How many people have actually told you about the restriction on foreign business in Thailand? None? That’s what! You will find hundreds of articles talking about all that is allowed in Thailand for foreigner investors. But hardly will anyone speak about the restrictions. I know how saddening it is to get rejected for doing business in Thailand after being all excited reading the articles that talks about the privileges.
Coming to the Thai law, the Foreign Business Act (1999) limits foreign participation on a few businesses. Note that the restrictions imposed on the foreign businesses are ascertained on a certain percentage of the total number of shares. Usually, there are 3 business sectors, wherein the majority of the foreign participation is restricted;
- Businesses related to agriculture, fishery within Thailand specific Economic Zones, trading in real property, animal farming, land trading, extraction of Thai herbs, trading Thai antiques, and publishing and broadcasting, making Buddha images, land trading and forestry and wood fabrication from the natural forest.
- Business activities including national security, local custom, natural resources, culture, and art. However, a foreign entity may be eligible to perform business activities that fall under these categories only if it is permitted by the Minister of Commerce and is approved by the Cabinet. Also, the entity must have minimum 40% of the registered capital with the Thai nationals and two-fifths of the directors must be Thai nationals. This includes production, selling and maintenance of ammunition, explosives, firearms and gunpowder, and armaments, ships or military vehicles.
- Similarly, businesses involving traditional and folk handicraft, such as the production of crockery, depicting Thai art and culture, silkworm farming and production of Thai musical instruments. This section of business also includes rock salt mining, wood fabrication of furniture and production of utensils.
- A foreign entity is prohibited or restricted from getting engaged in businesses in which the Thais aren’t ready for competition with the foreigners unless of course it is permitted by the Director-General of the Department of Business Development along with the approval from the Committee of Foreign Business. This includes rice milling, production of lime, plywood, chipboard, legal service business and engineering service business.
The Thai government has been keeping a balance of power in the domestic trade while making way for the foreign investors to add to the benefits to the country. However, some business activities have been particularly reserved for the majority Thai ownership.
