Bangkok Base News & Views

On August 25 2008, The Nation reported new initiatives, announced the previous week by Thailand’s Commerce Minister, Chaiya Sasomsap. 

Proposed amendments to the Foreign Business Act (FBA), would see a review of industries in Annexes I – III; comprising protected businesses under the Act. The initiative would remove some industry categories, in which Thailand is now deemed ready to compete with foreign-owned organisations.

The Nation defined the categories listed in Annex III that are expected to become more flexible towards foreign investment under the latest proposed changes. These include rice milling, fisheries, forestry, accountancy services, service businesses, legal services, agriculture, engineering, leasing, advertising agencies and retail and wholesale.

Annex I (media, rice & animal farming, forestry of natural forests, etc) & Annex II (manufacturing/trading in firearms & armaments, military vehicles, domestic transportation, Thai arts & crafts, silk farming/manufacture, sugar, salt, mining, or timber fabrication), will also be included under the terms of the review.

Minister Chaiya said that the committee reviewing the Act was expected to complete its task by the end of the year, to ensure that the new conditions can take effect next year - and that foreign direct investment will be stimulated as a result.

In the context of Thailand’s current politically challenging agenda, this ministerial announcement appears to be based on a genuine recognition by key decision makers of how Thailand, as an emerging global economic player, must continually review its protectionism policies.

While the devil will inevitably be in the legislative detail, Bangkok Base remains optimistic about the review committee’s recommendation to be tabled in early 2009. Irrespective of that outcome, Bangkok Base is currently assisting record numbers of new entrant foreign investors to participate, as Thailand continues to transition from a traditional agricultural commodity-based economy, to one that priorities leisure & tourism, value-added food & beverage products, burgeoning service industries, & elaborately transformed manufactures.

The Bangkok Post reported on September 11 2008  that Thailand has risen in World Bank rankings for “ease of doing business”. 181 economies were surveyed, with Thailand elevated 6 places to 13^th place.

As a Commercial Advisor during the critical development phase of TAFTA, Graham Storah, Managing Director of L-TAG Technologies Co. Ltd., played an integral role in formulating terms for the achievement of mutually beneficial trade objectives for the two nations.

While the Agreement clearly delivered enhanced exports to both nations, respectively AUD1.3bn increase for Australia (mainly copper, iron & steel), and AUD2.9bn for Thailand (dominated by motor vehicles) by 2006, Mr Storah is not convinced that Australia is getting a totally fair deal.

To illustrate this, he cites the dramatic imbalance in trade in elaborately transformed manufactures, in favour of Thailand. While it would be irresponsible of Thai authorities not to seek the best possible outcomes for their nation, Mr Storah takes the view that the umpire all too often appears to take a soft stance on perceived unfair Thai import classifications; non-harmonised tariff codes. This sometimes less than supportive positioning of the umpire in Thailand, effectively kills off countless export initiatives from Australia. Mr Storah has unsuccessfully attempted several such trade initiatives himself, and is aware of many more.

With the notable exception of Education, all of this tends to reinforce global perception of Australia as a raw commodities exporter.

Mr Storah is a passionate advocate for value-added exports from Australia, and is not reluctant to voice that view. But, he explains, it takes genuine innovation and smart thinking to overcome the non-tariff barriers on Australian non-commodity exports to Thailand.

Examples of this kind of innovation include:

- Australian exporters of “like products”, banding together (much like the successful model of agricultural cooperatives) to consolidate freight and undertake import handing/distribution in Thailand.

- Identifying Australian businesses that fit with Thailand’s declared priority industry sectors, such as environmental, biotechnology, energy, water. For example, under the strong identity branding of Loxley Climate Solutions, L-TAG Technologies is currently bringing together a range of outstanding Australian companies to deliver Green Technology processes & products (eg lightweight structural concrete) to Thailand; www.ltagtech.com

A visionary who never accepts the status quo, Mr Storah is demonstrating that serious Australian export initiatives can become reality, despite TAFTA’s less than equitable performance.

Bangkok Base is proud to be a close associate of L-TAG Technologies, and through its range of corporate services, plays a key role in enabling the smooth establishment of business initiatives in Thailand.

Read more about the Thailand Australia Free Trade Agreement:
Australian Department of Foreign Affairs and Trade TAFTA

Read more about Graham Storah.
The Thais that bind the Thailand Australia Free Trade Agreement

As of July 1 2008, establishing & operating a business in Thailand became more streamlined……but are the new enhancements to Thai company law genuinely beneficial to private companies?

In the wake of legislative “modernization” initiatives to the Civil & Commercial Code (CCC), most SMEs wishing to establish operations in Thailand will find that the simplified regulatory requirements will deliver efficiencies and lessen barriers to entry.

Thanyakamon Limakunawoo who heads up Bangkok Base’s Legal unit, said that the changes were not only welcome, but reduce red tape that her clients have frequently found inhibiting when establishing a business here.

As Thailand’s premier one-stop-shop for new entrants into the Thai market, providing serviced offices, full accounting & legal services (incl. co. registration, licences & work permits), Bangkok Base welcomes the company law enhancements. Ms Limakunawoot is confident they will assist her organisation to deliver an even more attractive “set-up” service to its clients.

Much has been written and said elsewhere about the specific CCC changes, but a succinct summary is available in AustCham Thailand’s June ’08 edition of Advance magazine. AustCham can be contacted in Bangkok on 02 210 0216.

Some key enhancements to the law include:

• The reduction of the minimum number of promoters and of shareholders from 7 to 3
• Incorporation within one day, instead of the current minimum of 9 days – subject to specific conditions
• Notification of shareholder meetings – amended rules as to how the notice is to be communicated
• Announcement of dividends. Notification via newspaper notice no longer required. Shareholders to be notified directly by mail. Shares issued in bearer form must however still be announced in a local newspaper as well.

This is a key question to answer if one is contemplating a business start-up in S E Asia.

Let Bangkok Base take you through the fundamentals:

1. Thailand has a large well-educated population compared with most of its neighbours, with largely untapped pools of labour resident in the North-East.

Around 63 million people, of whom 92% are literate, make Thailand the 19th most populous country in the world. GDP per head of $8677 provides Thailand with a healthy domestic economy. (source: UNDP report)

2. Substantial incentives are on offer from the Board of Investment for the right sort of project.

The Board of Investment offers support to companies wishing to invest in a wide range of activities including, but not limited to, research and development, scientific laboratories, industrial zones for environmental preservation, waste water treatment, disposal services of refuse, industrial waste or toxic chemicals, and manufacture of specified industrial machinery, such as parts and equipment for high precision machining processes. The BOI web-site (http://www.boi.go.th/english/about/eligible_activities.asp) has full details.

Along with tax-breaks, BOI sponsorship also makes it possible to avoid some of the more restrictive elements of the Foreign Business Act, 1999.

3. Growth and stability

Notwithstanding the temporary return to military government (19 Sept 2006 – December 2007) and a subsequent hiatus in spending on large infrastructure projects, Thailand’s economy grew at the fastest pace in seven quarters towards the end of last year as exports of rice, automobiles and computer chips all steadily rose. Southeast Asia’s second-biggest economy expanded 5.7 percent in the fourth quarter, accelerating from a revised 4.8 percent in the third quarter (source: Thailand economy watch).

Those of us resident during this period saw few changes, little public disorder, and mostly rational uncensored debate. Veterans of earlier coups (e.g. 1992) can report the same, attributable in part to the religious beliefs of the population (more than 90% are Buddhist) and in large measure to the excellent leadership provided by His Majesty King Bhumibol.

4. Democracy has returned.

Elections were held on December 23rd 2007 (largely peaceful) and resulted in the return of many veteran politicians, mostly running under the People’s Power Party (PPP) banner. The PPP along with five smaller parties command all but 166 out of 400 seats in the House of Representatives. The Democratic Party constitutes the opposition. Changes to the constitution introduced during the period of military rule make it much easier than hitherto to challenge the Government in debate.

Election of 74 Senators took place on March 4th and they have joined 75 appointed Senators from all sectors of the community. A truly independent Speaker has been chosen and there is real hope that any excesses proposed by the House of Representatives will be curtailed by the Senate.

5. Recognition from the current government that foreign investment is good for the country.

Companies in Thailand are governed by the Foreign Business Act of 1999. Due to perceived abuse of loopholes in the Act which enabled Shin Corporation to be acquired by Temasek of Singapore in early 2006, the interim military government proposed changes to the law which would have closed the loopholes and made it more difficult for foreign shareholders to manage their investments here. The outcry from the business community was sufficiently loud to stall the enactment of the changes until a democratically elected body was in place to oversee these. So far, little has been said by the new Government about the FBA but, in an interview given shortly after appointment, the Deputy Prime Minister and Finance Minister Surapong Suebwonglee said “We must send a clear signal that nothing is retroactive and we are not shutting our door to foreign investment”.

In the same interview when asked “What are your views on the capital reserve requirement?” he said “Symbolically, the measure has been continually relaxed. I need to talk with the Bank of Thailand and analyse what strengthens the baht - irregular inflows or our own economic flaws. Our trade surplus is huge due to low investment. Without investment, the baht is strong. This abnormal condition allows speculation. To solve the problem, we need monetary and fiscal measures, taking into account the entire picture.” Since then the 30% reserve requirement has been dropped without an apparent upsurge in speculation.

6. Foreign reserves in excellent shape

Thailand’s net international reserves, which jumped by US$5.1 billion within a week before Feb 29, have soared to a new high of US$123.8 billion (Bt3.91 trillion), including forward positions.
On Feb 29, the Bank of Thailand (BOT) lifted its 14-month-old capital controls. Gross international reserves, which are currently less than the net international reserves, amounted to $100.5 billion as of Feb 29 due to the central bank’s intervention in the market to rein in the baht. The net reserves have risen sharply because of the BOT’s unwinding position of swap agreements to manage liquidity. It bought back the US dollar and sold the baht to counter upward pressures, causing the net forward position to drop to $23.3 billion, from $24.1 billion in the previous quarter. The rising reserves also resulted from valuation change as the euro, a main component of currencies in the BOT’s portfolio, has appreciated against the dollar.

7. Cautious optimism

As other Asian economies raced past their pre-1997 financial crisis stock exchange peaks, Thailand is still just a few notches up at half of its 1400-point high in the mid-90s, said Frederic Neumann, HSBC’s economist for Asia-Pacific. This means there is plenty of room in the upside for equity to climb, as stocks are still relatively cheap in terms of price to earnings, he added.

Bangkok Base shares HSBC’s cautious optimism, especially in the light of the massive increases in spending on infra-structure planned for the next three years. Prices of land around the new routes of the mass-transit rail network have risen by 10 per cent to 100 per cent this year since the government confirmed an investment of up to Bt500 billion in such schemes. The nine routes announced by Prime Minister Samak Sundaravej cover a total of 311km. Property developers are vying to secure additional land along the routes and many jobs will be created by such development in addition to the jobs created by construction of the routes themselves

It’s hard to believe in the hustle and bustle of Bangkok that it would be possible to find a peaceful place in which to do business. The pollution, traffic, and noise combine to faze first time visitors to Bangkok and leave people wondering whether they could actually live and do business in such chaos.

The Bangkok Base Serviced and Virtual office centre on Sukhumvit Soi 31 offers business people one of the most peaceful and convenient locations in Bangkok from which to conduct business. Directly across the road from the office centre is the Imperial Queen’s Park, a wide open green leafy park with a lake and sports grounds. The park is a great place for a mid day stroll or picnic and gives one the chance to get out of the office for some sun and fresh air. In the evenings the park is brought to life by people jogging, practicing aerobics, tai chi, basketball, and other activities.

The office complex is a few minutes stroll from The Emporium, one of Bangkok’s most prestigious shopping centres. The Emporium has several food courts and a range of coffee shops and restaurants making it a convenient location for business lunches.

The Bangkok Base serviced office centre is located conveniently between Asoke and Phrom Phong BTS stations as well as being close to the Sukhumvit MRT station. This puts one at the intersection of all major transport routes in Bangkok. No matter which part of Bangkok you need to get to, you can avoid the traffic jams and get there swiftly.

Bangkok Base’s business services only help to contribute to the tranquillity of the business environment it provides. Full accounting and legal support services are available to help foreign businesses and entrepreneurs negotiate the complexities of doing business in Thailand.

For more information about the Peaceful Bangkok Base Business environment please Contact Us, view our serviced office image gallery or take a look at the different office packages that are available.