Thai-Norwegian Business Review 2015 â€“ 04
Thai-Norwegian Chamber of Commerce
Myanmar Elections: What next?
ASEAN and AEC: Myths demystified
Contents President’s Foreword
Myanmar Elections: Now what?
A Look into the Crystal Ball of Myanmar’s Future
Huge Growth for Huge Modules
Norway’s Export Financing Gaining Popularity in Asia
Theme: ASEAN Economic Community (AEC)
What is ASEAN?
In it for the Long Haul: AEC in 2015 and Beyond
AEC: Huge Benefits if Done Right
AEC Implementation: Hopes and Expectations
Enhancing Energy Security: ASEAN Regional Cooperation
AEC Myths: Andrew Durieux Says Don’t Believe the Hype
An Uneasy Alliance: Exploring China’s Relations with ASEAN
The Importance of ASEAN Service Integration to Productivity
Facts vs fiction: AEC’s Free Movement of Skilled Labour
Member Perspectives on the AEC Outlook
Driving Innovation for Growth: An SME Perspective of AEC
Building for the Future: Unleashing Digital Innovation in ASEAN
AEC: The Legal Perspective
Thailand’s Economy at a Glance
Editor: Thitikul K. Opdal Advertising: Anders Magnusson Journalists: Eric Baker, Sofie Lisby, Henri Viiralt Graphic Design: Graphics-Related Co., Ltd. www.norcham.com
Daw Aun San Suu Kyi. Photo: Edstock2
Finnair is Europe’s ﬁrst airline to ﬂy the new, fuel-efﬁcient and quiet Airbus A350 XWB. Experience a new sense of ﬂying at A350.ﬁnnair.com
Finnair ﬂies to 17 destinations in Asia and over 60 destinations in Europe.
The year 2015 is soon at an end. Looking back, it has been an eventful year for our Chamber and many activities have taken place. I am really pleased to see that the number of members is steadily growing and that the turnout at the Chamber events is increasing. Relevance for the members is the key. I must thank our Executive Director, Khun Thitikul and our Secretary, Khun Nattamon for the excellent jobs they are doing in coming up with interesting and well-executed events. I’d also like to thank H.E. Ambassador Kjetil Paulsen for the generous and most valuable support we are enjoying from the embassy. Myanmar has been a central item on our agenda since the first Business Delegation in 2012. Some of us held our breaths during the election on 8 November 2015. We were scared of a repeat of the military crackdown in 1988, but this did thankfully not happen. It is really touching to see that things are now moving ahead in a positive direction with a peaceful transition towards democracy. We can only congratulate Daw Aung San Suu Kyi and the National League for Democracy with the election result. The question now is “What’s next?” In this magazine, we have a pleasure of the insight and opinion of two renowned Myanmar veterans who have looked into the crystal ball. Next up is ASEAN Economic Community (AEC), which comes into effect on 1 January 2016. Is it all hype and empty promises or is there real action behind the hype? This magazine offers one of the most extensive collections of opinions on the next steps for ASEAN and what it will signify for businesses; hopefully there will be quite a few positive effects around the corner. In April 2016, Singapore will host the Norway-Asia Business Summit. I urge you to participate in the summit, taking place at the fabulous Fullerton Hotel in Singapore from 12 to 14 April 2016. It is a great way to combine business and pleasure and to escape the heat and the water buckets in Thailand during Songkran. Singapore has an abundance of family attractions to offer in addition to world class shopping; Universal Studios, the Singapore Botanic Gardens and the Indoor Skydiving at IFly Singapore are just a few selections to check out. Finally, the Chamber is undergoing a complete rebranding. Together with the Myanmar-Norway Business Council, we have decided to adapt the Team Norway visual identity concept. On 1 January 2016, we will launch our rebranded website and Business Review will take on a new and more modern look from the first issue in February 2016. We hope you will be pleasantly surprised and find the new look refreshing and inspiring! Let me end by thanking you for your support and wish you a Merry Christmas and all the best for the coming year. Sincerely, Vibeke Lyssand Leirvåg President Thai-Norwegian Chamber of Commerce Thai-Norwegian Business Review
30 November 24, 2015
Pyithu Hluttaw Sagaing Region 176 Ayadaw 177 Banmauk 178 Butalin 179 Chaung-U 180 Depayin 181 Hkamti 182 Homalin 183 Htigyaing 184 Indaw 185 Kalay 186 Kalaywa 187 Kanbalu 188 Kani 189 Katha 190 Kawlin 191 Khin-U 192 Kyunhla 193 Lahe 194 Leshi 195 Mawlaik 196 Mingin 197 Monywa 198 Myaung 199 Myinmu 200 Nanyun 201 Palae 202 Paungbyin 203 Pinlebu 204 Sagaing 205 Salingyi 206 Shwebo 207 Tamu 208 Ta-sei 209 Wetlet 210 Wuntho 211 Ye-U 212 Yinmabin
Kachin State 64 Bhamaw/Bhamo 65 Chipwe 66 Hpakant 67 Hsawlaw 68 Ingyanyan 69 Khaunglanhpu 70 Machanbaw 71 Mansi 72 Mogaung 73 Mohnyin 74 Momauk 75 Myitkyina 76 Nawngmun 77 Puta-o 78 Shwegu 79 Sumprabum 80 Tanai 81 Waingmaw
Magwe Region 96 Aunglan 97 Chauk 98 Gangaw 99 Htilin 100 Kamma 101 Magwe 102 Minbu 103 Mindon 104 Minhla 105 Myaing 106 Myothit 107 Natmauk 108 Ngape 109 Pakokku 110 Pauk 111 Pwintphyu 112 Salin 113 Saw 114 Seikphyu 115 Sidoktaya 116 Sinbaungwe 117 Taungdwingyi 118 Thayet 119 Yenangyaung 120 Yesagyo
Chin State 55 Falam 56 Hakha 57 Htantlang 58 Kanpetlet 59 Matupi 60 Mindat 61 Paletwa 62 Tiddim 63 Tonzang
North Dagon South Dagon
52 49 31
Kayah State 82 Bawlakhe 83 Dimawso 84 Hpasawng 85 Hpruso 86 Loikaw 87 Me-se 88 Shardaw
54 29 39
Kayin State 89 Hlaingbwe 90 Hpa-an 91 Hpapun 92 Kawkareik 93 Kya-in Seikkyi 94 Myawady 95 Thandaunggyi
91 47 152
149 89 157
National League for Democracy
Lisu National Development Party
Union Solidarity and Development Party
Kachin State Democracy Party
Shan Nationalities League for Democracy
Wa Democratic Party
Arakan National Party
Kokang Democracy and Unity Party
Taâ€™Arng Palaung National Party
Pao National Organization
Tanintharyi Region 268 Bokepyin 269 Dawei 270 Kawthoung 271 Kyunsu 272 Launglon 273 Myeik 274 Pulaw 275 Tanintharyi 276 Thayetchaung 277 Yephyu
Shan State 213 Hopan 214 Hopone 215 Hpekon 216 Hsi Hsaing 217 Kalaw 218 Konkyan 219 Kunhein 220 Kunlone 221 Kutkai 222 Kyaingtong/Kengtung 223 Kyaukme 224 Kyethi 225 Lashio 226 Laukkai 227 Lechar/Laihka 228 Linkhae/Langkho 229 Loilin/Loileng 230 Mabein 231 Manton 232 Mawkme 233 Metman 234 Mine Hpyat/Mong Hpyak 235 Mine Hsat/Mong Hsat 236 Mine Kaing/Mong Kaing 237 Mine Khat/Mong Kha 238 Mine Lar/Mong La 239 Mine Maw/Mong Mao 240 Mine Pan/Mong Pan 241 Mine Pyin/Mong Ping 242 Mine Shu/Mong Shu 243 Mine Ton/Mong Ton 244 Mine Yan/Mong Yang 245 Mine Yaung/Mong Yawng 246 Mine-ye/Mong Yai 247 Moe-ne/Mong Nai 248 Momeik/Mong Mit 249 Muse 250 Namhsan 251 Namkham 252 Namsan 253 Namtu 254 Narhpan 255 Nawngcho 256 Nyaungshwe 257 Panghsang/Pangkham 258 Pangwaing/Pangwaun 259 Pindaya 260 Pinlaung 261 Tachileik 262 Tang Yan 263 Taunggyi 264 Theinni 265 Thibaw/Hsipaw 266 Yatsauk/Lawksawk 267 Ywarngan Yangon Region 278 Ahlone 279 Bahan 280 Botahtaung 281 Cocokyun (*not pictured) 282 Dagon 283 Dagon Seikkan 284 Dala 285 Dawbon 286 East Dagon 287 Hlaing 288 Hlaing Tharyar 289 Hlegu 290 Hmawbi 291 Htantabin 292 Insein 293 Kamaryut 294 Kawhmu 295 Kayan 296 Kungyangon 297 Kyauktada 298 Kyauktan 299 Kyeemyindaing 300 Lanmadaw 301 Latha 302 Mayangone 303 Mingaladon 304 Mingalar Taung Nyunt 305 North Dagon 306 North Okkalapa 307 Pabedan 308 Pazundaung 309 Sanchaung 310 Seikgyi Kanaungto 311 Seikkan 312 Shwe Pyi Thar 313 South Dagon 314 South Okkalapa 315 Taikkyi 316 Tarmwe 317 Thaketa 318 Thanlyin 319 Thingangyun 320 Thongwa 321 Twante 322 Yankin
Zomi Congress for Democracy
Mingalar Taung Nyunt Dawbon
Pabe Latha dan Kyauk tada
Bago Region 27 Bago 28 Daik-U 29 Gyobingauk 30 Htantapin 31 Kawa 32 Kyaukkyi 33 Kyauktaga 34 Letpadan 35 Minhla 36 Monyo 37 Nattalin 38 Nyaunglaybin 39 Okpho 40 Oktwin 41 Padaung 42 Paukkhaung 43 Paungde 44 Phyu 45 Pyay/Pyi 46 Shwedaung 47 Shwegyin 48 Taungoo 49 Thanatpin 50 Thayawady 51 Thegon 52 Waw 53 Yedashe 54 Zigon
205 179 199 134 198
Mon State 149 Bilin 150 Chaungzone 151 Kyaikmaraw 152 Kyaikto 153 Mawlamyine 154 Mudon 155 Paung 156 Thanbyuzayat 157 Thaton 158 Ye
Ayeyarwady Region 1 Bogale 2 Danuphyu 3 Dedaye 4 Einme 5 Hinthada 6 Ingapu 7 Kangyidaunt 8 Kyaiklat 9 Kyankhin 10 Kyaunggon 11 Kyonepyaw 12 Labutta 13 Laymyetna 14 Maubin 15 Mawlamyinegyun 16 Myanaung 17 Myaungmya 18 Ngaputaw 19 Nyaungdon 20 Pantanaw 21 Pathein 22 Phyapon 23 Thapaung 24 Wakema 25 Yegyi 26 Zalun
Rakhine State 159 Ann 160 Buthidaung 161 Gwa 162 Kyaukphyu 163 Kyauktaw 164 Manaung 165 Maungdaw 166 Minbya 167 Mrauk-U 168 Myebon 169 Pauktaw 170 Ponnagyun 171 Rambre 172 Rathedaung 173 Sittwe 174 Taunggok 175 Thandwe
Mandalay Region (for Nay Pyi Taw Union Territory, see inset) 121 Amarapura 122 Aung Myay Tharzan 123 Chan Aye Tharzan 124 Chan Mya Tharsi 125 Kyaukpadaung 126 Kyaukse 127 Madaya 128 Maha Aung Myay 129 Mahlaing 130 Meiktila 131 Mogok 132 Myingyan 133 Myitthar 134 Ngazun 135 Nwartogyi 136 Nyaung-U 137 Patheingyi 138 Pyawbwe 139 Pyigyitagun 140 Pyin Oo Lwin 141 Singaing 142 Singu 143 Tada-U 144 Taungtha 145 Thabeikkyin 146 Thazi 147 Wundwin 148 Yamethin
Nay Pyi Taw
Ottarathiri Pyin Oo Lwin
Aung Myay Tharzan Chan Aye Tharzan Maha Aung Myay
Chan Mya Tharsi
Dekkhina thiri Tada-U
Final Election Result for Myanmarâ€™s 440 seat Pyithu Hluttaw (House of Representatives). A similar result was recorded for the 224 seat Amyotha Hluttaw (House of Nationalities). Graphics courtesy of Myanmar Times/Khin Zaw
Thai-Norwegian Chamber of Commerce
Myanmar Elections: Now what? By Sofie Lisby
ollowing a landslide victory in the Myanmar’s general election on November 8 2015, Daw Aung San Suu Kyi is finally back in power. Or is she? Daw Aung San Suu Kyi’s National League for Democracy (NLD) has won a large majority in parliament following a victory in the 8 November landmark election in Myanmar. With 390 seats, the NLD has won an absolute majority and more than 80 percent of the electable seats in both houses, compared with just 42 seats to the governing Union Solidarity and Development Party (USDP).
The result has opened the floor for discussions with other political actors, not least the country’s military leaders, who remain in a key position in the country’s current political environment. The result gives the NLD the power to elect a president to be voted in when the presidential polls take place in February next year (a constitutional ban obviously crafted with Aung San Suu Kyi in mind bars anyone with a foreign spouse or children from becoming president). It has also opened the floor for discussions with other political actors, not least the country’s military leaders, including the Tatmadaw (Myanmar army) who remain in a key position in the country’s current political environment. While both President U Thein Sein and Senior General U Min Aung Hlaing, the head of the military, have both congratulated Aung San Suu Kyi and the NLD on their victory, they have also given mixed signals about the timing of the transition of power. It is evident that the next challenge for Aung San Suu Kyi is to find a working relationship with Gen. Min Aung Hlaing. According to the constitution, three key ministries in the government – Home Affairs, Defence and Border Affairs –
Daw Aung San Suu Kyi on the campaign trail. Photo: National League of Democracy (NLD)
are the domain of the military, their ministers appointed by the army commander and approved by the president. The election of a new president is one of the more pressing issues on the agenda and several observers believe that the outcome will tell a lot about the military’s stance towards the new government. The three blocs in parliament – the elected representatives of the Lower House, the elected representatives of the Upper House and appointed army representatives each nominate a presidential candidate who will face a vote in a joint session that includes all of the parliament. Although the election results suggest the NDL candidate would win the vote, the new president’s power would be seriously hampered if the military does not support him or her. So far, Aung San Suu Kyi and the NLD have not announced their presidential candidate. Another thorn in the NLD victory are the ethnic issues that continue to trouble the country. The NLD won most of the parliamentary seats in ethnic majority regions such as Karenni, Kachin, Shan and Mon states, indicating that Myanmar’s many ethnic minorities have put their faith in Aung San Suu Kyi to change their status as second class citizens and put an end to government-sanctioned violence. The party leader has announced plans to build a government of national unity and build a road towards national reconciliation but faces criticism for her silence on the Rohingya, whose desperate situation leads them to risk their lives fleeing the country. The verdict seems clear: The elections are won but the real battle has only just begun.
Thai-Norwegian Business Review
A Look into the Crystal Ball of M By Eric Baker
he first official meeting of the MyanmarNorway Business Community took place following Myanmar’s first democratic election in decades on 8 November. The group, which is initially a subsidiary of the ThaiNorwegian Chamber of Commerce until the new Chamber legislation is ready, invited Stein Tønnesson, a Norwegian peace researcher and historian, and Larry Jagan, a former BBC World Service editor for Asia and Myanmar specialist, to look into their crystal balls and see what the future holds post-election.
Ola Borge, President of the new Business Council and Partner at Baker & McKenzie Myanmar took the initiative to challenge two Myanmar experts to a panel discussion and to look into the crystal ball of Myanmar’s future. Both Tønnesson and Jagan were fairly certain Daw Aung San Suu Kyi will become president despite constitutional clauses meant to prevent such an occurrence. “It doesn’t make sense to have her as a super-president with a figurehead as president because it would undermine respect for the office and create a logjam at the top level,” said Mr Tønnesson. “Parliament will make changes that allow her to have the power. Because of her father, who is considered the father of modern-day Myanmar, she is the closest you could come to royalty in this country.” “The party [National League for Democracy] has not been institutionalised in a way where other people’s voices are very influential, so she is still the main speaker. “I think she has three possible paths from here. The first is a power struggle with the military where Ms Suu Kyi decides to go for full power and constitutional change. This scenario would see her use her mandate from the people while it’s still fresh, knowing the military cannot step in now because of the economic and political pressure from the international community. She would try and mobilise her support to force a system where she is the supreme power holder.
Thai-Norwegian Chamber of Commerce
“The second situation would be she works with the military, builds trust gradually, and accepts the current constitution to prevent a coup or anything that would lead to bloodshed. “The final scenario is muddling through, where in order to achieve economic progress, she decides to do a balancing act and tries to please everyone. I think most people would choose option No.3 if they were in her position because it is the most pragmatic. But she has shown herself to be very strong-willed and proud through the years, so I think it’s possible she chooses one of the first two paths. “If she engages in a power struggle, she will try to get rid of 59(f) [the article in the constitution that prevents Ms Suu Kyi from becoming president because she married a foreign citizen and her children are foreign citizens], get rid of the military getting 25% of representatives in all the assemblies, the military being able to nominate the three key ministers in the cabinet, the military’s full autonomy and its ability to stage administrative coups, allowed by the current constitution. “To do this, she must mobilise the people behind her and this could lead to a similar scenario as you see in Thailand. Ms Suu Kyi could lose that power struggle, leading to an alternating cycle of military coups and civilian democracy. The Thai scenario is a likely outcome if she chooses this bold approach. She would need to maintain popular and external support, so she would have to be kind to China and would not want to antagonise any domestic groups, meaning this could be a useful time for ethnic minorities to enhance their position through bargaining. “If she chooses the second path, this involves trust-building on the elite level. This scenario would gradually reduce military power, so it would be similar to Indonesia. She would need to work with the cronies but expose them to competition from other companies. Most importantly, she would build capacity. The best way to satisfy the military would be to provide US support because they could provide the world’s best training and weapons. But this would lead to trouble with China and would be bad for peace in the border regions with that country.
“The military would be allowed to carry out offensives against ethnic minorities in this scenario, such as the Kachin Independence Army and the United Wa State Army. This would lead to many human rights protests and disappointment with Ms Suu Kyi for her policies in dealing with Rohingyas. “The third scenario would be the best for the economy as it will build capacity in government and the economic sector and perhaps satisfy the enormous appetite for change. A colleague who writes for the Myanmar Times visited several small villages ahead of the election and everyone was expecting change but no one knew what that would entail. If the NLD thinks the best way to win the next election in five years is economic growth, there is potential that Ms Suu Kyi would choose this option. It would be good for foreign relations and investors, but there is risk as the development would be unequal, mostly in the urban centres, and the party could lose popularity if it doesn’t quench the thirst for change quickly enough. “I think No.2, where she works with the military, is the most likely option, and this will disappoint many people.” Mr Jagan is quite optimistic about the future, though he admitted his prognostications are not always accurate. “I’ve been following Myanmar since 1974, though I’ve been banned from the country for 21 of the last 27 years,” he said. “What happened on 8 November is so reminiscent of the election in 1990, even down to voting numbers and percentages. But the military was unsure of what to do at the time. If it had handed over power to Daw Aung San Suu Kyi then, we’d be living in the most developed country in the region now politically and economically. “When I look at it I see 25 years lost. But the military look at it as ‘25 years and they still hate us. We’ve built roads and infrastructure and the people still hate us.’ “One has to differentiate between the military and the USDP [Union Solidarity and Development Party, created by Than Shwe [after the 2008 constitution] as the military’s political party in preparation for 2010. The USDP is fin-
Prof. Stein Tønnesson, MNBC Chairman Ola Borge, H.E. Ambassador Ann Ollestand and veteran Myanmar journalist Larry Jagan after the panel discussion on Myanmar’s future. Photo: MFA/Alexander N. Lien
ished; they have no credibility. But the military is constantly regenerating and the new guys have a different outlook. “I am optimistic because I don’t think Ms Suu Kyi is going to take on the military and convince them. After the election victory, she said we have to build on what the Thein Sein government has done, and she has never made statements like this before. I think muddling through represents the worst-case scenario for the future, but I don’t think that will be the path. “Ms Suu Kyi wants competence, and she wants experts for the cabinet posts, so I think she’s going to look outside the NLD for these positions. This will be welcomed by the military because they are willing to compromise given she understands what they are looking for. “Don’t expect the constitution to be changed as the head of the military came out in recent weeks saying ‘we will defend the constitution with our lives’. This upped the ante, but I’ve been around Myanmar long enough to know when people use blunt statements like this it means there is something going on beneath the surface. In this case, I have little doubt negotiations are underway for Ms Suu Kyi to become president. H.E. Ann Ollestad, the Norwegian ambassador to Myanmar who hosted the meeting at her residence, said she was deeply moved by the election. Businesses have an important role to play in smoothing the transition to democracy, from increasing the power grid to paying taxes and providing jobs, she said.
Thai-Norwegian Business Review
Huge Growth for Huge Modules By Christian Holm Foder
ibel Thailand has seen considerably growth over the past five years. The latest addition to its portfolio of high quality modules is the main support frame (MSF) for the deck of the Johan Sverdrup drilling platform.
With its approx. 10,000 tons, the MSF module is the largest of three modules that will constitute the deck, which has a total weight of around 21,000 tons. That makes the entire project the largest in the history of Aibel, and the MSF module the biggest ever built at Aibel’s yard in Laem Chabang, which was opened in 1999.
The exchange of employees between Thailand and Norway is not unique for the Johan Sverdrup project. In recent years, similar cooperation models have been used for successful deliveries for the Gudrun and Troll A 3&4 projects, both projects contributing to huge amounts of work at the yard.
Increased activity levels Work on this record-breaking project has been well under way since early spring of 2015. In its initial phase most engineering has been carried out at Aibel’s office in Oslo, but during the autumn the activity level in Thailand has increased. The first cut of steel for the grillage, which the module will be built upon, took place in October, while first cut for the module itself is planned for mid-December. In addition, so-called tail-end engineering related to the MSF module will move from Oslo to Thailand right after New Year. This means that around 30 Thai engineers will return to Thailand from Oslo, where they have worked
Thai-Norwegian Chamber of Commerce
A happy Thai worker at Aibel. Photo: Aibel
side by side with their Norwegian colleagues in order to familiarise themselves with the project team and gain good understanding of the project and its demands. The complete MSF module is scheduled to leave Thailand in the summer of 2017. It will then be transported to Bømlafjorden north of Haugesund in Norway, where the assembly of the platform’s three modules will take place. Competitive advantage The exchange of employees between Thailand and Norway is not unique for the Johan Sverdrup project. In recent years, similar cooperation models have been used for successful deliveries for the Gudrun and Troll A 3&4 projects, both projects contributing to huge amounts of work at the yard. In connection with Aibel’s delivery of the Gudrun platform, two out of three modules were built at the yard in Laem Chabang. For the Troll A 3&4 project, Aibel Thailand delivered the largest of the three modules.
Not only have these projects been a key factor in the development of the Thai organisation that has gained solid experience of the entire project life cycle from engineering and procurement to completion and commissioning. It has also given Aibel an important competitive advantage, as the proven track record shows that the company is able to deliver high quality models at competitive prices. Growth in size and projects In addition to the projects for the Norwegian continental shelf, Aibel Thailand has supplied modules for FPSOs (Floating Production, Storage and Offloading), platforms and onshore facilities for clients from other parts of the world. Most recently are modules for the P-74 and TEN projects, which both were managed from Aibel Thailand and completed during the second half of 2015. The many recent projects have led to considerable expansions of the yard in Laem Chabang as well as the prefabrication area at Aibel’s trusted partner Deeline, who is partly owned by Aibel and situated nearby in Huaypong, Rayong. Today the combined construction area stretches over 300,000 m2 with an annual capacity of 15,000 tons, corresponding to 4-7 million man-hours. Safety first Common for all projects and other activities in Aibel is a strong focus on safety. This means that safety routines and HSE training have been important and integrated parts of the development of Aibel Thailand. The company has a zero injuries philosophy and a corporate culture in which safety comes first. The company’s proactive risk management systems and HSE training is designed to avoid causing injury to personnel or damaging the environment or assets. Compliance with these routines has resulted in excellent HSE performance on the projects executed in Thailand.
The Aibel plant in Laem Chabang is blessed by monks. Photo Aibel
Aibel in brief: Aibel is a leading service company in the oil and gas industry. The company is also established within renewable energy. Around 5,000 employees are engaged in work both onshore and offshore. Aibel has eight offices in Norway. In addition, the company has operations in Thailand, Singapore and Denmark.
Facts about Aibel Thailand: • • • •
Established in 1999
The annual capacity of the yard is 15,000 tons, corresponding to 4-7 million man-hours
Assembly area of 122,250 m 2
Approx. 300 employees The engineering office is located in Banchang The yard is situated in Laem Chabang on Thailand’s Eastern Seaboard
Fabrication area of 179,200 m 2 (at Deeline – partly owned by Aibel – in Huaypong Rayong)
Thai-Norwegian Business Review
In Sweden, we see ahead of the curve That’s why we’re always finding new ways to redefine safety, like designing IntelliSafe with Pedestrian Detection with Full Auto Brake, which detects and brakes for unexpected pedestrians at speeds up to 50 km/h.
Volvo IntelliSafe looks out for the safety of you, and those around you.
VOLVOCARS.COM/TH For more information on Volvo cars, please call 02 305 4499
Norway’s Export Financing Gaining Popularity in Asia By Henri Viiralt
n 2012, the Norwegian government launched a new financial institution with the mission of promoting Norwegian goods and services to the world by offering medium to long-term loans on favourable terms to customers of the country’s export industry. Oslo-based Export Credit Norway (Eksportkreditt) deals with the entire loan application process from start to finish, including commitment, disbursement and monitoring of loans. It works in tandem with another government agency, the Norwegian Guarantee Institute for Export Credits (GIEK), which takes the financial risk for the loans while Export Credit Norway provides the funds.
Together they service customers from around the world, financing anything from ships, drill rigs and subsea technology to onshore industries including IT, infrastructure and renewable energy projects. “Around half of Norwegian exports comprise of offshore and maritime goods and services, which is by far the largest economic sector, and one that has seen most demand for export financing,” says Ivar Slengesol, Director of Lending, Industry & Renewable Energy at Export Credit Norway.
We offer very attractive interest rates on government-backed loans that may run for 18 years, However, interest from IT, biotech and renewable energy sectors has been picking up in recent years and Slengesol attributes this to increasing difficulty for companies finding long-term, stable funding schemes. “We offer very attractive interest rates on government-backed loans that may run for 18 years, as is the case with renewable energy, drinking water and drainage projects,” says Slengesol. “Another
Export Credit Norway has financed the Norwegian AquaFence flood protection system. Photo: AquaFence
huge incentive is for companies to diversify their financing sources by working with us, effectively freeing up their credit lines to domestic banks.” Export Credit Norway recognises SMEs as a growth sector and has introduced a specific package for it, the so-called “simplified application”, about a year ago. The simplified solution consists of a joint application form for GIEK and Export Credit Norway for contracts totalling less than NOK 100 million (THB 414 million). It aims to minimise the use of external legal fees, thereby cutting down transaction costs and streamlining the overall loan application process. One of the more innovative projects Export Credit Norway are currently backing is bringing micro solar systems to low- and mid-income households that lack access to electricity in rural Pakistan. Rolled out by Norwegian Brighterlite in partnership with Telenor, this off-grid power solution
Thai-Norwegian Business Review
Who wouldn’t want to save 30 olympic-size pools of diesel fuel - if they could?
75 million litres of diesel - corresponding to 30 olympic-size pools full - is the annual theoretical saving* if Myanmar’s telecom tower infrastructure were to be built with hybrid power solutions, including solar panels and windmills. The more free, renewable energy one can use instead of diesel to power telecom equipment, the lower the total cost of ownership – and the sooner the extra hybrid investment will pay for itself. Achieve substantial savings with Hybrid Power Solutions for Telecom
14email:Thai-Norwegian email@example.com Chamber of Commerce
Perhaps equally important, – a hybrid solution will benefit both the environment and the local communities near the site: Significant CO2 emission reductions, less noise and local pollution, and maybe even provide surplus energy to nearby health stations, schools or other important village functions.
*Assuming 10 000 towers
Green hybrid power solutions really make a difference. They are good for the environment, good for society, good for business and good for corporate reputations.
Continued from page 13
Export Credit Application Process The application process comprises six steps: 1. Filing a financing application with Export Credit Norway before a commercial export contract is signed. Both exporters and potential buyers may do this
The Songa Endurance platform built in Korea has been financed by Export Credit Norway. Photo: Songa Offshore
provides lights, mobile charging and power for fans and TVs on a monthly service plan. Brighterlite has plans to introduce this solution to Myanmar in the future. While there has not been a lot of interest for export financing from Thailand yet, Slengesol remains optimistic about future growth potential in targeting the kingdom’s SMEs. “I don’t think we’ve been visible enough in Thailand and we need to do more marketing so that the local companies are more aware of the financial options available for them,” he says. “Our main strategy has been making sure our exporters provide their customers with the relevant info, but we also need to do more seminars and one to one meetings directly with Thai companies.”
2. Based on the application, Export Credit Norway prepares an indicative term sheet for the exporter to enclose with its tender 3. The exporter or purchaser applies for a guarantee from GIEK and/or one or more commercial banks which Export Credit Norway cooperates with 4. Export Credit Norway negotiates a loan agreement with the purchaser 5. Export Credit Norway disburses the loan to the exporter when the purchaser takes delivery of all or some of the product or service in accordance with the agreement 6. The purchaser repays the loan to Export Credit Norway
One such seminar was recently held in Bangkok in association with Innovation Norway and the Thai-Norwegian Chamber of Commerce. Slengesol was pleased with the amount of interest and the ability to revisit some potential project ideas in the one on one sessions. “Asia is definitely a growth region for us as more and more Norwegian exporters are moving in and our financial solutions can help give them a competitive advantage in securing their next contract,” says Slengesol. “The challenge now is to get the word out.”
Thai-Norwegian Business Review
Manufacturing quality collection requires free flow of creativity, understanding, knowledge and a lot of support. They say, behind every great designer, there is a great manufacturer.
HIGH END JEWELRY MANUFACTURER
ASEAN Economic Community (AEC) As the region gears up for the ASEAN Economic Community coming into force on 31 December, the Business Review decided to look at what effect the pact will have on our members, how long it will take before real change happens, and tried to clear up some of the myths regarding the AEC. This issue includes reviews and opinions on how the AEC will affect services trade, the environment, the digital divide, the energy sector, laws and regulations, small businesses, relations with China, and flow of skilled labour. Many analysts believe ASEAN is poised for great things, with a population of 600 million that can become a real force on the global scene if it can muster a cohesive voice. But there is still much concern as to whether the member countries will see the value in that common bond. That is why one article will look at what ASEAN is and how its leaders see its aim. Read on to learn what moves and mistakes businesspeople should be aware of heading into 2016, a period of greater promised economic integration.
Thai-Norwegian Business Review
What is ASEAN? By Eric Baker
he ASEAN Economic Community (AEC) is scheduled to come into effect on 31 December, and while much of the rest of the magazine explores what that will mean for the region, if the pact is ineffectual it is worth asking what the organisation actually comprises.
The association is a grouping of the ten nations of Southeast Asia, with each member country chairing the organisation annually on a rotating basis. ASEAN claims it aims to promote collaboration among member nations, including economic and trade growth. Most of the group’s achievements have been economic, such as the AEC and free trade agreements with several regional powers such as China and India. ASEAN also wants to promote peace and stability in the area. Members have signed a treaty not to have nuclear weapons and most of them have signed a counter-terrorism pact that includes sharing intelligence. But ASEAN’s efficacy has come under fire in recent years for its inability to change behaviour. The group always threatened pressure on Myanmar but never actually passed any sanctions. And the heightened sabre-rattling regarding the South China Sea territorial disputes begs the question of the association’s supposed cohesiveness. The Philippines, Vietnam, Malaysia, Brunei and Indonesia all have overlapping claims with China over the marine area. China asserts it owns a broad swathe of the sea and has started building installations in the area. ASEAN has been unable to address the matter because even its members cannot agree on how to deal with China. “What ASEAN has accomplished is a series of international treaties, but no country has surrendered any sovereignty to another entity,” said Andrew Durieux, principal consultant for business continuity planning at Coverage Ltd and the former chairman of the AEC Committee at the Joint Foreign Chambers of Commerce. “Each country is responsible for how it complies with agreements, and there is no fund-
Thai-Norwegian Chamber of Commerce
ing for a central authority. Agreements like the AEC don’t force the member countries to actually pass any specific laws, and there is no enforcement body because no country will give up any power or money to create one.” “The message of ASEAN thus far has been ‘Leave me alone to run my country. We can make some comments about how to change things, but we’re not going to force anything.’ The problem with that model in a global environment is integrated economies start to hit snags, such as the South China Sea situation. Because ASEAN doesn’t have funding or infrastructure, it has no way to resolve the problem. ASEAN is merely a mechanism for peaceful ongoing discussions without unnecessary building of tensions.”
“What ASEAN has accomplished is a series of international treaties, but no country has surrendered any sovereignty to another entity. Each country is responsible for how it complies with agreements, and there is no funding for a central authority.” Several commentators have echoed Mr Durieux’s sentiments in making recommendations to “fix” ASEAN. In 2012 The Economist said only strong leadership will be able to convince members to establish a pay for a central regional authority with some clout, and called on Indonesia to take that role given it has the largest population and economy in ASEAN. In that year, ASEAN failed to issue a joint communiqué for the first time in its history because members couldn’t agree on a statement about China. Later in 2012 the Philippines expelled the Cambodian ambassador because he said the Philippines and Vietnam were playing “dirty politics” by trying to include the South China Sea in the ASEAN agenda.
policy, switching to a two-thirds majority to be able to act more nimbly. Mr Kurlantzick recommended the association appoint more high-profile former heads of state from the region to lead ASEAN. Richer nations such as Singapore, Brunei and Indonesia should commit more resources to ASEAN, enabling it maintain a small peacekeeping force as well as an election monitoring unit. The 27th ASEAN Summit was held in Kuala Lumpur in November 2015. Photo: ASEAN Secretariat
These kinds of rifts are not unique in Southeast Asia. One need only look at Thailand and Cambodia’s recent dust-up over the Preah Vihear temple on the border where both sides threatened war because they couldn’t agree on how to manage the facility. Part of analysts’ tendency to compare ASEAN with the EU is they both feature several distinct ethnicities living in close contact with different languages and a long history of disputes that makes parties distrustful. The EU has been able to overcome that to some degree, but Southeast Asia can still feel like a powder keg at times. The promise of ASEAN lies in its potential to broadcast a unified Southeast Asian voice amid louder drum beats from China and the US. China provides a lot of economic support to Cambodia, Laos and Myanmar, giving it, as The Economist put it, an “outsider’s veto”. In a working paper for the Council on Foreign Relations in 2012, Joshua Kurlantzick identified several key steps for ASEAN if it wants to develop legitimacy. In addition to creating and funding a stronger ASEAN secretariat, he called for the association to end its consensus decision-making
He also advocated a reduction of the annual meetings of association as well as the issues covered, sticking to economic liberalisation, regional integration and non-traditional security threats. Mr Kurlantzick pushed for a broad, cohesive policy on human rights protection, which would give ASEAN more moral authority. And he wanted an economic harmonisation mechanism that enables the poorer member states to boost their economies. Some of the non-traditional security threats mentioned above are economic issues that only a strong regional organization can address such as rules on deep-sea fishing, cooperation on fighting pandemic disease, reducing smog from forest fires and tsunami and earthquake warning systems. As a senior adviser from Indonesia said in The Economist article, “if the member countries don’t care enough about ASEAN, why should other powers defer to it?”
Thai-Norwegian Business Review
In it for the Long Haul: AEC in 20 By Henri Viiralt
pread across 4.4 million square kilometres of land abundant in natural resources, the ASEAN region is home to approximately 625 million people, making up 8.8% of the global population. In 2014 its compound gross domestic product reached US$2.57 trillion, making it the world’s seventh largest economy, and one of its fastest growing ones.
Deeper regional integration and increased macroeconomic stability remains a top policy priority for ASEAN. Shaped by geopolitics, globalisation and financial crises, in 2007 during the 13th ASEAN Summit in Singapore, the member states adopted a unified vision with the aim of creating a prosperous and highly competitive region with a single market and production base. The 2015 ASEAN Economic Community (AEC) Blueprint, a roadmap that would guide this consolidation of the region’s diverse economies by the end of 2015, is built on four basic pillars: (1) creating a single market and production base, (2) a competitive economic region, (3) equitable economic development, (4) integration with the global economy.
mented, becomes a one-stop customs clearance system for the region, connecting 10 National Single Windows of individual member states into a unified system, allowing the expedition of customs clearance, thereby enhancing trade efficiency and competitiveness. Liberalisation of services has seen less progress due to the evolving nature of trade in services along with complex policy constraints, making it difficult for ASEAN to cope with rapid changes, especially in relation to emergent sectors like e-commerce. For many of the member states, restrictive and protectionist national policies must be tackled before any substantial progress can be made.
“The greatest success under Pillar 1 has been in tariff reduction. Some headway has also been made in trade facilitation. Liberalisation of services has seen less progress.
Progress The 2015 AEC Blueprint’s first pillar comprises of five core elements: (a) free flow of goods; (b) free flow of services; (c) free flow of investment; (d) freer flow of capital; and (e) free flow of skilled labour. “The greatest success under Pillar 1 has been in tariff reduction. Following the implementation of the ASEAN Free Trade Area (AFTA) and the adoption of the ASEAN Trade in Goods Agreement (ATIGA), common effective preferential tariff rates between the ASEAN-6 (Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore, and Thailand) fell to virtually zero. As a result, more than 70% of intra-ASEAN trade incurs no tariff and less than 5% is subject to tariffs above 10%,” states a recent report by Asian Development Bank. Some headway has also been made in trade facilitation. The so-called ASEAN Single Window Initiative, once imple-
Thai-Norwegian Chamber of Commerce
Mutual Recognition Agreements (MRAs) are intended to facilitate the movement of professionals by recognition of their qualifications by ASEAN member states, but they cover only a few sectors since leaders fear “brain drain” in case of free movement of labour, skilled and unskilled. The International Labour Organization (ILO) also argues there are still notable barriers, such as national requirements which inhibit the free movement of professionals. Although many studies have recognised the benefits of competition policy as a key factor to achieving the second pillar of creating a competitive economic region, there is a lack of a strong consensus on the effectiveness of a regional approach over a national one, but more importantly whether it can truly benefit developing economies that lack fully functioning legal systems, business environments and infrastructure.
015 and Beyond
Work on realising the fourth pillar, however, has been by far the most successful, with most of the objectives already met. ASEAN has been successful in driving free trade agreement (FTA) activity in Asia, as well as updating trade rules for ASEAN+6 (Australia, China, India, Japan, South Korea, New Zealand).
Remaining challenges Some analysts have pointed out that the pace of reforms has slowed down since what remain are the more difficult targets to achieve and that many of the major initiatives have been bogged down by a combination of financing shortfalls, poor governance, corruption, as well as an inability of interdepartmental coordination of governments. Looking at the the progress made in creating the free flow of goods and services, Nu To Van, Director of Customs and International Trade at Pricewaterhouse Coopers, says it’s far too early to celebrate.
Courtesy call by President of ASEAN-China Association. Photo: ASEAN Secretariat
it forward. The ASEAN Secretariat, that was tasked with oversight, lacks the financial and intellectual resources, but as Nu points out it’s also due to a lack in compliance-enforcement tools that for example the EU has. This is based on EU countries willingness to relinquish some of their sovereignty, something that Nu doesn’t believe will happen in ASEAN anytime soon.
“If we look at the trade in goods, even though most of the duty rates have gone down to zero, companies trading between ASEAN countries complain about the many nontariff barriers before and even after importing, restrictions in terms of distributions of goods or standards and testing requirements that are still in place.
“Thailand, for example, is notorious for having non-tariff barriers as it has around 500-600 measures that they report to the WTO,“ Nu says. “That’s the biggest stumbling block to doing business, and I don’t see that changing in the near future.”
“Everybody was looking for this big bang at the end of the year and it’s very clear now that it’s not going to happen. It’s replaced by a new 10-year plan, and in my view the biggest challenge for ASEAN is whether they can sustain the momentum beyond 2015,” concludes Nu.
How ASEAN is measuring success proves to be problematic, too. “Having an MRA in tourism, they can say they’ve ticked that box, but can people actually use it is another question. Practicality of many of the objectives that have been met are questionable, so even if there’s an MRA in place, in a way it becomes useless,” he says.
Whether there will be a force driving this vision forward in a meaningful way or whether it means more of the same remains to be seen, but ASEAN should find a way to give its commitments more teeth by installing strong regional institutions and sanction mechanisms instead of adopting the lowest common denominator as the threshold for action. 2015, therefore, should be viewed as a milestone instead of an end on a continued journey.
One of the key reasons why AEC has seen slow progress is simply because ASEAN lacks the structural capacity to push
During the 27th ASEAN Summit held between 18-22 November in Kuala Lumpur, the 10-member block penned the ASEAN Community Vision 2025, effectively extending AEC by another 10 years.
Thai-Norwegian Business Review
AEC: Huge Benefits if Done Righ By Sofie Lisby
he Norwegian Ambassador to Thailand, H.E. Kjetil Paulsen, sees huge potential in the ASEAN Economic Community (AEC) – and a few challenges. Discrepancies between various trade agreements in the region, significant differences between member states and a troublesome year for the European Union all loom in the background less than a month before the AEC enters into force.
When the AEC enters into force at the end of the year it will be a unique opportunity for Thailand and the rest of the region to benefit economically and politically, predicts the Norwegian Ambassador to Thailand, Kjetil Paulsen. But some challenges remain. In a region where trade partnerships – rather than political ones – takes priority, Thailand finds itself in a situation where it may well be part of the AEC, the Trans-Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP) all at once.
“What the countries of the region have to figure out is how they are going to relate themselves to all the new free trade initiatives,”
“What the countries of the region have to figure out is how they are going to relate themselves to all the new free trade initiatives,” says the ambassador. “The TPP has already been negotiated and there is a debate about whether Thailand should join. The Bangkok Post recently opposed the agreement in an editorial due to concerns about the medical industry and the effect on Thailand’s hospitals and the price of medicine.
Thai-Norwegian Chamber of Commerce
“On the other hand, if Thailand does not join the TPP, particularly the manufacturing industry may have a problem because of the rule within the TPP, which states that if a product produced by one TPP member is going to be exported duty free, at least 45 percent of the product will have to be produced in that country. That means if Thailand is outside the TPP, Thailand cannot export cars duty free to for example Vietnam, because 45 percent of the car would have been produced inside that free trade area. That is a concern.”
Discrepancies a challenge Ambassador Paulsen also points to discrepancies between the various agreements. “What happens if Thailand cannot export this car duty free to Vietnam, according to the rules and regulations of the TPP but, for instance, the AEC is in place, and within the AEC you can export duty free to all the member states? Then you are in a situation where you have one agreement saying no and another agreement saying yes. “We have a situation where some countries are members of the RCEP, the AEC and the TPP, other countries are members of one or two of them. A few may be members of none of them. And as that was not enough, there are bilateral agreements between individual countries. However, the current environment also has the potential to significantly alter the trade in the region for the benefit of millions of people, according to Paulsen who thinks that one agreement need not exclude the other. “If the countries in the region, including the super powers, get it right, they might turn the situation around and these initiatives may become very powerful. But it requires hard work because as it is now, the situation is quite chaotic and uncoordinated.”
Not just about trade and the economy The ambassador rejects the idea that the AEC is insignificant in the face of the larger TPP and RCEP, which include not only regional, but global super powers. “The AEC is not insignificant at all,” he says. “I think it would be wise for
ASEAN to proceed as rapidly as possible with the AEC. In fact, the AEC is probably at the moment the most realistic of the various agreements in view of the fact that ASEAN has already come quite far in liberalising both trade between member states but also the movement of people and services. So my advice would be, proceed as quickly and effectively as possible. If these other initiatives (TPP and RCEP, red.) move forward, the AEC can easily be adjusted to that in the future. ASEAN shouldn’t let all these initiatives delay the AEC.” Ambassador Paulsen hopes ASEAN will see more political cooperation in the future as well. “Historically ASEAN has been a economic partnership more than a political one,” he says. “Because that has been easiest. But I hope that the ambition is broader than that. In the last few months we have seen some good examples of why cooperation should span wider than just the economy. The Rohingya crisis in April and May is a typical example of an issue that should be addressed regionally. It involves a number of ASEAN member states. The smog from the burning of forests in Indonesia is definitely a very serious regional problem, which is best addressed regionally. Problems with illegal fisheries in the region involves Thailand, Cambodia, Indonesia and Malaysia to name just a few. “There are many issues that should be dealt with on the regional basis but that has been a bit difficult for ASEAN. I understand that the organisation has to move forward carefully and cautiously but there must be a broader ambition than only trade and economic issues.”
Norwegian ASEAN partnership Norway recently entered into a partnership agreement with ASEAN, the second country to do so after Pakistan. The finer details are being worked out between the ASEAN Secretariat and the Norwegian embassy in Jakarta, however the main focus is cooperation in a wide range of areas including trade, security and energy.
H.E. Ambassador Kjetil Paulsen. Photo: Thor Jørgen Udvang
institution and its member states,” explains Paulsen. “We hope it will be mutually useful in the area of energy for instance, in which Norway has very high competence. There are a lot of possible areas, which we are now discussing with the ASEAN secretariat in Jakarta and hopefully we can make more specific programs in the future.” Despite the many challenges facing the region, Ambassador Paulsen maintains a positive outlook. “The issue of trade and regional partnerships is so important for the countries in this region. The decisions that the government of Thailand has to make in the months and years to come are crucial for the development of this country. But I’m confident Thailand will make the right decisions. There is a lot of competence in this area I’m sure Thailand will cope with these issues in a good manner.”
“We believe the partnership will be good for Norwegian businesses because we will now have better access to the
Thai-Norwegian Business Review
AEC Implementation: Hopes and By Sofie Lisby
lot has been said and written about the AEC but the reality is that its implementation will likely have different effects on different industries. ThaiNorwegian Business Review asked four CEOs in telecommunication, manufacturing, healthcare and logistics about their expectations for the AEC and how they envision the AEC will affect their specific industry.
Michael Shum, Managing Director, Jotun Thailand Limited The Jotun Group is a leading supplier of paints and power coatings, operating in over 100 countries. Its various paint systems and products are designed to protect and decorate surfaces in the residential, shipping and industrial markets. The company has been operating in Thailand since 1968. What will be the biggest impact of the AEC on your industry/business? The manufacturing industry and the market will be much more open for low cost manufacturing competitors from other countries in the AEC. Thailand is located in the centre of developing countries like Laos, Myanmar, Vietnam and Cambodia and the manufacturing cost in Thailand is the highest among these five countries. With easier inland transportation and logistic operations within those countries, we expect more competitors entering into the market from these countries due to their cost advantage. What do you see as the biggest benefits for your industry? The biggest benefits will be potential business growth via our scale of production and accessibility to more competitive resources such as raw materials and workers. We are exporting 20 percent of our products to nearby countries in the AEC currently. A double-digit export growth is expected due to increased efficiency in logistics and operation within the AEC. We would improve our level of scale of production
Thai-Norwegian Chamber of Commerce
by lowering average production cost and accessing more competitive resources. What do you see as the biggest challenges for your industry? We expect to see labour mobility as the biggest challenge to the industry. The concept of free movement of people may increase the instability of the workforce moving around within the AEC in the short term. A higher turnover rate of employees could be expected. We expect midlevel, skilled and young employees to be the most challenging workforce segment. It would imply more programmes are needed in order to attract and keep people. In relation to your specific industry, how do you think Thailand will do as part of the AEC? Improving the infrastructure and setting up the industrial standards are the key areas we can see that Thailand is focusing on. The transportation network is important to a manufacturing company like ours. It covers inbound and outbound transportation of raw material and goods from our production base and between suppliers and the market. Improvement in the transportation system means improvement in competitiveness in the efficiency within the AEC. Setting up the right industrial standards in the AEC is helping the industry to compete better. Which industries, types of industries/businesses do you see as benefitting most from the AEC? I think the financial can benefit the most. The AEC will involve more business activities and cooperation in the region. Therefore, we will see more financing activities related to growth. Another sector, which I think will benefit is human resources as increased mobility will boost the sector initially.
Trond TĂ¸njum, Vice President, Head of South East Asia, Wallenius Wilhelmsen Logistics (Thailand) Co., Ltd.
Wallenius Wilhelmsen Logistics (WWL) is a leading independent provider of global factory-to-dealer transport solutions for the automotive, agricultural and construction equipment industries. The company has been operating in Thailand for xx years. What will be the biggest impact of the AEC on your industry/business? ASEAN today has many logistics barriers driven by local protective markets, cumbersome customs regulations and cabotage regulations. With the AEC the intention is that some of these barriers will be removed or made simpler. From a logistics point of view, this will enable us to cut cost and deliver quicker and smarter logistics solutions to the customers, which in itself will help to increase trade among the AEC nations. What do you see as the biggest benefits for your industry? ASEAN member states have already agreed that cars produced within ASEAN will have zero percent import tax. As such many manufacturers are planning and gearing their production in ASEAN for the ASEAN market. A Toyota produced in Thailand will have zero percent import tax within ASEAN, while if the car is imported from Japan it will have 20 percent import tax. On a more long-term note, we see that opening of borders and less customs formalities will enable us to transport vehicles by truck directly from the factory in Thailand across the border into neighbouring countries, such as Vietnam. Using the same truck all the way will reduce lead time and cost. Today a car from Thailand to Vietnam is first transported to Laem Chabang port, then on to a vessel to Singapore where it is shifted to a new vessel that then sails to Vietnam, and finally on to a truck that transports it to the dealer. The long-term vision is that we can load the truck in Thailand and drive straight to the dealer in Vietnam. What do you see as the biggest challenges to your industry?
Trond TĂ¸njum, Managing Director of Wallenius Wilhelmsen Logistics
When it comes to the open borders, I think this will take time. There is still a lot of protection and trade barriers among the nations that will take time to remove. One of the major challenges is that the level readiness differs from country to country. Without being on the same page of the implementation plan there are many hurdles to sort out before we can see the real benefits of the AEC. In relation to your specific industry, how do you think Thailand will do as part of the AEC? It depends what type of product is being produced. If you are producing high value consumer products such as cars, trucks and busses and you have foreign ownership, it is good to be in Thailand because you can have 100 percent ownership. If you produce t-shirts or something like that, maybe ownership is not so important and you outsource your production to for example Vietnam or Cambodia where labour is cheaper.
Thai-Norwegian Business Review
Continued from page 25
Which industries, types of industries do you see as benefitting the most from AEC?
land. It is now even easier for Myanmar patients to seek healthcare in Thailand.
Our expectations is that we will see a growth in production within ASEAN for sale in ASEAN. Other than that, I think it is hard to say which industries will benefit the most, as certain rules and regulations will benefit some and be detrimental to others. One of the challenges is that information is not coherent, and things are being delayed, countries are pulling back. Some businesses may see an immediate impact, others may only see one in the long term. But I think some of the lower hanging fruits are in trade.
What do you see as the biggest challenges for your industry?
Nicolas Leloup, General Manager, Samitivej International and Head of International Marketing, Samitivej Public Company Limited
In relation to your specific industry, how do you think Thailand will do as part of the AEC?
Samitivej Public Company Limited is a leading provider of healthcare services in Thailand. Its four hospitals are JCI accredited. Samitivej Public Company Limited has been operating hospitals in Thailand since 1979.
The Thai government as well as the private sector always had a long-term vision to position Thailand as the medical hub of Southeast Asia. Therefore, we are in a strong starting position. Increased competition will also ensure that the quality of care improves even further.
What will be the biggest impact of the AEC on your industry/business? The AEC will transform ASEAN into a region with free movement of goods, services, investment, skilled labour, and freer flow of capital. We are concerned about skilled labour. Not so much for our doctors as the potential income gains of working for example in Singapore would not offset the loss of social status and culture change. However, some nurses might be tempted by higher wages elsewhere in the region and that would compound the deficit of nurses that come out each year of Thai nursing schools. What do you see as the biggest benefits for your industry? The reverse is also true. We will be able to attract talent from the region. From the patient’s point of view, Thai healthcare will be more accessible. We just had a recent example where visa requirements were lifted between Myanmar and Thai-
In the short term, the biggest challenge will be human resources: how to retain our staff and recruit talent from the region without altering our cost structure too much. Our HR department has been preparing for the AEC for the past two years by developing an employee loyalty programme that includes career path development, training and engagement activity programs.
Thai-Norwegian Chamber of Commerce
Which industries, types of industries/businesses do you see as benefitting most from the AEC? The reality is that integration and the free flow of resources will only be gradual, step by step, sector by sector. So far, only some sectors such as retail, wholesale and transport have been opened. Not all countries are at the same stage of “readiness”. So even this close to the AEC, it is still a difficult question to answer.
Rajiv Bawa, Chief Country Representative for India, Telenor Group and Acting Head of Corporate Affairs, dtac. Telenor Group is an international provider of telecommunication services with a history of more more than 150 years in communication technology. dtac is Telenor Group’s Thailand operations. The mobile operator was established in 1989 and Telenor became a shareholder in 2001.
All kinds of Telecommunication systems and equipment provider.
Covering microwave transmission, IT network and payment solutions Nera is a major EDC Verifone/Spectra credit card terminal provider to Thai banks. The company is a specialist IT services and solutions provider, helping clients to plan, to build, to support and to manage their IT infrastructure.
Nera (Thailand) Ltd. 26th Floor, 253 Asoke, Sukhumvit 21 Road, Klongtoey Nua, Wattana, Bangkok 10110, Thailand Tel: +662 664 1464 Fax: +662 664 4002
Call +352 43 88 77 77 to find out more about our service
You know where to go. We know how to guide you there. Moving abroad can be very complicated. There are many things to consider, including the requirements of the different regulatory regimes to which cross-border wealth planning is subject. Let us guide you through the legislative labyrinth, and help you avoid unnecessary, timeconsuming paperwork, as well as any unwelcome (and often expensive) surprises along the way. No matter where life takes you, Nordeaâ€™s in-house wealth-planners and their external network of experts can ensure that you are well prepared to meet the challenges that moving abroad brings. Visit us at www.nordea.lu/WP, call +65 6597 1083, or e-mail firstname.lastname@example.org
Making it possible Nordea Bank S.A, Singapore Branch is part of Nordea Group, the leading financial services group in the Nordic and Baltic Sea regions. Some products and services may, due to local regulations, not be available to individuals resident in certain countries and their availability may depend, among other things, on the investment risk profile of persons in receipt of this publication or on any legislation to which they are subject. Nothing in this publication should be construed as an offer, or the solicitation of an offer, to purchase, subscribe to or sell any investment or product, or to engage in any other transaction or provide any kind of financial or banking service in any jurisdiction where Nordea Bank S.A., Singapore Branch or any of its affiliates do not have the necessary licence. Published by Nordea Bank S.A., R.C.S. Luxembourg No. B 14.157 on behalf of Nordea Bank S.A., Singapore Branch, 3 Anson Rd #20-01, Springleaf Tower, Singapore 079909. www.nordeaprivatebanking.com subject to the supervision of the Monetary Authority of Singapore (www.mas.gov.sg).
SEB GROUP Singapore Branch
SEB is a leading Nordic bank which is serving corporations and financial institutions with corporate banking, trading and capital markets and transaction services. The international nature of SEB's business is reflected in its presence in some 20 countries worldwide. The bank’s focus in the Asian region has since 1979 been to serve Northern European clients. SEB helps its customers in entering and establishing operations in Asia as well as Asian companies expanding operations into Northern Europe and Germany. The bank knows the market and its opportunities. It has a broad footprint in Singapore, Shanghai, Hong Kong, Beijing and New Delhi. Close working relationships between the sites, in Asia and home markets, provides a seamless experience. With almost 200 employees in the region we have the knowledge and competence to meet customer needs.
SEB’s corporate banking services in Singapore: Trade and Export Financing Commercial Loan Facilities including Working Capital and Capital Investment Financing in global and local currencies Broad range of Cash Management and Treasury solutions With a 24 hour Foreign Exchange network service we offer a full range of FX products tailored to the specific client needs. We provide a locally based research team covering the major Asian economies. 28
Thai-Norwegian Chamber of Commerce
Mr. Jan Stjernström General Manager Phone
: +65 63501 381
Mr. Lars Hagne Head of Corporate Coverage International, Singapore Phone
: +65 63501 384
Skandinaviska Enskilda Banken AB (publ) Singapore Branch 50 Collyer Quay #12-03, OUE Bayfront Singapore, 049321 Phone: +65 6223 5644 Website: www.mb.seb.se
Enhancing Energy Security: ASEAN Regional Cooperation By Eric Baker
he ASEAN Economic Community (AEC) is the latest in a series of economic pacts the association has agreed to for Southeast Asia. A truism is economic growth leads to a concomitant increase in energy demand. If the region wants to continue its impressive economic progress, it will have to increase energy supplies in an environmentally sound manner that promotes energy security.
As the UN climate summit takes place in Paris, ASEAN faces increased risk from climate change, especially rising sea levels near urban areas, typhoons and flooding. The challenge is to craft an energy policy for the region that is affordable but is mindful of carbon output.
The region needs much more technology transfer and meaningful partnerships to make geothermal, solar and wind sources viable choices. For the APAEC 2010-2015, ASEAN set a target of 15% of the total installed power capacity be renewable energy by 2015. The organisation decided to emphasise regional cooperation on energy as a priority area going forward. The ASEAN Vision 2020 statement sought â€œto establish interconnecting arrangements for electricity, natural gas and water within ASEAN through the ASEAN Power Grid and the TransASEAN Gas Pipeline (TAGP) and promote cooperation in energy efficiency and conservation, as well as development of new and renewable energy resourcesâ€?. An ASEAN Plan of Action for Energy Cooperation (APAEC) 2010-2015 was drawn up to provide medium-term recommendations. In addition to the focus on the power grid and
TAGP, the plan included coal and clean coal technology, renewable energy, energy efficiency and conservation, regional energy policy and planning, and civilian nuclear energy. The ASEAN Centre for Energy (ACE) was established in 1999, but really kicked into gear once APAECs were signed. The newest one for 2016-2020 was deliberated on this October in Kuala Lumpur at the ASEAN Ministers on Energy Meeting. The APAEC serves as a blueprint for how to strengthen and deepen integration among ASEAN states. Expanding the focus to include liquefied natural gas regasification terminals should help improve margins. To create an ASEAN Power Grid, the Heads of ASEAN Power Utilities/Authorities (HAPUA) Council was formed. This council works to sort out cross-border obstacles such as legal questions, technical standards and financial institutions. The power grid is meant to ensure regional energy
Thai-Norwegian Business Review
Continued from page 29
security while promoting efficient use and sharing of energy resources. The original target date for all 15 cross-border interconnections of the power grid to come online was 2015, and 11 of these projects are ongoing. The ASEAN Power Grid is expected to require an investment of USD 5.9 billion. A potential savings of USD 662 million in new investment and operating costs is projected from proposed interconnections costs. After over a decade of TAGP planning, 11 cross-border gas pipelines are in operation for a total gas pipeline length of 3,019 kilometres. While only 45% (3,169 km) of the planned TAGP pipeline connections are in operation as of 2015, they form the backbone in eastern ASEAN, allowing transmission of gas from Myanmar to Vietnam and Indonesia. Likewise, Singapore can export gas from its liquefied natural gas (LNG) terminal to Thailand through a pipeline connection. The ACE said if current fossil fuel production levels in the region do not increase, ASEAN will have no choice but to source out energy from other regions or adapt more renewable energy supplies.
carbon options to the energy supply mix. The association is promoting biofuels through trade and cooperation, increasing renewable energy generating capacity by 10% from 2004-2009. But ASEAN is still focused on coal, oil and gas for energy generation because they are the cheapest. The region needs much more technology transfer and meaningful partnerships to make geothermal, solar and wind sources viable choices. For the APAEC 2010-2015, ASEAN set a target of 15% of the total installed power capacity be renewable energy by 2015. The renewable energy installed capacity in ASEAN was 39,098 MW as of 2011, up from 24,425 MW in 2006. Renewable energy makes up 29.3% of the total installed capacity for the region in 2011, with the bulk of that comprised by hydropower, followed by biomass and geothermal. The Laos, Thailand, Malaysia and Singapore Power Integration Project is going to be delayed six months into 2016 as Singapore needs to stabilise its power grid first before allocating 100 megawatts to the project.
Gas consumption is projected to reach 17.5 billion standard cubic feet per day by 2020 and then decline slowly as a result of production constraints. Despite claims that the environment is a priority for ASEAN, oil and coal actually grew as a part of the region’s fuel supply mix from 2002 to 2011. The 2010-2015 APAEC called for at least an 8% reduction in energy intensity by 2015 based on the 2005 level. Energy intensity is a measure of the energy efficiency of a nation’s economy. It is calculated as units of energy per unit of GDP. Working programmes such as the ASEAN Energy Manager Accreditation Scheme, ASEAN Energy Award and Energy Labelling helped energy ministers report in 2012 the region’s energy intensity was reduced by 4.97% between 2005 and 2009. ASEAN wants to diversify into renewable energy resources not only to cut its dependence on oil but also to add low-
Thai-Norwegian Business Review
AEC Myths: Andrew Durieux Say By Eric Baker
ew people are as intimately familiar with the progress of the ASEAN Economic Community (AEC) as Andrew Durieux, principal consultant for business continuity planning at Coverage Ltd. He was the chairman of the AEC Committee at the Joint Foreign Chambers of Commerce until recently, during which time he dove into the details of the pact set to come into effect at the end of this year. Few people are as bluntly honest in interviews either. “On 31 December, nothing is going to happen,” he said. “There will be some celebrations by government ministries highlighting what they have done in meeting their AEC obligations, but there is still a long way to go.” “Is Thailand ready for the AEC? That depends on what your interpretation of what the AEC is. There are still a lot of myths that persist about the agreement. For example, free movement of labour. There is a very controlled set of labour regulations that only allow eight professions movement of labour among AEC countries, and each of those professions has its own set of rules and regulations limiting movement. There will be no mass movement of people, and factory owners cannot acquire more labourers via the AEC. “Tourism will not increase dramatically either. The only change the AEC makes is that other ASEAN citizens can travel to Thailand without a visa, but that was implemented 18 months ago. If Thailand’s tourist numbers increase in 2016, it will be a coincidence and not correlated to the AEC. “Businesspeople making investments based on these myths are making a mistake. The Thai government has claimed it has met its AEC requirements, but each country has its own ‘escape clause’ built into the AEC mechanism letting them claim they have done everything that is required. “For instance, labour movement is still blocked by professional associations in the eight professions requiring certification tests in Thai language. And while a lot of the regulations on goods trade have already been implemented, the
Thai-Norwegian Chamber of Commerce
AEC still allows some non-tariff barriers such as quotas on certain products, customs clearance, logistics and clearance barriers, standards, labelling and taxation harmonisation. “These countries were very careful in how they drafted this agreement. Unlike in the EU, in ASEAN it’s very difficult to see how a foreign businessman could seek relief from a discriminatory practice. There is no protection except to lodge a complaint with the local authorities, and there is no independent judge to uphold the rules of the AEC.” Mr Durieux said in order for the AEC or any ASEAN regulation to be effective, there needs to be a central regulatory body enforcing these rules, and that would require ASEAN countries cede some of their sovereignty and pony up money to fund such an authority.
There is a very controlled set of labour regulations that only allow eight professions movement of labour among AEC countries, labour movement is still blocked by professional associations in the eight professions requiring certification tests in Thai language. “While AEC implementation has been very disappointing from a business perspective, there might be some light at the end of the tunnel regarding the Trans-Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP),” he said. “Vietnam is in the AEC and the TPP, so it has a goods exporting advantage to the US over Thailand. Vietnam has also seen an increase in foreign direct investment while Thailand has seen a slowdown in industrial expansion. This puts pressure on Thailand to join
ys Don’t Believe the Hype
the TPP or RCEP to compete, and the question is whether Thailand will take a leadership role in ASEAN or if it merely complies and focuses more on the TPP and bilateral trade agreements. “Both the Thai government and Thai trade associations have a protectionist mindset. They look at the AEC and say ‘What is the easiest way to comply and not give away too much so that we force competition on the local market?’ “Implementing the AEC rules on goods movement has been easy compared to services and investment because Thailand has long been a manufacturing country. This means it has advocated low customs barriers because it wants to get into other markets cheaply, but for services and investment it is not as developed so it has opposed liberalisation. Because of the political situation here, the government and public service sector have been more concerned with internal politics than looking at how to take advantage of liberalising the service and investment sectors.
Andrew Durieux, Principal Consultant at Coverage Ltd. Photo: Eric Baker
“Going forward, the intention of all the ASEAN governments is toward integration. However, even given the progress on goods shipments, there are still problems regarding paperwork, labelling, taxation and other non-tariff barriers. Within ASEAN, you’ve got four island countries and six land-based ones. Shipping is required for the island countries, but for the land countries some drive on the right and others on the left. So the right of a logistics operator to do business across borders is not easy to harmonise. “The AEC offers transshipment potential, as the preferred model is an industry base where everything is nearby, usually close to borders to take advantage of a trade arrangement. But having everything so concentrated also brings risk from natural disasters or corruption damaging the reputation of an industry cluster.
“Even within ASEAN, there are multiple trade deals that not every member country is signatory to. Businesses should look at expanding to other countries to take advantage of these. For example, if Thailand does not join the TPP, it may be beneficial to ship a product to Vietnam, have a company add value to the product there, and then export it to the US. “In the near term, don’t expect the sky to turn green overnight when the AEC comes into effect. Remember that these agreements are for ASEAN citizens and ASEANowned businesses. Some countries have decided to take a wider implementation of the AEC rules, but Thailand is taking a more narrow view. “Also remember that ASEAN is still a work in progress. I think more pressure for liberalisation will be applied by ASEAN countries and through free trade agreements, and in the long term that will provide a more competitive Thailand. But I can’t say when that will be a reality.”
Thai-Norwegian Business Review
An Uneasy Alliance: Exploring Ch By Henri Viiralt
rom Chinese-backed copper mining enterprises in Myanmar to component manufacturing in Malaysia to financial services in Singapore, Beijing’s influence on ASEAN economies is undeniable. It’s an economic symbiosis, as several ASEAN member states have established integrated supply chains with China, paving the way for its ascension as the world’s manufacturing and assembly hotbed. 76% of ASEAN trade in 2013 was with countries residing outside the 10-member bloc, with China being its largest trading partner since 2009. Bilateral trade is expected to reach USD 500 billion this year and USD one trillion by 2020. Although the bulk of bilateral trade is still made up of manufactured goods, specifically machinery and electronics, a recent report released by the US-China Economic and Security Review Commission finds that China’s economic interdependence with ASEAN has deepened in recent years in importing fuel and mineral resources as Beijing is seeking ways to diversify its imports and secure energy closer to home after becoming the world’s largest oil importer in 2013. While there may be legitimate concerns over Beijing’s oftentimes less than transparent practices, the fears over its ability to exert economic pressure on its much smaller ASEAN counterparts is largely blown out of proportions. The report goes to show that the degree of dependence on China as a source of exports and imports fluctuates greatly between member states, with wealthier ones unsurprisingly being safer due to an ability to leverage an extensive pool of trading partners while some of the poorer ones still rely heavily on China for imports. Looking at the balance of trade reveals another story: since the full enactment of the ASEAN-China FTA in 2010, ASEAN’s trade in goods with China has gone from a surplus to a deficit, reaching USD 45 billion in 2013. Investment must also be taken into account in order to measure economic influence, and in 2013 China contributed a measly 2.3% to ASEAN’s total FDI inflows.
Thai-Norwegian Chamber of Commerce
Beijing seems set to remedy the situation. During the 16th China-ASEAN Summit on 9 October 2013, Chinese Premier Li Keqiang proposed the “2 + 7 cooperation framework”, a policy declaration aimed at forging closer relations and building mutual trust with ASEAN over the next decade, which he proclaimed the “diamond decade.” Under the framework, China proposed to sign a treaty on good-neighbourliness, upgrading the China-ASEAN Free Trade Area (CAFTA) in order to achieve the target of USD one trillion bilateral trade by 2020, setting up the Asian Infrastructure Investment Bank (AIIB) with a mandate to fund infrastructure projects promoting regional connectivity, and developing a “21st century maritime Silk Road,” looping from Venice through the Indian Ocean to Fujian Province.
While there may be legitimate concerns over Beijing’s oftentimes less than transparent practices, the fears over its ability to exert economic pressure on its much smaller ASEAN counterparts is largely blown out of proportions. Another separate, but equally important financial institution that may change the landscape of foreign investment in ASEAN is the BRICS-backed New Development Bank, which is seen as an alternative to the World Bank and the International Monetary Fund, and is aimed at lending money to developing countries in their pursuit of infrastructure projects. It is expected to make its first loans in early 2016. ASEAN is in active pursuit of various FTAs within and beyond the region, and over the past four years has participated in an initiative to combine five individual agreements with Australia and New Zealand, China, India, Japan, and
hina’s Relations with ASEAN
Korea into a compound Regional Comprehensive Economic Partnership (RCEP), which is seen as a less sophisticated alternative to the US-backed Trans-Pacific Partnership (TPP), due to its exclusion of advanced trade provisions such as those governing regulatory convergence, digital goods and services, and intellectual property. Brunei, Malaysia, Singapore, and Vietnam are also participating in the talks over TPP, which comprises 12 economies, notably excluding China. It is seen to directly challenge Beijing’s The South China Sea islands and coral reefs have seen aggressive bild-ups by the Chinese. increased influence in the Photo: istockphoto region, and president Obama has even gone on record, saying A string of talks to dissolve the situation have yielded little if that China cannot be allowed to any tangible results as yet another Asian regional summitry dictate the terms of global trade. Whichever FTA ultimately ended recently with no signs of progress, forcing the Philipprevails, it will undoubtedly have its part to play in shaping pines to take a hardliner approach by taking the dispute to regional relations. the international tribunal in The Hague, while Vietnam has The complex relations between China and ASEAN, albeit been strengthening its ties with Japan and the US. having vastly improved over the past few decades, are still China’s path to resolution in this matter still seems to be wrought with tension and uncertainty in relation to secudangling the economic carrot in front of ASEAN members. rity, and any economic benefits in dealing with China must While it may have worked earlier, it is unlikely to do so this be weighed against the obvious elephant in the room as time around as ASEAN members are slowly moving from Brunei, Indonesia, Malaysia, the Philippines, and Vietnam complementing to competing with China’s economic activare locked in territorial and jurisdictional disputes with ity while attracting foreign investment from multinationChina in the South China Sea over rights to exploit the als who are shifting their low-cost production bases out of region’s potentially vast reserves of oil and gas. China. There is growing concern over China’s expanding military It is difficult to predict what these economic developments and naval capabilities, and the lack of transparency in its with undertones of political tension will amount to in the intentions. Since 2009, Beijing has been steadily expanding long run, but for better or for worse, the stage seems set for the territory it controls in the South China Sea and has been taking the Chinese-ASEAN relations to the next level. ratcheting up its assertiveness of it through armed clashes, imposition of unilateral fishing bans and continued harassment of vessels from other nations.
Thai-Norwegian Business Review
'"--<-- r /
International Schools are places where children are active protagonists
in their own learning. They comprise a family of unique schools where students base their research, discovery, and experimentation within the context of contemporary culture and learning. Those within strive to resolve dilemmas of individual and shared importance in their quest for knowledge, and
understanding but most importantly, imagine possibilities for a better future. In the daily life of elc schools, we can perceive a pronounced increase in children's creativity, the quality of their research, and their ability to access information. This facilitates the development of complex digital projects and products of knowledge, which are elaborated between children and between children and adults.
elc)nternational schools THE CITY SCHOOL Ages 3-11 years
#18 Soi Arkaphat , Sukhumvit Road 49/4, Bangkok 10110 Tel: (662) 381-2919, 391-5901, 712-5338 Fax: (662) 391-1334
THE COUNTRY SCHOOL Ages 2-5 years
#44 Samakee Road, T. Tasai, Muang Nonthaburi 11000 Tel: (662) 588-1063, 952-4147 Fax: (662) 589-4809
THE PURPLE ELEPHANT at 55 Ages 18-36 months
79 Soi 8, Sukhumvit Road 55, Bangkok 1011O Tel: (662) 662-7653, 662-7654, 391-4866 Fax: (662) 260-5947
THE PURPLE ELEPHANT at 39 Ages 18-36 months
61 Soi Prommitr, Sukhumvit Road 39, Bangkok 10110 Tel: (662) 662-4570, 662-4571, Fax: (662) 662-4572
The Importance of ASEAN Serv By Eric Baker
ne of the complaints about ASEAN Economic Community (AEC) implementation is that while goods trade is percolating, the service sector remains stagnant. The World Bank held a seminar earlier in the year on ASEAN services integration to explain why it is so important to economic development. “Services are not only important on the demand side but are critical intermediate inputs on the supply side,” said Ahmad Ahsan, lead economist for East Asia and the Pacific for the World Bank. “Services are the glue that holds international production and trading systems and global value chains together.” “The digitisation and unbundling of global production networks in the 1990s led to an explosion in the services trade: it now makes up 20% of global trade in nominal terms (USD 3.3 trillion) and 50% of trade in value-added terms. Regional integration in services can help countries achieve economies of scale and regulatory cooperation. “Tangible inputs only make up 9% of manufacturing costs in the global value chain, with services, intellectual property, profits and other unknowns making up the rest. In general, services performance seems to be related to the middle-income trap of productivity growth that we hear so much about in Thailand, according to World Bank research. Only 110 years ago, the US and Argentina had the same level of per capita income. “Our studies have shown most of the productivity growth in advanced economies this century can be attributed to the service sector. In a middle-income economy such as Chile, foreign direct investment in services was closely linked to manufacturing productivity, especially for small firms. In Indonesia relaxing equity restrictions in the transport, electricity, gas and water sectors led to significant productivity gains for manufacturing firms. “In ASEAN, service exports have grown in gross value-added terms as a share of total exports, but unfortunately the
service sector remains relatively underdeveloped in most countries in the region except Singapore. The regional trade intensity of services is low, meaning intra-ASEAN trade in services, suggesting there is untapped potential. “The service sector’s role in ASEAN is below what would be expected in such a dynamic region. Services are a fundamental input to other activities and thus a key determinant of the region’s competitiveness. “But there are success stories to be found in ASEAN. Malaysia opened up its higher education institutions to foreign students and tripled that segment between 2003 and 2011. It also paired with universities to open local branch campuses increased cross-border trade through distance learning courses. Singapore liberalised its financial services and saw a large increase in both exports and imports, with finance becoming the largest contributor to a positive services trade balance. “And Thailand became the leading medical tourism destination in the region because of its cost advantages and hospitable culture.” Mr Ahsan had several recommendations for ASEAN in trying to integrate services. “First, government is best at accommodating liberalisation to contain adverse impacts rather than micro-managing the process,” he said. “Second, setting and controlling quality standards is important, but uniform requirements seem difficult to implement region-wide because of ASEAN’s diversity. And finally, reforms can be initiated at different levels, but overlapping, overambitious targets might be counterproductive by adding to administrative confusion if implementation lags behind.” Mr Ahsan called for deeper liberalisation at home and abroad through reciprocity-based market access negotiations and enhanced credibility of the current trade regime and commitment to future reforms through the ASEAN Framework Agreement on Services (AFAS).
vice Integration to Productivity
“ASEAN economies are not more open on average than the rest of the world, but are more open than other Asian countries. The region has taken some steps toward mutual recognition agreements (MRAs) for professional services but is still a ways from meeting its AEC Blueprint goals. “Interestingly, in addition to Singapore, Cambodia also has a very open economy, the only two in ASEAN. Licences are almost always required in the region and almost never automatic, even if the criteria is public and reasons for denial are provided. The national flags of the ten ASEAN memberstates. Photo: Istockphoto
“Several professions are still very protectionist, such as architect, where the requirements in most ASEAN countries are more restrictive than the rest of the world. Air transport is one of the few exceptions in the region that has been partially liberalised.
“Lack of regulatory cooperation has become an impediment to real integration and a single market under the AEC and AFAS goals. Awareness of the benefits of integration is not that well respected or understood in the region, and the private sector has a role to play here in educating businesses, the government and the public on the benefits because it will gain the most from liberalisation. “The AFAS provides a backbone for service liberalisation but it is not being applied. The implementation of MRAs has been patchy because the language is unclear and the technical capacity of trade ministries is not strong enough. There is not an effective dispute settlement system, which is reducing transparency and predictability for businesses. There is also a lack of regular communication between institutions in ASEAN that is hampering services integration.
“ASEAN needs to remove foreign equity limitations for other ASEAN citizens and eliminate the 15% flexibility rule (allows member countries leeway in meeting their services liberalisation goals). There are two ways of reducing regulatory heterogeneity: harmonisation and mutual recognition. In the EU, mutual recognition helped to clear up regulatory and administrative opacity, remove explicit barriers to trade and investment, and reduce barriers to competition. Regulatory cooperation is essential because the gap between Singapore and the rest of ASEAN is so large. “A lot of the ASEAN members have monopoly rents in certain industries, so these don’t want integration. Small and medium-sized enterprises have a lot more to gain from services integration because large corporations can afford to keep all their services in-house. “MRA implementation has been slow because a lot of the discretionary powers have been kept with local regulatory agencies.”
Thai-Norwegian Business Review
Facts vs Fictions: AEC’s Free Mov By Henri Viiralt
he unification of ASEAN member countries into a single market and production base is expected to bring with it increased competition and new opportunities for prosperity, as well as generate 14 million additional jobs, as revealed by the International Labour Organization (ILO).
One of the central policies of AEC is to enable free flow of skilled labour, but its actual impact on migration flows is still largely misunderstood. Rather than removing restrictions as the EU has done, the aim of AEC is to facilitate a “freer” movement of skilled labour by implementing mutual recognition agreements (MRAs), which recognise education, experiences, licenses, or certifications obtained across ASEAN member countries for professionals in eight fields – accounting, engineering, surveying, architecture, nursing, medical services, dental services, and tourism. In 2012, ASEAN member states penned two agreements, The ASEAN Agreement on the Movement of Natural Persons (MNP) and The ASEAN Comprehensive Investment Agreement (ACIA), designed to streamline cross-border movement of skilled labour. However, even more a decade later the implementation progress remains largely stagnant. The key reasons are the lack of political decisiveness in fixing outdated national immigration policies and inequalities in professional education and licensing. There are also other interrelated issues, such as market demand of labour and skill gaps, admissions and visa policies, and the private sector control of the recruitment process. ASEAN creates artificially high barriers through MRAs themselves in order to safeguard nations from brain drain, in the process limiting the number of eligible applicants considerably. For example, aside for the tourism sector, the MRAs for dental and medical practitioners require no less than five consecutive years in the country of origin, seven years after graduation for engineers, and at least 10 years in practice for architects, five of them after receiving their licences.
Thai-Norwegian Chamber of Commerce
“Lack of awareness regarding the MRAs may itself present an additional impediment, given that businesses have already displayed a general lack of awareness of their development and implementation status. For example, in 2012 a survey of Thai professionals found that only 30% of engineers and 20% of nurses knew about the AEC and understood its implications,” a recent report by the ILO revealed. Furthermore, The United Nations reports that intra-ASEAN migrants increased from 1.9 million to 6.5 million between 1990-2013. 87% of it comprises irregular and unskilled labour that are highly concentrated between only three corridors: Thailand, Malaysia and Singapore. Some research also suggests that Malaysia and Thailand have become dependent on irregular migrants (Sugiyarto, 2014) and as such may be more reluctant to regulate it. Migrant worker abuse cases remain rampant in both countries. These issues must be addressed, but ASEAN has yet to enforce any regulatory mechanisms or policies to deal with the situation.
This will put domestic employers in ASEAN in an increasingly difficult situation as they can’t find highly qualified workers to fill the gaps, thereby reducing competitiveness on a regional level.
Demographic factors will also account for ASEAN migration. The ILO forecasts that population ageing will impede labour force growth in every country until 2030. Despite that, it will grow by an expected 59.3 million workers between 2015-2030, with half of them emanating from Indonesia.
vement of Skilled Labour
These factors bring brain drain into sharp focus, but ASEAN fears of intraregional migration may be misguided as they would prefer to go further overseas instead. During 2011, according to the latest available OECD figures, around 385,000 people moved from ASEAN to the OECD, where most countries impose high restrictions such as rigid work and visa requirements. Therefore, it is likely that migrant workers there are by and large affluent and highly skilled. This will put domestic employers in ASEAN in an increasingly difficult Philippine doctors and nurses could be a valued addition to the Thai medical field. situation as they canâ€™t find Photo: Istockphoto highly qualified workers to fill the gaps, thereby reduction and certification standards between member states. ing competitiveness on a regional level. This is one of the Meanwhile, many enterprises and professionals are obliviareas where governments need to develop better policies to ous to the benefits of more streamlined migration, renderattract and retain suitable talent, notes the World Bank in a ing political will and public support too weak to drive the 2011 report. MRA process forward,â€? writes Victor Bernard, a program associate of The Asia Foundation in Thailand, in an August The ILO report also states that rising labour mobility in 26, 2015 article. ASEAN will generate different impacts depending on enterprise size and sector. Concerns have been raised regarding Although ASEAN has established frameworks and incenpossible scarcities of domestic workers and the consequent tives for the freer movement of skilled labour, it has also rises in labour costs in labour-intensive sectors like the garset artificially high barriers for it while completely ignoring ment industry while capital intensive industries like chemiirregular and unskilled labour, which makes up most of the cals and steel, talent may be poached by foreign recruiters, workforce in many if not most ASEAN member countries. adding to shortages of skilled labour for entire countries. As long as these obstacles remain unchecked, the region is unlikely to realise the full potential of growth and prosperâ€œThere is a gap between aspiration and reality, as ASEAN, ity as envisioned by the AEC. in practice, still lacks uniform and flexible intraregional visa procedures or policies that can bridge the gaps in educa-
Thai-Norwegian Business Review
Member Perspectives on the AE By Eric Baker
ith the ASEAN Economic Community (AEC) slated to start on Dec 31, the Business Review decided to interview two members of the Thai-Norwegian Chamber of Commerce about how the new pact will affect their business. A & S Thai Works Co. (ASTW), a producer of machines that make animal feed, and Wilhelmsen Ships Service, a maritime services and logistics firm, had quite varied opinions about the impact the deal will have for their companies. “Will the AEC bring something new? We feel no, not to the degree that it will change much,” said Thor Jørgen Udvang, export marketing manager of ASTW. “Most of the countries in ASEAN can already export freely among each other, so we believe this is mainly a showpiece deal.” “Most of what we sell costs USD1-2 million, and because our shipments cost so much, there is not so much demand for bribery concerning customs officials. However, for spare parts for our machines, AEC could play a part. “Let’s say we have a customer in another ASEAN country that needs a gearbox and they need it now, because their business is hurt every day it cannot operate. Between duties and corruption delays, it can take weeks or months for it to get through customs. They charge a higher duty and delay the shipment because they know there is the potential for corruption because the customer has such high demand for the item. “We don’t feel the AEC will change this customs process, but it should because this is a legitimate hindrance to free trade. For mid-sized companies like ASTW, this stuff actually matters. This is particularly a problem with Vietnam.” Another area where ASTW feels there is potential for the AEC is in personnel, though it is not optimistic. “There is a lack of engineers in Thailand, and Vietnam has a surplus,” said Sverre Golten, managing director of ASTW. “The language of the AEC free movement of labour in the service sector, but for skilled labour moving to Thailand
Thai-Norwegian Chamber of Commerce
they must still take a certification test that is written in Thai. This is a form of local protectionism that many of the professional organisations are using to avoid competition in their sectors. It’s easier to just get these people a work permit under the old system.” “It would be smarter to allow skilled ASEAN citizens to move freely among these economies because the alternative is China and India will force their people in to take positions for which the locals are not qualified. Both of these economies are so huge that they are very good at exerting pressure to get their people into whatever country they want.
Thailand’s population growth rate is now 1.4%, which is below Europe and below the replacement rate. The country is going to have a labour shortage, skilled and unskilled, so it needs to find ways to make it easier for people to work here. “And the problem is not just a lack of qualified Thais. Thailand’s population growth rate is now 1.4%, which is below Europe and below the replacement rate. The country is going to have a labour shortage, skilled and unskilled, so it needs to find ways to make it easier for people to work here. “I think the Thais are being protective because if they don’t limit what foreigners do here, they will lose some power. This is a weakness in the Thai thinking. “One fantastic option would be to have an ASEAN visa where citizens of those countries could travel to any of the countries. The natural thing would be to get a Malaysian to come here and fix the roads because the roads there are great.”
“It would be a huge advantage for Thailand to allow ASEAN citizens from other countries to come here for marketing jobs,” said Mr Udvang. “The AEC should have rules for this but unfortunately it does not. You won’t find a Thai that knows anything about the Indonesian market. Between the language barrier and the market knowledge, this could be a huge boon to Thai companies. All the paperwork we have to fill out for the Thai government for these positions is so repetitive and makes no sense. But there must be a balancing system with the AEC so that no one takes advantage of it.” Both men agree that for each ASEAN country to determine the method of how it is going to meet its AEC obligations means the pact will not work. There needs to be some central binding organisation with authority, meaning the member countries would have to surrender some sovereignty. Nigel Goode, managing director of Wilhelmsen, is much more upbeat about the AEC. “We see a big opportunity with maritime logistics,” he said. “In addition to ocean movement of cargo, we offer inland services including ground transport, tracking, clearance and cross-border services. This is a small part of our business now, but we expect it to open up quite a bit with the AEC as not many companies offer the services we do across borders.” “The big promise is the growth projected for some of the other ASEAN economies as they open up. This will allow us more volume and we can invest in infrastructure to improve our ocean and inland services. The AEC should mean less fees and delays at border crossings. “We are very optimistic about the AEC leading to substantive change in three to five years, and so are many of the experts the Joint Foreign Chambers of Commerce have brought in to speak on the matter. “Thailand is quite progressive in its vision for meeting its AEC obligations. Malaysia is very advanced as well, and Singapore is already there. Indonesia and the Philippines still have a way to go, and Myanmar, Laos and Cambodia are further behind.
Nigel Goode, Managing Director, Wilhelmsen. Photo: Eric Baker
Wilhelmsen is the largest provider of maritime services to that sector, but for it does not receive much business from local shipowners using Thailand as a hub for trading in Asia because “corruption is alive and well in this market,” he said. “We focus on international companies trading in Asia because they can have confidence that all of the standards are being met if they use us.” “Along with meeting its AEC obligations, Wilhelmsen is hopeful the AEC will have other positive effects on Thailand,” said Mr Goode. “The level of corruption is endemic here and Thais don’t understand the value of non-corruption. There is a gap between public officials’ salaries and their cost of living, which they make up for with bribes. The government needs to realise there are other ways to fill this gap. “On the fiscal side, the reliance on duties in Thailand needs to change as that is a key source of income here. But there is simply no way it will change by Dec 31.” Wilhelmsen predominantly uses road transport for inland cargo services now, but Mr Goode is confident it will switch to more rail and river transport once ASEAN countries develop their infrastructure.
Thai-Norwegian Business Review
Driving Innovation for Growth: A By Henri Viiralt
ibeke Lyssand Leirvåg is not only a jewellery industry veteran with 25 years of experience under her belt, but she has also spent an equal amount of years in Thailand as an expat. She currently splits her time helming Felicia Design, a 100% Norwegian owned premium silver and gold jewellery design and manufacturing house, which she has run in the kingdom for over two decades, and serving as the President of the Thai-Norwegian Chamber of Commerce. Simultaneously a business owner and the acting head of the Chamber, she is in a unique position to comment on the current state of the SME sector in Thailand and beyond, and how well prepared they are in taking advantage of the potential opportunities that AEC may offer. “I think the SMEs are not prepared at all because there is a serious lack of information. The only source for the business sector is the media or the official AEC website, but it’s for promoting something, they’re not real facts,” Leirvåg says. “We’ve had quite a few AEC meetings organised mainly through the Joint Foreign Chambers of Commerce and those have had well prepared questions, but we never get any real answers. As an SME, you walk out of a lot of them with a ‘yes, we’ll look into it and get back to you’ and that’s the where it ends.” The information gap between the general public and the business sector is something that ASEAN has struggled with for a long time. Leirvåg proposes the creation of a common platform for the SMEs, a depository where all ASEAN countries would have access to the same guidelines and regulations, as a possible solution. “It is a complicated issue because we have all these countries with different regulations, but there should be a harmonisation of information transmitted from ASEAN with a set committee that would be responsible for the dissemination of proper information, not only to the general public but to the business sector.
Thai-Norwegian Chamber of Commerce
“In the case of Thailand, it would mean providing information not just in Thai but in English, and not information that is merely a guideline, but formal and legally-binding information. Currently, everything in Thailand is regulated by the Thai language and English translation serves only as a guideline, which can obviously create problems in interpretations of the laws and regulations. I think it will be a huge challenge to overcome,” she says. Aside from the information gap, Leirvåg also sees access to finance as a key barrier to developing the SME sector in the kingdom, and while she says that the current government is listening and there have been some promising developments as of late for the Thai-owned companies, there is
“I think the SMEs are not prepared at all because there is a serious lack of information”
still a differentiation between local and foreign-owned enterprises, something that will no doubt hinder regional integration in the coming years. “I’m a 100% Norwegian-owned company operating under the Foreign Business Act, and getting a bank loan as a foreign company in Thailand is just about impossible. At the same time, it’s a Thai-registered company so I can’t access these loans back in Europe either, effectively leaving me between a rock and a hard place.” Leirvåg believes the services sector holds definite promise and that Thailand has an opportunity to become a regional leader in technology and innovation, but finds the current legal framework is undermining the potential.
An SME Perspective of AEC
TNCC President Vibeke Leirvåg with former ASEAN Secretary General, Dr. Surin Pitsuwan. Photo: TNCC
“We have far too strict regulations around the service sector in terms of obtaining a work permit and requirements of minimum staff, so as a country, I think we need to open up a bit as not to be left behind since it’s much easier to do business in Singapore, or Vietnam for example. If we are targeting technology and innovation then we need to ease the access of skilled labour, because as a manufacturing country we’re starting to lose the edge.”
newed focus on SMEs and entrepreneurship in general and if the government is able to overcome the restrictive measures in importing foreign talent to drive innovation, she is convinced that it’s an area where local SMEs could become strong fast due to the ease of innovation as a smaller player.
She also finds that there is huge potential for exports. Currently, Thai SMEs lack the knowledge on how to penetrate overseas markets because of all the different rules and regulations, but thinks that the groundwork has to be laid by larger corporations, allowing SMEs to follow suite.
“Regionally, I think it’s still very early and we’re looking at the next 2-3 years to find common ground on which to build upon, and then we can look at potential. It all depends on how quickly some of these changes will come into effect,” she says.
Looking at the opportunities that AEC may bring once it is instated, Leirvåg remains cautiously optimistic.
She is pleased, however, that Thailand has realised there’s a need to become more competitive overall. There is a re-
Thai-Norwegian Business Review
Building for the Future: Unleash By Henri Viiralt
ne of the leading challenges to ASEAN integration is narrowing the various development gaps between member states. The 10-member bloc is home to some of the richest countries in the world, namely Singapore and Brunei, which according to analysis by Global Finance Magazine rank third and fifth respectively, and Burma, sitting at the bottom of the 23 poorest list. Part of the challenge is to bridge the digital divide, and ASEAN has recognised it through its various master plans as a key driver in reducing disparity between well developed and low- to medium-income nations, one that can eliminate geographical, economic, and institutional boundaries, while fundamentally transform how business is conducted. According to OECD, the term “digital divide” refers to the gap between individuals, households, businesses and geographic areas at different socio- economic levels with regard both to their opportunities to access information and communication technologies (ICTs) and to their use of the Internet for a wide variety of activities. Internet penetration in ASEAN countries fluctuates between 82% in Singapore to 2% in Myanmar, according to data from June 2015 by Internet World Stats. The reason is anti-competitive market conditions in less developed nations for internet service providers (ISPs), making the private sector reluctant to invest in ICT infrastructure. Another reason is the lack of international bandwidth, forcing ISPs to route traffic overseas and back again, adding to costs and latency. As a result, internet access remains unaffordable to most in low- and low-medium ASEAN countries, and is thereby deepening the digital divide not only between member states, but within them. As the internet becomes evermore embedded in the daily lives, the consequences of being left out can be potentially devastating and digital connectivity should be prioritised with other infrastructure developments in ASEAN. “The multiplier effects from increased Internet usage to the economic and social development of ASEAN member econo-
Thai-Norwegian Chamber of Commerce
mies are so profound as to warrant a specific and sustained focus,” states a recent report by TRCP and Internet Society. The same report goes on to make a case that while ASEAN is currently giving rise to an internet economy where ISPs, e-commerce platforms, content providers and social media are already contributing significantly to GDP, it needs to do more. “However, to fully unleash the potential of the Internet across the region, ASEAN members need to move towards a fully developed digital economy and digital society in which Internet protocol (IP)-enabled networks and services form an underlying infrastructure that is embedded in all economic and social activities.”
“The multiplier effects from increased Internet usage to the economic and social development of ASEAN member economies are so profound as to warrant a specific and sustained focus” Ironically, this is where developing countries have the upper hand since they are able to leapfrog iterative build and development cycles, and build directly for the digital society. By laying these foundations early, it would also help AEC to achieve its overarching goal of rapid integration across the region. An example of a fully functioning digital society is Estonia, a tiny Baltic country where every resident has a digital identity, enabling them to vote in elections, fill tax returns, sign legally-binding documents, view government resolutions or register a company in as little as 18 minutes. Since its launch, it has created an unprecedented level of transparency and accessibility in governmental affairs, and a prosperous environment for business and entrepreneurship.
hing Digital Innovation in ASEAN
Some progress in transitioning to a digital economy and society has been made in ASEAN, specifically in providing access to innovative digital payment platforms that extend financial services to populations previously left out and form the basis for e-commerce. Governments, too, have made some progress through various e-government initiatives, although this is expected to be a lengthier process since many of these government agencies in ASEAN countries rarely collaborate with each other. The potential for e-commerce is huge. “Today, e-commerce remains relatively underdeveloped in Southeast Asia, accounting for less than 1% of total retail sales, compared to rates of 6-8% in Europe, China, and the United States. In the coming years, as purchasing power increases, Internet penetration spreads, and online offerings improve, online retail in ASEAN markets could grow as much as 25 percent annually,” reported in a research paper by The CIMB ASEAN Research Institute and A.T. Kearny. While there are various obstacles to overcome in creating a booming e-commerce ecosystem in ASEAN, barriers to en-
try to compete in a digital marketplace are already quite low as SMEs with a lack of financial resources or digital talent are able to leverage marketplaces created by industry giants such as eBay, Lazada, and Rakuten without having to build everything from scratch. There are potentially disruptive developments taking place in the area of internet connectivity, too. In late November, 2015, a little known Delhi-based startup, Velmenni grabbed international headlines by introducing its iteration of Li-Fi technology. As an alternative to Wi-Fi, it transmits data through LED lights, which turn on and off within nanoseconds and offer speeds of 1GBPS in real world use, a roughly 100-fold increase over Wi-Fi. Velmenni is planning implement it in LED light bulbs, giving dual functions – to light a room and create a network, at a fraction of a cost of a traditional network router. Velmenni is currently testing the technology in offices and industrial environments in Estonia, expecting to one day soon make Wi-Fi obsolete. If they do succeed then the future might indeed be brighter for ASEAN as well.
Thai-Norwegian Business Review
Continued from page 26
What will be the biggest impact of the AEC on your industry/business? Telenor Group, being present in three ASEAN markets, Malaysia, Myanmar and Thailand, and with online classifieds platforms in Indonesia and Philippines, will have much to gain from closer regional collaboration. While the impact of the AEC will materialise over time the potential is significant in several areas, which are important to telecommunication and the ICT industry. What do you see as the biggest benefits for your industry? First of all, harmonisation of regulations and openness to improved market access for foreign direct investment is at the heart of the AEC, which will ensure healthy competition and affordable services. Secondly, easier flow of investments and trade within ASEAN and between ASEAN and the world will fuel increasing demand in the region, both from the large and underserved mass market and from the rapidly growing middle class. Finally, the AEC will also facilitate easier flows of talent and highly skilled workers across the region, which is crucial to the knowledge economy that the ICT sector is a vital part of. What do you see as the biggest challenges for your industry? Connecting the unconnected is the most critical element for our industry in ASEAN. In ASEAN there are close to 300 million mobile and internet users, which is around 45 percent of the population. This means that close to 330 million, more than half the population of ASEAN, is still unconnected with significant differences from Singapore to Myanmar. ASEAN also has a rapidly growing middle class demanding connectivity. To meet these needs requires close collaboration between the member states and private sector in areas such as competition and market access, licensing, spectrum, taxation and cross border data flows.
Telenor Groupâ€™s Rajiv Bawa. Photo: Telenor Group
In relation to your specific industry, how do you think Thailand will do as part of the AEC? Thailand should have the ambition to become a digital hub for ASEAN. The consumer demand is there, the entrepreneurial spirit and creative skills are available, and high-speed mobile broadband infrastructure is being deployed. Accelerating the realisation of the Digital Thailand initiative will be crucial to capitalising on this opportunity â€“ because mobile and digital communication will be vital infrastructure for ASEAN. Which industries, types of industries/businesses do you see as benefitting most from the AEC? In the short term, benefits might first materialise in sectors such as consumer goods. Looking forward, one of the sectors with the strongest potential is e-commerce. Today, e-commerce remains relatively underdeveloped in Southeast Asia, accounting for less than one percent of total retail sales. In the coming years, as purchasing power increases, Internet penetration spreads, and online offerings improve, online retail in AEC markets could grow as much as 25 percent annually.
Thai-Norwegian Business Review
AEC: The Legal Perspective By Sofie Lisby
ubhead: When the AEC enters into force at the end of the year, Thailand will be part of Asia’s most ambitious attempt at regional integration. However, several of Thailand’s laws and regulations are in direct opposition to the AEC’s blueprint of free movement of goods, services and people. Blueprints, framework agreements and memorandums of understanding and recognition; there is no shortage of goodwill when it comes to the AEC but for the moment, the majority of it remains on paper. While ASEAN member states have made significant progress in terms of trade in goods, there is still a long way to go when it comes to the free movement of services and people. “The area which has so far been most significantly affected by the AEC in Thailand is trade in goods,” says Wichien Harnpraween, Managing Partner of Wissen & Co., Ltd, a legal services provider acting primarily for multinational corporations operating in Thailand. “Already for a number of years, the majority of trade in goods between ASEAN nations, with a few exceptions, has been traded with zero import duty. The goal is to have zero import duty on all products and we’re almost there.” However, while significant steps have indeed been made with respect to the trade in goods, some barriers remain, according to Cynthia Pornavalai, Partner in Tilleke & Gibbins who specialises in regional integration. “What they have to work on now is the removal of non-tariff barriers, which include customs clearances and licensing for example. “One initiative is to have a co-called ASEAN Single Window, which will integrate customs and cargo clearances across member states. That means if you are importing a product from a non-ASEAN country and you have already passed through the customs clearance of one country within the ASEAN Single Window area, you don’t have to go through customs in another Single Window country.”
Thai-Norwegian Chamber of Commerce
National Treatment Cynthia Pornavalai points to four specific areas in which Thai law will have to change in order to comply with the AEC blueprint: the trade in services; foreign investment, capital markets, and skilled labour. “In most countries in ASEAN, the service sector is well protected and closed,” Cynthia Pornavalai explains. “In Thailand foreigners cannot engage in certain services and the maximum shareholding that foreigners can hold is 49 percent. This includes all things that are not manufacturing. Under the ASEAN Framework Agreement on Services,
Under the ASEAN Framework Agreement on Services, Thailand has committed to a goal of opening up the sector to 70 percent foreign shareholding. Thailand has committed to a goal of opening up the sector to 70 percent foreign shareholding. “What it means is that if you are a Malaysian company and you want to invest in Thailand in the service sector, you will not be considered a foreigner but an individual from an ASEAN member state, which would allow you to hold 70 percent of the foreign company. At present there is no distinction, all foreigners get 49 percent. But remember, this is only a framework and I still don’t see any move that it is going to be expanded to 70 percent for ASEAN member states. A similar philosophy applies to the field of foreign investment, explains Cynthia Pornavalai. “They are trying to implement the idea of national treatment. If you are a national of an ASEAN member state and you invest in Thailand, you will not be deemed as a foreign investor per se but an ASEAN investor, which will give you national treatment
and if not national treatment, a treatment that is better than that received by any other foreigner, i.e, a most favoured nation treatment. ”
The trouble with skilled labour One of the biggest contention points has to do with the free movement of labour, in particular skilled labour. “Thailand has signed Mutual Recognition Arrangements (MRAs, red.) in regards to the mobilisation of the work force in seven areas, including engineering, nursing, architecture, surveying, medicine, dentistry and accounting,” explains Kamthorn Ounhirunskul, Partner in Kamthorn Surachet & Somsak Co., Ltd, a legal services provider. “But these are subject to the rules and regulations of each country. For example if you are a Singaporean doctor and you want to practise in Thailand, you can but only after you pass the licensing exam.” With regards to the free movement of skilled labour, Cynthia Pornavalai notes that it is still a very sensitive issue among ASEAN countries. “While Thailand has signed mutual recognition agreements for certain professions, each country has a high degree of control, for example through regulations and licensing, effectively curtailing entry of nationals from ASEAN member states in such professions. For example, under the mutual recognition agreement for medical pratitioners, a doctor from Malaysia or Singapore would be allowed to practice in Thailand. However, Thai licensing regulations for doctors would require that he or she pass the medical license exam, which is currently only in Thai language. These minor details and small print give ASEAN member states wide latitude of control.”
Two perspectives According to Panya Sittisakonsin, Partner at Baker & McKenzie, a global legal services provider, the implications of the AEC on the legal framework in Thailand can be divided into two sections; the laws Thailand has committed to
amend in order to comply with the AEC and the laws, which are not directly impacted by the AEC, but which Thailand tries to improve in order to better position themselves in the AEC. “We need to look at the broader picture,” says Panya Sittisakonsin. “If we talk about the law related to doing business in Thailand, there are several laws that are relevant and not all of them are directly related to the AEC. For example, the BOI (Board of Investment, red.) recently announced a new initiative, which is aimed at accelerating and attract foreign investment to Thailand. The BOI policy is now to encourage investment into various sectors and to allow foreign companies to use Thailand as a hub for investment in ASEAN. Thailand recently revised the International Headquarters law to provide tax and non-tax privileges. In addition, the new IHQ law allows investors in Thailand – foreign and local companies – to hold offshore companies and bring revenue back to Thailand at no extra cost. There are varying degrees of confidence in Thailand’s ability and desire to amend its existing laws to fully comply with the AEC. “It’s all there,” says Cynthia Pornavalai. “The protocols have been signed, the agreements have been signed and a framework for member states to follow has already been set in place. But the AEC doesn’t have a supranatural body as the EU so change doesn’t come from the top. It is not forced upon governments. But if the countries feel that it is to their advantage to group together and be one bloc, they will pursue economic integration one way or another.”
Thai-Norwegian Business Review
BANKING THE NORWEGIAN WAY One of the leading providers of corporate and investment banking services to the international Energy, Offshore and Maritime community.
YOUR ACTIVE PARTNER. DNB BANK ASA, SINGAPORE BRANCH DNB ASIA LTD 8 SHENTON WAY #48-02, SINGAPORE 068811 TEL: +65 6220 6144 FAX: +65 6224 9743
Thailand’s Economy at a Glance
Thailand’s Economy at a Glance
Other bits and pieces Petrol/litre (95 E10) NOK: TH Petrol/litre (95 Octane) NOK: NO McDonald BigMac price NOK: TH McDonald BigMac price NOK: NO
6.09 15.34 16.91 40.00
Thai Consumer Price Index
Thai GDP Growth (%) 10.0
1 0 -1 -2
2008 2009 2010 2011 2012 2013 2014
2010 2011 2012 2013 2014
Stock Exchange Index (SET) 1,800 1,600 1,400 1,200 1,000 800 600 400
Exchange Rates 7.00 6.50 6.00 5.50 5.00 4.50 4.00 3.50
Bilateral trade 2014
Manufacturing Index 2000=100 1200 1000 800 600 400 200 0
200 180 160 140 120 2007 2008 2009 2010 2011 2012 2013 2014
100 Basic Figures: BOI. Comparisons: Wikipedia. GDP/Capita and Thai Population: Wikipedia/IMF. Thai GDP and CPI: Bank of Thailand. Quarterly GDP: NESDB. SET: Stock Exchange of Thailand. Exchange Rate THB/NOK: OANDA. Manufacturing Production Index: Thailand’s Ministry of Commerce. Bilateral Trade: Statistics Norway. Petrol and BigMac prices as of 3 December 2015
0801 0807 0901 0907 1001 1007 1101 1107 1201 1207 1301 1307 1401 1407 1501 1507
69.9 mill 5.0 mill 10,300,000 875,000 71/76 79/83
Import 1,348 (1,550) MNOK Export 3,906 (2,494) MNOK
Chemicals Fish Pulp Engineering Others Metal prod Electronics Food Cloth/Text Machinery Cars Computers Others
MY CN TH ID PH VN LA IN MM KH
NO US SG KE TW
Apr15 May15 Jun15 Jul15 Aug15 Sep15
80+ 70-74 60-64 50-54 40-44 30-34 20-24 10-14 0-4
0501 0601 0701 0801 0901 1001 1101 1201 1301 1401 1501
Geography Geographic Area: TH 514,000 sq. km Geographic Area NO: 385,199 sq. km Highest peak TH: Doi Inthanon 2,565 m Highest peak NO: Galdhøpiggen 2,469 m Inland water areas TH: 2,230 km Inland water areas NO: 16,360 km Coastline TH: 3,219 km Coastline NO: 25,148 km Demographics Population TH: Population NO: Population Bangkok: Population Oslo: Life expectancy M/F TH: Life expectancy M/F NO:
Thai Population 2012
Top 10 Exports Jan-Jul15 %/value USD bill Motor Cars and automotive 11.6%/14.5 EDP equipment 8.0%/10.1 Precious stones/jewellery 4.8%/6.0 Refined fuels 3.9%/4.9 Polymers etc. 3.9%/4.9 Electronic integrated circuits 3.4%/4.2 Rubber products 3.4%/4.2 Machinery and parts thereof 3.3%/4.1 Chemical products 3.2%/4.0 Iron and steel and their products 2.5%/3.2
GDP/Capita 2015 (TUSD)
Export Growth 2014 -0.3% Export Growth 2015 projected 3.5% Trade Balance USD 24.6 bill Current Account Balance USD 13.1 bill International Reserves USD 157.1 bill Minimum wage (Bangkok) Baht 300/day Unemployment 0.7% Corporate income Tax 10-20% Withholding Tax 0-15% Value Added Tax 7% Personal income Tax 0-35%
Jun15 Jul15 Aug15 Sep15 Oct15 Nov15
Basic Figures Thailand (2014)
Thai-Norwegian Chamber of Commerce
Thai-Norwegian Business Review
Christmas Luncheon H.E. Ambassador Kjetil Paulsen generously opened the residence garden for the Thai-Norwegian Chamberâ€™s Christmas Luncheon on 29 November 2015. Both children and adults had a great time with traditional Norwegian Christmas delicacies and a Christmas workshop with many activities.
Bringing Internet for All with scandinasian passion
Mobile connectivity is for the many, not just the few. Bringing Internet for All means rolling out and managing vast mobile networks in far-flung areas, distributing SIM cards where where few people have set foot, and delivering digital services that people find useful and entertaining. Manisha is one of 21,000 Telenor employees in Asia who share a mission to bring the power of digital communication to as many people as possible. Looking after our supply chain sustainability, she has helped bring our Indian supply chain to award-winning quality levels. Now she is ensuring the same Telenor quality and sustainability in Myanmar. www.telenor.com
2015-04 ASEAN and AEC Myths demystified