08 Jul Dej-Udom & Associates Business and Legal Update – June 2014Download PDF
The Dej-Udom & Associates monthly business and legal update for Thailand and the ASEAN region for June 2014
COUNTDOWN 2015 – ASEAN Economic Community
World Investment Report 2014
According to the United Nations Conference on Trade & Development (UNCTAD) World Investment Report 2014, developing Asia remains the world’s top foreign direct investment (FDI) destination. Developing Asia accounted for 30% of the US$ 426 billion in global FDI inflows in 2013. The reports states that FDI inflows into Southeast Asia rose by 7% in 2013 to US$ 125 billion of which Singapore drew in half. The 16 members of the future Regional Comprehensive Economic Partnership (RCEP) had a combined FDI inflow in 2013 of US$ 343 billion, 24% of the world’s inflows. RCEP FDI flows now make up over 40% of the inflows to ASEAN.
Ratings Agency Warning
A leading ratings agency warns that the negative operating environments in many ASEAN countries may pose downside risks to bank ratings, if they continue. It reports that five of the eight bank sectors it assesses in Southeast Asia have negative outlook trends, but that Singapore, Malaysia, and the Philippines have stable outlooks. The ratings outlook for most ASEAN banks is stable because they tend to have strong loss-absorption buffers that help mitigate risks.
Revised Negative Impact List
To liberalize its investment environment and help boost foreign and domestic direct investments, Indonesia recently revised its Negative Investment List (NIL) which became effective on April 24, 2014. Some business sectors are now open to foreign investment, others are subject to increased foreign ownership limits, and certain sectors are now completely closed. The advertising industry is open for the first time, but energy and mineral resources and trade are subject to increased investment restrictions. Banking, finance, and retail remain the same.
According to financial experts and government officials, Cambodia needs more microfinance institutions (MFIs). There are only 43 MFIs in the country and only 3.7% of Cambodia’s population uses banking services. This leaves a large market share available, and more MFI’s will benefit Cambodia’s economy.
Company Registrations Up
The Ministry of Commerce reported that the number of new businesses registered in Cambodia from January to June 2014 increased by 55% for the same period in 2013. Most of the new foreign-owned companies are from South Korea, China, Japan, Thailand, and Malaysia and doing business in garments, footwear, agriculture, agro-industry, tourism, construction and real estate.
Permanent Residency System
The Immigration Ministry announced that it will commence a permanent residency (PR) system for foreigners in October 2014. The initial permitted stay under the PR system will be five years and can be extended upon expiration. The Immigration Ministry will invite different groups to apply including intellectuals and technicians, investors, former citizens, and citizens who studied abroad or went abroad for other reasons.
Airport Upgrade Tenders
Myanmar plans to call for tenders from local and foreign firms to upgrade 30 domestic airports. The investors can be either 100% privately owned companies, joint ventures or build-and-operate projects. Since government plans are to dramatically increase the number of yearly visitors, the country’s aviation industry is expected to keep expanding.
SMEs Prefer Indonesia
A recent bank survey reports that Indonesia is the preferred location for Malaysian small & medium enterprises (SMEs) to expand their businesses in Southeast Asia. The SMEs chose Indonesia because of its strong domestic consumption, high economic growth rate, and lower labor costs. In 2013, Malaysian SMEs in Indonesia grew by 40% compared to 2012.
Securities and Exchange
Preparation for AEC Integration
To prepare for the challenges of the coming ASEAN Economic Community (AEC) integration, the Stock Exchange of Thailand (SET) wants to help educate and produce high-quality professionals for the securities industry and further the qualitative development of listed companies, investors, products, and services. The SET plans to collaborate with universities around Thailand and open 179 “SET Corners” in Bangkok and various provinces along with seven SET Investment Centers.
Copyright Law Enforcement
The Intellectual Property Department announced that it is now working with 25 organizations to help improve copyright law enforcement in Thailand in preparation for the start of the ASEAN Economic Community.
Geographical Indication Rice
The Commerce Ministry is sending a mission to London to promote different varieties of Thai Geographical Indication rice. The goal is to increase the sales of Thai rice to high-end vendors.
Zero Duty Implementation
At the coming ASEAN Trade in Goods Agreement meeting, the Trade Negotiations Department will request that Cambodia, Laos, Myanmar and Vietnam reduce their duties on products to zero. The other six ASEAN countries reduced theirs to zero in 2011. The Department will also request different members to remove other trade barriers such as Indonesia’s restrictions on vegetable imports. Other topics of discussion will be logistics, certificates of origin, and the ASEAN Trade Repository.
Ranong-Yangon Shipping Route
The Port Authority of Thailand announced that the container shipping route between Ranong Port in Thailand and Yangon Port in Myanmar will commence operations in August 2014. The new route will be part of Thailand’s ASEAN linkage to international trade routes.
Organic Food Hub
Thailand plans to become the ASEAN hub for organic farming and food exports by 2020. The Commerce Ministry has a three-year strategy to promote organic agriculture, help farmers comply, and develop export products. The goal is to increase organic food exports by 10% a year from the current THB 3.1 billion a year. The first initiative is to encourage farmers to grow organic crops and educate them on organic farming techniques.
Tech Start-Up Association
To help develop the tech sector in Thailand, a group of Thai entrepreneurs launched the Thailand Tech Start-up Association. The association’s president says its objectives are to unite the country’s tech community and help it meet international standards, drive the industry through collaboration and create start-up friendly initiatives and policies, and accelerate the growth of Thai start-ups.
Future FDI Inflows
Thailand is ranked as one of the top foreign direct investment (FDI) recipients in Asia by a recent United Nations report, and the International Institute for Trade and Development (ITD) recommends that the country upgrade its soft infrastructure to prepare for a potential increase in FDI after the ASEAN Economic Community integration. The ITD says that Thailand should expect a loss under the Generalized System of Preferences, but that the impact on the economy will be minimal.
Board of Investment
New Privileges Granted
Thailand’s Board of Investment (BOI) held its first meeting under the governance of the National Council for Peace and Order (NCPO) and agreed to grant support to 18 investment projects worth THB 122 billion. Applications for BOI privileges fell 42% in January-June 2014 compared to 2013, and the BOI Secretary-General believes that the investment promotion for the 18 projects will help restore Thailand’s investment climate, bolster investor confidence, and allow investment applications to bounce back to previous levels for the rest of 2014.