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Steps needed to avoid legal disputes with US

Bangkok Post, 6 May 2005

Steps needed to avoid legal disputes with US


The Thai government must become more efficient and enact more ironclad laws in order to avoid unnecessary legal disputes with US investors once the Thailand-US free trade area (FTA) agreement takes effect, says a local researcher.

A proposal from Washington in the draft agreement states that commercial conflicts between the Thai government and US entities should be judged by international arbitrators instead of domestic courts in either country, according to Duenden Nikomborirak, research director for competition policy and consumer protection with the Thailand Development Research Institute (TDRI).

’’The Thai government must make its bureaucratic regime transparent and fair to US investors,’’ she said. ’’Otherwise, it will face the risk of being sued by American investors for unfair business practices such as excessive red tape and corruption.’’

In exchange for opening up the US market for Thai exports, US service providers will have greater access to the Thai market, resulting in more competition in the telecoms, banking and logistics sectors in particular, Ms Duenden said.

Under the agreement, Thailand has been asked to end restrictions on capital flows from the US. As well, Washington is seeking eased conditions for investors seeking privileges such as reduced corporate tax holidays or reduced taxes on raw material imports. These conditions typically require that a proportion of the output be exported, a certain level of domestic raw materials be used, and that investors transfer technology to local ventures.

Ms Duenden said large service enterprises in Thailand would inevitably suffer from the inflow of US investments and management systems.

She said Thai telecommunications companies would prevail because of their better understanding of the local market and strong existing networks, but local banks and logistics providers such as freight forwarders, couriers, cargo agents and other transport service providers were in for tough struggle.

Local banks would need to improve their efficiency and cost management to provide competitive transaction fees compared to US banks, otherwise no one, including the government, could guarantee their survival, she said.

As for local logistics companies, she said they needed to upgrade in terms of vehicle quality, speed, technology and pricing in order to be more competitive.

She noted, however, that in the long run, small and medium-sized companies in Thailand would enjoy lower costs and more efficient service as a result of the FTA with the United States.

 source: Bangkok Post