ATTA fears investor invasion

BANGKOK, 3 May 2013: Thailand’s travel agency association will demand the government maintains a law that limits foreign investment in travel companies to 49% even after the ASEAN Economic Community kicks in December 2015.

Association of Thai Travel Agents vice president, Chidchai Sakornbadee, said the country should keep the 51%:49% ratio as stated in the Act of Tourism and Guide Registration 2008.

“Although the AEC regulation will allow ASEAN members to hold 70% of the equity in ASEAN countries, we should find the way to maintain the allowance at 49%, he said. “If we allow foriegners to hold the majority local shareholders will gain nothing from the business.”

He claimed there was widespread support for the exclusion on travel company shareholding.

However, despite the present law foreigners are already controlling companies through nominees.

In addtion, major tour companies, worldwide, will be able to own 70% of any ASEAN travel firm by simply establishing a firm in Singapore where they can hold 100% of the shares.

The Singapore backdoor will then open  the entire ASEAN business market to international firms that can take up  70%  of the equity in other ASEAN nations.

Thailand was the last country in the 10-member bloc to sign off on the AEC leaving very little room to change the ground rules that have already been agreed and will become law in December 2015.

Companies registered in Singapore pose the major risk as they can be owned 100% by a foreign entity, which is then free to move to other ASEAN nations taking up a 70% stake in local travel firms.

In other ASEAN nations, laws apply to ensure local investors hold the majority 51%, which in turn would dilute the equity percentage for a foreign partner if the company expanded and bought a 70% stake in other ASEAN nations. The non-ASEAN foreign partner would hold 49% of a the 70% stake and not 49% of the entire company ‘s stock.

For a non-ASEAN tour operator establishing  a company in Singapore under the 100% rule  is a better option if they have regional ambitions. They can then expand to other ASEAN nations and hold a  majority 70% through joint ventures and have just one local partner.

They would have to be registered as a company in Singapore and demonstrate that they traded and paid tax in that territory.

In the hotel industry there are some controls that limit the sectors under the 70% rule.

Thai Hotels Association consultant,  Udom Srimahachota, said according to the 8th edition of the AEC agreement, ASEAN investors will be allowed to hold share up to 70% in tourism business but in the hotel industry, Thailand limited the scope of the investment to high star rated hotels.

“The Thai parliament has already approved that agreement to allow ASEAN investors to hold  70%, but only for six-star hotels of 100 rooms or more with an investment of at least Bt20 million per room.”

In addition, the land title deed and license must belong to a Thai citizen who is permanently resident in Thailand.

“The Ministry of Tourism and Sports then has to set the six-star hotel standard and regulation in terms of protecting the hotel business for Thailand,” he said.

Similar investment zoning was not applied to the travel agency business, obviously because it is difficult to star-rate or segment the industry into areas that could be restricted to Thai ownership.

Although the ATTA vice president says there is cause for concern, the avenues to reverse the agreement in AEC are few and the time required to approve an amendment or exclusion for a country, while not impossible, would be lengthy.

The recent controversy over Russian investors taking full control of local travel firms prompted the association to express concerns that investors were finding loopholes in the law mainly by recruiting nominees who hold a batch of shares, but privately sign over the authority to foreign shareholders.

Sourced: ttrweekly