Back in the 1950s, Western European and United Kingdom retirees and holiday makers discovered that sunny Spain was a wonderful holiday location to get some respite from the dreary northern European winters. They soon discovered that not only was the cost of living much cheaper, but also the cost of housing was relatively cheap, and that both property and residency were easily obtainable for foreigners.
As soon as they were in a position to retire, these retirees flocked to Spain to enjoy their new found life-style, but they were not all financially struggling pensioners. With them came the ultra-wealthy, who had “made good,” and decided to retire early in life - these people brought financial wealth to Spain, as their active life-style saw them buy large villas, restaurants, bars, hotels, farms, luxury yachts, thereby injecting a huge amount of capital into the country.
The end result of this capital injection was that Spain, which was once considered a poor country, became quite affluent. However, after many decades of good fortune, clouds began to gather on the horizon, in the form of the European Union. Subsequently, the EU currency was introduced, resulting in the prices of many items rising dramatically - some small items almost doubling in price due to opportunistic sellers.
However, the salaries of Spanish workers remained pegged at more or less the old levels, so that Spain retained its competitive edge in the manufacturing field. This, of course, made it more difficult for the average Spanish worker, even though his job was assured.
Unfortunately, Spains relaxed immigration policy also allowed many undesirable and illegal immigrants into Spain. Many of these “undesirables” had been involved criminal activities in their home countries and continued on with these criminal activities in Spain.
However, Spain was still a good choice for retiree’s, particularly British nationals, as being part of Europe it was close to the UK, allowing retirees to easily return home to visit their relatives at a very nominal cost. But, the question arose - was there now somewhere better than Spain?
The Discovery Of Thailand
It wasn’t long before some of the more adventurous holidaymakers discovered the attractions of the Kingdom of Thailand - from the hills of Chiang Mai, to the beaches of Phuket, the extremely friendly people, the low living costs, the tropical warmth and sunshine, and the relaxed “laid-back” (mai pen rai) attitude and lifestyle.
Many of these holiday makers never forgot how much they enkoyed Thailand and its friendly people, and when the time came for their own retirement, many of them opted to retire to Thailand rather than Spain or elsewhere. As many had retired early and had both time and money to spare (partly due to the low cost of living), they decided to obtain work permits and open or start their own businesses in Thailand. Many of these men had retired early because they were at the top of their chosen profession, and by starting a similar (albeit smaller) business, they imparted many of these skills to their Thai staff. This capital inflow, both financial and intellectual has been of great benefit to the Kingdom of Thailand and has been an integral part of the incredible advances made by the country. The retirees in turn have then benefitted greatly from the rapid improvements in business, technology and services.
Thai Government Changes Their Interpretation?
Although Thai law strictly prohibits foreign nationals (or aliens) from owning land in Thailand, it has, in the past, been possible to own land through a Limited Liability Company - this form of purchasing property has been the most popular with foreign investors as the Articles of Association can be varied to allow greater protection for foreign minority shareholders where majority Thai ownership is required under the Alien Business Law. Thai law requires that 51% of the shares be held by Thai juristic persons, however, any company with more than 40% foreign interest that purchases land will be investigated by the Central Land Office in Bangkok (under Section 74 of the Land Code) to ensure that the company has not been organized in an attempt to circumvent the prohibition against foreign ownership of land.
This results in the foreign ownership of the company being limited at 39%, but with changes to the Articles of Association, the use of two tiered stocks (ie. Ordinary Shares and Preferred Shares with different voting rights), plus the foreigner being the only director of the company who can commit or bind the company in any contractual dealings - it is possible to effectively give the minority shareholder control over the company.
However, an Interior Ministry announcement issued on 15 may 2006 has requested that all Regional land offices investigate any land transactions involving companies with foreign shareholders. This is not a new law, it is simply a different interpretation or application of the existing laws. The main problem is that no-one is sure exactly what this announcement/directive means - many believe that it is aimed primarily at Thai companies buying land for business or development purposes.
Due to the prevailing uncertainty over this announcement, the Interior Ministry has scheduled various meetings in an attempt to clarify the matter for all concerned.
Sea Change On The Way?It will be of great interest to a good many retirees to see which way the Thai Government proceeds on this controversial issue. A negative interpretation could have a substantial financial impact, both current and future as many retirees seek to protect their wealth by divesting themselves of any land that they may be holding through Thai companies.
Worse than that, is the prospect of a significant departure of expats from Thailand, to more foreign friendly countries, such as Cambodia, Vietnam or Malaysia. Cambodia could become a wise choice, as the port city of Sihanoukville appears to resemble Pattaya in its early years, before the business and tourism boom. It will become a question of whether Foreign Nationals are free to own a residential property, for their own quiet enjoyment, or whether they will be forced to become tenants, with the same status as “short stay tourists.”
Not only is Cambodia a lower cost destination, but it is a fairly “free-market” ideology, where bars can stay open all night (if they choose), and even though you can still only own 49% of any property purchased, the authorities are most unlikely to interfere in your normal affairs. As the Secretary General of one Province stated to one overseas developer; “If you meet our criteria and complete all relevant documentation, we will ensure that things go smoothly, as we want foreign capital and foreign expertise to come into our country.”
If Thailand isn’t careful backward Cambodia could capitalize on the present situation.
