06 Jun Dej-Udom & Associates Legal and Business Update – May 2014

The Dej-Udom & Associates monthly legal and business update for Thailand and the ASEAN region for May 2014

COUNTDOWN 2015 – ASEAN Economic Community

Regional Currency Swap
Finance ministers and central bank governors from all ten ASEAN member states plus South Korea, Japan and China agreed to continue developing the US$240 billion Chiang Mai Initiative Multilateralization scheme as a financial safety net and to further develop resilient and safe bond markets in the region. The standby fund was set up after the 1997 economic crisis as a currency swap plan to solve or prevent future currency debacles.

Forestry and Climate Change Report
The recently published report by the Center for People and Forests and the ASEAN Social Forestry Network is an analysis of social forestry and climate change mitigation and adaptation in the ASEAN region from 2010 to 2013. The findings show that ASEAN community forests are increasing, but that deforestation continues to outpace growth by 6 to 1. The report also details climate change trends such as an increase of average surface level temperatures, an annual rise in sea levels, and erratic dry and rainy seasons.

Tariff Nomenclature Review
ASEAN is planning to review and update its Harmonized Tariff Nomenclature well before the planned review in 2017. The emergence of new products and technologies requires new nomenclature, classifications and descriptions to differentiate products and to help facilitate trade and control technical smuggling.

Year of Cultural Exchange
To commemorate the beginning of the second decade of the strategic partnership between ASEAN and China, 2014 has been designated the “Year of China-ASEAN Cultural Exchange.” China intends to offer 15,000 scholarships to students from ASEAN countries and establish more ASEAN-oriented education centers in China over the next 3 to 5 years.

Vietnam Update
Exports Fall
Despite the 2010 free trade agreement, Vietnam’s exports to other ASEAN member states fell from 25.4% in 2012 to 4.4% in 2013. Revenues from the country’s three largest markets, Cambodia, Malaysia and Thailand, have also decreased. Rice and crude oil account for the majority of Vietnam’s exports.

Philippines News
Highest Unemployment Rate
The International Labor Organization (ILO) reports that the Philippines has the highest unemployment rate in ASEAN, 7.3% in 2013. The ILO noted that the high rate will continue because the country has not translated its economic growth into job opportunities for its unemployed. According to the ILO, overall unemployment in ASEAN is on a downward trend with Laos, Thailand, and Cambodia having the lowest unemployment rates.

Myanmar Watch
SEC Rules Submitted
Rules for the new Yangon Stock Exchange were submitted to the Attorney General in order to meet its October 2015 launch. The rules will establish a Securities and Exchange Commission (SEC) responsible for the Yangon Stock Exchange and for the licensing of brokers, dealers, and underwriters. Myanmar is the only ASEAN member without a modern exchange.

Cambodia News
SME Loans
Three of Cambodia’s largest financial institutions received over US$ 100 million in loans from foreign banks to be used solely in supporting small and medium enterprises (SMEs). This will allow the financial institutions to make more money available to start new SMEs or to expand a current SME’s production. However, the loans will not be used to ease interest rates.

Memorandum of Understanding Signed
The Cambodia Securities Exchange signed a memorandum of understanding with the Stock Exchange of Thailand (SET). The SET will assist Cambodia’s exchange in developing the capital market between the two countries.

THAILAND UPDATE

Securities and Exchange
Progress Indicators Introduced
The Securities and Exchange Commission (SEC) and the Thaipat Institute introduced the Kingdom’s first progress indicators. Listed Thai companies can use the indicators to measure the success of corporate social responsibility (CSR) programs and anti-corruption efforts. The SEC Secretary-General said that the indicators will make it easier for international metrics like the Dow Jones Sustainability Indices to assess the performance of Thai listed companies and improve their chances of being invited into the indices.

Revised Rules
The Securities and Exchange Commission (SEC) revised its regulations on convertible bonds to require that applications for offshore offerings be jointly prepared by a convertible debentures issuer and an SEC-approved financial adviser. More comprehensive disclosure of dilution effect information is also now mandatory in order to provide more accurate information in an issuing company’s notice to call a shareholders’ meeting. The regulations come into effect in June 2014.

Technology Upgrade
The Stock Exchange of Thailand (SET) and the Thailand Futures Exchange (TFEX) replaced its entire technology platform, and it now performs both equity and derivatives trading. The SET President said this has already led to volume increases and low latency and will help maintain a leading market position.

Taxation
Revenue Department Incentives
To help achieve the ASEAN Economic Community blueprint’s goals, the Thai Revenue Department (RD) is providing incentives to businesses to make Thailand more competitive. The department also plans to boost efficiency in tax collection in ways like integrating mobile and social technology into tax collecting. Overall, the RD wants to reduce the cost of tax collection while collecting more taxes. To help small and medium enterprises (SMEs), the RD reduced the tax rate for SMEs by 15 to 20%.

Banking
Loan Guarantees for SMEs
To help with the liquidity problems being experienced by small and medium-sized enterprises (SMEs), the Ministry of Finance (MOF) plans to increase their loan guarantee from 18% to 50% and offer loan guarantees for five years instead of one. The MOF believes this will encourage commercial banks to lend to SMEs. The Thai Credit Guarantee Corporation (TCG) will also postpone its loan guarantee fees for six months for SMEs

Investment
Overseas Investment Up
A recent bank survey reports that in response to the extended political situation, Thai corporations are increasingly investing into the ASEAN region, in particular Myanmar, Indonesia, and Vietnam. The survey found that total projected investment planned for overseas was 60% for 2014, compared to only 35% in 2013.

Business
Foreign Firms Approved
In the first five months of 2014, the Business Development Department in the Ministry of Commerce approved 151 foreign firms worth a total of THB 6.3 billion to set up operations in Thailand under the Foreign Business Act. The approvals will create around 1,730 new jobs for Thais.

Streamlined Registration Procedures
The Business Development Department is making it easier to open new businesses by streamlining their registration procedures. Business owners will be able to register and pick up their registration certificates at banks and modern traders like Big C, Tesco, and 7-11. In most cases, registration of a new enterprise can be done outside the district it will be located in.

Personnel Rules Revised
The Foreign Trade Department (FTD) is recommending that Thai small and medium enterprises (SMEs) travel abroad and explore business opportunities in other countries. The FTD Secretary-General said that if SMEs only focus on business activities in Thailand, they will experience further liquidity problems because of the economic slowdown.