Dej-Udom & Associates Business and Legal Update – September 2013


The Dej-Udom & Associates monthly business and legal update for Thailand and the ASEAN region for September 2013

COUNTDOWN 2015 – ASEAN Economic Community |

Outflow of Business from Thailand –
According to the Thailand Development Research Institute (TDRI), preferential trade agreements are causing local investors to move their businesses across the border to neighboring countries. Vietnam, Myanmar, Cambodia and Laos offer better export incentives to manufacturers for goods sold to the US and Europe. Implementation of the nationwide 300-baht minimum wage has also caused manufacturers to seek cheaper labor sources.

Agricultural Standards Strengthened
A memorandum was signed in Kuala Lumpur between the ASEAN member countries and the UN’s Food and Agricultural Organization (FAO) to strengthen agriculture cooperation with the goal of increasing food security. The agreement will cover food safety, nutrition, bioenergy development and animal disease control. Under the MOU, ASEAN countries will be given greater access to FAO information and programs.

Free Trade Pact with Hong Kong Proposal
Hong Kong and ASEAN plan to enter into free trade pact discussions early next year. Hong Kong is interested in investing in financial, logistics, tourist and entertainment sectors. China would also like to see more ASEAN investment in the Chongqing area.

Laos Update
Economic Zone Attracts Investors
The Thakhek Specific Economic Zone located near the Lao-Thai Friendship Bridge is attracting investors. In total, 24 companies have signed up to use the zone and licenses have been granted to six others to do business in the region.

New Tax to Cover Revenue Shortfalls
In view of revenue shortfalls, Laos plans to launch an electronic tax collection system for automobiles based on a vehicle’s engine capacity, brand and model.

Malaysia News
Thai-Malaysia Cooperation
Thailand and Malaysia have agreed to cooperate on trade in six areas: oil and gas, energy, rubber, automobiles, sugar and rice, and tourism. In order to encourage trade, the two nations intend to streamline customs procedures and facilitate logistics.

Singapore Trends
New Employment Rules to Benefit Locals
Starting in August 2014, companies with more than 25 employees will be required to advertise for Singaporeans to fill any jobs before accepting foreigners. For jobs paying salaries of less than USD 9,000 a month, the company will need to wait 14 days before seeking an employment pass to hire a foreigner.

Free Trade Agreement with EU
Singapore has concluded one of the world’s most comprehensive trade agreements with the European Union. The agreement is considered a first step in reaching a wider agreement between the EU and ASEAN.

Myanmar Watch
Telecoms Bill Passed
Parliament passed a new telecoms bill that will permit foreign companies to operate in the country. Licenses recently awarded to Norwegian and Qatari firms are expected to expand telephone coverage to 80% by 2016.

Traffic Problems
Traffic problems in Yangon have increased since the government’s car replacement scheme came into effect two years ago. Over 200,000 automobiles have been imported into the country since then and local police are unable to cope with the mounting congestion.

Mega-City Tenders
The government will soon invite tenders for the construction of Yangon’s new mega-city. The planned site for the new hotels, shopping malls, and housing projects is a 162-hectare plot in northern Yangon.


Gold Exchange Concerns
The Bank of Thailand (BOT) is considering ways to regulate gold trading in order to curb speculation. The central bank suspects that recent gold imports have been used to speculate on exchange rates. A number of gold futures dealers have proposed that a spot gold exchange be created in order to make Thailand a gold trading hub.

Eight Loan Guarantee Categories
The Cabinet has given its approval to the Finance Ministry’s outline and scope of loan guarantees for state enterprises and government agencies. The announcement defines eight different types of loan guarantees including those for infrastructure projects, for international agencies/foreign governments, and refinancing. The Cabinet has the power to approve additional borrowing outside the eight categories.

New SME Bank Lending Procedures
The Bank of Thailand (BOT) has suggested that the Small and Medium-sized Enterprises Development Bank’s (SME Bank) loan procedures be changed to eliminate loopholes. The BOT wants to modify the present practice of breaking down loans to less than 5-million baht to avoid board approval by linking loan applications to the clients rather than the projects.

Higher Retirement Age
The Cabinet has given its approval to increase the mandatory retirement age to 65 from 60 due to labor shortages. The Thai Chamber of Commerce estimates that Thailand will be short one million workers. The construction industry is experiencing serious problems in finding enough laborers.

New Airport Courtroom
The Airports of Thailand has set up courtroom space in Suvarnabhumi Airport to handle cases involving foreigners. The court is intended to make it more convenient for foreign travelers to pursue cases against Thai criminal elements.

Excise Tax Increase
The excise tax on alcohol has increased from 7% to 15% after the Cabinet approved large increases last month. The alcohol tax is divided into two parts: a tax on product value and a tax on alcohol content. Wine products worth less than 600 baht will be exempt from product value base while those priced more than 600 baht will be taxed at 36% of the product’s value. Business operators feel that the tax increase is unfair.

Fund to Assist SME Exports
The Commerce Ministry has approved a special SME Proactive Fund to assist small and medium-sized enterprises (SMEs) in handling export difficulties. The International Trade Promotion Department plans to participate in 81 trade fairs and join six trade missions overseas to promote SME goods.

Green Rules Encouraged
Exporters in the food business are being encouraged to pay more attention to environmental awareness in order to succeed in the global food business. This is due to developed countries requiring stricter observance of measures governing environmental protection, human rights, and animal rights. Negotiations of free trade agreements will include requirements to observe stricter rules.

New Industrial Estates
The Industrial Estates Authority of Thailand (IEAT) has decided to review 13 out of 18 proposals to set up new industrial estates. The new projects include industrial estates for small and medium-size businesses. One project will cater to industries wishing to be located near the Lao border in the Chiang Khong district of Chiang Rai.

New Foreign Companies
The Business Development Department announced that 44 foreign firms have been granted licenses to set up operations. The department notes that foreign investors still consider Thailand safe for investment.

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