TDRI economist, said the draft law is more restrictive. "The government should consider the benefits of consumers as the top priority." For instance, the telecom industry is subject to more protection. Thai investors don't have technology and money to invest. "Eventually, it all comes down to customers receiving worse service," he said.

Santi Vilassakdanont, chairman of the Federation of Thai Industries, said revised rules wouldn't seriously affect investment in industry. "Newcomers will study the changing laws and compare other factors if they want to invest here," he said. "The existing ones would look for good partners rather than withdraw their investments."

No investors want to withdraw their investments if their operations are going well, he said.

Teerachon Manomaiphiboon, senior executive vice president of Property Perfect Plc, said a real-estate joint venture should not suffer from the new law because most of them strictly follow the law.

Professor Manop Bongsadadt, chairman of the International Real Estate Federation in Thailand, said the law would not dampen foreign investors' confidence to expand their investment in Thailand. He said now foreign investors who expand their investment in Thailand have to set up a joint venture with Thais to comply with the current law.

"Foreign investors have to form joint ventures with Thais because of the property law which limits foreign ownership. We think the revised law will create a level playing field in applying the law," he said.

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