05 Jan Dej-Udom & Associates Newsletter – December 2014Download PDF
The Dej-Udom & Associates monthly newsletter covering Thailand and the ASEAN region for December 2014
COUNTDOWN 2015 – ASEAN Economic Community
At a regional summit, China announced that ASEAN and China are moving into a “diamond” decade of mutually beneficial cooperation that will be essential to maintaining peace and stability in the region. Bilateral trade between China and ASEAN is expected to reach US$500 billion in 2015 and a target of US1 trillion has been set for 2020. Negotiations also continue on the Regional Comprehensive Economic Partnership, a free trade agreement between the ASEAN member states and China, South Korea, Japan, India, Australia, and New Zealand, which would have a combined GDP of US$26 trillion, 33% of global GDP.
Malaysia announced that it will open ASEAN Lanes, express immigration lanes for citizens of ASEAN member states, at the Kuala Lumpur International Airport (KLIA) in February 2015. There will be a total of nine ASEAN Lanes in the arrival and departure areas of both KLIA terminals. ASEAN country passport holders make up 20% of all travelers to Malaysia.
New Bourse Framework
The Bursa Malaysia issued a new framework for retail and corporate investors opening trading and securities accounts. The bourse’s CEO says that the new framework will allow for a simpler and smoother account opening process, provide technological advancement and accords flexibility, and will leverage information technology. Individual investors will be able to use internet e-service applications to open accounts and submit all required documents. Corporate investors will also benefit from the standardization and reduction of document requirements.
Tax Information Exchange
Singapore and Indonesia have committed to accelerate their efforts to implement a system that will automatically exchange information on tax matters between the two countries. The system will help close tax evasion loopholes and improve trade and investment ties. At present, tax information on individuals and financial institutions is only exchanged upon request. Indonesia plans to implement the system in 2017 and Singapore in 2018.
Fair Competition Act
The Philippine Senate passed the Fair Competition Act of 2014 (FCA) that will benefit and protect small businesses and consumers. The aim of the FCA is to eliminate monopolies, cartels, and other unfair business practices that lead to goods and services becoming overpriced. The Philippines is the only ASEAN member state that does not have a competition law already in place.
European Chamber of Commerce
The European Union (EU) launched the European Chamber of Commerce in Myanmar earlier this month. The new chamber of commerce (CC) will be set up by the French Myanmar Chamber of Commerce and Industry, the Eurochambres, and chambers from Belgium, France, Italy and Hungary. It will be supported by key EU businesses in Myanmar and the Union of Myanmar Federation of Chambers of Commerce and Industry. The EU also endowed the fledgling CC with 2.7 million euros.
Energy Sector Changes
State-owned energy firms in Myanmar have begun seeking foreign partnerships to improve operations and open up downstream energy operations to investment. The sought partnerships are the first step in shifting these state-owned enterprises into publically-owned ones. A decrease in the state’s role in the energy sector will also boost foreign investment in energy. Myanmar hit its FDI target for the 2014-15 fiscal year six months early and investments in the energy sector contributed 20% to the overall FDI target.
Instructions for E-Commerce Operators
The Revenue Department is focusing on making more e-commerce operators enter the tax system. Although the number of e-commerce operators has grown, many have never entered the Thai tax system because they were under the minimum tax entry level. Letters have been sent to 500,000 e-commerce operators instructing them to register and pay taxes.
Changes to Excise Tax Reviewed
The Finance Ministry is planning to change the excise tax on ex-factory goods in order to create a single tax base for both local and imported products. In order to establish a new tax calculation structure, seven laws will be incorporated into a single regulation. The objective is to establish fairness for local manufacturers when the market is flooded with imported products from the ASEAN Economic Community (AEC) countries.
Corruption Ranking Improves
Thailand’s ranking on the Corruption Perception Index (CPI) has significantly improved. Thailand is now listed 85 out of 175 countries after being listed at 102 last year. The government hopes that Thailand can place in the top 50 countries within the next three years.
Stimulus Package Considered
The cabinet is considering a series of measures aimed at stimulating the economy and assisting small and medium-size enterprises (SMEs). The package includes corporate income tax cuts of 15% for annual income of no more than 3 million baht and 20% for more than 3 million baht. The establishment of a 50 million baht venture capital fund is another proposed measure.
The government has conceded that the Thai economy is likely to only grow by less than 1% this year due to missed export targets and delayed government spending.
Railway with China
China and Thailand signed a memorandum of understanding for the joint development of a dual track rail system that will enter Thailand from Laos at Nong Khai and extend to the coastal Map Ta Phut industrial site in Rayong. A 133-kilometer route linking Saraburi to Bangkok will also be constructed.
Red Line Delay
The revised completion date for the new electric rail Red Line is now 2018. The one year delay is a result of problems caused by relocating water pipes and electric lines and the project’s limited budget to acquire new trains.
Taxi Fare Hike
This month several thousand Bangkok taxis will increase their rates. The base fare of baht 35 baht will stay the same. However, rates will increase for longer distances. Taxis must pass a vehicle check before the meter is changed.
Funds Increase for Islamic Bank
The state-owned Islamic Bank of Thailand (IBank) has received a 10-billion baht capital increase in order to meet the required capital adequacy ratio. IBank’s non-performing loans amount to half of its total lending at present.
Mortgage Law Changes Delayed
Amendments to the Civil and Commercial Code law governing guarantees and third-party mortgages are being considered before the law takes effect. The law was supposed to take effect in February 2015; however, banks have asked for additional changes to the law.
Securities & Exchange
SEC Relaxes Listing Rules
Effective February 2015, the Securities and Exchange Commission (SEC) will relax listing rules on the Stock Exchange of Thailand (SET) for foreign companies. The new rules are intended to facilitate listing and concern the raising of funds from primary markets and dual-listings. Under the new rules, foreign companies will now be permitted to list on the primary market instead of just the secondary markets.