07 Apr Dej-Udom & Associates Newsletter – March 2015Download PDF
The Dej-Udom & Associates monthly newsletter covering Thailand and the ASEAN region for March 2015
COUNTDOWN 2015 – ASEAN Economic Community
ASEAN Banking Framework
Finance ministers from the ASEAN member states signed a landmark agreement on banking integration, the ASEAN Banking Integration Framework (ABIF), this month. Qualified banks within ASEAN will be able to sign reciprocal bilateral deals to operate in other ASEAN countries on the same terms as domestic financial institutions. To achieve Qualified ASEAN Bank status, banks will have to meet the criteria agreed upon by the different ASEAN central banks. Allowing banks to operate freely throughout the region under the ABIF will help provide greater access to loan facilities, promote stable liquidity, and reduce volatile flows of money from developed markets.
AEC Integration Commitments
Vietnam’s Minister of Industry and Trade reported that the country has met over 90% of its ASEAN Economic Community integration commitments. The Minister attributes the country’s success in meeting its integration goals to government guidelines, programs, and strategies such as facilitating administrative formalities for businesses and raising public awareness of opportunities and challenges. He also stated that Vietnam has now taken the lead in eliminating tariffs.
Business Climate Improves
A leading Vietnamese think tank and a US government agency say that the business climate in Vietnam has improved considerably over the last twelve months. They noted that the average time spent on tax and social insurance matters has dropped from 900 to 400 hours a year, that customs procedures at border gates have been simplified, and its effective corporate tax rate of 15.7%
To encourage companies to expand within Indonesia, the government plans to offer tax incentives for companies that reinvest profits into domestic operations instead of paying out dividends to overseas stockholders. Longer tax holidays will also be available for companies investing over 1 trillion rupiah in renewable energy, basic metals, and refineries. To help increase the country’s foreign exchange reserves, Indonesia will now offer visa free travel to tourists from China, Japan, South Korea and Russia.
According to a recent report by the US Chamber of Commerce, Singapore is considered a robust environment where intellectual property rights are protected and enforced and is the strongest in the ASEAN region. The report ranks 30 economies with Singapore ranking 5th behind the US, the UK, Germany, and France. Malaysia ranked 12th and Thailand took last place in the rankings.
Foreign Direct Investment Growth
Foreign direct investment (FDI) into Myanmar for the 2014/2015 fiscal year reached US$ 8.1 billion, a considerable increase from the US$ 4.1 billion in FDI from the 2013/2014 fiscal year. The head of the Myanmar Investment Commission says that the energy sector drew 35% of the total FDI and that 25% went to the manufacturing sector and 25% to the newly opened up telecommunications sector. FDI into Myanmar has skyrocketed over the past five years, up 25 times the US$ 330 million inflow in 2009/2010.
New Fuel Directive
To improve the country’s air quality, all oil companies in the Philippines will only be able to sell Euro IV-compliant fuels starting on July 1st 2015. The government directive also affects car companies who will only be able to import cars with Euro IV engines as of the July deadline. Euro IV fuel is much cleaner than Euro II and has a sulfur content of 50 parts per million (ppm), much lower than the 500 ppm of Euro II fuel.
Securities & Exchange
The Securities and Exchange Commission of Thailand signed a Memorandum of Understanding with the Securities Commission of Malaysia, the Monetary Authority of Singapore, and the Singapore Stock Exchange to establish a Streamlined Review Framework for the ASEAN Common Prospectus. Under the Framework, issuers and offerers of list equity or plain debt securities will enjoy shorter time-to-market and faster access to capital across the signatory countries. It will be implemented by late 2015.
The Stock Exchange of Thailand wants to increase its number of individual investors to 1.5 million and see daily trading over THB 100 billion by 2020. Currently, the exchange has 770,000 investors. In the Thai bond market, 132 companies launched short- and long term debt instruments in January and February for a total of THB 165 billion. This exceeded the 2015 target of 72 issuing companies.
No VAT Increase
Due to the sluggish economy, the Thai government will not raise the value added tax (VAT) rate this year. The current 7% VAT rate will rise to 10% in September 2016 if there are no further exemptions. The government had planned to raise VAT to 8% this year.
Tax Amnesty for SMEs
The Finance Ministry will offer a tax amnesty to help encourage Thailand’s small and medium enterprises (SMEs) to enter the country’s tax system. The minister expects the amnesty to result in 80% of Thailand’s 2.75 million SMEs entering the tax system.
Tax Incentives for Data Centers
To support Thailand’s new digital economy plan, the government will offer tax incentives for investors who set up internet data centers in the country this year. The government seeks to connect local partners with foreign companies to set up 40 internet data centers which will require an investment of THB 30 billion.
Geographical Indication Products
Thailand’s Department of Intellectual Property (DIP) is extending its ‘one geographical indication (GI), one province’ scheme to all provinces for another three years. 51 of Thailand’s 77 provinces already have GI products and the DIP is focusing on developing GI products in nine more provinces this year. To date, 116 Thai products have registered for GI protection and 67 have been approved.
According to the World Economic Forum’s Global Competitiveness Report 2014-2015, despite Thailand’s political and economic challenges, the Kingdom strengthened its competitiveness and moved up 6 places to 31st out of 144 countries. The report defines competitiveness as the set of institutions, policies, and factors that determine the level of productivity of a country. The level of productivity then sets the level of prosperity for a country.
New Online Filing Service
The Thai Immigration Bureau will launch its online 90-day report filing service on April 1, 2015. However, filers need to be aware that there is a very limited scope of service and limited time for online reporting. Additionally, the new 90-day report is not automatically approved after it has been filed online. Online reporting opens 15 days before the end date of the 90-day period, but ends 8 days later, and the final 7 days are used for the approval process. However, the filing period at the Immigration Department Office is still 15 days before or 7 days after the end date of the filer’s continuous 90-day stay in Thailand.
MICE Education Center
Thailand is working to become a meetings, incentives, conventions and exhibitions (MICE) education center in ASEAN. 50 institutions have joined with the Thailand Convention and Exhibition Bureau to develop the curriculum for MICE education. Thailand is ranked second in the region behind Singapore for hosting international MICE events.