Internet connection

[webfact]

INVESTMENT

Vague rules open door to non-Asean firms

Petchanet Pratruangkrai

The Nation

A customer, second right, buys cosmetics during the Thailand Trade Exhibition at Tatmataw Hall Monday, April 9, 2012, in Yangon, Myanmar.

Service sector most at risk of losing out: Experts

BANGKOK: -- The lack of a clear legal definition of a firm with a "substantive business operation" in Asean could see Thailand lose ground to non-Asean investors with the implementation of the Asean Economic Community (AEC) in 2015, as foreign investors benefit from regional trade liberalisation.

Experts warn this could be particularly true in the service sector.

So far, nobody can say exactly what "substantive business operation" means. However, the Trade Negotiations Department is studying the impact of this Asean investment rule.

Without a clear definition, foreign investors will find it easy to invest in Thailand and other Asean countries through nominees.

"We raise this point as we are worried that non-Asean countries who invest via nominees will immediately reap 100-per-cent benefits equal to Asean countries. In fact, they are not Asean [firms]," said Piyanuch Malakul Na Ayuthya, CP Group vice president for trade rules and regulations.

Under Asean's regulations, non-Asean investors can hold a maximum 49.99 per cent in a company set up in the bloc. This will be raised to a maximum of 70 per cent by 2020, depending on the type of business.

Piyanuch said the government should consider which businesses are too sensitive to allow non-Asean investors to hold a 100-per-cent stake. The government should also consider preventive measures to ensure that Thai businesses will not be at a disadvantage against these non-Asean investors.

At a seminar titled "Preparing for AEC" held by Charoen Pokphand Group yesterday, the panel expressed a similar view, saying that a single standard and a shared Asean brand were essential to regional integration. The single standard will encourage not only Thailand, but all Asean countries to compete well in the global arena. In addition, each country's strength can be used to boost recognition of Asean products among customers around the world, such as Asean palm oil from Malaysia, Asean coconuts and seaweed from the Philippines and Asean rice from Thailand.

They noted that Thailand should not think of regional integration only in terms of zero tariffs on exports, but should realise that investors from both within and without Asean will enter Thailand.

Participants said that Thailand should develop business clusters to strengthen competitiveness.

Charoen Pokphand Group vice chairman Ajva Taulananda said the Thai Chamber of Commerce has set up AEC Prompt as an early-warning body to help Thai entrepreneurs, particularly small and medium-sized enterprises (SMEs), survive and explore business opportunities in the AEC.

Ajva is also an adviser to AEC Prompt. He said big operators in the hospital, healthcare and spa businesses have already joined forces to provide knowledge that potential SMEs could use in expanding abroad. Initially, the Thai Chamber of Commerce is considering setting up a single standard for those businesses as a reference for the Kingdom. Concerned agencies both from the government and private sectors will jointly draw up the standard, which will also draw on international standards.

"We [the Thai Chamber] look forward to certifying those private-sector standards to facilitate business operations. When this step is successfully completed, Thailand will approach other Asean countries about joining," Ajva said.

He pointed out that Thailand's food and farm sectors have the greatest opportunity to grow once seamless Asean trade is implemented.

Material sharing

Trade liberalisation will allow Asean countries to share materials at a competitive cost because of tariff elimination.

Vichai Poonpiriyasup, senior vice president of Charoen Pokphand Seed, said Asean has a great opportunity to become a seed export hub. Looking beyond Asean, the Asian region will also be a target, particularly India and China.

"The Thai government has encouraged Thai companies to grow abroad, especially to conduct contract farming in Asean countries, but our import restrictions have made it hard for Thai manufacturers to import low-cost materials," Vichai said.

Operating in the service sector, Papon Ratanachaikanont, True Corp's group chief commercial officer for sale and retail, said the company has drawn up its business "bible" to ensure investment in Asean, particularly in the coffee business. This will function as a set of investment guidelines.

Papon said "retailisation" is an important strategy for Thai operators. Retail systems should be developed to match each business in Asean, the True Corp executive said.

"Competing in Asean, Thai operators should concentrate on know-how to ensure competitiveness and survival in the coming tougher competition," Papon said.

So far, True Coffee has opened in China, Vietnam and Laos. However, investment in China still faces barriers, due to difficulties in trademark registration. As a result, the company is focusing more on business expansion in Laos.

Jakchai Nutprayoon, senior vice president of CPF Trading, said Thailand can enjoy the benefits of Asean integration by importing raw materials from the region then producing value-added products. Achieving value-added production would also encourage Thailand to export outside the region at competitive cost.

Thai SMEs should join forces to co-manufacture and co-market goods to reduce costs in the supply chain.

Sathit Sangkanarubordee, senior vice president of CPF (Thailand)'s 5 Star chicken kiosk business, said that after Asean integration, the company will try to transform its businesses in other Asean countries to become 100 per cent franchise operations.

The firm has more than 300 5 Star kiosks in Myanmar, Cambodia and Laos, while Thailand has more than 4,700 branches. After the AEC's launch, the number of franchise kiosks in Asean should exceed the number in Thailand, he said.

"Entering the Asean market, Thai businesses should learn more about the culture of each country to develop the business to meet local people's needs," Sathit said, adding that the company's grilled chicken in Myanmar, for example, would have a taste different from the chicken sold elsewhere.

If the firm meets with success in Yangon, it will look further afield to India and Bangladesh, Sathit said.

-- The Nation 2012-04-11

[androssi]

One thing for me is not very clear on the AEC... is labour. Can it more freely or not?

I have heard defintely no, and definitely yes, and several positions in between...

And I have heard a Govt official state in another country, " irrespective of what AEC says we must do, we are not bound by AEC.."

Edited April 11, 2012 by androssi

[anterian]

I get the impression there are rules you must obey and rules you can ignore, each country makes its own choices. Rather like the EU:D