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Here is your Mekong Memo Thailand for November 17, 2023.
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New Tax Law Rattles Expat Community
A shift in Thailand's tax law, altering a 38-year-old interpretation, targets foreign income, sparking potential legal challenges and confusion. The revision an attempt to expand the tax base, obliges expats to report income sourced abroad, irrespective of the tax year it was earned. Legal experts, including Kitipong Urapeepattanapong, a former chairman of Baker McKenzie and member of the National Reform Council, criticize this change. They advocate for a comprehensive tax system overhaul to align Thailand competitively with Singapore and Hong Kong, warning that the current approach might deter foreign investment and complicate tax situations for Thai nationals investing abroad.
Read more: Thai Examiner
Rising Investments and Consumer Spirits Despite Industrial Gloom
Investment applications from January to September increased by 22%, primarily in the electronics, agro-industry, and automotive sectors. The total number of projects reached 1,555, a 31% rise from the previous year, with a combined value of 516.8 billion baht ($14.55 billion). China led foreign direct investment, followed by Singapore and Japan. The approved projects for 2023 are expected to contribute 2 trillion baht in exports and create over 100,000 jobs.
Thailand's consumer confidence hit a 44-month high, driven by government measures to manage living costs, increased foreign arrivals, and recovering exports. This marks a genuine shift in public sentiment, reflecting apparently newfound confidence in the government's economic management.
Finally, industrial confidence dropped to a recent low, attributed to a weaker baht, and higher interest rates.
BOI Targets 100 Top Firms, Boosting Job Market
The Board of Investment (BOI) intends to attract more than 100 leading companies, with a goal of creating more than 10,000 jobs in the next four years. This move is part of the strategy to become a leader in the electric vehicle (EV) market, with over 6,000 EV registrations in the past nine months. The National EV Policy Committee's support for EV promotion and investment is expected to facilitate this growth.
Read more: Bangkok Post
Unleashing the Power of the Senior Workforce
According to new research from Sasin / Chulalongkorn University, Thailand's labor market statistics reveal a growing senior population: an increase from 12 million in 2011 to 18 million in 2021. Despite this growth, employment of senior citizens reportedly only increased by 600,000 jobs, leaving a large portion of the potential workforce underutilized. The authors of the piece identify strategies for including more of these older people in the workforce, and the urgency of early intervention as the longer that people remain out of the workforce, the more difficult it is to reintegrate them.
Read more: Chulalongkorn University
Imminent AI Legislation Signals Shift
Trying to apply existing laws to new circumstances could be a challenge for Thai courts, specifically due to some prescriptions of Thai tort law. To mitigate some of the potential risk, in early 2022, the government began to study the approach of regulators elsewhere and is now advancing its Artificial Intelligence regulatory framework with two draft legislations: the Draft Royal Decree on Business Operations that Use Artificial Intelligence System (Draft Decree) and the Draft Act on the Promotion and Support of AI Innovations (Draft Act).
The Draft Decree, influenced by the EU's AI Act, categorizes AI systems based on risk levels and requires compliance with corresponding obligations. The Draft Act, separate from existing laws, is meant to support AI development by use of a committee overseeing AI system operation, risk assessment, and a compensation fund.
Baker McKenzie has their finger on the pulse of this and if you’re involved in the space, this is a must-read.
Read more: Baker McKenzie
Wages Set to Rise 5% in 2024
Employee salaries in Thailand are forecast to increase by 5% in 2024, slightly below the Asian average of 5.2%. This prediction, based on a Mercer (Thailand) survey of 617 companies, follows a 4.8% rise in 2023. The increase is attributed to the government's economic stimulus and efforts to shore up business confidence and tourism. The survey, covering seven industries, highlights automotive, life sciences, and high technology as the top sectors for salary growth.
Separately, there have been calls for a new law to safeguard the national wage committee's independence from political influence. This move aims to ensure wage decisions are based on economic realities rather than political promises, striking a balance between necessary pay adjustments and economic sustainability, especially for small and medium-sized businesses.
Binance Joins Thai Tycoon in Crypto Exchange Venture
Binance, the world's largest crypto exchange, is partnering with Thailand's Gulf Energy to launch a new digital asset exchange, Gulf Binance. This venture, Binance's first foray into Southeast Asia, aims to grab a piece of the growing crypto pie as blockchain technology becomes more important to the economy. Despite facing legal challenges in the U.S. and Europe, Binance's collaboration with Gulf Energy (which holds a 51% stake in the new exchange) demonstrates a confidence in further growth and development of the technology in Southeast Asia.
Major Investments from Global Tech Giants
Thailand is set to improve its standing in the global tech scene with PM Srettha Thavisin securing investments worth 300 billion baht from Amazon Web Services, Google, and Microsoft. This money is expected to be a boon for Thailand's digital infrastructure and skilled labor force, positioning the country as a key data center hub in Asia-Pacific. The investments, including the establishment of three data centers by Amazon and a Google Cloud region in Bangkok, mark a big win coming from Srettha’s visit to the United States this week.
Thailand Pitches Land Bridge Project
Thailand is initiating a $28 billion Land Bridge project to establish an alternative to the Malacca Strait trade route. The project includes constructing deep-sea ports on the Gulf of Thailand and the Andaman Sea, connected by rail and road networks. Transit times are expected to be reduced by four days and shipping costs by 15%, enhancing Thailand's role as a logistics hub in Southeast Asia and potentially altering regional trade dynamics.
Rethinking Cannabis Policy
Cannabis bills are being revised to tighten control over the drug’s sale and use, following the rapid growth of over 6,000 cannabis shops since decriminalization. The new draft, set for cabinet approval in December, is intended to address concerns about potential addiction and misuse, focusing on medical rather than recreational use. This change in policy is being presented as a balance between economic opportunities and health priorities, but enforcement and any actual effect on the market remain to be seen.
Interest Rate Hike Shakes Up Residential Market
Interest rate increases have led to a decline in residential unit transfers, particularly affecting the lower-end segment. The Real Estate Information Center reported a 0.8% year-on-year drop to 84,619 units in the third quarter of 2023, following consecutive declines since the first quarter. Despite a 7% decrease in transfers in the third quarter, the value of transfers rose by 1.6% to 766.97 billion baht, indicating a shift towards higher-priced segments. The largest declines were in units priced at 1 million baht or less. In contrast, units priced above 7.5 million baht saw significant growth, reflecting changes in purchasing power and buyer preferences towards second-hand units in certain price brackets.
Read more: Bangkok Post
Drones to Boost Farming Efficiency
The Ministry of Digital Economy and Society has launched a “1 Tambon 1 Digital” project, introducing agricultural drones across 500 communities. The initiative, in partnership with the Digital Economy Promotion Agency (DEPA), is supposed to enhance Thai farming efficiency and productivity using drone technology. DEPA will subsidize 60% of the drone costs, while communities will cover the rest. The project includes training in drone operation and maintenance, expecting to establish 50 service centers nationwide within a year, training 1,000 individuals in operation and 100 in maintenance. This initiative is set to impact 4 million rai of land, with an economic boost of 350 million baht in its first year.
Read more: Thai PRD
High Mobile Connectivity and AI Optimism
Thailand ranks as the second-most connected country in the region, with 86% of its population spending a significant part of their day on mobile devices. A Telenor Asia study reveals that Thais are using mobile devices to manage living costs and increase revenue. They show less concern about security compared to other South and Southeast Asian countries. With one of the region's best mobile networks and affordable prices, Thai businesses are increasingly adopting AI technologies. The study also notes a high expectation for increased mobile phone service use, particularly among women. Thais are utilizing mobile devices for financial management and online investments, and there's a growing demand for generative AI training in workplaces.
Read more: Bangkok Post
Tightening the Reins on PDPA Compliance
Thailand's Personal Data Protection Act (PDPA) enforcement is set to intensify, as indicated by four recent decisions from the “Expert Committee.” This represents a shift from the previous relaxed enforcement approach, signaling stricter compliance requirements for businesses handling personal data. The cases involve various issues, including improper data collection without consent, inadequate action on data subjects' requests, and conditional consent practices. With the PDPA having been fully in force for more than a year, the committee is prepared to impose administrative fines and penalties for non-compliance. Businesses are advised to ensure strict adherence to PDPA regulations to avoid potential sanctions.
Read more: Tilleke & Gibbins
And now for something (not quite) completely different - Here’s an article from our friends at aseanwonk.com (an official recommendation of The Mekong Memo! Dr. Prashanth Parameswaran is a fellow at the Wilson Center, a senior columnist at The Diplomat magazine and an instructor at various institutions including the State Department and the Department of Defense) about China’s Belt and Road and its effect on the region as a whole over the next decade.
Evolving BRI Dynamics in Southeast Asia
China's Belt and Road Initiative (BRI) has had a varied impact in Southeast Asia over the past decade, with significant but uneven engagement across the region. Southeast Asia, vital to the BRI since 2013, has seen mixed responses from governments. Projects like the Jakarta-Bandung high-speed rail and China-Laos railway highlight successful collaborations, while others, like in Malaysia, faced renegotiations and suspensions. Some nations, like Vietnam, remain cautious of close BRI involvement. The BRI's future is shaped by Southeast Asia's need for investment, China's adaptive strategies, and external factors like the U.S.'s alternative funding initiatives. Despite challenges, the BRI remains a crucial factor in Southeast Asia's growth, with its trajectory influenced by domestic and international dynamics.
Read more: The Diplomat
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