10 Nov Dej-Udom & Associates Newsletter – October 2014Download PDF
The Dej-Udom & Associates monthly newsletter covering Thailand and the ASEAN region for October 2014
COUNTDOWN 2015 – ASEAN Economic Community
AEC Labor Growth
In a recent report, the International Labor Organization (ILO) states that the ASEAN Economic Community (AEC) integration will allow low and middle-income ASEAN member states to move up the productivity and skills ladder. The report estimates that future demand for high-skilled employment for Cambodia, Indonesia, Laos, Philippines, and Thailand could increase by 14 million jobs by 2025 and future demand for medium-skilled employment could increase by 38 million jobs over the same time period. The ILO maintains that the greatest impact of the AEC will be on medium-skilled jobs, especially in Thailand and Vietnam.
China Increases ASEAN Investment
China plans to increase its investment flows into ASEAN by 500% by 2020. One major reason is the continued rise in production costs in China as it moves up the value chain. Chinese companies are now utilizing ASEAN countries for additional manufacturing capacity and plan to diversify capital outlay into infrastructure, real estate, retail, and agricultural processing. Another factor is China’s ongoing transformation into a consumer driven economic power. Experts estimate that the number of Chinese middle-class consumers will rise from 250 million people currently to 600 million by 2020.
Singapore plans to diversify the country’s energy resources and concentrate on renewable energy with a focus on solar. To help manage the problem of solar intermittency, a US$ 25 million fund for energy storage projects will be established. Another planned initiative is to further deregulate the electricity industry.
Raw Timber Exports Banned
To protect its natural forests and old growth trees, Myanmar has banned the export of raw timber. The country’s forests have shrunk from 58% of total land area in 1990 to 47% in 2010. The government is now inviting foreign and domestic companies to invest in forest plantations on government land. Myanmar still has largest remaining forest areas in Asia.
The Myanmar Investment Commission (MIC) reports that overall foreign direct investment (FDI) inflows into the country rose to US$2.62 billion in 2013, up from US$901 million in 2010, and expects FDI to rise to US$5 billion in the 2014-15 fiscal year. To date, 772 companies have invested US$50 billion under the new investment regime. Chinese companies are the top investors with a combined investment of US$14 billion.
New Goods and Services Tax
Malaysia will launch its 6% goods and services tax (GST) in April 2015. One intended goal is to increase the competitiveness of Malaysia’s exports. There are more than 900 items that will be zero rated and exempt from GST. Consumers do not have to pay GST on zero-rated goods and exempt goods are tax free all along the value chain. Companies will also be able to defer GST on short-term imported goods designated for re-export
Overpriced Housing Market
A report by an urban development research company says that Malaysia’s residential housing market is not affordable to most buyers. The median of house price to annual income is 5.5 times. According to the report, the housing markets in Singapore, Japan, and the US are more affordable than Malaysia’s.
A leading global bank reports that high electricity prices and its erratic supply are the main obstacles to doing business in Cambodia. Macroeconomic uncertainty and corruption are also of concern. The report finds that even the country’s Special Economic Zones are not exempt from these problems.
Board of Investment
Thailand’s Board of Investment (BOI) approved 18 new projects in October with a value of THB 6.86 billion. A majority of the investment value, THB 52.64 billion, is for the second phase of the eco-car program. The continuing goal of the program is to make Thailand the ASEAN hub for eco-car manufacturing with the production of two million cars annually by 2017.
The Board of Investment (BOI) reports that outward investment from Thailand into other ASEAN countries continues to increase with THB 146 billion outbound in 2013.
The Customs Department launched an anti-graft promotional campaign, the Custom’s Department’s Bell, which focuses on transparency issues. The public will be allowed to meet directly with a unit’s superior officer for any graft or transparency complaints. Each Customs Department unit must now clearly post the names, positions, and telephone numbers of its superior officer in any area used to meet with the public.
New Laws and Amendments
The National Legislation Assembly (NLA) recently passed drafts of 13 new laws or amendments to existing laws. The laws or amendments pertain to the following topics: 1) Retirement fund for government officials, 2) Amendment of the Revenue Code, 3) Land Transportation, 4) Passenger Transportation, 5) Automobiles, 6) Customs, 7) Establishment of the Administrative Court, 8) Military Conscription, 9) Security of the Royal Family and the King, 10) Amendment to the Commercial Code, 11) Homeless Persons, 12) Measurements and Weights, and 13) Royal Decree of the Customs and Tariff Rate. The new legislation will come into effect after being published in the Royal Gazette. For more details about any of the above legislative changes, contact Dej-Udom & Associates at email@example.com.
Thailand’s Minister of Agriculture and Cooperatives and Malaysia’s Minister of Plantation Industries and Commodities met to discuss cooperative measures to stem plunging rubber prices. The Thai minister says oversupply is main reason for declining prices and proposed ways to reduce production and reduce stockpiles. These include cutting down old trees and increasing domestic demand for rubber. Raw rubber prices have declined 25% since 2011. A meeting of the region’s rubber producers is planned for the end of the month in Kuala Lumpur to further discuss measures.
Special Economic Zones
Thailand’s Board of Trade and Thai Chamber of Commerce met with Myanmar’s Federation of Chambers of Commerce and Industry and agreed to draw up a master plan to develop special economic zones (SEZ) between the two countries. For Thailand, the planned SEZs will be located in three provinces: Mae Sot, Mae Ramat and Phop Phra in Tak; Sing Khron in Kanchanaburi; and Mae Sai in Chiang Rai. Myanmar plans to set up SEZs in Myawaddy, Pha An and Mawlamyine. Cross border trade with Myanmar is expected to keep growing by 10% a year.
Thai investment into Myanmar has reached THB 320 billion, and Thailand is now the second-largest source of foreign direct investment (FDI) into the country. Thailand’s ambassador to Myanmar expects Thai energy investments in Myanmar to remain strong and also anticipates strong growth in the country’s construction sector for Thai companies. To attract Thai investors, the Thai Embassy in Yangon launched a new website, www.thaibizmyanmar.com, which will provide up-to-date investment news and information.
Tax Loophole Closed
The Cabinet approved an amendment to the tax law which closed a loophole that allowed individuals to avoid paying taxes by registering as a non-juristic body. Individuals can now only file for personal income tax. The amended law will come into effect for the 2015 tax year.