International Banking Facilities

A. Bangkok International Banking Facility

• Offshore Lending
• Local Lending
• Other Related Business
• Other Unrelated Business

B. Conditions for Participating in BIBF

Exchange Controls

A. Importation of Funds

• Non-residents
• Residents
• Investors

B. Repatriation of Funds

C. Foreign Exchange in Business Transactions

• Foreign Currency Accounts of Thai Residents
• Foreign Currency Accounts for Non-Thai Residents
• Non-Resident Bank Account
• Imports
• Exports
• Transactions of Invisibles
• Gold

Stock Exchange of Thailand

A. SET Members

B. SET Listed Companies

C. Foreign Shareholding Limits

D. The Securities and Exchange Commission

E. Market for Alternative Investment (MAI)

On September 16, 1992 the Ministry of Finance and the Bank of Thailand established rules and conditions for commercial banks to establish international banking facilities in Thailand. The annual fee for participants is 500,000 baht.

A commercial bank that receives a license will be able to undertake international banking facilities (IBF) business for:

Offshore Lending

• Accepting deposits or borrowing from abroad in foreign currencies from foreign natural or juristic persons who have no establishment in or business with Thailand. An exception is made for receiving money from foreign banks that have a branch or representative office in Thailand, from foreign branches of Thai commercial banks, and from the Ministry of Finance, the Bank of Thailand, or the Exchange Equalization Funds. These foreign currencies may be lent abroad, to other IBF businesses, and to the Ministry of Finance, the Bank of Thailand and the Exchange Equalization Funds.
  
  
• Acceptance of deposits or borrowing of offshore baht funds from offshore banks, foreign branches of Thai commercial banks and other IBF. These funds may be lent to foreign banks, foreign branches of Thai commercial banks, or other IBF businesses.

Local Lending

• Acceptance of deposits, or borrowing from abroad in foreign currencies from foreign natural or juristic persons who have no establishment in or business with Thailand, foreign branches of Thai commercial banks, and other IBFs to lend foreign currencies in Thailand. However, each withdrawal and disbursement must be of an amount not less than US$2,000,000 except in one of the following two cases, where the minimum disbursement is US$500,000:
  • An exporter who has income from export in excess of 50 percent of all income during the last accounting period
    
    
  • An exporter who has goods and services that are sold to an exporter who meets the above-specified condition
    
    

Other Related Business

• Cross-currency transactions with overseas customers, other IBF businesses, the Bank of Thailand, the Ministry of Finance, the Foreign Equalization Funds, banks licensed under the foreign exchange control laws, or local customers to whom such IBF businesses have lent foreign currencies
  
  
• Giving acceptance or guarantee against any debts in foreign currencies when either:
  • The bank is licensed under the foreign exchange control laws; or
    
    
  • The parties involved reside outside of Thailand.
• All matters dealing with letters of credit in cases where the buyer and the seller of goods involved with the letter of credit purchasing agreement both reside abroad and the goods involved in the agreement have not been either exported out of or imported into Thailand.
  
  
• Procuring, or managing the loan syndication procurement of, foreign currency loans from foreign sources to those requiring loans in foreign currencies.

Other Unrelated Business
Commercial banks licensed to undertake IBF businesses may also:

• Provide news, financial and general economic information
  
  
• Prepare or analyze investment projects
  
  
• Advise in the purchase, merger or amalgamation of businesses
  
  
• Give financial advice; and
  
  
• Arrange or underwrite debt instruments issued for sale abroad. If the debt instruments are issued from Thailand, this must be undertaken in conjunction with the IBF business of a commercial bank registered in Thailand.
  
  

However, these activities must be separated from the accounts of the IBF business - as if the commercial bank were a separate juristic person.

The Bank of Thailand stipulates that the IBF must be separate from other banking business - as if it were a separate juristic person. In addition, the IBF business in offshore lending must be separate from the IBF business in local lending, and the IBF business in local lending cannot transfer or raise funds to the IBF for offshore accounts. Customers of IBF are required to provide their actual names, addresses, and information for correspondence, and the names on the accounts must be the actual names of customers.

Tax Privileges for participating in BIBF

* Withholding tax paid on interest for O-I lent to State Enterprises is exempted
** Tax on fee of O-O loan syndication exempted if:

• At least three BIBF's participate in the same syndication
  
  
• Most of the operations are carried out in Thailand
  
  
• If there is only one arranger, a BIBF is the arranger, or if there is more than one arranger, at least half the arrangers are BIBF's
  
  

The Exchange Control Act, B.E. 2485 (A.D. 1942), as amended, governs all matters involving foreign exchange. As a general rule, all matters involving foreign currency are regulated by, and require the permission of, the Bank of Thailand. Since May 22, 1990, however, foreign exchange control has been considerably relaxed by the Bank of Thailand. At present, certain transactions in Thai baht or foreign currency can be performed virtually without restriction, and only a few require approval from the Bank of Thailand.

• Non-residents
  Individuals in transit may normally bring foreign currency and negotiable instruments into Thailand without limit. They may also freely take out of the country all foreign currency they had brought in, without limit. Individuals in transit, however, may not take out Thai currency exceeding 50,000 baht per person, except for trips to countries bordering Thailand (Myanmar, Laos, Cambodia, Malaysia and Vietnam), where an amount of up to 500,000 baht is allowed. There is no restriction on the amount of Thai currency that may be brought into the country.
  
  
• Residents
  There are usually no restrictions on the amount of foreign currency or negotiable instruments that a resident may bring into Thailand. However, all such currency and instruments must be sold to, or deposited into, a foreign currency account with a commercial bank within seven days from the date of receipt or entry into the country.
  
  
• Investors
  There is no restriction on the import of foreign currency such as investment funds, offshore loans, etc. Such foreign currency, however, must be sold or exchanged into Thai baht, or deposited in a foreign currency account with an authorized bank, within seven days from the date of receipt or entry into the country. An application form F.T. 3 or F.T. 4 must be submitted to an authorized bank for each transaction involving the sale, exchange or deposit of such foreign currency in an amount exceeding US$5,000 or its equivalent.
  
  

Repatriation of investment funds, dividends and profits as well as loan repayments and interest payments thereon, after settlements of all applicable taxes, may be made freely Similarly, promissory notes and bills of exchange may be sent abroad without restriction.

• Foreign Currency Accounts of Thai Residents
  Thai individuals and juristic persons in Thailand are allowed to maintain foreign foreign currency accounts under the following conditions:
  1. The accounts are opened with authorized banks in Thailand and deposited with funds that originate from abroad or from foreign currency borrowing from the Bangkok International Banking Facilities.
     
     
  2. The depositor must submit evidence showing the obligations to pay in foreign currency to persons abroad, authorized banks, the Export and Import Bank of Thailand, or the Industrial Finance Corporation of Thailand within three months from the date of deposit. The depositor can deposit no more than the amount of the above obligations.
     
     
  3. The deposit of foreign currency notes and coins must not exceed US$2,000 per day
     
     
  4. Debits to the accounts are permitted for pay ment of any external obligations upon submission of supporting evidence or for conversion into baht at authorized banks.
     
     
  5. The total daily outstanding balances in all accounts must not exceed US$5,000,000 for a juristic person and US$500,000 for an individual.
     
     
  
  
  
• Foreign Currency Accounts for Non-Thai Residents
  Non-residents can open and maintain foreign currency accounts with authorized banks in Thailand. The deposits must come from funds originating abroad. Balances on such accounts may be transferred without restriction.
  
  
• Non-Resident Bank Account
  Non-residents may open an account with any authorized bank in Thailand. They may freely credit the account with:
  • Proceeds from the sale of foreign currency that originate from abroad or foreign currencies from non-residents' foreign currency accounts.
    
    
  • Amounts transferred from other non-resident baht accounts.
    
    
  • Obligations between residents and non-residents.
    
    
  
  
  
• Imports
  Importers may freely purchase or draw foreign exchange from their own foreign currency accounts for import payments. Importers need not seek approval from the Bank of Thailand, but must submit form F.T. 2 to customs, together with the Bill of Lading when importing goods valued at more than 500,000 baht or its equivalent per transaction.
  
  
• Exports
  Exports are free from any foreign exchange restrictions. However, proceeds of exports valued at more than 500,000 baht or its equivalent per transaction must be received within 120 days from the date of export and must be surrendered to an authorized bank or deposited in a foreign currency account with an authorized local bank within seven days from the date of receipt.
  
  
• Transactions of Invisibles
  The remittance of amounts properly due to non-residents is permitted for items of a non-capital nature, such as service fees, interest, dividends, profits and royalties, provided supporting documents are presented to an authorized bank. Travelling expenses or educational expenses of residents are also freely permitted upon submission of supporting evidence. Proceeds from invisibles must be surrendered to an authorized bank or deposited in a foreign currency account with an authorized bank in Thailand within seven days of receipt.
  
  
• Gold
  Residents may hold and trade domestically in gold jewelry, gold coins and gold bullion. The import and export of gold other than jewelry was in August 1999 freed from licensing controls previously imposed by the Ministry of Finance.
  
  

The Stock Exchange of Thailand (SET) is Thailand's primary stock exchange in Thailand. It was established in 1974, and is supervised by a Board of Governors. The Board consists of 11 Governors, with five appointed by the Securities and Exchange Commission (SEC), five elected by the SET members companies, and a full time president, who is appointed by the Board and serves as an ex-officio Board member.

The SET considers applications from companies requesting listing on the Exchange, including ensuring applicants meet requirements as well as submit the correct documentation. It has also established information disclosure requirements for listed companies and monitors all trading activities involving listed securities. The Exchange's regulations strictly prohibit insider trading and price manipulation of listed securities.

Net Clearing and book entry settlement are services handled by the Thailand Securities Depository Co., Ltd. (TSD), a subsidiary of the SET. The SET lists a wide range of equity and debt instruments. Listed securities include ordinary shares, preferred shares, bonds and debentures, warrants and covered warrants, and unit trusts.

Currently, the SET has 50 broker seats. At present, there are 27 active members at the Exchange. Member companies must be securities companies permitted by the Ministry of Finance to conduct securities business in the category of securities brokerage.

All listed companies are publicly limited firms. Becoming a listed company not only allows a firm to gain access to development capital, but also allows shareholders to benefit from investment liquidity and enjoy dividend income as a result of revenue or profit growth at the companies they invest in.

The Thai Cabinet recently approved a new draft law that relaxes foreign ownership limits in certain industries. Its aim is to allow foreign investors to hold more majority stakes without limit in Thai companies, depending on certain criteria, that may apply to some sectors or industries.

Under earlier legal changes, the limits on the foreign ownership of securities companies have been relaxed, depending on a number of conditions. These included any new foreign owner investing at least 500 million baht in the securities company. Such amount of that money will include funds brought into the securities company within the period of one year prior to the date of applying for permission from the Ministry of Commerce. It must also be maintained for a minimum period of three years. Any foreign managing director must also reside in Thailand at least 60 days a year.

The Ministry of Finance and the Bank of Thailand have recently announced measures to restore confidence in the financial sector by requiring commercial banks and finance companies currently in operation to increase their capital as a cushion against any potential loss from asset deterioration.

All financial institutions are encouraged to take early action so as to prevent any problem in the future. To facilitate and expedite financial institutions' capital increase, the Bank of Thailand, with the approval of the Minister of Finance, has set the following guidelines for the financial institution's capital increase:

1. Guidelines for foreign equity participation in Thai financial institutions
   1. Foreign investors that have sound financial status and high potential to help increase the efficiency in the management of the financial institution shall be allowed to hold more than 49 percent of the share in the 15 commercial banks, 33 finance companies, and 12 credit foncier companies for a period of 10 years. After 10 years, foreign investors will not be forced to sell their shares but they may not purchase any additional shares, unless the amount of foreign shareholdings is less than 49 percent of total shares. Additional shares may be acquired to bring foreign shareholdings to 49 percent of total shares. For the holding of shares of the 58 suspended finance companies, the Financial Sector Restructuring Agency (FRA) shall follow the guidelines of the Committee to Supervise the Merger and Acquisition of Financial Institutions announced on 13 October 1997. The guideline allows unlimited amount of shareholding by foreign shareholders up to a period of 10 years. After 10 years, foreign investors may not purchase any more shares unless the amount held is less than 49 percent of total shares in which case additional shares maybe acquired until the 49 percent mark is reached.
   2. The guideline shall be the same for foreign investors that are banks. The foreign bank that already has a full branch or a Bangkok International Banking Facility will be allowed to continue their existing operation. However, the authorities reserve the right not to allow a foreign bank that has more than 49 percent stake in a Thai bank to have an additional full branch in Thailand.

In March 1992, the Securities and Exchange Act established a Securities and Exchange Commission (SEC) in Thailand. The SEC plays a supervisory and policy formulation role in the Thai capital market. However, it does not directly regulate the SET's operations, other than to give approval to the SET's major regulations not concerned with day-to-day operations.

In line with the Thai Government policy to support the development of small and medium-sized enterprises, in June 1999, the SET established a new secondary market for trading SME shares, or the Market for Alternative Investment.