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Foreign Business Act Thailand: Easing Restrictions for Foreigners
11/06/2024
Thailand’s foreign business landscape has undergone significant changes in recent years, with the government taking proactive steps to attract international investment and promote economic growth. At the centre of these developments is the Foreign Business Act Thailand (FBA) of 1999, which is the primary regulatory framework governing the operations of foreign businesses in the country.
However, the Thai government has recognized the need to adapt to the changing global business environment and has announced it is considering several amendments to the FBA to ease the restrictions on foreign business activities.
Key points
- Thailand is considering amendments to the Foreign Business Act (FBA) of 1999 to ease restrictions on foreign business activities and attract more international investment.
- Key proposed amendments include exemptions for futures trading of agricultural products, brokerage and agency businesses, and other services under List Three of the FBA.
- The reasons behind the proposed amendments are to streamline regulations, promote technology transfer, and enhance workforce productivity.
- The Draft Royal Decree and Draft Ministerial Regulation containing the proposed amendments are currently under public consultation and review.
- If approved, the amendments could provide foreign businesses with expanded opportunities, a simplified regulatory landscape, increased technology transfer, and improved competitiveness in Thailand.
What is the Foreign Business Act Thailand (FBA)?
The FBA is the centre of Thailand’s regulatory framework governing foreign business activities. The Act imposes strict limitations on the types of businesses that foreign entities can engage in, requiring them to obtain a Foreign Business License (FBL) before commencing operations in the country.
Under the FBA, foreign businesses are prohibited from operating in certain sectors, which are categorized into three main lists: List One, List Two, and List Three. List One encompasses activities that are strictly reserved for Thai nationals, while List Two and List Three outline activities where foreign participation is restricted or prohibited, respectively, unless an FBL is obtained.
For more information, please see our blog post on the FBA here.
What are the Proposed Amendments to the FBA?
In recent years, the Thai government has recognized the need to address the evolving business landscape and has proposed several amendments to the FBA. These proposed changes aim to ease the restrictions on foreign business activities and attract more international investment to the country.
Revisions to List Three (13) – Futures Trading of Agricultural Products
One of the key proposed amendments relates to the exemption for the futures trading of traditional agricultural products, which falls under List Three (13) of the FBA. The current exemption allows for the domestic trading of traditional agricultural products, excluding futures trading in the Agricultural Futures Exchange of Thailand that involves the delivery or taking delivery of the commodities.
The proposed amendment hopes to expand this exemption to include the futures trading of traditional agricultural products in the Derivatives Exchange, as long as the delivery or taking delivery of the agricultural products is done through the warehouse system determined by the Derivatives Exchange. This change is intended to facilitate foreign business operators who wish to engage in the futures trading of traditional agricultural products without the need to obtain an FBL.
Exemptions for Businesses under List Three (11) and (21)
The Thai government has also proposed exemptions for businesses falling under List Three (11) and (21) of the FBA. These exemptions include the following:
List Three (11) – Brokerage and Agency Business
- Telecommunications service business for Type 1 Telecommunications License
- Treasury centre business under the exchange control law
- Software development business with specific qualifications
- Service businesses in relation to administrative management, human resource management, and information technology management provided to a Juristic Person with Related Relationship
- Service business with respect to a guarantee of a domestic loan for a Juristic Person with Related Relationship
- Service business with respect to the lease-out of a part of space for installation of an electronic machine used in financial service provision or automatic vending machines to provide services to facilitate the company’s employees
- Service business on petroleum drilling
- Other businesses under the Securities and Exchange law
- Other businesses under the derivatives law
List Three (21) – Other Businesses
The proposed exemptions for businesses under List Three (21) are still under consideration and may undergo further amendments.
What is the Reason for the Proposed Amendments?
The main reason behind the proposed amendments to the FBA are:
Avoiding Redundancy in Regulatory Requirements
The Thai government hopes to streamline the regulatory landscape by aligning the FBL requirements with the sector-specific regulations administered by other government agencies. This move is designed to create a more efficient business environment for foreign investors.
Promoting Technology Transfer and Workforce Productivity
The proposed exemptions are designed to encourage the transfer of technology and expertise from foreign business operators to Thailand, particularly in high-value sectors. This is expected to contribute to the improvement of the country’s workforce effectiveness and productivity, ultimately enhancing the overall competitiveness of the Thai economy.
What are the Next Steps?
The proposed amendments to the FBA, including the Draft Royal Decree and the Draft Ministerial Regulation, are currently in the public consultation phase. The public hearing process for the Draft Ministerial Regulation was concluded on March 15, 2024, and the Thai government is now reviewing the feedback and finalizing the regulations.
Once this has been completed, the Thai government will submit the Draft Royal Decree and the Draft Ministerial Regulation to the Council of State for review and approval.
The final versions of these regulations are expected to be completed by the end of 2024.
What are the Implications for Foreign Businesses?
The proposed amendments to the FBA represent a significant development in Thailand’s efforts to create a more favourable business environment for foreign investors. If approved, these changes will provide foreign businesses with greater flexibility and opportunities to engage in a wider range of activities within the country, without the need to obtain an FBL.
Some of the key implications for foreign businesses include:
Expanded Opportunities in Futures Trading of Agricultural Products
The proposed exemption for futures trading of traditional agricultural products in the Derivatives Exchange will open up new opportunities for foreign businesses, without the administrative burden of obtaining an FBL.
Simplified Regulatory Landscape
The alignment of the FBL requirements with sector-specific regulations will streamline the approval process, reducing the time and resources required for foreign businesses to establish operations in Thailand.
Increased Technology Transfer and Workforce Development
The exemptions for high-value business sectors, such as software development and IT management services, are expected to facilitate the transfer of technology and expertise from foreign businesses to Thailand, ultimately improving the skills and productivity of the Thai workforce.
Improved Competitiveness
The proposed amendments are part of Thailand’s attempts to create a more attractive and competitive business environment, which will hopefully lead to increased foreign direct investment and economic growth.
How can Belaws help?
For more information about the foreign business act in Thailand, why not talk to one of our experts now?
Please note that this article is for information purposes only and does not constitute legal advice.
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Frequently asked questions
What is the Foreign Business Act Thailand?
The Foreign Business Act (FBA) is Thailand’s primary law governing foreign business operations in the country. It imposes restrictions on the types of businesses foreign entities can engage in and requires them to obtain a Foreign Business License (FBL) for most activities.
What are the proposed 2024 amendments to the FBA?
The proposed amendments aim to relax restrictions on foreign business activities by exempting certain businesses from the FBL requirement. This includes futures trading of agricultural products, brokerage and agency businesses, and other services listed under List Three of the FBA.
Why is Thailand making these changes on the FBA?
Thailand is aiming to create a more attractive business environment to attract foreign investment and stimulate economic growth. The amendments are also intended to streamline regulations and promote technology transfer.
What is the current status of the amendments?
The proposed amendments are currently under public consultation and review. The final regulations are expected to be completed by the end of 2024.
How will these changes affect foreign businesses?
If approved, the amendments will provide foreign businesses with expanded opportunities, a simplified regulatory landscape, increased technology transfer, and improved competitiveness in Thailand.
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