The hoops and hurdles of doing business in Thailand

Updated On: Nov 14, 2006

There seems to be no end in sight to the long-running Temasek-Shin Corp fiasco that purportedly set in motion the movement to topple Thaksin. This may deter foreign investors who seek entry into the Thai market.

Even as Thaksin seeks refuge in London, and has recently been told by incumbent PM Surayud to “wait another year” before returning to Thailand, the corruption scandal revolving around Temasek’s buy-over of Shin Corp continues unabated. This is despite Surayud’s insistence that the Thai government will not interfere in this commercial transaction and that he will abide by the Thai court rulings, Singapore continues to maintain that Temasek’s purchase of Shin Corp was “completely above board and can withstand any investigation”, according to Singapore’s Minister Mentor Lee Kuan Yew.

Just last week, Temasek has agreed to abide by the pending Thai decision on the nominee issue after the two respective governments’ discussion when Surayud visited Singapore last Thursday. An anonymous investment banker close to the deal told the Nation that “The Singapore side has agreed to look upon the Shin Corp deal as ‘'commercial’ [and] are willing to take a loss on this deal” so as not to create a rift in the good bilateral relations both sides have customarily enjoyed.

Nonetheless, Temasek looks set to suffer substantially not only monetarily, and in potential losses if “Shin's flagship unit, Advanced Info Service, is found to have benefited from ‘policy corruption’ under the previous administration”, and in the finding of a local partner due to the political sensitivities involved, the Nation reported.

Now that Thai Finance Minister Pridiyathorn Devakula has announced that foreign investment and nominee laws will be amended and time will be given to foreign investors to comply, the latter are obviously worried. On a separate issue, Thai Commerce Minister Krik-Krai Jirapaet has announced, “Tesco-LotusBritain's biggest retailer, has agreed to halt its expansion in Thailand for three months.” This comes in the wake of a row in which foreign-owned big retailers like France’s Carrefour have been involved. Small Thai businesses “[have complained] the giant supermarket chains are driving them out of business”, the Nation noted. “The decision to give up store expansion is a good sign the firm is willing to work together with the government to solve the problem,” he added.

Still, a few observers say that the horizon may brighten for foreign investors. How this will pan out for foreign investments in Thailand remains to be seen. Shawn Crispin of the Asia Times has noted that “Standard & Poor's and Fitch Ratings provisionally placed Thailand on a so-called rating watch negative list after the coup, but both credit-rating agencies retracted their alarm after new Prime Minister Surayud Chulanont consolidated his power and appointed well-respected technocrats to key economic and finance portfolios. Now, a growing number of foreign investment banks have revised up their Thailand economic growth forecasts for 2007 from below 4% to near 5%, on expectations that the recent 25% decline in global oil prices will spark a new consumption and investment cycle”. He also lauds Surayud’s sound economic policies and predicts it bodes well for Thailand.

Participants at this week’s “Open House with Economic Ministers” seminar has felt some relief after the interim government's economic team clarified “policies that had weighed heavily on their minds, particularly the mega-project plan, foreign nominees and the true meaning of the sufficiency economy”, the Nation reported. Nevertheless, doubts naturally remain. While Surayud stresses a public administration based on tenets of good governance, like accountability, transparency and equal income distribution, and the welcoming of foreign investment based on fair laws, it is uncertain what the “sufficiency economy” Thailand is headed towards really means. It could very well mean a tighter control of the economy, with a close watch on foreign investors and a limitation on their actions –such as the postponed venture with Tesco.  The new government also looks set to trim several of Thaksin’s grand projects.

On a separate issue, Thaksin's children, Panthongtae and Pinthongta Shinawatra, have been ordered to pay 11.7 billion baht over a sale of shares in Shin by March 2007.


Britain's Tesco suspends Thai expansion over retail row (Nation, 13 November 2006)

Tesco Thai unit to halt expansion (Business Times Malaysia, 13 November 2006)

PM to Thaksin: Wait another year (Bangkok Post, 13 November 2006)

Shin Corp Temasek 'is ready to swallow its medicine' (Nation, 13 November 2006)

Surayud prescribes good governance for growth (Nation, 13 November 2006)

Chamber of Commerce boss backs 'sufficiency economy' (Nation, 12 November 2006) 

Thaksin children to defend share buys (Bangkok Post, 12 November 2006)

Thaksin kin facing huge bills (Bangkok Post, 11 November 2006)

CS Loxinfo seeks policy clarity (Bangkok Post, 11 November 2006)

Noose tightens (Nation, 11 November 2006)

Ministers ease worries over direction (Nation, 11 November 2006)

Shin Corp's profits slide to four-year low (Straits Times, 11 November 2006)

Saluting Thailand's military-run economy (Asia Times Online, 10 November 2006)

Temasek may cut stake after Thai law changes (Bloomberg News, 9 November 2006)

Thailand to revise foreign investment laws (IHT, 8 November 2006)

New government trims Thaksin’s grand projects (Straits Times, 14 November 2006)