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Published on November 27, 2007

European Commission (EC) director-general for trade Philippe Meyer said last weekend in Bangkok that the EU was watching developments here with mounting concern.

He said the legislation amounted to an attempt by Bangkok to restrict foreign companies doing business here.

"We used to think the foreign-business law might affect 1,000-2,000 companies. But now it appears it might affect even more," Meyer said.

Meyer criticised the lack of transparency in the legal process here. He said outsiders were unable to see the wording of legislation or receive information about the directing in which laws were headed.

"We don't get the legal text [of laws] on time or know how it will look like. We don't know, either, how it will evolve," he said.

He added that the foreign business community had insufficient consultation with the government over the legislation.

The two bills passed their first readings in the National Legislative Assembly after several rounds of squabbling among legislators. The government and local-business lobbyists are keen to see passage of both for the protection of local industries. They hope to pass them within the term of the current government.

Yet foreign companies and governments view the two laws negatively, because they will further restrict business in Thailand.

The foreign-business legislation in particular will be enforced retroactively.

Meyer and Seamus Gillespie, head of Southeast Asia for the EC's External Relations Directorate, suggested Thailand and the EU already enjoyed broad, sound bilateral relations, so Thailand should not adopt a protectionist trade policy.

Gillespie said the EU valued its relations with Thailand.

"Thailand's role in Asean is also increasing; next year, Thailand will

chair Asean. This will bring Thailand into closer contact with the EU," he said.

"Thailand has a good image in Europe, and we're watching the December election closely. We hope everything will go well."

At present, bilateral trade between Thailand and the EU reaches about 21 billion euros (Bt1 trillion) annually, with Thai exports worth ¤14 billion and EU imports worth ¤7 billion. The trade balance is heavily in Thailand's favour.

Meyer said the EU offered Thailand unilateral action on its preferential tariff regime under the Generalised System of Preferences (GSP), which further helps facilitate exports to the EU.

Thailand is one of the 10 largest benefactors of EU GSPs, apart from receiving more than ¤7 billion in foreign direct investment.

"In this good context, we want to proceed with a more bilateral trade system with Thailand as we move toward more free trade," said Meyer.

Attempts to pass the Foreign Business Act have been controversial and attracted strong resistance from the foreign business community in Thailand.

The government wants to make rules clear once and for all regarding the definition of foreign ownership, the types of businesses in which foreign ownership is restricted and rules barring foreign companies from using nominees or other means to circumvent regulations.

Authorities argue foreign companies still have great flexibility to do business in Thailand and that the Foreign Business Act will not affect operations as they fear.

However, Meyer said the act lacks predictability - something businesses do not like - and adequate consultation with the foreign business communities as well as transparency. The wording of the law is changing all the time, too, he said.

Of the retail-business law, Meyer said it was difficult for outsiders to obtain access to the text in a timely fashion and that companies were not sure how to manage their business.

While the law may help protect one particular sector - local retailers - it affects consumers and the competitiveness of Thailand as a whole, because it is aimed at restricting competition, he said.

Meyer said the way out was for Thailand to delay adopting the two laws. They need further consideration. It is more appropriate to let a newly elected government deal with them in a more transparent atmosphere.

Thanong Khanthong

 The Nation