Dej-Udom & Associates Newsletter – February 2015


The Dej-Udom & Associates monthly newsletter covering Thailand and the ASEAN region for January 2015

COUNTDOWN 2015 – ASEAN Economic Community

Online Retail Market Growth
A recent study by a global management consulting firm says that the online retail market in six ASEAN countries: Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, could potentially grow by 25% per year through 2017. However, for its sustained growth in the ASEAN region, member states must increase broadband access, support local offers, reinforce online security, promote e-payment, and improve logistics and trade efficiency. The study says that state aid will be essential to improve the region’s online access and to encourage local companies to participate through access to financing and the promotion of e-commerce marketplaces.

Myanmar Watch
Economic Recovery Fast Track
A regional bank says that Myanmar could recover from its fifty years of economic isolation over the next five years through foreign direct investment into its infrastructure and the establishment of a significant manufacturing base. The bank believes that Myanmar could have GDP growth of 10% per annum by leveraging its strategic location between China and India, its youthful population, and cheap labor costs. Challenges include the country’s poorly capitalized financial institutions, untested regulatory structures, and unskilled labor force.

Electrified Households
Myanmar wants half of its nine million households to have access to electricity in the next fiscal year and access to electricity for all households by 2030. Currently, 3.2 million of the country’s households are electrified, up from 2.1 million in 2010. To help achieve this, Myanmar must double its electricity supply.

Indonesia Update
Tax News
To try and recover US$15.6 billion in lost tax revenues, Indonesia plans to crackdown on corporate tax avoidance, particularly transfer pricing in the commodities sector. The tax office now has the power to revise a company’s tax bill if transfer pricing is suspected and goods are being sold at too low a price. A tax amnesty for funds held offshore and brought back into Indonesia is also being planned. Under the amnesty, there will be no tax on repatriated funds. To help keep money onshore, new tax breaks will be implemented.

Vietnam News
Foreign Competition
Vietnam will enter into multiple free trade agreements in 2015, and there are worries that the country’s small and medium sized enterprises (SMEs) will have difficulty competing with their foreign counterparts. 96% of Vietnamese companies are SMEs and are considered weak in capital, technology, and skills. Repairing business gaps is now a priority and exporters are being urged to meet international requirements for standards and quality, safety and hygiene, and source of origin.

Singapore Watch
Top Real Estate Investor
A leading real estate company reported that Asian outbound real estate investment in 2014 reached US$40 billion, a 23% increase on 2013. Singapore was the top investor at US$11.9 billion followed by China and Hong Kong. The report states that compressed yields in Singapore’s home market and a shortage of investable assets were responsible for the increase in offshore investments.

Philippines News
Healthy Emerging Market
The Philippines is considered one of the healthiest emerging markets of 2015. Following 6.9% growth in Q4 of 2014, the economy in 2015 is expected to grow by 6-8%. The strong growth is being attributed to a decrease in corruption, an increase in multinational presence, outsourcing, and infrastructure development.


Securities & Exchange
New Listing Regulations
In approximately two months, the Securities and Exchange Commission (SEC) plans to implement new regulations that will require companies from neighboring countries to have a minimum of 2 billion baht in capital to list on the Stock Exchange of Thailand (SET). The rules will apply to the neighboring countries of Cambodia, Laos, Myanmar and Vietnam. The goal is to make Thai capital markets the fund-raising center of the Greater Mekong Subregion. The new rules will be part of the regulations that cover foreign equity offerings for both primary and dual listings.

Online Meltdown Problems
The Stock Exchange of Thailand (SET) experienced trading problems for a half-day when its online system failed. Over 30 brokerage houses were affected by the disruption of the trading session. Damage assessment to investors is being discussed.

Foreign Currency Settlements
The Securities and Exchange Commission (SEC) is seeking approval from the Bank of Thailand (BOT) to permit local securities to be settled in foreign currencies. If permitted, multi-currency settlement would bring the Stock Exchange of Thailand (SET) one step closer to its goal of becoming a center for regional exchange. If approved, the first two foreign currencies to be used would be US dollars and Chinese yuan.

Control of Public Gatherings
The National Legislative Assembly (NLA) has passed the first reading of a bill to control public gatherings. The bill specifies that public rallies cannot be held near certain locations such as monuments and palaces. In addition, rallies must not disrupt public services or block entrances. The proper authorities must also be informed about any public gatherings at least 24 hours in advance. The bill does not apply to company workers, religious demonstrations, and gatherings held in educational institutions.

Airport Developments
The Airports Authority of Thailand (AOT) has confirmed that construction of the long-overdue Suvarnabhumi airport expansion will commence in 2016. The plan calls for the construction of a new passenger terminal to be completed by 2019. A third runway will also be constructed. The AOT has also announced that the U-Tapao airport near Pattaya, under the control of the Royal Thai Navy, will be upgraded to a full commercial airport.

Phuket Light Rail
The Transport Ministry plans to help make Phuket a “premium destination” for tourists by creating a light rail system to serve the island and province of Phangnga. The ministry’s stated goal is to improve air, land and water transport in order to better accommodate the area’s 8-10 million annual visitors.

SME Tax Reductions
A panel chaired by Prime Minister Prayut Chan-o-cha has agreed in principal that small and medium-size enterprises (SMEs) with a net profit under 5 million baht should pay 5% tax, and those with a profit of 10 million baht should pay 10%, and those with profit up to 20 million baht should pay 15%. The current income tax rate is 20% for companies with a net profit of more than 1 million baht.

Cyber Laws
The government is in the process of creating ten new “digital economy” bills, eight of which have already been approved by the cabinet. While the bills are deemed necessary for driving economic growth, they have also raised questions about privacy. The Cyber Security Bill that permits access to personal information has raised the most criticism.

Record Low Unemployment Rate
Thailand’s official unemployment rate at the end of 2014 was 0.56% and one of the lowest in the world. The Kingdom has maintained a low unemployment rate of about 1% since 2011 and this rate is not expected to change in the near future.

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