07 Sep Dej-Udom & Associates Newsletter – August 2015Download PDF
The Dej-Udom & Associates monthly newsletter covering Thailand and the ASEAN region for August 2015
COUNTDOWN 2015 – ASEAN Economic Community
At the 47th Meeting of the ASEAN Economic Ministers held this month in Kuala Lumpur, Malaysia, significant progress was made on the pending Regional Comprehensive Economic Partnership (RCEP). The RCEP is the proposed free trade agreement between the ASEAN member states and Australia, China, India, Japan, South Korea and New Zealand. Past obstacles were overcome during the meeting and now the RCEP agreement could be finalized by 2016. Of note at the meeting, all parties to the RCEP agreed to immediately zero-rate 65% of all tariff lines when the agreement takes effect and have 80% zero-rated within 10 years after.
ASEAN Bank Resilience
In a new report, a global credit-ratings agency maintains that while the asset quality of ASEAN banks may weaken over the next year, the banks will be resilient and absorb any downside risks. The agency credits this to the healthy recurring profits and adequate capital cushions of ASEAN banks and strong government support.
New Securities Directives
To promote the Cambodia Securities Exchange and encourage more companies to list on it, Cambodia’s government released two new directives. The first gives listed companies a 50% tax break for three years, and the second allows companies to delay their monthly prepayment of tax on profit until the end of the year.
Open Skies Agreement
Cambodia and New Zealand finalized an open skies air services agreement this month which will improve air links between the two countries and the ASEAN region.
A recent report from the Laotian National Committee for Special Economic Zones states that due to the coming regional integration, more companies are investing into the country’s special and specific economic zones (SEZs). Currently, 213 companies are investing in the SEZs with a total registered capital of US$ 4.2 billion with future investment plans of US$ 17.4 billion.
Working in Indonesia just became less complicated for foreigners. To help brighten Indonesia’s business climate, President Joko Widodo cancelled the requirements that foreign employees have to master the Indonesian language and hold a Temporary Stay Permit (KITAS) in order to work.
To attract more foreign investment, the Indonesian government has extended tax incentives for pioneer industries and is planning to open it fisheries sector to foreign investors. Firms investing a minimum of 1 trillion rupiah in pioneer industries will be eligible for tax reduction of 10-100% for up to 15 years. Currently, foreign investors can only own 40% of Indonesian processing and food technology businesses. For fishery-related businesses, except for fishing in Indonesian waters, ownership will be increased to 100%.
EU Free Trade Agreement
After over two years of negotiations, Vietnam and the European Union (EU) signed an agreement in principle for a free trade agreement earlier this month. They have agreed to eliminate almost all of their import tariffs within 10 years for Vietnam and 7 years for the EU.
The World Bank and the International Monetary Fund are urging Myanmar to reform and modernize the country’s four state-owned banks. These four banks account for more than 60% Myanmar’s total banking assets and are performing poorly.
New Copyright Law
The amended Thai Copyright Act came into effect this month. Under the new copyright law, intermediaries and internet service providers can now be held responsible for copyright infringement on the internet. Also, people who illegally record movies in theaters can be fined and imprisoned.
Securities and Exchange
Regulations for equity crowdfunding were announced by Thailand’s Securities and Exchange Commission earlier this year and the first crowd funding platforms are expected to launch by the end of 2015. The SEC hopes that crowdfunding, which uses the internet to raise money, will boost the economy and help start-ups and small businesses get funding.
SET Opportunity Days
The Stock Exchange of Thailand (SET) held its quarterly Opportunity Days where listed companies’ top executives meet with analysts and investors. In all, 145 firms, an event best, with a total market capitalization of THB 5 trillion were showcased. The sessions are available on the SET’s website.
ASEAN Cultural Center
The first ASEAN Cultural Center (ACC) in Southeast Asia opened in Bangkok at the
Ratchadamnoen Contemporary Art Center. The Thai Minister of Foreign Affairs hopes the ACC will provide an active cultural learning space for Thais and ASEAN visitors as the ASEAN Economic Community integration approaches.
Trade Websites Linked
To help drive export growth and forge closer ties with online traders and shoppers, the International Trade Promotion Department will link its website, Thaitrade.com, to the major websites of Thailand’s trading partners. The sites include China’s Alibaba, South Korea’s TradeKorea, India’s TradeIndia, and Vietnam’s VietTrade.
Board of Investment
As part of the plan to revive the country’s economy, Thailand’s Board of Investment (BOI) will now offer maximum incentives to eligible investments in special economic zones (SEZs). 61 business activities are eligible and the maximum incentives include corporate income tax exemption for 8 years, import duty exemption for machinery and raw materials, and the use of unskilled foreign labor.
Job Creation Program
The Cabinet approved a THB 6.5 billion job-creation program to help boost domestic purchasing power. Made up of 5,000 projects that will create jobs primarily in the agricultural sector for 2 million households, the program also seeks to reduce agricultural production costs. The program funds will be disbursed in the 2015 fiscal year.
To help reduce their exposure to the volatile global markets, the Bank of Thailand and the Bank Negara Malaysia signed a memorandum of understanding to encourage the use of the two countries’ currencies in settling cross border trades and direct investment.
The Economic Stimulus Committee announced that the 14-month process for public-private partnerships (PPPs) for infrastructure projects will begin in January 2016 with work expected to commence in the first half of 2017. The Thai government disclosed a five-year PPP strategic plan earlier this year that has 65 development projects in 20 categories worth a total of THB 1.35 trillion.
Land Transfer Fees
Property experts expect land transfer fees for developers and buyers to increase by 25% on overage in 2016. However, for land near the mass transit systems, they expect the land transfer fees to increase by 100%.