07 Mar Dej-Udom & Associates Business and Legal Update – January 2014Download PDF
The Dej-Udom & Associates monthly business and legal update for Thailand and the ASEAN region for January 2014
COUNTDOWN 2015 – ASEAN Economic Community ||
Thai Border Provinces to Benefit –
The Commerce Ministry created the ASEAN Economic Community (AEC) Committee to prepare for the coming AEC integration. To help stimulate business growth in the border provinces, the Ministry wants the areas to take advantage of trading and tourism opportunities. The most promising provinces to benefit from the growth of border check points are Chiang Mai, Chiang Rai, Nong Khai, Sa Kaew, Kanchanaburi, and certain points in the south.
Mining Policy Revised
The Laos government plans to revise its mining policy in order to obtain more revenues from concessions. All granting of new mining concessions was suspended in June 2013 after the government discovered that few proceeds had been collected from existing concessions. The existing mining concessions are being inspected, and concessions will be revoked if operators have failed to comply with their agreements.
Additional Revenue Found
Following an audit of 73 state organizations, auditors found 1.85 billion Baht in additional revenue. A government report disclosed that many state organizations and enterprises have infringed on financial regulations including authorizing spending without parliamentary approval. Other organizations have also kept separate bank accounts that have prevented revenue from flowing into their central bank accounts.
Foreign Loan Problems
A new ministerial decree states that the government will not be responsible for loans that it has not guaranteed. The decree will have an impact on enterprises operating under the Law of Enterprises and will affect credit institutions, foreign bank branches, and cooperatives.
Money Laundering Rules
Singapore authorities are concerned about the increasing reports of fraud and on the funneling of illegal funds through Singapore. The Monetary Authority of Singapore (MAS) is now considering prompt actions to counter money laundering and terrorism financing. The Singapore central bank also plans to modify its anti-money laundering rules to conform to global regulations.
Restrictions Eased on Automakers
Restrictions barring foreign automakers from manufacturing small passenger automobiles will be relaxed in order to compete with Thailand. The Malaysian government plans to selectively seek foreign investors that bring advanced technology to the auto industry.
Special Economic Zone
On January 23, 2014, the government signed into law the new Special Economic Zone (SEZ) law that provides tax exemptions for local and foreign business investors. The law includes the formation of the SEZ central authority and management committee, and the establishment of new zones. Income tax exemptions for up to 7 years for companies and up to 8 years for construction will be granted for investments made in the SEZs. Myanmar currently has three SEZs.
Political Risk Insurance
Myanmar has fulfilled the requirements to become a member of the Multilateral Investment Guarantee Agency (MIGA). As part of the World Bank, the organization offers political-risk insurance and credit enhancement. Through the use of MIGA guarantees, investors will now be able to mitigate certain risks.
Filipino Visa-Free Entry
Myanmar will allow Filipino holders of ordinary passports to enter the country for up to 14 day stays without a visa.
Disruption of Work Permit Services
The temporary closure of the Employment Department in January due to the political demonstrations has resulted in a delay in the processing and renewal of work permits. As a result of the Immigration Department’s move to temporary premises, there were also some delays in extending visas. The One Stop Service Center (OSSC) that handles all Board of Investment applications remained open all month except for one day.
Banking and Finance
Debt Repayment Problems Increase
Small and medium-size enterprises (SMEs) are experiencing problems in repaying debt according to banking executives. As a result, banks are declining to provide new working capital. Leasing companies are also anticipating delays in customer payments due to the ongoing political troubles.
Board of Investment
Appointments of new members to the Board of Investment (BOI) have been delayed due to the dissolution of Parliament. The term for Board members expired in October 2013 and no new Board members have been appointed. According to BOI regulations, applications above 200 million baht cannot be approved without Board authorization. New investment regulations have also not yet been endorsed.
Board of Investment (BOI) applications exceeded expectations in 2013. In total, there were 2,237 applications for projects worth 1.1 trillion Baht. Japan remained the top investor, and services and utilities sectors accounted for the most investment.
SME Focus Narrowed
The Board of Investment (BOI) is focusing on four areas of investment for Small and Medium Size Enterprises (SME). These are value-added agricultural products, creative industries, supporting industries that require skills in production and service, and tourism.
Securities and Exchange
Investment Fund Rules Change
The Securities and Exchange Commission (SEC) is considering making changes to the rules on investment funds. The changes would make mutual funds, private funds, and provident funds more flexible for different asset types. Fund portfolios would be more diversified and calculation of derivative investment would fall in line with international standards. In addition, the SEC plans to speed up changes to the rules and regulations governing security listings in order to attract and facilitate foreign investment. The stock market will also be upgraded to make Thailand a funding hub for the region.
The Employment Department reports that as of December 15, 2013, 0.7 percent of the population was unemployed. There are over one million foreigners legally employed in Thailand as of October 2013 and over 400,000 Thais working overseas.
Used Car Tax Payment
The Revenue Department plans to require used-car dealers to pay a tax on auto sales margins in order to increase revenues. Even though used car sales have risen significantly, tax revenues on used cars have not increased considerably.
Oversupply of One-bedroom Condos
With an oversupply of one-bedroom condos in Bangkok, property companies expect rental prices to decline. However, the demand for two- and three-bedroom units continues to grow and is pushing up prices.
The government’s plans for a series of mega-projects will be delayed due to the ongoing political problems. Concerns are being expressed that the delays might slow down private sector investment.