08 May Dej-Udom & Associates Newsletter – April 2015Download PDF
The Dej-Udom & Associates monthly newsletter covering Thailand and the ASEAN region for April 2015
COUNTDOWN 2015 – ASEAN Economic Community
AEC Integration Report
A recent report by a major regional bank maintains that the ASEAN Economic Community (AEC) will take 10 to 15 years to become fully integrated, but that ASEAN will keep developing as a global economic power. Southeast Asia is expected to displace China as the ‘world’s factory’ due to the region’s strengths. The bank says that cheap, young labor and advantageous locations will draw even more manufacturers to the region. ASEAN’s population is expected to rise to 650 million by 2030 of which half will be under the age of 30 and who will be a powerful middle class with high consumption.
The ASEAN Working Group on Intellectual Property Cooperation (AWGIPC) announced that over 80% of the 108 initiatives under the ASEAN Intellectual Property Rights Plan will be complete by the end of 2015. The AWGIPC reports that eight ASEAN countries have acceded to the Patent Cooperation Treaty and that ASEAN is still committed to acceding to the Madrid Protocol on Trademarks by the end of 2015. Another achievement is the ASEAN Patent Examination Cooperation, a patent work-sharing program between all ASEAN countries, except for Myanmar, where costs and waiting times to obtain a patent within ASEAN have been reduced.
Currency Swap Extended
Malaysia renewed its currency swap agreement with China for another three years. The swap exchanges RMB 180 billion for MYR 90 billion. The governments say that the swap will promote the use of local currencies for payment settlement and encourage bilateral trade and investment between the two countries.
As part of its reform program, Vietnam’s government is moving to divest itself of the country’s state-owned enterprises (SOEs) and non-core and underperforming businesses. The government also wants SOEs to undergo privatization so it can free up funds for investment in other areas. Many of the country’s SOEs have high levels of non-performing loans and are not profitable.
New Banking Sector Rules
Vietnam’s prime minister announced that rules for foreign investment in the banking sector will be relaxed in order to help rebuild the financial sector. Currently, there is a 30% cap on foreign investment in a bank and a single foreign investor can only own up to 20%. Due to these limitations, foreign investors have hesitated to invest in the country’s banks which need restructuring and recapitalization.
New Foreign Banks Open
For the first time in decades, foreign bank branches opened in Myanmar, two from Japan and one from Singapore. Due to mismanagement of the country’s banking sector over the last 50 years, local banks are not equipped to deal with commercial banking for global companies. The new foreign banks are limited to one branch that can provide loans to foreign companies in foreign currency and loans to domestic banks.
Border Trade Increases
The Ministry of Trade and Commerce of Myanmar reported that legal trade on its borders with China, Thailand, India, and Bangladesh has doubled in four years. In 2011, trade was US$ 3.4 billion which has jumped to US 6.6 billion this year.
The World Bank says that even though Laos’ economy grew by 7.5% in 2014, the growth only took place because of the country’s fragile, but improving macroeconomic environment. The bank says that the country must keep restoring its macroeconomic stability to ensure strong GDP growth.
Securities & Exchange
Foreign Stock Offerings
Foreign companies will soon be able to launch public offerings of shares in Thailand as the Securities and Exchange Commission’s (SEC) primary listing regulations came into effect this month. However, However, the foreign companies are subject to stringent requirements including that the shares must be publicly offered on the Stock Exchange of Thailand and at least two company directors must be Thai nationals residing in Thailand.
New State Bank Regulations
The Bank of Thailand (BOT) announced that new regulations governing state banks will be fully effective by the beginning of 2016. The BOT is now responsible for supervising, inspecting, and regulating the Kingdom’s eight state banks in place of the Ministry of Finance. The new regulations are to ensure that state banks have proper risk management systems, stay efficient, practice good governance, and are transparent.
The Ministry of Finance says that Thailand’s financial sector is 87% ready for the coming ASEAN Economic Integration, higher than the 77% average of the other ASEAN countries. The ministry will launch new strategies later this year to further prepare the country for the integration. These include turning Thailand into a joint-production base, promoting competitiveness, and integrating the local economy with the global one.
Corporate Tax Cuts for SEZs
The cabinet approved a cut of 10% for ten years to the corporate income tax for factories located in the Kingdom’s special economic zones (SEZs) to attract more investment into these sites. Allowed investment categories include businesses which focus solely on exports or focus on areas where Thailand is less competitive. However, companies that opt for the tax cut will not be eligible for other investment promotions from the Board of Investment.
BOI Projects Approved
Thailand’s Board of Investment (BOI) approved promotional privileges for 793 projects with a total value of THB 218 billion in Q1 2015, up 5 times the total value of approved projects for Q1 2014. The BOI reports that many of the approved projects are in the targeted categories of processed agricultural goods and industries requiring advanced technology and alternative energy sources. The Commerce Ministry’s Business Development Department also gave approval to 31 foreign firms with a total investment capital of THB 1.7 billion to set up operations in Thailand this month.
Thai Property Market Still Attractive
A global property guide says that Thailand is still attractive to property investors in the residential market despite the Kingdom’s economic slowdown and political turmoil. The guide maintains that Thailand has some of the highest rental yields in Asia and some of the lowest property prices for premium developments. Compared to premium developments in Hong Kong and Singapore, Thailand’s prices are one-third lower and properties generate double the rental revenue.
State-Owned Land Revenue
The Treasury Department believes that there is a potential THB 20-30 billion a year in additional revenue available if all state-owned land is properly commercially developed and all 32 million land plots are fully assessed. Currently, the revenue from leases and the commercial development of state-owned land is THB 2 billion a year.
Copyright Act Amended
The Thai Copyright Act was amended earlier this year and now covers the responsibilities of internet service providers offering infringed materials on the internet. The amendment will come into effect in August 2015. The penalties for recording movies being shown in a theater came into effect earlier this month. Under the new amendments, the copyright owner now has the burden of initiating an infringement case against an internet service provider