10 Apr Dej-Udom & Associates Business and Legal Update – March 2013Download PDF
The Dej-Udom & Associates monthly business and legal update for Thailand and the ASEAN region for March 2013
COUNTDOWN 2015 – ASEAN Economic Community |
AEC Preparedness –
Experts from many business sectors are urging Thailand to do more to prepare for the ASEAN Economic Community (AEC). A recent survey shows that small and medium-sized enterprises are not prepared for regional integration. Members of foreign chambers of commerce have also expressed concern that they do not have enough information about the AEC, and business operators outside of Bangkok are cited as having little access to information about it. Additionally, language ability and Information Technology (IT) skills must also be improved. Thailand’s service sector encompassing tourism, construction, and logistics will also face increased competition.
Cost of Living Rises
The booming economic market in Asia has increased cost of living, and Singapore is now ranked as the sixth most expensive city in the world. Tokyo tops the list followed by Osaka, Sydney, Oslo and Melbourne. The increased cost of living in Singapore is due to rising wages and regional growth. If the cost of living in Singapore continues to increase, companies setting up regional headquarters for the AEC will most likely consider other locations as hubs.
Bilateral Free Trade
At a meeting in Hanoi this month, economic ministers from ASEAN countries discussed the possibility of setting up an ASEAN-EU bilateral free-trade agreement. The meeting also discussed the plan to include Hong Kong in the ASEAN-China free-trade agreement.
Concerns about Good Governance
A new report shows a sharp decline in economic governance in Vietnam. Surveys indicate that business performance is at an all-time low, and one study revealed that 42% of companies doing business pay commissions to government officials to obtain contracts.
The Myanmar government has stated that there are no plans to amend its 1982 Myanmar Citizenship Law. The Rohingya people of the Rakhine state lost their citizenship in 1982 when the law came into effect. However, the government is issuing temporary passports to undocumented children of Myanmar migrant workers living in Thailand. Thailand and Myanmar signed an accord in 2003 to start a nationality verification system for migrant workers.
Economic Zone Displaces Residents
The Burmese government plans to move six villages with about 5,000 inhabitants to make way for a new economic zone in the Thanlyin township of Yangon. Several large Japanese manufacturers intend to set up factory operations in the new zone. Residents want the government to provide proper compensation for being forced to move. Development of the project is subject to the 2012 Farmland Law which requires that the project must be implemented on schedule. If the developers fail to meet the proposed timeframe, the land must be returned to the original owners.
Infrastructure Projects Suspended
The Laos Government is suspending infrastructure projects that were not initiated through government bidding as required under the State Investment Law. Upon review of the projects, the government decided that the costs of certain projects were too high and would encourage corruption.
Regulations for Sustainability
The World Bank is assisting Laos to improve its laws and regulations regarding natural resources and the environment. The International Finance Corporation (IFC) is working with the Laotian Ministry of Natural Resources to improve rules and enforcement. The aim is to ensure that hydropower will be developed and operated in a sustainable manner that protects the environment as well as local livelihood.
Relaxed Single Lending Cap
The Bank of Thailand (BOT) will temporarily relax the rule on lending limits to companies under one group. The current regulation does not allow banks to lend more than 25% of their Tier 1 capital to one single client. The BOT wants the rule relaxed in order to lend to large conglomerate companies.
Forex Rules Eased
The Bank of Thailand (BOT) will relax rules for outbound investment from April until June 2013. Shareholders of listed companies will be permitted to convert funds for investment in more than a 10% stake in foreign firms without asking permission.
The Finance Ministry is drafting a new bill that groups polluters into different categories. Factories will be taxed according to how badly they pollute the environment.
Securities & Exchange
Thailand’s Securities Exchange Commission (SEC) has implemented new measures to contain speculation. Effective March 1, 2013, stocks that are assessed with “abnormal trading patterns” will be required to trade using cash balance accounts for six consecutive weeks instead of the previous three. Since the beginning of the year, 44 stocks have been singled out for trading restrictions as opposed to 50 for all of 2012.
Between April 5 and 12, 2013 Thailand will be affected by the interruption of natural gas deliveries from Myanmar. As natural gas accounts for 70% of Thailand’s electricity generation, power cuts or shortages are anticipated. A number of heavy industries have already announced plans to suspend or reduce activities during the cut-off period. The Industrial Works Department will rate factories based on their energy-saving efforts. Plants receiving a Grade A or B rating will be given an inside fast track for license renewal and exemptions from licensing fees.
Smart E-Tax Incentive Service
The government is expanding services for businesses under its Single Window scheme. Recently, 18 commercial banks signed a memorandum of understanding to use Smart e-Guarantee and e-Payment systems. Under the e-Payment service, traders will be permitted to pay tax via a bank instead of directly to the Customs Department.
Pattaya High-Speed Link
The government expects to complete a high-speed train link to Pattaya by 2018. Three other high-speed lines to Phitsanulok, Nakorn Ratchasima and Hua Hin are planned to be ready a year later.
New Airport in the South
Plans are going forward to build a new airport in the southern province of Yala at the city of Betong. The government has acquired 90% of the required land and commercial operations are expected to commence in 2015.
Bangkok’s newly re-opened second airport, Don Mueang, is now fully functional and expects to see a large upsurge in airport traffic.
Twelve New Zones
The Industrial Estate Authority of Thailand (IEAT) is inviting developers to create 12 new industrial zones. Three are intended for local and foreign small and medium-sized companies. Another will be the Chiang Khong logistic zone located in Chiang Rai. The third category will be zones located in eight provinces in the northeast. IEAT will provide special incentives for factories to set up in the new zones.
Thai-EU Free Trade
A Thai delegation returning from Europe announced that a Thai-EU free trade agreement will be concluded in less than two years. Presently, Thai exports to the EU receive lower taxes under the Generalized System of Preferences, but this ends in 2015.