06 Oct Dej-Udom & Associates Newsletter – September 2015Download PDF
The Dej-Udom & Associates Newsletter for September 2015
COUNTDOWN 2015 – ASEAN Economic Community
Immediate AEC Benefits
In a new report, a global commercial real estate company maintains that the ASEAN Economic Community (AEC) integration will immediately benefit the member states’ industrial sectors and their local office and retail property markets. According to the report, more multinational companies (MNCs) and small and medium enterprises (SMEs) will be established in the AEC to take advantage of its benefits, in particular the regional logistics market which is expected to develop and grow. With the influx of new MNCs and SMEs, there will then be higher demand for industrial and office space in the ASEAN countries and subsequent growth in local supply.
A leading regional bank says that due to poor access to financing, few of Asia’s small and medium sized enterprises (SMEs) have the opportunity for the strong, sustainable growth needed to become part of the global supply chain. The bank says that overall in 20 Asian countries, 96% of all registered firms are SMEs which employ 62% of the labor force, but only contribute 42% of the economic output. To combat the problem, the bank recommends more access to bank credit and more involvement from the region’s governments to make it easier for SMEs to access new financing options like supply chain finance.
New Investment Framework
The ASEAN Capital Markets Forum (ACMF) and Securities & Exchange Commissions from Malaysia, Singapore, and Thailand established the Streamlined Review Framework for the ASEAN Common Prospectus. The ACMF aims to enhance the region’s attractiveness as a fund raising center.
First Modern Industrial Park
The Thilawa Special Economic Zone, Myanmar’s first modern industrial park, began partial operations this month. 48 companies from 13 countries plan to operate in the 400 hectares designated for Phase One of the 2,400 hectare SEZ. Benefits to operating in Thilawa include access to inexpensive labor, corporate tax cuts and exemptions for up to 12 years, and obtaining government permits faster than companies operating outside the SEZ.
Two-Part Stimulus Package
Indonesia’s President announced a huge two-part economic stimulus package this month to attract fresh investment and to reinforce and stabilize the national currency. The package includes tax incentives, deregulation, de-bureaucratization, and a boost in legal certainty. In particular, simplifying licensing procedures, accelerating the land acquisition process, and discretion in the settlement of disputes.
Record FDI Growth
To date, Vietnam has received a record amount of actual foreign direct investment (FDI) in 2015, US$ 9.65 billion. Most of the FDI inflows have gone into the country’s manufacturing sector and to help offset its trade deficit and boost its capital account.
Despite a challenging year, according to the World Economic Forum Global Competiveness Report 2015-16, Malaysia rose two places and is now ranked as one of the top 20 most competitive economies in the world this year. The country is also on track to achieve high-income status in the next five years.
New MOU on IP signed
Singapore and the United Kingdom signed a new Memorandum of Understanding (MOU) on intellectual property this month. The MOU will enhance cooperation between the two countries on copyright, patent, trademark and design issues.
Six Strategies Announced
The Thai government announced six strategies to strengthen sustainable export growth for the Kingdom. They include focus on cross-border trade, creation of industrial clusters, solving trade obstacles, increasing human resource efficiency, and taking advantage of the growth of e-commerce. The goal of implementing the new strategies is to create a continuous increase in exports and to ensure Thailand’s global competitiveness.
Halal Food Supplier
The Commerce Ministry says that Thailand has the potential to become one of the world’s top suppliers of halal products by 2020. The world’s Muslim population is expected to reach 2.05 billion in 2020 with the export of Thai halal products estimated to grow by a factor of five from the total value of $30 billion in 2014. The Kingdom is currently the world’s 11th largest halal food supplier.
Securities and Exchange
To encourage sustainable investment, the Stock Exchange of Thailand (SET) launched its Thailand Sustainability Investment project. The SET has used the initiative to set an Environmental, Social, and Governance (ESG) benchmark in line with international best practices. The SET will announce the final list of stocks under the initiative in mid-October 2015.
More Money to Village Fund
To help promote the growth of Thailand’s grass-roots economy, the Cabinet approved adding money to 59,000 Village Funds for vocational support for low-income earners. Villages can apply for loans of up to THB 1 million that are interest free for two years, and individual villagers can also borrow up to THB 20,000. 7,255 tambons will be eligible for THB 5 million grants for job promotion and community investment projects. The grants will help create economic opportunities for the villages and promote the Kingdom’s rural economy.
Class Actions Arrive in Thailand
The National Legislative Assembly recently passed a bill amending the Civil Procedure Code to allow class action lawsuits in Thailand. This will enable a large number of injured parties suffering from a common set of facts relating to tort, breach of contract, etc. to commence a class action. The bill aims to increase the efficiency of the judicial system by aggregating small claims that would otherwise not be economically feasible. The bill will become effective in December 2015.
New Debt Collection Rules
Good news for all debtors. Creditors must now comply with the newly introduced Debt Collection Act which came into effect on September 2, 2015. The new law provides protection and rights to debtors and guarantors and allows them to be free from any threatening, abusive, or unfair practices, blackmail, or use of false information in debt collection. Importantly, the act applies to both legal and illegal debts. Any violations to these new rules will be considered a criminal offence.
SME Loan Warning
A major global credit rating agency warns that Thailand’s small and medium-sized enterprise (SME) segment is becoming the main source of downside risk to asset quality and may cause a higher rate of non-performing loans in the next 12-18 months. SMEs make up 39% of total loans, compared to 30% for large companies and 31% for consumers.
Solar-Farm Project Bids
Thailand’s Energy Regulatory Commission issued an invitation for bids to invest in solar-farm projects developed by state agencies and agricultural cooperatives. Since government agencies cannot use their state budgets to invest in the projects, private investors are being sought to sponsor the projects. The agencies can then earn rental fees or share revenue from the electricity sold. Private investors can join in more than one project, but cannot sponsor more that 50MW of power capacity.
The Office of Insurance Commission intends to strongly promote micro-insurance sales as it plans to sell over 1 million policies in 2015. To date, over 600,000 policies have been sold through 7-11 convenience stores.