www.eabc-thailand.eu

European investors are very worried about the latest reports that the Ministry of Commerce and the Thai Chamber of Commerce suggest changing the Foreign Business Act in particular regarding foreign shareholding. This initiative comes at a very bad time when the Thai economy is struggling for growth. “This is detrimental to the global trend and will certainly have serious impact on the Thai economy, its labour force and investments from Europe.” Mr. Rolf-Dieter Daniel, President of EABC noted. EABC (European Association of Business and Commerce) represents the views of European Businesses in Thailand and has established 10 working groups in close dialogue with the Royal Thai Government, EU Institutions and Chambers of Commerce.
 
As countries develop and become more prosperous, the contribution from the services sector becomes the most important part of their GDP by a significant portion (e.g. more than 70 per cent of GDP in cases of US, UK, Australia and Japan). The underlying message is that growth in the services sectors have been recognised as playing a key role in the economic advancement of the majority of developed economies. “Liberalizing the service sector to foreign business would greatly advance the Thai economy and restart a new growth cycle since services industries are considered to be the economic growth engines of the future” Mr. Daniel stated.
 
EABC is concerned the same proposals as in 2007 are raised again which had negative economic impact at the time. Implementing such changes to the FBA will likely lead to an exodus to other ASEAN countries in particular in such sectors like ICT, Health Care, Insurance, transport, logistics and distribution. “While other ASEAN countries are opening up their services sectors in view of the AEC integration, Thailand seems to go the other way and thus giving a wrong signal to European investors that direct foreign investment to the country remain even more restrictive in particular in services” Mr. Daniel said. That is also bad news for Research and Development projects that Thailand requires urgently to bridge the middle income trap. Thai companies spend far below global average on R&D. EABC is therefore advocating for a better protection of Intellectual Property Rights (IPR) to obtain new technologies and an easing of  the work permit and visa regime to attract high level professionals. “For Thailand to overcome the middle income trap, its service sector is in dire need for an infusion of new skills and technologies to increase the productivity of workers” Mr. Daniel continued.
 
European investors are surprised that under the WTO framework no consultation with GATS trading partners took place. This might have negative implications on the ongoing negotiations of a Free Trade Agreement between Thailand and the EU.In addition Thailand will not be in a position to compensate for the expiration of GSP privileges in particular for agricultural products resulting in permanently higher cost for imported Thai products to the European Union. “EABC is worried that such additional restrictions on foreign ownership for European investors will have a negative impact on the FTA negotiations between Thailand and the EU”. Mr Daniel elaborated.
 
In the EABC Position Papers we clearly show a way out of the middle income trap by liberalizing the service sectors and working towards a more competitive economy. “The use of preferential voting shares is totally legal andby prohibiting such arrangement it will send a wrong message to investors. Only by liberalizing the services industries and improving the competitiveness of its economy Thailand can retain its current FDI position within ASEAN and attract new European investment. It should be noted that Europe is the largest investor in ASEAN but only the 3^rd largest in Thailand. So there is room for improvement if the right policies are implemented” Mr. Daniel suggested.