Joint Foreign
Chambers of Commerce
in Thailand
AEC 2015
Threats and Opportunities for the
businessman in Thailand
JFCCT AEC Committee March 2012
Outline
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JFCCT
ASEAN Agreements and background
AEC Agreement
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Goods
Investments
Capital
Labour
Services
Roadmap
Status of Changes
Challenges and Threats
Opportunities
Next Steps for JFCCT
Questions
JFCCT
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27 Members
Advocacy for
JFCCT Members
Presidents Council
Committees
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Labour
ICT
Tourism
Legal
AEC
• Meet with Thai Government
Departments
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MOC
BOI
Revenue
Customs
Labour
Immigration
Land
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Tax laws changing
Customs laws
Foreign Dominance
90 Day Reporting
Residency Permits
Views are heard
• Wins:
ASEAN AGREEMENTS
Introduction to ASEAN
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Association of Southeast Asian Nations
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Established on 8 August 1967
in Bangkok, Thailand
ASEAN Declaration (Bangkok
Declaration) signed by the
Founding Fathers of ASEAN
(Indonesia, Malaysia,
Philippines, Singapore and
Thailand)
Additional countries joined
as follows:
- Brunei Darussalam: 7 January
1984
- Vietnam: 28 July 1995
- Lao PDR and Myanmar: 23 July
1997
- Cambodia: 30 April 1999
ASEAN 6 + CLMV
ASEAN Community : AC
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ASEAN Charter
Signed on 20 November 2007 and entered into force on 15
December 2008
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Enhances regional cooperation and integration through the
establishment of three pillars
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Instrument providing a legal framework for ASEAN to be a
more rules-based, effective and people-oriented
organization
3 Pillars of ASEAN Community
ASEAN
Cooperation
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Political
Cooperation
Social
Cooperation
Economic
Cooperation
ASEAN Community : 3 Pillars
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Rules-based community of
production base
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shared norms and values
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Cohesive, peaceful, stable,
resilient region with shared
responsibility for
comprehensive security
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Single market and
ASEAN
PoliticalSecurity
Community
ASEAN
Economic
Community
region
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Dynamic and outward-looking
region in an increasingly
integrated and interdependent
ASEAN SocioCultural
world
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Human development
Social welfare and protection
Social justice and rights
Ensuring environmental sustainability
Building an ASEAN identity
Competitive economic
development
Integration into global
economy
ASEAN Economic Community
Deepening and broaden economic
integration in ASEAN
• Free flow of goods
• Free flow of services
• Free flow of investment
• Freer flow of capital
• Free flow of skilled
labor
• SME Development
• Initiative for ASEAN
Integration
Single
Market and
production
base
Competitive
economic
region
Region of
equitable
economic
developmen
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Region fully
integrated
into the
global
economy
• Competitive Policy
• Consumer protection
• Intellectual Property
rights
• Infrastructure
development
• Taxation & Ecommerce
• Coherent approach towards
external economic relations
• Enhanced participation in
global supply networks
ASEAN v Europe?
Key Differences with Europe
ASEAN
Est. 1967 (BKK Treaty of Amity &
Cooperation)
Stop Communism, put an end to
Confrontations
Message: “Leave me alone to run
my country”
Provide forum to deal with territorial
and political disputes between SEA
nations
Allow leaders to build their own
country model without outside
interference
Hope that shared economic interest
erase old animosities
Bigger clout and footprint with the
West, China and India
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EEC
Est. 1957 (Treaty of Rome)
To make sure there would never be
another war
Message: “Make sure no one is
ever left alone again”
Governments gave up some of their
authority to Brussels (agriculture,
transport, trade, etc)
Meant to foster economic
cooperation & secure lasting
democratic peace
Ensure free movement of people,
capital, goods and services
Leading eventually to Customs-,
Monetary- and Political Union
Aim of ASEAN was to ensure non-interference, aim of
EU was close integration to ensure inter-dependence
AEC 2015 ELEMENTS
Core Elements of AEC to become
Single Market and Production
Base
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Free flow of goods
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Free flow of services
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Free flow of investment
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Freer flow of capital
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Free flow of skilled labor
Free Flow of Goods
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The ASEAN Free Trade Area (AFTA)
ASEAN Trade in Goods Agreement (ATIGA)
governs the ASEAN Free Trade Area for intraASEAN trade in Goods
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Elimination of tariff barrier under tariff reduction
program
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Elimination of quantity restrictions and non-tariff
barriers
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Only ASEAN’s products that are directly consigned
within the region will qualify for benefits of AFTA
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The ASEAN Free Trade Area (AFTA) has now been
virtually established.
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ASEAN-6 : more than 99% of tariff lines have
0% tariff in 2010
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CLMV will reduce tariff to 0% by 2015
Free Flow of Investment
Intra-ASEAN investment governed by ASEAN
Comprehensive Investment Agreement (ACIA) 4
main pillars Liberalization, protection, facilitation and
promotion.
Objectives
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enhancing ASEAN’s competitiveness
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attracting foreign direct investment (FDI)
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increasing intra-ASEAN investment.
Actions
 Extend non-discriminatory treatments
National Treatment to investors from other
members
Most-Favored nation treatment must be
respected
 Reduce and eliminate restrictions to entry for
investments
 Reduce and eliminate restrictive investment
measures and other impediments including
performance requirements
Free Flow of Capital
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Strengthening ASEAN Capital Market Development and
Integration.
• Achieve greater harmonisation in capital market standards
in the areas of offering rules for debt securities, disclosure
requirements and distribution rules;
• Facilitate mutual recognition arrangement or agreement for
the cross recognition of qualification and education and
experience of market professionals;
• Achieve greater flexibility in language and governing law
requirements for securities issuance;
• Enhance withholding tax structure, where possible, to
promote the broadening of investor base in ASEAN debt
issuance; and
• Facilitate market driven efforts to establish exchange and
debt market linkages, including cross border capital raising
activities.
Free Flow of Skilled Labor
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Greater mobility of services
Greater mobility of qualified service professionals
in the region by accepting common standards of
some professionals
First mutual recognition arrangements are for:
1. Medical practitioners
2. Dental practitioners
3. Accountancy services
4. Engineering services
5. Nursing services
6. Architectural services
7. Surveying qualifications
SERVICES (AFAS)
Free Flow of Services
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No restrictions on ASEAN services suppliers in providing services and
in establishing companies across national borders in the region,
subject to domestic regulations.
Eliminates restrictions to trade in services among ASEAN countries to
improve the efficiency and competitiveness of ASEAN services
suppliers.
Liberalization of services has been carried out through rounds of
negotiation mainly under the Coordinating Committee on Services.
Recognition of professional qualifications by recognizing mutual
recognition arrangements (MRAs)
Substantial removal of all restrictions on trade in services (Priority
sectors are air transport, e-ASEAN, healthcare, tourism and logistic)
Negotiation of some specific services sectors such as financial services
and air transport are carried out by their respective Ministerial bodies.
SOUNDS GOOD ….
BUT JUST LIKE MANY FACEBOOK RELATIONSHIPS
……..
IT’S COMPLICATED
Negotiations Process
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Foreign Affairs Negotiated ASEAN for Thailand
Handed Internal changes to Ministry of
Commerce Department of Trade Negotiations
DTN responsible to get changes made
DTN have no authority within other ministries ….
Stakeholders? = many!
Private sector discussions – Thai and Farang
FTA and other negotiations ongoing
Slow progress
Compensation/Adjustment for local business?
Service Sectors and Supply
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Business services
Financial
Professional services
Construction
Distribution
Education
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Environmental services
Healthcare
Maritime transport
Telecommunication
Tourism
Other
Cross-Border
Consumption Abroad
Commercial Presence
Movement of Natural Person
Relevant laws and regulations
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Land code of Thailand
Foreign Business Act
Royal Decree Prescribing Works
Relating to Occupation and
Professional in which an Alien is
prohibited to Engage
Economic Need Test/Labor
Market Test
Immigration Regulations
BOI Investment Policies
Bank of Thailand Prudential
Measures
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Ministry of Commerce
Ministry of Foreign
Affairs
BOI
Professional Councils
Ministry of labor
Immigration Bureau
Ministry of Finance
Bank of Thailand
Ministry of Transport
Other line Ministries
specific to services
sub-sectors
English translations for these Acts, Notifications and
Regulations:
• www.krisdika.go.th
• www.lawreform.go.th
Roadmap/Timeline
Timeline
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Roadmap and status of changes in
the Thai government
What will happen from now toward
2015 ?
Timeline for Services Liberalization
Foreign (ASEAN Citizen) ownership limits
SECTORS TARGETS
e-ASEAN, healthcare tourism
services
2008
51%
Logistics
Construction
Others
2010 2013 2015
70%
51%
51%
70%
70%
51%
70%
Status?
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Free flow of goods
Free flow of investment
Freer flow of capital
Free flow of skilled labor
Free flow of services
Advanced
Commenced/problems
Commenced/caveats
Commenced/caveats
Behind
Services falling behind…
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In some cases changes can be made
using ministerial regulation or workarounds
But in many cases Legislation needs
to be changed
Political issues and focus?
Votes and interests?
Competition concerns
Challenges and Threats
Is Thailand up to it?
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Competition from new entrants to
the market
• Bigger with more financial capability
• Better technical products/service
systems
• Some may have Most Favoured Nation
status
• May get support from home countries
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Banking or Finance
Specialist Employees/Managers easier to
bring in
• More experience competing already
What might happen?
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English Language skills problems
Labour shortages get worse?
• Workers go home to CLM
• Good workers go to higher salary paying countries
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Doctors, engineers etc
Labour rate increases
• more than they have already!
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Delays in implementation create a “shock”
rather than a “planned” process
Thailand could be seen as lower value
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Agriculture
Factory workers
Tourism based
Low Cost only
Is ASEAN Structure ready?
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Lack of key government
leadership and infrastructure for
the ASEAN Secretariat
• 10 Ambassadors whose only job is
to say “No”
• Enforcement of the Treaty and
agreements
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Currently no “flagship project”
uniting ASEAN
ASEAN Harmonized?
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Exchange Rates
Standards across many industries
University degrees
Compliance for listed companies
Telecommunications standards (for the business user
as well as within)
Stock Market issues (such as Prospectus
requirements, 2nd listing, taxation, disclosure rules,
Index setting)
Taxation variations and double tax treaties
Competition Law
Accounting and reporting dates and periods
Emissions standards, electrical standards and the use
of alternative fuels
Payments processing
ASEAN – is it united?
Big Differences :
 Democratic Capitalism v Communism
 Buddhist, Islamic and Christian
 Stages of Development
• Education
• Health
• Corruption
• Technology
Other Countries….
Malaysian International Trade Ministry 2011 ….
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Malaysia stands to benefit the most from services
liberalisation in ASEAN as Malaysia has the capacity to tap
into the opportunities offered in the regional market
Malaysia undertakes to bind commitments of unilateral
liberalisation of its services sectors under AFAS so as to
provide transparency and predictability to investors and the
business community attract investments, specialised expertise
and technology into the (targeted) sectors;
Reap the benefits of being the ‘first mover’
Create opportunity for Malaysian companies to expand out of
domestic market and enter into the regional markets or global
markets which are more open; and
Inject competitiveness into the services sector in Malaysia.
Malaysia signed FTA deal with Australia this week.
Included was the chance for Aussies to own 70% of
Malaysian services company now.
Opportunities
Ideas being discussed
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Stock Markets?
• One new ASEAN market
• Joint Exchanges
• Dual Listing
• Or … Do nothing
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ASEAN Bonds
Single Customs window or system
Single Tourism Visa
“Flagship project”??
Does Money grow on Trees?
Opportunities for Thais to expand
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Thai Companies can sell to 600 million
people (x 10)
Can own 100% of companies in other
ASEAN countries
Should be treated equally as local
companies/people
Moving goods should be easier
Access to capital markets and repatriation
of profits and dividends
FTA’s will likely become ASEAN negotiated
Tax opportunities
Pot of Gold in Thailand?
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ASEAN citizens and companies should
be able to own 70% (maybe more) of
services companies
May be able to bring in workers
easier
Some admin processes may be
improved
• Work Permits, Visa’s, Customs, Moving
funds
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Likely to be many non-ASEAN
companies looking for entry over the
next 3 years
Questions
Next Steps for JFCCT AEC
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Provide Information to the JFCCT Member
companies
Discuss implementation of changes
Try to influence government departments
• smooth transition
• well thought out processes
• general improvements for the longer term
benefit of Thailand
• encourage take up of ideas
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Need questions, issues and ideas from
members
Last Thoughts -What’s the target?
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European v ASEAN
Current view is “business threat” and fear
tactics
Should focus on advantages and opportunities
for Thai citizens and consumers
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Access to better quality goods and services
Lower prices
Employment opportunities
Better standard of living
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Australia/New Zealand
US
Hong Kong
Singapore
Examples of open economies: