Aviation industry: Relaxation of 51% Thai ownership rule

22 กุมภาพันธ์ 2560

In a first, laws that restrict foreign investment in Thailand dating back to 1954 to be reversed. Civil Aviation Board will now set limit.

AVIATION INDUSTRY & FOREIGN INVESTMENT

Aviation industry: Relaxation of 51% Thai ownership rule

22/02/2017
Chatrudee Theparat

The cabinet yesterday approved a new bill on civil aviation that authorises the Civil Aviation Board (CAB) to decide the proportion of foreign ownership in Thailand's aviation business.

The move is aimed at enhancing Thailand to become an aviation hub in Southeast Asia and enhancing Thailand's capacity to become an aircraft maintenance centre.

An enhanced Thai aviation industry would also likely put an end to the continual challenge posed to Thailand's airline industry by international civil aviation regulators and their safety inspections over the last two years.

FIRST LAW TO END LONGSTANDING RESTRICTIONS ON FOREIGN INVESTMENT IN THAILAND

The new law puts an end to long existing restrictions on foreign investment in Thailand.

This investment is also known as foreign direct investment (FDI) as opposed to portfolio investment made indirectly through the country's stock exchange and bond markets.

The bill amends the Civil Aviation Law of 1954 and revokes the announcement of revolutionary article No 58 (1972).

The U-tapao tarmac was packed with planes during the protests that took over Suvarnabhumi Airport. The airport has been expanded and plans for an aircraft maintenance facility were made.

OBSTACLE TO DEVELOPMENT OF THAI AVIATION: 51% THAI OWNERSHIP RESTRICTION

Existing law requires Thai ownership to control 51% of aviation companies and shareholders must be individuals, prohibiting investment by investment funds.

That law is considered an obstacle to the development of Thai aviation.

This is according to Kobsak Phutrakul, assistant minister to the Prime Minister's Office.

MAJOR INVESTMENT IN 2015 APPARENTLY FELL THROUGH

THAI Airways International has a repair centre at U-Tapao airport (see photo below).

In 2015 a major foreign investment in Thailand's aviation industry looked to be imminent but ultimately did not happen. The news release at the time read:

"Chiang Rai will get a more prominent spot in Thailand's aviation industry when a joint venture led by Singapore's ST Aerospace establishes a major aircraft maintenance, repair and overhaul service centre (MRO) there. The partnership with Seri Sapphakit Co, a Bangkok-based trading company, is seeking Airports of Thailand (AoT) approval to build a facility that will initially cost 800 million baht, with later plans for a pilot training school and flight simulator centre. The land lease would be for 30 years and development conducted on the basis of "BTO" public-private partnership, standing for build, transfer and operate" (see here).

Photo taken during Prime Minister Prayut Cha-o-cha's tour of a THAI Airways International repair centre at U-Tapao airport as he inspects construction of the new terminal, which emphasises the commercial development of the airport.

EASTERN ECONOMIC CORRIDOR (EEC) INVESTORS WAITING

The government is keen to promote the aviation industry in the Eastern Economic Corridor (EEC), while many foreign companies such as Airbus are keen to invest in the government's new investment location.

The planned EEC, spanning Chon Buri, Rayong and Chachoengsao provinces, has been designated for development as a high-tech industry cluster, with an eye towards becoming Asean's leading economic zone for industrial, infrastructure and urban development.

The corridor will also rely on developments in transport infrastructure.

AMBITIOUS PLANS FOR EASTERN ECONOMIC CORRIDOR

The EEC is set to become an Asean water transport hub, linking the Dawei deep-sea port in Myanmar with Sihanoukville in Cambodia and Vung Tau port in Vietnam.

Investors in the EEC will receive privileges, including land leases for 50 years and extensions of 49 years, visa-free grants for the import of skilled labour or executives, and special tax perks.

It is estimated that the economic corridor program will help generate new investment value of up to 1.5 trillion baht within five years, from both the government and the private sector.

PROPORTION OF FOREIGN INVESTMENT: CIVIL AVIATION BOARD TO HAVE FULL AUTHORITY

The new law governing EEC development is set to come into force between the middle of the year and September.

Mr Kobsak said the new amendment allows the board to have full authority in setting the proportion of foreign investment.

The board will be chaired by the transport minister.