The AEC and the Free Flow of Investment The establishment of the ASEAN Economic Community (AEC) to occur by 2015 is quickly becoming a major talking point for government officials, politicians and business people on all levels in Thailand and for good reason. The AEC is set to have an immence impact on the Thai market with its stated goal being to “establish ASEAN as a single market and production base making ASEAN more dynamic and competitive with new mechanisms and measures to strengthen the implementation of existing economic initiatives; accelerating regional integration in the priority sectors; facilitating movement of business persons; skilled labor and talents; and strengthening the institutional mechanisms of ASEAN” and “to hasten the establishment of the [AEC] by 2015”.
Michael Doyle
But as with all huge government initiatives there are, of course, some skeptics, who believe that the individual member countries may strategically use the exceptions stated in the AEC Blueprint to lessen its impact on their local businesses which, to date, have been largely protected from too much foreign competition. The overall sense in the market, however, is that the AEC is a serious and ambitious initiative and the business community should prepare itself accordingly. One of the most interesting characteristics of the AEC as set forth in the Blueprint is “the free flow of investment” component. Under the Blueprint, “all industries (in the manufacturing, agriculture, fishery, forestry and mining and quarrying sectors and services incidental to these five sectors) shall be open and national treatment granted to investors . . . .”. This will be a sweeping change to the existing regulatory framework for foreign investment in Thailand and will require that substantial changes be made to the Foreign Business Act as well as other laws pertaining foreign investment. It will, also, require an unprecedented amount of coordination between AEC member country governments (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam) as the agreed upon action plan emphasizes promoting the free flow of investment in the region by i. Harmonizing, where possible, investment policies to achieve industrial complementation and economic integration;
ii. iStreamlining and simplifying procedures for investment applications and approvals; iii. Promoting dissemination of investment information: rules, regulations, policies and procedures, including through one-stop investment centre or investment promotion board; iv. Strengthening databases on all forms of investments covering goods and services to facilitate policy formulation; v. Strengthening coordination among government ministries and agencies concerned; vi. Consulting with ASEAN private sectors to facilitate investment; and vii. Identifying and working towards areas of complementation ASEANwide as well as bilateral economic integration. Other agreed upon actions include strengthening investor-state dispute mechanisms and the transfer and repatriation of capital, profits and dividends. Leading up to 2015, the Thai government will no doubt be confronted with many legal and practical issues related to complying with the AEC requirements. How effective the Thai government and the other ASEAN member country governments are in dealing with these issues will in large part dictate how strong a community the AEC will become and what its long term impact will be on the region. Michael Doyle is a US lawyer and partner of the Bangkok based law firm Seri Manop & Doyle and the author of the book Doyle’s Practical Guide to Thailand Business Law 3rd Edition. He may be contacted at michael@serimanop.com.