Bangkok, January 29:

Top business leaders in Thailand said that the government’s proposed changes to foreign investment rules were politically motivated and left foreign firms mired in uncertainty.

The government earlier this month proposed closing a loophole that many international companies have used to support their operations here, prompting widespread concern among foreign investors about the direction of Thai policy.

Under the changes to the Foreign Business Act, foreign investors would be limited to holding not more than 50 per cent of the shares and the voting rights in companies. But business leaders at a seminar organised by the International Chamber of Commerce in Thailand said the changes were a political move by the post-coup government against interests linked to ousted prime minister Thaksin Shinawatra.

“The amendment was purely politics, as the government was struggling to balance the political situation and that forced them to come with such changes,” said Sigve Brekke, chief executive of Total Access Communication Plc (DTAC), a mobile phone operator controlled by Norwegian telecom giant Telenor.

“It is disppointing to see the government come up with a policy change just to fix a single problem,” he said. The military justified its takeover in September by accusing Thaksin of using his political office to enrich his business empire — noteably in his family’s $1.9 billion sale of their shares in Shin Corp to Singapore’s state-linked Temasek Holdings.

The changes to the law could force Temasek to restructure the deal, or possibly to sell off some of their shares. A Temasek-led group of investors now holds some 97 per cent of Shin Corp. But foreign investors said the proposed changes to the law remain unclear, undermining confidence in Thailand after the coup.

“Foreign investors like predictable regulations that made it more practical so thay can made investment plans,” said the chamber’s executive board member Siriporn Chaiyasuta.

“It sent another confused signal that whether Thailand wants to move toward market liberalisation or highly-regulated market condition,” said Siriporn, also a general counsel for US’ Chevron operations in southern Asia.

The government has insisted that many companies will be exempt from the new rules, including exporters and manufacturers, but that has done little to reassure investors who also worry about future abrupt changes to policy.

In mid-December, the Bank of Thailand imposed draconian capital controls, sparking a one-day long stock market crash and forcing policymakers to backtrack on some of the rules.

David Lyman, chairman of international law firm Tilleke and Gibbin, said the change to the investment law could also affect 18 other business laws governing diverse sectors like property, travel, telecom, banking and life insurance.

“Foreigners now have a 50-50 per cent chance to get it right or wrong about the new law. That creates lots of uncertainties,” he said.