11 Aug Dej-Udom & Associates Business and Legal Update – July 2013Download PDF
The Dej-Udom & Associates monthly business and legal update for Thailand and the ASEAN region for July 2013
COUNTDOWN 2015 ASEAN Economic Community |
Single Market Challenges –
A report made by the CIMB ASEAN Research Institute suggests there will be problems in achieving a single ASEAN market as originally planned by the ASEAN member countries. The report indicates that intra-trade between ASEAN nations is not increasing as expected because priority is still placed on trade with other countries including Japan and China. The report entitled “The ASEAN Economic Community: The Status of Implementation, Challenges and Bottlenecks” also highlights economic and development gaps between members as another area of concern.
Tour operators are being encouraged to create multi-country packages to help promote the ASEAN Community. The new focus is on creative tourism that highlights regional experiences including immersion in the local way of life. 20 tour operators have already created regional themed tours and are listed on the ASEAN travel website http://aseantourism.travel.
Tax Pool Proposal
Thailand’s Finance Ministry has proposed that the tax databases of all ASEAN countries be integrated when the ASEAN Economic Community is launched at the end of 2015. According to the proposal, integration of the tax data base will make it easier for businesses to identity which goods and services are subject to what taxes in a particular jurisdiction.
For the first time since 2011, the Vietnamese dong has been devalued. The country’s Central Bank set the new currency reference rate at 21,036 dong per dollar. Last year, the Vietnamese economy expanded at its slowest rate since 1999, and the nation’s trade balance also moved back into a deficit.
Foreigners Allowed to Own Property
The Indonesian government is planning changes to regulations concerning foreign ownership of property. The changes would permit foreigners to acquire property ownership rights under strict conditions including requiring the foreigner to own a business in Indonesia, and if the foreigners wish to sell their property, they would only be permitted to sell it to the government.
The Indonesian President has apologized to Singapore for the haze that has engulfed the island for more than a month. ASEAN environmental ministers recently met in Malaysia and agreed that ASEAN member countries should adopt a joint haze monitoring system to track wrongdoers who start illegal forest fires.
According to the Myanmar Directorate of Investment and Company Administration (DICA) almost 90% of all foreign investment in the nation during June 2013 was made by Thai companies. Last month, 14 businesses were given licenses to invest in Myanmar under the Foreign Investment Law.
Major Yangon Renovation
The Yangon City Development Committee (YCDC) is working with the Japan International Cooperation Agency (JICA) in planning major infrastructure, public transport, and housing projects for Yangon. The JICA undertook a feasibility study of the city and targeted four areas that require urgent attention: transportation, water supply, garbage disposal, and cargo.
The Myanmar government has enacted new legislation giving the central bank more autonomy and removing it from the control of the finance ministry. With the approval of parliament, a central bank governor and three deputy governors will be appointed to oversee the bank.
Banking & Finance
Dollar Payment Link with Hong Kong
The Bank of Thailand (BOT) and the Hong Kong Monetary Authority have agreed to cooperate and set up a cross-border payment link to support real time transactions between the baht and US dollar. The system will be launched in July 2014.
Applications for New Branches
The Bank of Thailand (BOT) has announced that it will issue five new licenses allowing foreign banks to set up subsidiaries in Thailand. The newly licensed banks will be permitted to open up to 20 branches and 20-off premise ATMs. Applications are being accepted until the end of the year.
The Bank of Thailand (BOT) is cautioning local financial institutions to further closely review the default risk of derivative products. Bank regulators are concerned that the current capital reserve rules under Basel II are not sufficient to protect banks from losses on over-the-counter derivative products.
Board of Investment
The Board of Investment (BOI) is encouraging Thai companies to invest abroad in order to reduce costs and find a solution to expiring privileges under the Generalized System of Preferences (GSP). The four business sectors that need to diversify are: electronics and electronic appliances; agriculture; textiles; and apparel. The Industrial Estates Authority of Thailand (IEAT) is also interested in encouraging overseas investment and is seeking board approval to establish IEAT International.
Waste Regulation Deadline
The Industrial Estate Authority of Thailand (IEAT) has announced new regulations concerning the disposal of waste in industrial estates nationwide. All factories located in industrial estates will be required to legally dispose of waste by September 2013. Factories will be required to verify that waste was properly disposed of by using a manifest system to track the shipping.
Phuket Firms Breach Rules
After investigating 153 companies, the Commerce Ministry found that 56 Phuket companies were suspected of breaching the Foreign Business Act by having Thais acting as nominees so that foreigners could hold majority control. The Foreign Business Act does not allow foreign interests to hold more than 50% of many types of businesses. Most of the companies suspected of breaching the rules were found to be owned by Russian interests and are involved in food and beverage trading or financial agencies.
Software Piracy Enforcement
Over the past two months, the Royal Thai Police have raided 48 companies to inspect whether they are complying with software licensing regulations. The recent raids uncovered widespread use of unlicensed software programs in manufacturing facilities. The raids were intended to set an example and encourage other companies to review their own software use.
Surge in New Factories
The Industrial Works Department announced that investment in new factories has increased 189% during the first half of 2013. Over two thousand new permits were issued for factories and three hundred existing factories sought permission to expand facilities. Property companies expect the demand for rental factory space and industrial land to continue to grow for another 18 months. The highest investment was made in factories producing electronic appliances and equipment.
Tourism Still Growing
Tourism continues to be a growing industry for Thailand with the hotel business continuing to expand. For the 4th year in a row, Bangkok was voted as “World’s Best City” by the readers of Travel and Leisure magazine. The Tourism Authority of Thailand (TAT) predicts a 7% increase in tourism for 2014, and more focus is being placed on budget hotels and value-added tourism.