Asean countries are embarking on a framework to strengthen their
political and security affairs, social and cultural ties as well as the
regional economy. The culmination of this is the Asean Economic Community
(AEC), which will formally take shape at the end of 2015 as a single regional
common market, and an international organisation under the Asean Charter.
Within the region there has been
continued economic development. It started with the establishment of the Asean
Free Trade Area (Afta), followed by the Asean Framework Agreement on Services
and the Asean Investment Area, leading toward the AEC to allow for easier and
freer mobility in five areas: investment, services, goods, skilled labour and
capital.
Out of the above five areas, only
free flows of investment and services will be directly associated with the
liberalisation of business operations in Thailand that are under the control of
the Department of Business Development (DBD). These will be subject to terms
and conditions negotiated by the Department of Trade Negotiations with Asean
countries. Once concluded, these terms and conditions will be automatically
enforced by the Commerce Ministry through regulatory controls, conditions and
procedures for applying for privileges and protection under the Foreign
Business Act (FBA).
The FBA is a law controlling the
business operations of foreigners. It reserves certain businesses for Thais,
categorised into three lists. List One businesses are closed to foreigners for
special reasons related to Thai heritage and culture. List Two businesses are
open to foreigners only if they have permission from the commerce minister,
with the approval of the cabinet under specific conditions. Foreigners may
operate businesses in List Three only after they have obtained permission from
the director-general of the DBD, with approval of the Foreign Business
Committee.
Free flow of investment: In light
of the free flow of investment, Thailand will initially allow Asean countries
to engage in five industrial operations _ mining, agriculture, fisheries,
forestry, and manufacturing _ under the Asean Comprehensive Investment
Agreement (ACIA). Of those listed, manufacturing has long been open to
foreigners.
Further, the proportion of Asean
investment in certain activities in these five industrial sectors has been
raised from the 49% ceiling to any percentage between 51% through joint
investment with Thai partners, and 100% provided that Asean investors apply for
a foreign business certificate. This process is detailed in the DBD
announcement on general criteria and qualifications issued under the FBA and
ACIA in August 2012. The ceilings and activities are:
- 60% for onshore and offshore
mining;
- 100% for flour production from
rice and farm plants;
- 51% for marine animal culture
specifically tuna, sea cage culture, and spiny lobster;
- 51% for onion cultivation as
well as onion propagation.
In addition to the above
ceilings, the DBD stipulates further conditions, such as the debt-to-equity
ratio, the minimum number of Thai directors, minimum capital, and requirement
of licences or permits from related government authorities, i.e. the Industry
and Agriculture ministries.
Persons who are eligible to apply
for a foreign business certificate with the Bureau of Foreign Business
Administration under this scheme are juristic persons under the law of Thailand
and Asean citizens with proof of nationality with the embassy of their country
in Thailand.
Free flow of services: The Asean
Framework Agreement on Services calls for Thailand has to remove all
restrictions for cross-border supply in all service sectors mentioned by the
World Trade Organization. It also must increase the percentage of foreign
shareholding to 70% in four priority integration sectors - air transport, ICT, healthcare and tourism -
by 2012 and up to 100% in all other businesses by 2015.
According to negotiations
concluded so far, the following service sectors will be opened up to a ceiling
for Asean shareholding of 70%:
- professional services, e.g.
accounting, legal, architecture and engineering;
- construction, e.g. general
construction of industrial plants;
- brokers or agents, specifically
for medical goods;
- trading services, e.g.
wholesale and retail of medical goods;
- advertising, specifically the
sale of internet advertising space;
- hotel, tourism and travel-related
services, e.g. superior deluxe or six-star plus rated hotels, hotel management,
outbound travel information service;
- computers and related services,
e.g. hardware and software consultancy, maintenance and repair services for
office machinery and equipment including computers;
- research and development
focusing on physical sciences, linguistics and languages, and interdisciplinary
research;
- real estate services:
specifically, residential condominium management;
- rental or leasing services:
specifically, space transport equipment, computer servers, furniture, and
equipment for building construction or demolition;
- distribution services:
specifically, franchises for fast-food businesses;
- educational services:
specifically, science and technology;
- environmental services, e.g.
hazardous waste treatment and disposal, marine environmental protection;
- healthcare, related and social
services, e.g. private hospitals, specialised medical services in private hospitals,
nursing department services in hospitals, day-care services for children;
- recreational, cultural and
sporting services, e.g. amusement parks, private libraries, sports event
promotion and organisation.
Despite the negotiation and
conclusion of the above services, the DBD has not yet issued any announcements
about its enforcement under Thai laws to ensure Thailand's smooth transition
into the AEC in order to improve its competitiveness.
Vunnipa Ruamrangsri
Business & Investment Opportunities
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