03 Mar Dej-Udom & Associates Newsletter – February 2016Download PDF
The Dej-Udom & Associates Newsletter for February 2016
ASEAN Economic Community News
In February, leaders of the ten ASEAN nations and the President of the United States met for the first US-ASEAN Leaders Summit – the first ever held in the US and the first since the establishment of the ASEAN Economic Community. At the conclusion of the Special Leaders Summit, a joint US-ASEAN statement, the Sunnylands Declaration, was signed. The 17-paragraph Sunnylands Declaration lists the key principles that will guide US-ASEAN cooperation going forward and is meant to provide the most comprehensive framework for strategic and security cooperation between ASEAN and the US thus far.
Top Digital Economy
In a recent report, a global management consulting firm and a leading Asian telecommunications company maintain that the ASEAN region has the potential to become one of the world’s top five digital economies by 2025. The authors believe that the region is set to be at the forefront of the coming digital revolution and that many fundamentals for the growth are already in place. A robust digital economy could add US$1 trillion to the ASEAN GDP over the next 10 years.
The Central Bank of the Philippines ended its 16-year ban on granting new bank licenses. The ban was imposed to encourage financial institutions to become stronger through local mergers and acquisitions. The ban will be gradually lifted and fully removed by January 1, 2018. The Central Bank says lifting the ban will give local businesses opportunities in the financial sector and will open the banking industry to foreign capital infusion. The Central Bank also further relaxed its foreign exchange rules to help support the domestic economy by financing infrastructure projects.
Vietnam released a new decree on employment and eased restrictions on foreign workers this month. Now, foreigners with bachelor’s degrees and three years of experience can work in the country without a work permit. However, the exemption is only available for specialists, managers, CEOs, and technicians who can now work for up to 30 days at a time, but no longer than 90 days a year. Restrictions on unskilled labor jobs were also lifted, and foreigners are now eligible for the jobs as long as they were offered to local workers first. Foreign teachers at schools and universities no longer need a work permit, but still need Education Ministry approval.
Negative Investment List
Indonesia removed 35 industrial sectors from the Negative Investment List (NIL) this month. These sectors are now open to foreign direct investment, some with up to 100% foreign ownership. The 35 newly opened sectors include restaurants, sports centers, crumb rubber industry, warehousing, tourism, e-commerce valued above IDR100 billion, toll road operators, and raw medicine materials. However, 20 sectors were added as closed or restricted to the NIL including low-tech construction.
Myanmar plans to invest US$481 million into its electricity supply for the current fiscal year, up US$338 million from the previous year. The country has tripled spending on its electrical supply over the last five years. While the country’s electricity capacity has grown from 3400MW in 2010 to 5100MW in 2015, 30% of the population still lives without electricity.
Foreign Recruitment Suspended
Malaysia suspended the recruitment of all foreign workers earlier this month until the government reviews its new levy program for foreign workers. Malaysia had implemented a new levy system on February 1, but the new system drew criticism and sparked protests from companies and labor groups.
As part of the Thai government’s campaign to stimulate investment in technology and science, taxpayers, including joint venture companies, private corporations, and individuals, are now free from taxation collected on dividends, income from the sale of company shares, and trust investment in certain types of businesses including the automobile industry, the electronic industry and the renewable energy industry according to the Royal Decree issued by virtue of the Revenue Code (No.597) which came into force on February 11, 2016. This exemption will be valid for ten years from the registration of the business with the Securities and Exchange Commission.
The National Legislative Assembly approved the World Trade Organization’s (WTO) special treatment provisions for 34 least developed countries (LDCs). While Thailand will open up six service sectors, the LDCs will still have to follow all relevant laws and will not be able to hold more than 49% ownership. The approval of the provisions will also demonstrate Thailand’s WTO commitment and increase the Kingdom’s bargaining power in trade matters.
At the recent ASEAN Foreign Ministers Retreat, Thailand was appointed as the coordinating nation to the United Nations on sustainable development in the ASEAN region. The sustainable development’s focus is the region’s peoples together with decreasing the development gap and increasing participation from all members.
The Finance Ministry raised the excise rate on tobacco to 90% which should generate an additional THB10 billion in revenue in the coming fiscal year and raise the price of cigarettes 5-10 baht a pack. The Cabinet also approved measures to promote Thailand’s jewelry industry including a VAT exemption and only 1% withholding tax on jewelry sales.
Intellectual Property News
Patent Act Meetings
The Director-General of the Intellectual Property Department organized meetings at the Patent Office to obtain different viewpoints from government bodies, private companies, the public, and other interested parties including Dej-Udom & Associates’ representative regarding the upcoming amendment of the Patent Act. The meetings will help ensure that the amended Patent Act will conform with Thailand’s policies and the level of the country’s development and be able to satisfy the needs of the related parties.
Capital Market Liberalization
The Bank of Thailand (BOT) says it has continued to ease measures for capital-account liberalization to help protect Thailand’s economy from uneven growth caused by market volatility and alarm over the global economy. The BOT says that Thailand is in a good position to weather any financial volatility with its THB1.2 trillion current account surplus, strong international reserves, and low level of private sector foreign debt.
The Thai Credit Guarantee Corporation (TCG), a state-owned specialized financial institution that guarantees loans to small and medium-sized enterprises (SMEs), received Cabinet approval to provide THB13.5 billion in loan guarantees to micro-entrepreneurs. Micro-SMEs loans average about THB 100,000 per business, so the new scheme will be able to guarantee thousands of small business loans. Also, the TCG guaranteed loans should help reduce the use of unscrupulous lenders.
ASEAN CEO Ranking
In an annual global CEO survey by a multinational professional services firm, ASEAN CEOs ranked Thailand as one of their top five investment destinations. Even with Thailand’s difficulties, ASEAN CEOs point out that the country’s strengths – abundance of skilled labor, acceleration of public and private investment, and central location – make the country very attractive for investment.