Thai Commerce Minister Says Temasek-Shin Corp Deal Likely Broke Law
Thai Commerce Minister Krikkrai Jirapaet said Singapore's Temasek Holdings Pte Ltd. (TEMAH.YY) likely broke Thailand's foreign ownership laws when it bought a stake in Shin Corp. (SHIN.TH) last year, but it should ask Bangkok for permission to own a majority of the Thai telecommunications company.
23 March 2007
SINGAPORE (Dow Jones) -- Thai Commerce Minister Krikkrai Jirapaet said Singapore's Temasek Holdings Pte Ltd. (TEMAH.YY) likely broke Thailand's foreign ownership laws when it bought a stake in Shin Corp. (SHIN.TH) last year, but it should ask Bangkok for permission to own a majority of the Thai telecommunications company.
"The preliminary investigation findings have shown that they (Temasek) broke the law. The case is now in the hands of the police and we will soon know whether it will go it court," Krikkrai told Dow Jones Newswires in an interview on Thursday.
He is the second Thai cabinet member to suggest in recent weeks that Temasek, a Singapore government-owned investment company, broke the law in the Shin deal.
Information & Communications Technology Minister Sittichai Pokaiudom, who is overseeing the case, told Dow Jones Newswires in February that he was convinced Temasek broke Thailand's foreign ownership laws and that Shin may soon return to Thai control.
But Krikkrai strikes a more conciliatory tone than Sittichai, indicating a desire at the most senior levels of the Thai government to ease tensions between the kingdom and the city-state and to resolve the Shin row without further damaging Thailand's reputation with foreign investors.
"If they did break the law, and this involves both the sellers and the buyers, they will have to face the consequences. I believe that involves jail sentences up to three years or fines ranging between THB300,000 and THB1.5 million," he said.
But he added that the government should think twice before deciding more radical measures like bringing back Shin Corp. under Thai control as suggested by Sittichai.
"Shin is listed on the stock exchange and taking it back is a very sensitive issue," Krikkrai said.
In January 2006, a consortium led by Temasek bought a controlling stake in Shin Corp. for US$1.9 billion from the family of former Thai prime minister Thaksin Shinawatra, a move that helped precipitate a coup and his ouster in September.
Thailand's commerce ministry then began to investigate the nationality of Kularb Kaew Co., a holding company allegedly used by Temasek as a nominee shareholder of Shin Corp. to evade a 49% limit on foreign ownership of telecommunications companies.
The ministry said initial indications showed that Kularb Kaew was actually a Temasek nominee, which meant that the Singaporean company exceeded the foreign ownership limit.
Krikkrai said the use of nominees is illegal and this will be reiterated in a new foreign business act that the commerce ministry is working on.
"The use of nominee companies allow foreign investors to circumvent and abuse the law on foreign ownership limits," he said.
Temasek, which couldn't immediately be reached for comment, has repeatedly said that it hasn't broken any laws in the deal.
"After the legal issues are dealt with, I think Temasek should adjust. The should ask the Thai government for permission to own more than 49% in Shin and the government should consider the request," Krikkrai said.
According to Thai legislation a foreign investor may hold a majority stake in a telecommunications company only if it gets approval from the Thai cabinet.
Krikkrai said Sittichai will be the one who will propose how the government should proceed.