AEC AEC Impact on Thailand ASEAN 6 : IPMSB,TH since 2010 ASEAN 4 : CLMV reduce tax on their goods to be zero

in 2015 Changes arising from the AEC will not be abrupt because the Blueprint towards the AEC has been carried out incrementally, with completion targeted for 2015. - Opportunities - aggregate population of 580 million. - Greater market - competition,only those who have core competencies alive. GOAL : Single market and production base Liberalization and facilitation of free flow of goods, services, investment, skilled labor, and capital How to : each member country has joint agreement under AEC blueprint which is the plan for an integrated economic operation. 1. Free flow of goods Tariff removal: zero tariff on all intra-ASEAN goods Removal of non-tariff barriers: enhancing transparency of non-tariff measures and formulating regional rules and regulations consistent with international best practices

 Trade facilitation: simplification, harmonization and standardization of trade and customs processes by ultimately establishing an ASEAN Single Window (ASW) 2. Free flow of services Complete removal of restrictions to the provision of services and the establishment of companies across national borders within the ASEAN, subject to national regulations (increase in equity participation: 49% by 2008, 51% by 2010, 70% by 2015) Priority service sectors: air transport, e-ASEAN, healthcare, tourism (gradual increase in equity participation: 51% by 2008, 70% by 2010)/ logistics: 51% by 2010, 70% by 2013) Mutual recognition arrangements for professional services (MRAs) starting with architectural services, accountancy services, surveying, medical and dental practitioners. Analyze : The liberalization of trade in services will affect Thai services primarily in two aspects: (1) an increase in shares held by foreigners, and (2) freer mobility of the professional workforce that is an important factor for services businesses. Services businesses in Thailand will be affected by the elevation of permitted maximum shares held by ASEAN nationals, including legal consultancy, retail food, packaging services, and hospitality services because these businesses already have a high proportion of foreign share

holding, with an average of 39%. If the ceiling is lifted to 70%, there is a high possibility of encountering further foreign investors. On the other hand, some services businesses such as retail apparel, commercial printing, and IT services, have not been popular among foreign investors. The average of foreign equity participation in these businesses is only 4%, despite a ceiling of 49%. 3. Free flow of investment Free and open investment regime Enhancement of investment protection, facilitation, and cooperation Progressive liberalization of member countries investment regimes ASEAN Investment Agreement (ACIA) Single investment agreement Dispute with host governments resolved in domestic courts or international arbitration Non-discriminatory treatment Analyze: As businesses in Thailand will be affected, the higher ceiling of foreign shares held by ASEAN members will provide opportunities for Thai businesses in other ASEAN countries. Thai businesses will be presented with greater opportunity to increase their investment, especially in Malaysia, the Philippines, and Indonesia. These countries have so far capped the percentage of foreign share ownership at 30%, 40% and 49% respectively. The liberalization of trade in services under the AEC will push the ceiling up to 70% and enhance opportunities for Thai businesses. Singapore,

Vietnam, and Cambodia are already largely open towards foreign investors (at least on paper!). However, the elevation of foreign investment ceilings may be difficult to enforce. In practice, there are many other domestic rules and regulations to be complied with by foreign investors. These rules and regulations will be obstacles or barriers that could impede an increase in foreign investment. The most frequently raised example is the right of foreigners to own land, which remains prohibited in many countries, including Thailand. Some countries have found a way out by allowing long-tern rent instead. Moreover, there are other rules, for example, regarding minimum investment, modes of investment, the composition of a companys board of directors (which must be local people), economic needs tests, joint ventures, and technology transfer.

4. Free flow of capital Capital market development and integration Harmonization of capital market standards (e.g. offering rules for debt securities, disclosure requirements and distribution rules, and crossborder capital raising activities). Ensure capital account liberalization 5. Free flow of skilled labor visa facilitation and issuance of employment passes for ASEAN professionals and skilled labor. harmonization and standardization of core

competencies and qualifications for occupational trainers skills promoting skills and job placements and developing labor market information among the member countries. Analyze: In a relatively short time, Thailand will have a free flow labor with the other ASEAN member countries. The ten nations of ASEAN have prepared the Mutual Recognition Arrangements (MRA), which specify the basic qualifications for seven groups of professionals to work freely in each others countries. These groups are Engineering Services, Architectural Services, Surveying Qualifications, Medical Practitioners, Dental Practitioners, Nursing Services and Accountancy Services.. Naturally, labour will opt to flow to countries that pay better. Therefore, It is a possible that there will be a flight of Thai skilled workers as well as scientists and engineers to earn more lucrative incomes elsewhere.If we look at the remuneration and cost of living of an accountant, for example, we will find that remuneration in Singapore and Malaysia is about 3 times higher than in Thailand. This could cause brain drainage from Thailand, especially to Singapore, which has a decreasing working age population and the fastest increase of elderly people in ASEAN. It is forecast that the proportion of elderly people in Singapore will reach 30% in 2025 and 35% in 2050, up from the current 16%. This

demographical change will double their need to import workers. The impact may not be confined to specific sectors. As pointed out above, differences in the remuneration of accountants will affect every business, as they all require accounting services. Moreover, a shortage of critical professionals like physicians and nurses will not only affect the health care business, but also society as a whole, which could suffer from insufficient medical services. In contrast,Thailand tend to face a flooding of workers from Burma, Cambodia and Laos as well. Despite mutual recognition, labor movement may not be so easy in practice. Many countries still preserve rules and regulations that may prevent labor mobility from happening. For example, medical personnel who wish to work in Thailand will have to obtain a license by passing an examination, some parts of which are in Thai. There are also other obstacles such as differences in language, culture, and social acceptance.

Analyze : WHAT will happen in 2015 One concrete output of integration towards AEC are the changing rules and regulations. This includes, for

example, an increase of the investment ceiling in the services sector to 70% for ASEAN investors, less paper work, and easier goods inspection at checkpoints in ASEAN countries due to harmonized standards. However, in addition to those agreements, some parts of the AEC consist of terms of cooperation which may not yield tangible outputs, including networking among SMEs, networking among ASEAN universities, and promotion of research and technology cooperation in the field of agricultural products, foods, and forestry. Therefore, economic unity within ASEAN after the completion of the AEC building process could be evident, or remain vague in 2015. Many countries still have reservations over parts of the AEC, such as the preservation of some business areas for their nationals, and the free movement only of skilled labor. The AEC in 2015 is unlikely to meet the high expectations of reaching the EU model. There have been discussions that by 2015 the AEC will transform ASEAN economies into a single market and production base like the EU, but a number of different factors affecting the AEC will prevent ASEAN from reaching those goals within that time-frame.

AFTA

Winner
Manufacturing sector: food processing and automotive & auto-parts Food processing and automotive & auto-parts manufacturing tend to receive bigger benefits arising from comparative advantages in manufacturing and trading. Thailand holds the largest proportion of exports, with a percentage of 77% in food processing and 61% in automotive and auto-parts manufacturing. The automotive and auto-parts industry will especially benefit from Thailand being a big production base due to infrastructure, knowledge, and labor capacity. This will further push Thailands benefits in a bigger market with more intense competition, and in future automotive trends.

LOSE RICE

Thailand is an important rice producer and exporter to the world and especially the ASEAN market, and had been anticipated that Thailand was likely to benefit from the agreements. However, as Vietnam now controls the rice market in ASEAN, Thailand faces a serious obstacle and may receive fewer benefits from the AEC agreements.