Dej-Udom & Associates Newsletter – February 2013

 

The Dej-Udom & Associates monthly newsletter covering Thailand and the ASEAN region for February 2013

COUNTDOWN 2015 – ASEAN Economic Community

AEC Labor Movement Issues
According to experts, movement of labor under the ASEAN Economic Community (AEC) will remain restricted for many types of workers. The AEC objectives call for the free flow of trade and commerce, services, investment, and capital. However, the flow of skilled labor under the AEC framework will be limited to two types, namely trade and services under the Asean Framework Agreement on Services (AFAS) and the movement of professional-level labor in accordance with mutual recognition arrangements (MRAs). AFAS will not be applicable to foreigners who enter a country to look for a job. Businesses will still need to comply with a member country’s labor and immigration rules. Under the MRAs, the ASEAN nations have agreed to facilitate the movement of seven professions: physician, dentist, nurse, engineer, architect, surveyor and accountant. In order to qualify to work in Thailand, these seven professions will need to show previous work experience, and new graduates will not be eligible.

Stock Market Cooperation
Presently, seven ASEAN stock markets are working to increase collaboration in view of the establishment of the ASEAN Economic Community. A first phase of cooperation was completed last year with the establishment of the Asean Trading Link. Currently, two more services are being completed: the ASEAN Depositary Link which will permit the holding of regional securities; and the ASEAN Clearing Link which will allow members to hold and settle regional securities as domestic securities. In order for the system to work, it will be necessary to have a linkage of all components of the system. Three ASEAN exchanges have already created an overall linkage system since last year: the Stock Exchange of Thailand (SET), Bursa Malaysia, and the Singapore Exchange. As a result, investors now have a single entry point for three of the region’s largest markets.

Myanmar Watch
Focus on Utilities
Myanmar is now in the second phase of national planning and is focusing on public services. The targeted areas for improvement are communications, water, electricity, sanitation, education and urban planning. Presently, Myanmar has the lowest mobile phone penetration within ASEAN. Thai telecom businesses are among the companies interested in submitting bids on two telephone service licenses. In view of the new goals to develop public services, the Myanmar Posts and Telegraphs Ministry has changed its name to the Communication and Information Technology Ministry.

Jewelry Tax-Free Zone
Myanmar plans to open tax-free and one-stop centers for finished gems and jewelry. The centers will open in Yangon, Mandalay and the new capital, Nay Pyi Taw. Raw jewelry and gems will be processed in the centers and then exported tax-free. A Tax Free Zone will be built in Nay Pyi Taw next to the Shwe Kyar Pin jewelry market.

Laos Report
AEC Policy Formation
The government of Laos is seeking help from the private business sector to formulate plans on Asean Economic Community (AEC) integration. One of the main issues Laos faces with AEC is the requirement to reduce import taxes. In order to compensate for the loss in revenue, Laos will implement a Value Added Tax system. The government hopes that with regional integration more foreign investors will turn to Laos.

New Vehicle Tax
The Laos government is considering implementing higher vehicle taxes in order to boost revenue. With the increased tax, the price of vehicles could rise from 25% up to 150% of the basic price. The new tax rates conform with the revised Law on Taxes which was promulgated in 2011. A pilot project for the new tax collection system is being launched next year.

THAILAND UPDATE

Securities & Exchange
Expanding Trading
The Securities Exchange of Thailand (SET) is seeking ways to expand trading volume. As approximately 60% of Thailand’s gross domestic product is contributed by the provinces, the SET is developing strategies to increase the investor base in provincial areas. In addition, SET expects to see online trading increase over the next year once 3G and 4G broadband are available. The Thailand Futures Exchange (TFEX) also anticipates doubling its accounts.

Controlling Speculation
The Securities and Exchange Commission (SEC) and the Stock Exchange of Thailand (SET) are forming plans to revise regulations in order to prevent stock manipulation. Both agencies are concerned about the high volume of speculative trading that has taken place in the past two months. Recently, the SET has insisted that brokers strictly comply with cash advance rules and has issued trading alerts to caution investors about certain stocks.

New Financial Product Rules
The rules governing advertising and sales promotion for businesses in capital markets have been amended. According to the Securities and Exchange Commission (SEC), advertisements must highlight product features and details on returns and risks. Gifts are not permitted to be used to attract investors.

Electricity
Power Shortage Issues
The Thai government has indicated that there could be power shortages in April. The reason for the potential power problem is due to a temporary disruption of natural gas supplied from Myanmar. Gas supplies will be interrupted due to repairs which must be made on the Yadana pipeline from April 5 to 14. The Industrial Estate Authority of Thailand (IEAT) is working with the Electricity Authority of Thailand (EGAT) to minimize any disruption at industrial estates. More than 800 factories plan to cut operating hours or shut down during the critical period. As April is one of the hottest months, the gas shortage comes during a period of peak electricity use.

Intellectual Property
Year of IP Protection
Thailand has decided to make 2013 the “Year of IP Protection.” The Ministry of Commerce is set to work closely with the Royal Thai Police to suppress all types of IP violations. Twelve specific locations in Thailand have been designated as places where enforcement officials need to make frequent checks. In addition, the Ministry of Education is running a campaign to increase awareness of Intellectual Property issues among younger Thais.

Thai Jasmine Rice Recognition
Thai jasmine rice is about to receive Geographic Indication (GI) recognition from the European Union. Hom Mali Thung Kula Ronghai rice which is grown in five provinces in the northeast will be the third non-EU product to receive European Union protection. Indian tea and Columbian coffee have already received GI recognition.

Banking
State Bank Lending Rules Reviewed
As a result of bad loan problems facing both the Small and Medium-Size Enterprise (SME) Bank and the Islamic Bank, the Finance Ministry plans to review rules on lending practices. The Islamic Bank recently experienced deposit runs due to lack of public confidence after the bank reported extensive non-performing loans in November 2012. Non-performing loans at the SME Bank are at 40% of all loans while those at the Islamic Bank range from 22% to 30% of all loans.

Business
Nominee Probe
The Commerce Ministry investigated 329 companies in the Chon Buri and Prachuap Khiri Khan areas and found that many are in breach of the Foreign Business Act (FBA). The companies were found to have Thais acting as nominees for foreigners who have majority control. The companies that are discovered to be in breach of the law are being told to fix the shareholding structure or face fines of 10,000 to 50,000 baht per day. The investigation will soon be extended to other Thai provinces.

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