Foreigners Still Can’t Farm

A few weeks ago, Thailand’s Prime Minister, Aphisit Vejjajiva, announced that indeed foreign nationals are not permitted to engage in rice farming or livestock nor own or lease any agricultural land pertaining to such industries. It appears this announcement came about due to some serious interest by investors in the Gulf region. The Gulf Co-operation Council (GCC) states which comprises of countries such as Kuwait, Oman, Qatar and Saudi Arabia had expressed a desire for some of the current laws in Thailand to be liberalized as food scarcity concerns are high on the agenda for the arid residents in the region. The lack of suitable farming area in these countries has meant that they are required to find alternative means to ensure a secure supply of agro-products to sustain their future development.

Despite such requests, it appears that Aphisit Vejjajiva made a statement confirming that such practice is reserved only for Thai nationals. This was probably not such a great surprise in that the existing Foreign Business Act of 1999, which incidentally hasn’t changed, stipulates that this area of business is restricted to Thai nationals for special reasons. Indeed, rice farming is considered a national icon and in many ways represents the quintessential core of Thai identity. It is perhaps something the Prime Minister is aware and sensitive towards. However, whether the continuance of such control measures under the FBA is considered healthy for our FDI and our economy in general remains to be seen. Over the past month, we have seen neighboring Malaysia taking sweeping measures to liberalize its foreign investment policy allowing foreign nationals and companies more rights to invest in the country without mandatory local participation. Prime Minister of Malaysia, Najib Razak, was quoted as saying that in order for Malaysia to develop, it needs to welcome foreign investment, particularly in light of the current financial crisis. Malaysia has its own set of ethnic tensions which may have instigated such a change in policy but liberalizing the market seems to be a good step in the right direction for the South East Asian region.

One of the good things that came about this year, however, was the announcement made by Mr. Vejjajiva that the rather controversial amendments to the FBA, which was instigated by the interim government, will not ensue. The Prime Minister gave the foreign business community much relief by stating that his administration will not seek to amend or modify the Foreign Business Act as it desires to maintain an investment-friendly environment. This probably didn’t have too profound an effect as the existing FBA is already rather restrictive as it is but at least it’s a good sign of things to come.

Going back to the request by certain Arab investors to liberalize the rules relating to rice farming, Mr. Vejjajiva further noted that although direct engagement in this business by foreign nationals are not permitted, they may certainly engage in business which involves research and development, processing and other means of improving agriculture technology. Further, foreigners are free to enter into joint venture agreements with Thai nationals who hold the majority of the shares in the company. Thus it appears Thailand is still taking a rather steadfast approach when it comes to foreign business investment and it remains to be seen whether such restrictions will still entice foreign investors to bring in their money during this much needed period.