AEC 2015: Threats and Opportunities in Thailand

1. Joint Foreign Chambers of Commerce in Thailand AEC 2015 Threats and Opportunities for the businessman in Thailand JFCCT AEC Committee March 2012

2. Outline • JFCCT • ASEAN Agreements and background • AEC Agreement • Goods • Investments • Capital • Labour • Services • Roadmap • Status of Changes • Challenges and Threats • Opportunities • Next Steps for JFCCT • Questions

3. JFCCT • Meet with Thai Government Departments • MOC • BOI • Revenue • Customs • Labour • Immigration • Land • Wins: • Tax laws changing • Customs laws • Foreign Dominance • 90 Day Reporting • Residency Permits • Views are heard • 27 Members • Advocacy for JFCCT Members • Presidents Council • Committees • Labour • ICT • Tourism • Legal • AEC

4. ASEAN AGREEMENTS

5. Association of Southeast Asian Nations Introduction to ASEAN • 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

6. ASEAN Charter Signed on 20 November 2007 and entered into force on 15 December 2008 Enhances regional cooperation and integration through the establishment of three pillars Instrument providing a legal framework for ASEAN to be a more rules-based, effective and people-oriented organization ASEAN Community : AC

7. 3 Pillars of ASEAN Community • ASEAN Cooperation • Political Cooperation • Social Cooperation • Economic Cooperation

8. ASEAN Community : 3 Pillars • Single market and production base • Competitive economic region • development • Integration into global economy • Rules-based community of shared norms and values • Cohesive, peaceful, stable, resilient region with shared responsibility for comprehensive security • Dynamic and outward-looking region in an increasingly integrated and interdependent world • Human development • Social welfare and protection • Social justice and rights • Ensuring environmental sustainability • Building an ASEAN identity

9. ASEAN Economic Community Deepening and broaden economic integration in ASEAN • Coherent approach towards external economic relations • Enhanced participation in global supply networks

10. ASEAN v Europe?

11. 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 • 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

12. AEC 2015 ELEMENTS

13. Core Elements of AEC to become Single Market and Production Base • Free flow of goods • Free flow of services • Free flow of investment • Freer flow of capital • Free flow of skilled labor

14. The ASEAN Free Trade Area (AFTA) Free Flow of Goods • ASEAN Trade in Goods Agreement (ATIGA) governs the ASEAN Free Trade Area for intra-ASEAN trade in Goods • Elimination of tariff barrier under tariff reduction program • Elimination of quantity restrictions and non-tariff barriers • Only ASEAN’s products that are directly consigned within the region will qualify for benefits of AFTA • The ASEAN Free Trade Area (AFTA) has now been virtually established. • ASEAN-6 : more than 99% of tariff lines have 0% tariff in 2010 • CLMV will reduce tariff to 0% by 2015

15. Free Flow of Investment • Intra-ASEAN investment governed by ASEAN Comprehensive Investment Agreement (ACIA) 4 main pillars Liberalization, protection, facilitation and promotion. • Objectives • enhancing ASEAN’s competitiveness • attracting foreign direct investment (FDI) • 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

16. 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 Capital

17. 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: Medical practitioners Dental practitioners Accountancy services Engineering services Nursing services Architectural services Surveying qualifications Free Flow of Skilled Labor

18. SERVICES (AFAS)

19. 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. Free Flow of Services

20. SOUNDS GOOD ….BUT JUST LIKE MANY FACEBOOK RELATIONSHIPS ……..IT’S COMPLICATED

21. Negotiations Process 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?

22. Service Sectors and Supply • Business services • Financial • Professional services • Construction • Distribution • Education • Environmental services • Healthcare • Maritime transport • Telecommunication • Tourism • Other • Cross-Border • Consumption Abroad • Commercial Presence • Movement of Natural Person

23. Relevant laws and regulations • 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 • 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

24. Roadmap/Timeline

25. Timeline Roadmap and status of changes in the Thai government What will happen from now toward 2015 ?

26. Timeline for Services Liberalization Foreign (ASEAN Citizen) ownership limits

27. Status? • Free flow of goods Advanced • Free flow of investment Commenced/problems • Freer flow of capital Commenced/caveats • Free flow of skilled labor Commenced/caveats • Free flow of services Behind

28. Services falling behind… In some cases changes can be made using ministerial regulation or work-arounds But in many cases Legislation needs to be changed Political issues and focus? Votes and interests? Competition concerns

29. Challenges and Threats

30. Is Thailand up to it? • 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 • Banking or Finance • Specialist Employees/Managers easier to bring in • More experience competing already

31. What might happen? • English Language skills problems • Labour shortages get worse? • Workers go home to CLM • Good workers go to higher salary paying countries • Doctors, engineers etc • Labour rate increases • more than they have already! • Delays in implementation create a “shock” rather than a “planned” process • Thailand could be seen as lower value • Agriculture • Factory workers • Tourism based • Low Cost only

32. Is ASEAN Structure ready? • 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 • Currently no “flagship project” uniting ASEAN

33. ASEAN Harmonized? 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

34. ASEAN – is it united? Big Differences : • Democratic Capitalism v Communism • Buddhist, Islamic and Christian • Stages of Development • Education • Health • Corruption • Technology

35. Other Countries…. • Malaysian International Trade Ministry 2011 …. • 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.

36. Opportunities

37. Ideas being discussed • Stock Markets? • One new ASEAN market • Joint Exchanges • Dual Listing • Or … Do nothing • ASEAN Bonds • Single Customs window or system • Single Tourism Visa • “Flagship project”??

38. Does Money grow on Trees? Opportunities for Thais to expand 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

39. Pot of Gold in Thailand? • 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 • Likely to be many non-ASEAN companies looking for entry over the next 3 years

40. Questions

41. Next Steps for JFCCT AEC • 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 • Need questions, issues and ideas from members

42. Last Thoughts -What’s the target? • European v ASEAN • Current view is “business threat” and fear tactics • Should focus on advantages and opportunities for Thai citizens and consumers • Access to better quality goods and services • Lower prices • Employment opportunities • Better standard of living • Examples of open economies: • Australia/New Zealand • US • Hong Kong • Singapore