Monday, October 02, 2006

Temasek Holdings might have overstepped foreign ownership laws

Thai probe turns up heat on Temasek's Shin deal

by Khettiya Jittapong

BANGKOK, Oct 2 (Reuters)
- A Thai Commerce Ministry probe into Temasek's purchase of the country's biggest telecoms firm has found that the Singapore state investment arm might have overstepped foreign ownership laws, an official said on Monday.

The investigation centred on Kularb Kaew, a holding company set up as part of Temasek's $3.8 billion purchase of Shin Corp from the family of now-deposed Thai Prime Minister Thaksin Shinawatra in January.

Non-Thais have in the past been able to control Thai affiliates through chains of holding companies, but the tax-free nature of the Shin sale deal -- and then the coup against Thaksin -- forced unprecedented scrutiny of the deal.

At the heart of the matter lies the question of whether Kularb Kaew, which is controlled by a Malaysia-based Thai who was a partner in the Shin deal, is a Thai company or a Temasek proxy.

"We have found some evidence, especially the way Kularb Kaew transfered money to buy Shin Corp, which might go against Clause 36 of the Alien Business Law," Dusit Uchupong, deputy director general at the ministry's Business Development Department, told reporters.

Given that the Commerce Ministry has no legal jurisdiction, the panel's findings have been forwarded to the police, he added.

"The ball is in hands of the police. Our department has no authority to decide whether the laws were violated or not," he said.

Complex Deal

Thai nationals are prohibited from "holding shares for" or assisting foreign nationals in ways that would enable foreign nationals to circumvent the laws.

Under Thai law, proxies of foreign firms face a three-year jail term and/or a fine of up to 1 million baht ($27,000) if found guilty of owning more than 49 percent of a Thai company.

A preliminary Commerce Ministry inquest has already ruled Kularb Kaew a non-Thai firm.

Shin Corp, which has major interests in Advanced Info Services , Thailand's largest mobile phone firm, was acquired through several affiliates of Temasek.

Under the complicated structure of the deal, Shin is 96.29 percent owned by two registered Thai firms, Cedar Holdings with 54.53 percent, and Aspen Holdings with 41.76 percent.

Aspen is owned directly by a Temasek subsidiary. Cedar is 49 percent-owned by Cypress Holdings, another Temasek subsidiary.

Unlisted Kularb Kaew owns 45.2 percent of Cedar, and Siam Commercial Bank PCL has 5.8 percent.

Surin Upatkul, the Malaysia-based Thai businessman who owns 68 percent of Kularb Kaew and who is now a Shin Corp director, has denied acting on behalf of Temasek.

Thai officials have not yet said what they would do if Kularb Kaew is found to be a Temasek proxy, although chief telecoms regulator Choochart Promphrasid said in August AIS would face legal action. ($1 = 37.59 Baht)

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