The Bank of Thailand said it would lift restrictions on same-company foreign currency loans and on fully hedged borrowings and funds raised from bond sales. Foreign loans with a maturity of less than 180 days used to pay for exports will also be exempt from capital controls. "The relaxation for some transactions will provide companies in Thailand more options in raising foreign loans for their business, not for speculation on the baht," said Suchart Sakkankosone, director of the exchange control department. "It makes sure that those loans and borrowings will not have an impact on the baht's volatility."
Prime Minister Surayud Chulanont said in a speech Wednesday that the government was seeking to create a level playing field in the adjusting of the foreign business law. He said the law would not affect existing foreign companies in manufacturing industries, export businesses, BOI-promoted industries or those businesses not listed under the Act. Surayud also emphasized that amending the foreign business law represented legal and technical adjustments rather than any fundamental change in the overall economic strategy. On the subject of capital controls, he said that despite upward pressure on the baht, the government would implement an expansionary fiscal policy to achieve growth of 4 percent to 5 percent.
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Thailand risks losing some of its resort home market to Southeast Asian rivals Malaysia and the Philippines if it goes ahead with plans to close a loophole in the Foreign Business Act, according to regional analysts. The government has proposed changes to the law that allows non-Thais to hold property through a local company that they control because Thai nominee majority shareholders waive voting rights. "Thailand is seen as a desirable place for resort property, but Malaysia has, quite frankly, a better legal framework," said David Simister, chairman of property consultants CB Richard Ellis. Malaysia recently eased curbs on foreign ownership of residential property in an effort to cut red tape and spur economic growth. Meanwhile, Songkran Issara, managing director of developer Charn Issara, complains that the government, which has said it wants to promote high-end tourism, was sending out mixed signals. "I want the government to be clear on its policies about foreign investments in Thailand, whether we want to boost them or we don't want to," Issara said.
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