The Dej-Udom & Associates monthly newsletter covering Thailand and the ASEAN region for June 2015
COUNTDOWN 2015 – ASEAN Economic Community
Non-Tariff Barriers
A recent report by a multinational professional services firm argues that the removal of non-tariff barriers (NTBs) is crucial to the success of the ASEAN Economic Community integration. And, if the region can truly integrate, ASEAN could become a full value chain for multinational companies, replacing China with its aging population and expensive labor force. The report also says that the removal of NTBs will be difficult as they are populist measures designed to protect strategic national industries. Removal could increase the region’s GDP by 5% and reduce the cost of doing business by 5%.
Basel III Requirements
A global credit ratings agency says that banks in Indonesia, Malaysia, Singapore, Thailand, Vietnam and the Philippines are well capitalized and meet the Basel III liquidity requirements. Most rated ASEAN banks are expected to comply with the 60% minimum liquidity coverage ratio by the end of 2015 and many banks are already 100% compliant.
Philippines News
New Banking Guidelines
The Bangko Sentral ng Pilipinas announced in their new guidelines that foreign lenders can now own 100% of local trust corporations. This aligns ownership rules with the new banking law that lifted ownership restrictions and now allows full entry of foreign banks into the Philippines. Under a 2011 law, banks can spin off their trust departments into trust corporations, and the central bank is encouraging banks to do so. The new guidelines provide more flexible capitalization requirements, and trust corporations are not subject to rules on lending to directors, officers, stockholders and the single borrower’s limit.
Malaysia Update
New Islamic Finance Standards
Malaysia plans to launch a comprehensive set of operating standards for Islamic finance contracts by the end of 2015. Currently, there are many inconsistencies in the use of Islamic contracts and market practices vary across the industry. The new operating standards will supplement Malaysia’s existing sharia finance rules.
Indonesia Watch
Visa-Free Travel
To help boost tourism and benefit national development, Indonesia will now allow visa-free travel for citizens of 45 countries. A visa-free stay will be permitted for up to 30 days, but cannot be extended or switched over to a different visa. Entry for a visa-free stay is only available at five international airports in Indonesia: Soekarno-Hatta in Jakarta, Ngurah Rai in Bali, Kuala Namu in Medan, Juanda in Surabaya and Hang Nadim in Batam.
Laos News
Economic Slowdown
The Lao government reported that low market prices of mineral commodities and rubber are slowing down the establishment of new ventures and seriously weakening the flows of private investment into Laos. Costly credit financing and difficulties in starting a new business are also being blamed.
Vietnam Update
Foreign Ownership Rules
As part of Vietnam’s economic reforms, listed companies can now be 100% foreign owned. Previously, foreign ownership was limited to 49%. Some sectors will still be protected with investment caps, e.g., banking will be limited to 30% foreign ownership. After years of delay, the government is accelerating economic reforms to increase investment into the country. Vietnam will now have one of the most open markets in ASEAN.
Singapore News
Currency Peg
The prime minister of Singapore and Brunei’s Ministry of Finance announced that the Brunei-Singapore currency peg is stable and there are no plans to end it. The peg has been in place for 48 years.
THAILAND UPDATE
Industry
Dominant Carmaker
According to Moody’s Investors Service, Thailand will remain the dominant carmaker in the ASEAN region after the establishment of the ASEAN Economic Community. Moody’s warns that potential risks at this time come from outside the region, namely China and India, but that the opening of the regional market will also be a threat.
Leather Goods
Even though Thai leather goods exports are declining, leather manufacturers are opting to stay in Thailand instead of shifting their businesses out of the country. Industry experts say that while Thailand has high technology and offers many advantages, manufacturers are wisely implementing new approaches to stay competitive. Leather goods exports are expected to grow by 4% in 2015.
Business
World Bank Report Rebuttal
The Commerce Ministry says that the section on starting a new business in Thailand in the World Bank’s “Ease of Doing Business 2015” report is not accurate. The report states that it takes 27.5 days to start a new business in Thailand. The Commerce Ministry disagrees and says that the bank overestimated the time needed. For example, it only takes 20 minutes to reserve a company name online, not less than one day, and a company can obtain a company seal in three hours, not four days.
Balance Sheets Submission
The Thai Business Development Department warned over 100,000 companies to submit their balance sheets or risk being blacklisted and losing their business licenses. However, companies submitting their balance sheets within a few months of the deadline are only liable for fines.
Trade
New SEZs
To boost cross-border trade, the Thai government plans to invest THB 2.4 billion in 35 projects in six special economic zones. The first zone to receive the investment monies will be located in Tak province.
Legislation
Transfer Pricing Law
After being approved by the Cabinet last month, Thailand’s first law on transfer pricing is now before the Council of State for approval. Currently, Thailand has no specific anti-avoidance laws on transfer pricing. The new law is based on OECD guidelines and will allow the Revenue Department to monitor transfer pricing transactions. When the new law is passed, companies will have to provide documentation on profits from their cross-border transactions to the Revenue Department.
Board of Investment
New Projects Approved
Thailand’s Board of Investment (BOI) approved 1094 projects worth a total of THB 392 billion in the first five months of 2015, up 680% on from the same period in 2014. Half of the new projects come under BOI’s “strategic industries” category: natural-rubber products, medical tools and components, enterprise software and digital content, and electricity from renewable source electricity.
Foreign Affairs
Thai-Singapore Agreements
Thailand and Singapore signed a new avoidance of double taxation agreement between the two nations earlier this month. Also signed were agreements to open up cruise tourism, promote cross collaboration between the respective media industries, and enhance economic cooperation between the Singapore Manufacturing Federation and Federation of Thai Industries.
Banking
SME Loans
A measure to help small and medium-sized enterprises (SMEs) obtain bank loans was passed by the Cabinet. Specifically, the measure applies to SMEs affected by the economic slowdown & SMEs lacking a proper guarantee to be eligible for a bank loan.
Tax
System Overhaul
The Finance Ministry plans to overhaul Thailand’s tax system and boost tax income to 20% of gross domestic product. Also, VAT is not expected to rise in the next 12 months.
The post Dej-Udom & Associates Newsletter – June 2015 appeared first on Dej-Udom & Associates: Law Firm | Thailand | Bangkok.
