08 Aug Dej-Udom & Associates Newsletter – July 2014Download PDF
The Dej-Udom & Associates monthly newsletter covering Thailand and the ASEAN region for July 2014
COUNTDOWN 2015 – ASEAN Economic Community
Infrastructure Investment Shortage
A leading regional bank warns of a shortage of infrastructure investment in the ten ASEAN member states, and that due to the region’s rapid economic growth, the physical infrastructure of the ASEAN countries is overworked and worn out. It says that private investment in infrastructure never rebounded after the 1997 financial crisis and that public financing is still too low. On average, ASEAN countries now only spend 4% of GDP yearly, compared to 6% a year during 1980-2009. The bank says that the region’s prospects for sustaining 5% annual growth is good, but it needs to upgrade its infrastructure if ASEAN wants to escape the middle-income trap.
Hong Kong – ASEAN Free Trade Agreement
The first round of successful negotiations on a free trade agreement (FTA) between ASEAN and Hong Kong took place this month. Currently, ASEAN is Hong Kong’s second largest trading partner for goods and fourth largest for services. For foreign direct investment, ASEAN is the fifth largest destination from Hong Kong and the sixth largest inflow to Hong Kong. A senior Hong Kong government official stated that the proposed FTA will boost economic growth in both aspects and also further develop Hong Kong as a regional trading hub and gateway between ASEAN and mainland China.
Work Permit Rules Eased
Vietnam has been suffering a shortage of skilled foreign workers due to the country’s tough labor laws. In November 2013, the restrictions were tightened even further, so much that it was said Bill Gates would not be eligible to work in Vietnam. The government has begun amending the rules on work permits for foreign workers and instructing different ministries to make the work permit process easier for foreign employees.
To meets its ASEAN Economic Community integration obligations, the Lao government began its move to abolish the reference prices used to calculate import tax. The Ministry of Finance is also drafting new regulations to adjust import duties and taxes.
Highly Ranked for Overseas Expansion
A global communications firm ranked Singapore as highly desirable place for companies to expand overseas – 6th in the world and 3rd in the Asia Pacific region. The high ranking is due to Singapore’s customer base, affluent citizens, IT skills, quality of governance, and IT security. New business formations increased by 14% in the second quarter of 2014 compared to the first quarter.
Arbitration Now Available
Cambodia’s first third-party dispute resolution body, the National Commercial Arbitration Centre (NCAC), is now providing arbitration services for Cambodia’s industries. The NCAC will focus on commercial and business disputes. It will benefit businesses since the country does not have a specialized court for commercial disputes. Currently, commercial disputes must be settled in the court system under the civil code which is complicated, time consuming, and costly.
Pharma Industry Growth
Myanmar’s government has tripled its spending on healthcare over the last three years, and experts anticipate the country’s pharmaceutical industry to expand by 10-15% a year due to this. Currently, Myanmar relies Published January 9, 2014 by ObamaCare Facts With enrollment at over 3 million in the Affordable Care Act’s health affordablehealth.info marketplaces opposition has taken their focus off of the sign up numbers and a full repeal and are attacking a new set of issues associated with the healthcare law, on the forefront of those will be website security. on foreign medicine of which 90% is imported. Its recent liberalized investment policies will now allow both foreign investors and local companies to expand this business sector.
Foreign Bank Approvals
In September, the Central Bank of Myanmar will approve and license between 5 and 10 foreign banks to operate in Myanmar. In July, twenty-five foreign banks made it to next round of the licensing process. Each bank will need a minimum US$75 million in capital.
Securities and Exchange
Tier 2 Rules Eased
Regulations governing Basel III-compliant Tier 2 subordinated debentures will be eased by the Securities and Exchange Commission (SEC) in the third quarter. The changes in the rules will permit banks to underwrite these types of debenture securities. At present, only securities companies are permitted to act as underwriters.
New Accounting Rules
Accounting firms have confirmed that the implementation of International Financial Reporting Standard 9 will have a major impact on Thai banks and insurers. The International Standards Board issued the fourth and final version of the standard on July 24, 2014. Adopting the new standard is expected to take time, effort, and money.
Bank Loans Encouraged
Government banks have been told by the governing National Council for Peace and Order (NCPO) to launch projects that help provide loans to people and enterprises in order to encourage business investment. Another goal is to boost exports by maintaining the stability of the baht.
Plans are being made to restructure the Anti-Money Laundering Office (AMLO) in order to make it an independent body. A nine-member board will be created to oversee the operations of the agency. The change is expected to give the AMLO more flexibility and remove it from political interference.
New Border Zones
The special economic zones (SEZs) created this month by the military government are expected to increase border trade by 20%. The National Council for Peace and Order (NCPO) approved the creation of five new SEZs in Songkla, Tak, Trat, Chiang Rai, and Mukdahan. Border trade with Malaysia grew the most during the first five months of 2014. The private sector is seeking special tax incentives to invest in the zones.
Thailand will have two new high-speed train routes to link the north with China. The National Council for Peace and Order (NCPO) approved the plans for the two projects, one linking the Port of Map Ta Phut with Nong Khai and the other linking the port with Chiang Khong. Construction of the routes will begin next year and should be completed in 2021. In addition, six dual-track rail routes have also been approved.
Plans are advancing for the construction of a new motorway to link central Thailand with the northeast. The first phase of the four-lane highway would run from the Bang Pa-in District of Ayutthaya to Pak Chong, and a second phase would extend to Nakorn Ratchasima. The present government has eliminated many infrastructure projects proposed by the previous government, but retained others such as this proposed highway.
Board of Investment
The Board of Investment (BOI) announced that investment applications reached a six-month high in June. The government agency considers this a sign that confidence in Thailand is on the rebound. Metals, machinery, and transport equipment attracted the largest increase in investment. Foreign direct investment had fallen 34% to only 407 projects for the first half of 2014 as compared with 619 in the previous year.
Energy Projects Reviewed
The Board of the Energy Conservation Fund ordered a review of 23 pending or under development energy-saving and efficiency projects. The Board will consider whether the projects should be cancelled, delayed, or have their investment terms revised. One official noted that 12 of the projects will definitely be cancelled. Thailand plans to have 25% of the nation’s total energy use come from alternative sources.