10 May Dej-Udom & Associates Business and Legal Update – April 2013Download PDF
The Dej-Udom & Associates monthly business and legal update for Thailand and the ASEAN region for April 2013
COUNTDOWN 2015 – ASEAN Economic Community |
Indonesia Report –
Lacking Preparedness –
According to local experts, Indonesia is not doing a good job in preparing for the 2015 start of the ASEAN Economic Community (AEC). Indonesian entrepreneurs note that many small businesses, especially those outside of Jakarta, do not understand how the AEC will function. In addition, Indonesia’s competitive edge is declining due to non-tariff barriers imposed by other countries.
Exodus from Jakarta Due to High Wages
Close to one hundred manufacturers are planning to move their operations from Jakarta to sites in central Java due to high minimum wages. The International Labor Organization (IOL) reported that more workers are being paid lower wages that are closer to the minimum wage.
Strong Economic Outlook
An Asian Development Bank (ADB) report notes that the Laos economy is looking strong with an anticipated 7.7% growth rate. Resource-based industries, manufacturing, and services all appear to be strong. New hydropower plants and construction of hotels, offices and residential buildings have all contributed to the growth.
The Lao government plans to set up an online process for obtaining business and trade licenses. The new process will be used for import and export licenses.
The Philippines has loosened foreign ownership constraints for partly nationalized industries. The Securities and Exchange Commission (SEC) has drafted a new set of guidelines that prescribes 40% foreign equity limits on both voting shares and outstanding shares for foreign companies.
Foreign Worker Law
A new law governing foreigners who work in Myanmar is being drafted by the Labor Ministry. Currently, foreigners who work in the country are given permission under the Myanmar Investment Commission; however, government officials say the country needs stronger policies to control foreigners. The present number of foreigners working in the country is only a few thousand, but this figure is expected to increase with the new business projects that are being developed.
One-Stop Investment Service
The Directorate of Investment and Company Administration has opened a new One-Stop Center for foreign and domestic investors. The center is intended to streamline the investment process by permitting potential investors to go through all the legal and administrative steps at one location. All related government ministries will have representatives at the center.
Three New Border Crossings
Myanmar and Thailand have concluded an agreement to open three additional permanent border-crossing checkpoints. In Thailand, the locations of the three new border crossings are: Three Pagodas Pass in Kanchanaburi, Ban Nam Pu Ron in Kanchanaburi and Singkorn checkpoint in Prchuap Khiri Khan. At first, the new crossings will only be open to Thai citizens or border pass holders.
Oil and Gas Plots Auction
This month, Myanmar launched the auction of 30 off-shore oil and gas exploration blocks. Bidders will be given full rights to the off-shore oil fields instead of being required to partner with state-owned oil companies as in the past. For shallow-water blocks, bidders will still be required to cooperate with a Myanmar state-owned company. The Burmese Energy Planning Department has also announced the names of 58 applicants who have been chosen to compete on bids for 18 inland oil and natural gas plots.
Clarity on Zero-Interest Loans
The Bank of Thailand (BOT) wants local banks to clarify to customers what is the interest burden on “zero-interest” mortgages. For this type of loan, banks offer zero interest for the first three to six months and then gradually increase the amount of interest to be paid.
ADB Forecasts Economic Growth
The Thai economy will continue to grow over the next two years due to private and government investment according to the Asian Development Bank (ADB). According to ADB, the Thai economy will grow by 4.9% this year and by 5% in 2014. Contributing to the growth, the Thai government has set a large budget to support water management and infrastructures.
Exporters Face Problems
The Business Development Department reports that 98 export firms have gone out of business in the first quarter of 2013, and the Thai National Shippers Council says that it will need to lower its export growth target. The reasons for the decline include the appreciation of the baht and the new higher 300-baht minimum wage.
Free Trade Talks with Europe
European Union representatives have set an 18-month timeframe to conclude free-trade agreement negotiations between Thailand and the EU. Thailand has expressed concerns about opening the market to Europeans; in particular, in the area of pharmaceuticals. However, the EU contends that Thailand will gain due to nation’s attractiveness with investors. In addition, after a seven-year lapse, Thailand is also resuming trade talks with the four countries in the European Free Trade Association: Switzerland, Iceland, Norway and Liechtenstein.
VAT Increase Discussed
The Finance Ministry’s Fiscal Policy Office has recommended that Kingdom increase the value-added tax (VAT) rate from its present 7% to 8%. The increase would support the government’s new infrastructure spending.
Board of Investment
The Board of Investment (BOI) is changing its focus on the types of businesses that will be given special privileges. The new BOI philosophy is to promote competitiveness in development and create value in the industrial sector. The merits of the proposed project will be considered in terms of environmental protection standards, location of the factory in an industrial zone, and research and development. Certain business activities that have low technology, low value-added output, simple production processes, and labor-intensive requirements will be removed from the list of BOI promotion eligibility. The new BOI promotion package is expected to be announced in July 2013.
The government plans to set up a new agency to oversee the development of four high-speed train routes. The agency will operate independently of the State Railway of Thailand (SRT) and is expected to have the Finance Ministry as its major shareholder. SRT will be given shares in exchange for use of its land for the tracks. The four lines will link Bangkok with Chiang Mai, Nong Khai, Rayong and Padang Besar.
Consulting firms and property company analysts believe that Thailand has a good chance of becoming a center for regional operating headquarters (ROH) as the Asean Economic Community (AEC) develops. The quality of local skilled labor, lower property prices compared with other AEC countries, and attractive tax incentives should all be contributing factors to the Kingdom’s advantage over its neighbors.
A recent survey showed that 72% of Thai companies are planning to hire more staff because of their optimistic outlook on business growth. However, experts point out that productivity will have to improve in all areas, and that finding key people will also become more difficult.