07 Sep Dej-Udom & Associates Newsletter – August 2014Download PDF
The Dej-Udom & Associates monthly newsletter covering Thailand and the ASEAN region for August 2014
COUNTDOWN 2015 – ASEAN Economic Community
ASEAN Collective Investment Scheme
Singapore’s Monetary Authority, Malaysia’s Securities Commission, and the Securities and Exchange Commission of Thailand announced that the ASEAN Collective Investment Scheme (CIS) framework is now operational between the three countries. Fund managers and retail investors in the three countries can buy and sell mutual funds issued in any of the three countries and have a direct channel for cross-border distribution of the funds in these three markets. Under the CIS, funds will not have to be structured for each individual country and can be easily registered for the three countries. The CIS will allow investors and fund managers to leverage and benefit from the region’s combined GDP of US$ 2.4 trillion.
ASEAN Liberalization Agreement
At the 46th ASEAN Economic Ministers Meeting in Myanmar, all member countries signed the 9th edition of the service sector liberalization agreement which will become effective in 180 days. The agreement will further open 101 businesses to increased liberalization including accountancy, maritime shipping services, and online information services. The ministers also signed a mutual recognition agreement on accounting professionals. Under it, all member states will now accept each other’s accounting regulations, ethics, and standards.
Doing Business Report Rankings
A senior government official announced that Myanmar plans to improve its rankings on the World Bank’s Doing Business Report by cutting red tape and easing regulations across all sectors. Myanmar ranks in last place at 189 out of 189 countries for ease of starting a business and ranks 182 of 189 countries for overall ease of doing business.
Tax Time Cut
The Ministry of Finance announced that it wants to cut the amount of time businesses spend doing tax-related activities. At present, businesses in Vietnam must declare and submit taxes 32 times a year which takes an average of 872 hours. The government wants to reduce the time to 354 hours by the end of 2014 and cut it to 171 hours in 2015.
Hydropower Projects Scrapped
The Vietnamese government cancelled twelve hydropower projects citing low economic benefits and high social and environmental risks. 40% of Vietnam’s total power output comes from hydropower and the country has 284 operational hydroelectric projects with another 204 under construction. The country’s reliance on hydropower has resulted in environmental problems including flooding, earthquakes, forest loss, and ecological destruction.
Stock Exchange Not Ready
Indonesia’s Financial Services Authority says that the country’s stock exchange is not ready for the coming ASEAN Economic Community integration. Complications include the fact that cross-border listings violate a prevailing law and that there are no supporting regulations to allow foreign companies to offer shares and be listed on the Indonesian Stock Exchange.
Foreign banks in Indonesia are facing challenges as a new law that caps foreign ownership in banks to 40% comes into effect. The law will apply retroactively and have a 10 year compliance window. The 100% capital deduction charge under Basel III will also discourage foreign banks in investing in Indonesian banks as minority shareholders.
AEC Blueprint Commitments
The Minister of International Trade and Industry announced that Malaysia has completed 80% of the country’s commitments detailed in the ASEAN Economic Community Blueprint for the coming integration and plans to have 90% finished by the end of 2015.
The Department of Intellectual Property launched a new program: One Geographical Indication, One Province, to help develop local products and boost income at the provincial level. The department will encourage each province to have at least one Geographical Indication (GI) product and teach producers how to market and trade them.
Patent Cooperation Treaty
Thailand, the 8th ASEAN member state to sign, is a now a party to the Patent Cooperation Treaty (PCT) which has 148 member countries. Cambodia and Myanmar have yet to accede to the treaty. The PCT allows for a patent to be registered in multiple member countries under one application.
South Africa Investment Promotion
Thailand and South Africa plan to sign an investment-promotion agreement in October 2104. The goal is to further promote two-way trade between the countries and increase it to US$9.5 billion a year by 2017. Thailand is South Africa’s largest trading partner in ASEAN, and South Africa is Thailand’s biggest African market.
Trade Solution Centre
To help Thai companies deal with trade problems arising from non-tariff barriers (NTBs) in the global marketplace, the Foreign Trade Department intends to set up a Trade Solution Centre to assist companies with their international trading matters. Thailand currently does not have a specific agency for this that businesses can use as a resource.
MICE Event Promotion
Thailand’s Convention and Exhibition Bureau (TCEB) and the Union of Myanmar Federation of Chambers of Commerce and Industry joined forces to promote and expand their meetings, incentives, conventions and exhibitions (MICE) industries. Myanmar wants to emulate the success Thailand has had with MICE events which generated THB 94 billion in revenue in 2013 for the Kingdom.
Board of Investment
New Promotion Strategy
Thailand’s Board of Investment (BOI) has a new investment promotion strategy for the 2015 to 2021 period. The BOI wants to increase Thailand’s competitiveness and cut its reliance on low-cost labor. The BOI will focus on industries with sustainable growth and cease their support of industries that do not meet their new criteria. The BOI wants to attract industries that use advanced technology, research and development, and environment-friendly techniques. Incentives will focus on activity and merit, and cluster-based promotion will replace zoning-based promotion.
Securities and Exchange
Derivatives Rules Relaxed
The Securities and Exchange Commission (SEC) has relaxed its rules on derivatives investment. Mutual funds for accredited investors can now make unlimited investments in derivatives. Mutual funds must still follow all other rules for derivatives investment and conduct stress tests and prepare contingency plans.
Capital Market Products
The Securities and Exchange Commission (SEC) announced that commercial banks can expand their businesses with new capital-market products and take on the roles of financial advisers, issuers, selling agents, and investors. The products include foreign company initial public offerings in Thailand (primary listings), foreign companies’ secondary listings, depositary receipts, private equity trusts, and the ASEAN Collective Scheme (CIS).
Excise Tax and VAT
The Excise Department is modifying the Excise Tax to reflect retail prices instead of ex-factory prices. The new bill will be sent to the Cabinet for approval in September and will cover alcohol, tobacco products, and playing cards. The National Council for Peace and Order (NCPO) announced that the value-added tax (VAT) rate would stay at 7% for an additional year and increase to 10% in October 2015.