29 Nov ASEAN Today – Regional Legal and Business News – September 2021
ASEAN Today – Regional Legal and Business News for September 2021 including an Immigration Update on the Covid Visa Extension Scheme and Corporate Law News on the Guideline on Fair Trade Practice regarding Credit Term for SMEs
ASEAN Economic Community News
ASEAN Trade in Goods Agreement
The 53rd ASEAN Economic Ministers Meeting was held earlier this month and economic ministers from the ASEAN Member States adopted revisions to several terms in the Operational Certification Procedures (OCP) in the first Protocol amending the ASEAN Trade in Goods Agreement (ATIGA) including Certificate of Origin (CO) Form D and its Overleaf Notes to incorporate agreed Rules of Origin (ROO) implementation issues without waiting for the General Review of the ATIGA to facilitate trade, especially during the COVID-19 pandemic. 98.6% of tariff lines in ATIGA have now been removed, but ASEAN says that the upgrade of ATIGA needs to help firms capitalize on its benefits by cutting compliance costs and increasing trade facilitation measures. To help cope with the pandemic, the addition of 107 kinds of farm produce and food into the list of necessities in ASEAN was also approved, raising the total to 257.
Global Minimum Tax Concerns
The Asean+3 Macroeconomic Research Office (AMRO) says that ASEAN economies must enhance their non-tax competitiveness in attracting foreign investment as a response to the global tax reforms aimed at fighting base erosion and profit shifting (BEPS). The Group of 20 (G20) and the Organization of Economic Co-operation and Development (OECD) released a statement on global tax reform in July 2021. It says that a multinational enterprise (MNE) may be taxed by a jurisdiction in which it generates revenue, even if it is incorporated elsewhere and proposed a global minimum tax rate of 15% for large MNEs. The AMRO says that changes on tax jurisdiction will be more beneficial to more populous countries and a global minimum tax might compromise the attractiveness of the ASEAN member states. Cambodia, Laos, Myanmar, and the Philippines are not participants of the inclusive framework while China, Japan, and South Korea are.
ASEAN-China Relations Anniversary
The 30th anniversary of the start of ASEAN-China economic and trade relations takes place this year and both sides have made important progress in cooperation in trade and investment. Trade volumes have jumped from US$8 billion in 1991 to US$685 billion in 2020, and ASEAN and China also became each other’s largest trading partner in 2020 with cumulative investment reaching US$300 billion. Among the ASEAN dialogue partners, China was first to join the Treaty of Amity and Cooperation in Southeast Asia and establish a strategic partnership with ASEAN. More than 200 pairs of sister cities have been formed, and personnel exchanges between ASEAN and China continue to grow and exceeded 65 million in 2019.
ASEAN-EU Free Trade Agreement
ASEAN announced that it was set to resume free trade agreement (FTA) talks with the European Union after negotiations were suspended in 2009. The EU Commission has agreed to a joint trade and investment program and both sides will start preparing for negotiations for an ASEAN-EU FTA and holding joint expert meetings on trade issues such as e-commerce, government procurement, and sustainable trade and development. After the breakdown of negotiations in 2009, the EU decided to pursue bilateral trade agreements with individual ASEAN member states. Six ASEAN countries began talks on bilateral FTAs, but only Singapore and Vietnam have ratified FTAs with the EU in effect.
New Internet Content Control Act
Singapore passed the Foreign Interference Countermeasures Act (FICA) that targets foreign influence campaigns and gives Singapore’s government new powers over internet content. The government says FICA will help prevent foreign entities from interfering with local politics by shutting down hostile information campaigns and dealing with foreign interference that uses local proxies. The government will have the power to request internet platforms to block social media accounts, to block content from being shown in Singapore, to disable or limit functions that allows content to go viral, and to block specific acts from being downloaded in Singapore. Critics say that FICA is giving the government more and more broad discretionary powers that can be used against citizens, critics, and opposition parties.
Risk Based Assessment Licensing System
Indonesia’s Risk-Based Assessment OSS (RBA OSS) system was implemented on August 9, 2021. Under Law No. 11 of 2020 regarding Job Creation and its implementing regulation, Government Regulation No. 5 of 2021 regarding Risk-Based Licensing, business licensing in Indonesia has shifted from commitment based to risk based. Now, licensing for businesses will be determined based on the risk in carrying out their business activities. All companies will now have to apply for a Nomor Induk Berusaha (NIB) license. Low-risk companies will only need an NIB, but middle- to high-risk companies will also need to comply with self-assessment certificate standards, government mandated certificate standards, and obtain specific permits. The RBA OSS system is the online business licensing platform for the implementation of all risk-based licensing in Indonesia.
As China continues to crack down on digital currency mining, Laos has approved the mining and trading of cryptocurrencies. Laos has now become the first ASEAN country to officially permit and participate in blockchain-based currencies. Cryptocurrency mining requires large amounts of electricity and Laos has a surplus of hydroelectric power. The Bank of Laos and the national power utility, Electricité du Laos, will work together to regulate the industry. Experts says that the move to digital currency mining and trading is a logical move due to Laos’s power generation capacity and minimal internal demand for it, but also warn that it could also be highly abused.
New Investment Law
Cambodia’s National Assembly approved a draft Law on Investment this month that would help create a transparent legal framework for investment and make Cambodia more competitive and resilient to regional and global crises. The new law will modernize and increase local production by offering incentives for new technology and value-added production processes, strengthen connectivity to regional and global supply chains, and attract foreign investors by protecting their legitimate rights and interests. If approved by the Senate, the draft law will replace the 1994 Law on Investment and its 2003 amendment.
New Business Restrictions
Malaysia announced that it will put measures in place that will restrict the sale of shares in Bumiputera companies to only Bumiputeras. Bumiputera refers to any of the indigenous peoples of Malaysia. This has the potential to reduce the ability of Bumiputera shareholders to make capital gains on the sale of shares in their companies due to their inability to sell shares to non-Bumiputeras and foreign entities and hamper their ability to raise capital through equity sales due to the restricted market. Malaysia also announced that local freight forwarding firms will now be required to have 51% Bumiputra equity to renew their customs licenses from the end of 2022.
THAILAND LEGAL REVIEW
Extension of the State Emergency
The Thai Cabinet decided to officially extend the State Emergency Decree from September 30, 2021, until November 30, 2021. The extension was necessary because COVID-19 is still spreading in other countries worldwide and infections continue to rise. Certain countries are still in lockdown, and this impacts international travel.
60-day COVID visa extension scheme
The Immigration Bureau issued an Announcement extending the period of the 60-day COVID Visa Extension Scheme. Under the Announcement, a new 60-day COVID Visa Extension Scheme will subsequently be implemented that will continue to allow foreigners who are stranded in Thailand and unable to leave to be able to continue to remain in the country. This visa extension scheme was previously supposed to end on September 27, 2021. Foreigners holding all types of visa categories shall be eligible to apply for 60-day COVID visa extensions until November 26, 2021, provided that they are qualified based on the requirements set by the Immigration Bureau.
Corporate Law News
Guideline on Fair Trade Practice regarding Credit Term for SMEs
The Trade Competition Commission issued the Notice on fair trade practice regarding the credit terms for sellers and service providers as Small and Medium Enterprises (SMEs) which will become effective on December 16, 2021. The summary is as follows:
(1) Definition of SMEs
– Employment of no more than 200 employees, or
– Annual revenue of no more than THB500 million
• Service, wholesale, or retail
– Employment of no more than 100 employees, or
– Annual revenue of no more than THB 300 million
(2) Fair trade practice on the credit term between business operators (Buyers) and SMEs (“Sellers”) shall be made as follows:
• Period of Credit Term
– For trading, manufacturing and services, the credit term shall not exceed 45 days
– For trading, manufacturing and services relating to agricultural products or processed agricultural products with uncomplicated production processes, the credit term shall not exceed 30 days
Note: The credit term may be stipulated differently from the period as mentioned above (for a longer period) by providing reasonable causes based on business, marketing, and economics
• Calculation of Period
– The credit term will start from the completion date of the delivery of products, or of provision of services
– In case of consignment, the credit term will start from the date that the products are completely sold as agreed in quantity and rate
– Buyers shall clearly indicate the process of payment in accordance with normal trade practices, and
– Sellers shall provide proof showing the number of employees, or proof of income, in order to confirm the status of being SMEs
(3) The following actions may be considered as unfair trade practices:
– Delay in payment of products or services which exceeds the credit term as prescribed without reasonable cause
– Change of credit term or other conditions under the agreement without reasonable cause or without giving advance notice of not less than 60 days
– Other unfair actions which may refer to a force by the Buyers, for instance, stipulation of special conditions relating to credit terms which may create an unnecessary burden on the party.
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