Liverpool Bid

The government's plan to acquire a 30-per-cent stake in Liverpool Football Club might fall foul of foreign-exchange regulations imposed by the Bank of Thailand, which would have to approve the transfer to Britain of about US$115 million (Bt4.7 billion).

Prime Minister Thaksin Shina-watra, who claimed yesterday that the English Premier League club had agreed in principle to his bid, also faces other major stumbling blocks. The club appears reluctant to give him more than one seat on its board and total control of commercial rights in Asia.

A group of senators yesterday also declared its intention to grill Thaksin in Parliament over the deal, which has triggered controversy over budgetary and national policy principles, as well as charges that Thaksin's national and personal interests are becoming dangerously intertwined.

In Britain, Sports Minister Richard Caborn stepped into the Liverpool bidding war by declaring that football clubs have a fundamental duty to retain their links with the community.

If Thaksin manages to sort out his differences with Liverpool over his reported demand for two board seats and Asian commercial rights, he still has to figure out how to get such a large amount out of the country. That question alone could cause him a major legal and political headache.

A Bank of Thailand source said MR Pridiyathorn Devakula, the governor of the central bank, might be reluctant to approve a transaction of this magnitude in case he opens the door to later political ramifications.

The source said the governor might decide to scupper the transaction so as not to give the opposition any ammunition to use against him.

According to central-bank regulations, any investment of more than 10 per cent in a foreign firm is considered as direct investment. If the investment does not exceed $10 million a year, it can be executed without prior Bank of Thailand approval. If the investment exceeds this amount, the central bank must approve it.

Asked if the Bank of Thailand would deem the overseas investment as productive in considering whether to approve the foreign-exchange transaction, another central-bank official said the authorities would look at the impact of capital outflow and the foreign-exchange factor in reaching their judgement.

"We have to look at it on a case-by-case basis. But we have not yet been asked to consider the Liverpool deal," the official said.

However, a Finance Ministry official said the government could invest a large sum of money abroad without asking the central bank for permission.

He also said the government did not have to ask the Parliament to approve the Liverpool deal.

Another senior official at the Finance Ministry, who asked not to be named, said the government could write a clause in an executive decree for the setting up of a state enterprise to waive the central-bank rule.

If the Cabinet approved such an executive decree and the State Council agreed with the draft, the draft could be sent to His Majesty the King for endorsement. After that, the decree would become effective.

However, Somchainuk Engtrakul, permanent secretary for Finance, admitted yesterday that he was not sure if the government would need the central bank's approval for such a large transaction.

"Let's have a meeting. An answer could be found in two or three days," he said.

Sommai Phasee, deputy permanent secretary for Finance, earlier said the government had a right to buy anything it wanted abroad. He said the new state enterprise formed to acquire Liverpool would have the same entitlements as Thai Airways International, which can spend foreign exchange to buy aircraft from abroad.

The Cabinet yesterday approved the Liverpool bid and the method to finance it. The government proposed the setting up of a state enterprise to be funded by money raised from the issuance of a special lottery and private investment.

But with the Anfield board not willing to give up its marketing rights in Asia, it remains to be seen if Thaksin's private investors remain keen.

According to the Daily Post, a Liverpool newspaper, it is understood that Thaksin's offer is not acceptable in its current form and must be changed in order to gain approval from the Anfield hierarchy.

Chief among Liverpool's concerns is the issue of the club's commercial rights in Asia.

"Liverpool are unwilling to meet Thaksin's demands and relinquish control of those rights, which are set to become even more lucrative as Asia's economic fortunes improve," it said.

Government sources, meanwhile, admitted that Liverpool were willing to give Thailand only one board seat, while Thaksin wants two.

British sports minister Caborn appeared to be uneasy about the situation.

"Football clubs are a little bit special, they're part of the community," he told BBC Radio Five Live.

"So I think it's incumbent upon football clubs to make sure that they do have those very strong roots into their community.

"That's where the club comes from, that's where the fans are. I think that's what ought to be considered when any takeover bids, or indeed investment into these clubs, are being made."