06 Feb Dej-Udom & Associates Newsletter – January 2015Download PDF
The Dej-Udom & Associates monthly newsletter covering Thailand and the ASEAN region for January 2015
COUNTDOWN 2015 – ASEAN Economic Community
A leading global research company released a report on the ASEAN integration based on a survey of 147 large multinationals operating in the region. The survey found that 84% of the companies located their regional head offices in Singapore and that Indonesia and Myanmar were the preferred destinations for new factories over the next five years. The number of Indonesian factories is expected to grow by 70% during this time period. The surveyed companies also said that the biggest challenges in ASEAN are the uncertain legal environment and the number of markets that remain protected. Indonesia and Myanmar are considered the most closed markets.
Cosmetic Preservatives Banned
At a recent meeting, the ASEAN Cosmetics Committee (AAC) banned the use of five parabens used as preservatives in cosmetics. The five compounds will be added to Annex II of the ASEAN Cosmetics Directive, aligning ASEAN law with European Union law which banned them last year. Products containing the substances must be off the shelves by July 30, 2015 in all ASEAN countries, except for Thailand and the Philippines which have to the end of the year to comply.
Treasury Bond Auctions
This month, as part of its financial reforms, Myanmar plans to begin selling government debt via an electronic auction system. To start, government treasury bonds will be auctioned among the local private banks and will then be offered to a larger marketplace in the future. At present, rates on treasury bonds are fixed, but after the opening, bond prices will be floating and dependent on multiple variables. Myanmar has four state owned and 23 private banks at this time.
New Business Resolution
The Vietnamese government issued a new resolution to help continue improving the country’s business climate and further enhance its competitiveness in 2015. The new resolution is based on last year’s Resolution 19/NQ-CP which cut down on red tape and streamlined new business set ups. At this time, registration procedure steps for new businesses have dropped from ten to five and the days needed to complete all registration procedures have dropped from 34 to 16. Total time for tax administration procedures have also dropped from 370 to 167 hours per year.
New One-Stop Service
The Indonesia Investment Coordinating Board (BKPM) launched a one-stop integrated service to help speed up the investment license process. Officials from 22 government agencies will now be based at the BKPM to work with investors. This new service is part of President Joko Widodo’s plan to make Indonesia more business friendly and increase the country’s economic growth. However, investment licensing procedures will still be a lengthy process – two years for agriculture, manufacturing, and logistics businesses – even with the one-stop service
Oil Tax Dropped
To encourage oil exploration during these times of unstable oil prices, Indonesia has stopped assessing a 0.5% land and building tax for companies carrying out exploration activities. The tax ministry said that the tax law had been interpreted wrong and the tax should only be applied to companies in the production stage.
Transfer Pricing Crackdown
As part of an aggressive global crackdown on tax avoidance by multinational companies, the Inland Revenue Authority of Singapore updated its guidelines on transfer pricing. Companies were minimizing their tax bills by having subsidiaries in low-tax jurisdictions sell products at high prices to subsidiaries in high-tax jurisdictions. Companies must now keep contemporaneous records to support the pricing of such transactions.
The Cabinet approved eight digital economy draft laws which will now be framed into new laws by the Council of State. Under the new laws, the Information and Communication Technology Ministry and related agencies will be restructured and be headed by the Digital Economy Policy Committee (DEPC). In addition, the National Broadcasting and Telecommunications Commission will no longer manage spectrum policy and will only act as the regulatory body for broadcasting and telecommunications. The DEPC will be solely responsible for all spectra matters.
To help One Tambon One Product producers increase their market base in cities in Thailand and abroad, the Business Development Department will hold regional workshops on e-commerce business practices and train the producers to trade online. In Thailand, online trading was valued at THB 744 billion in 2014 of which 20% was business-to-consumer.
Due to the decline in global oil prices, the Commerce Ministry plans to revise the pricing structure for consumer products to be in line with the market mechanism. Additionally, the Internal Trade Department is introducing a certificate symbol to guarantee the weight and quality listed on the labeling of consumer goods.
Foreign Business Act
To attract more foreign investment, the Business Development Department (BDD) will liberalize the banking and insurance sectors and remove them from Annex III list of the Foreign Business Act (FBA). Foreign investors will no longer need to acquire a permit from the Foreign Business Committee for these sectors. The BDD also announced that it will postpone any amendments to the FBA, a matter of concern to foreign investors and businesses. The BDD does plan to continue actively investigating into companies using Thai citizens as nominee shareholders.
Securities & Exchange
The Stock Exchange of Thailand and the Securities and Exchange Commission plan to plug loopholes in regulations regarding private placements. Listed companies could use these to take advantage of investors and manipulate stock prices and sales.
Asset Management Companies
The Securities Exchange and Commission (SEC) wants asset management companies (AMCs) to become more competitive. So, new SEC regulations have been released which will allow AMCs more distribution channels, new types of mutual funds, and joint business development with foreign investment funds.
International Monetary Fund
At a recent meeting, the International Monetary Fund (IMF) recommended that Thailand increase its Value Added Tax rate to 10% to help finance its budget deficit and infrastructure development. The IMF also supported the Kingdom’s restructuring of taxes and energy prices and urged the acceleration of state investment.
Current Account Surplus
The Bank of Thailand (BOT) revealed that it has a current account surplus of THB 180 billion due to plummeting oil prices. The lower oil prices have reduced the value of imports which has had a positive effect on Thailand’s trade and balance account. The surplus may also help the baht’s value to appreciate.
BOI Applications Up
Application values for Board of Investment (BOI) privileges reached THB 2.9 trillion in 2014, a 50-year high. The number of application rose 73% in 2014 and total project value rose 117%.
SME Promotion Budget
The Office of Small and Medium Enterprises Promotion approved a budget of THB 4 billion for the 2016 fiscal year. The money will be spent on promoting new small and medium enterprises (SMEs), enhancing their efficiency, and upgrading SMEs to become exporters.