ASEAN KEY DESTINATIONS
AEC’s arrival already impacting members
By David Swartzemtruber
Thailand produces about 35 billion cigarettes a year, with the state-owned Thailand Tobacco Monopoly holding a market share of 76.8 percent. There are 15 importers including Philip Morris. That company holds a 20.6 percent market share.
The Philippines, where Philip Morris produces its cigarettes, recently won a long-running dispute with Thailand over cigarette import duties. The Philippines filed a complaint with the World Trade Organisation (WTO), accusing Thailand of violating the 1994 General Agreement on Tariffs and Trade (GATT) regarding valuation methods for customs and value-added taxes on cigarettes imported from the Philip Morris plant in the Philippines. Thailand accused the company of understating the import prices.
Under WTO regulations, a member must abide by the GATT method, in effect the CIF (cost insurance, freight) prices, declared by an importer in calculating customs tax. In November 2010, the WTO ruled in favor of the Philippines.
Thailand now says it will now calculate taxes based on retail prices instead of the ex-factory prices of the Thailand Tobacco Monopoly (TTM) for local cigarettes and CIF (cost, insurance and freight) prices for imported cigarettes. Philip Morris supports that proposal as it believes this will increase transparency in the taxation system.
Thailand now proposes to tax cigarettes The Excise Department is proposing to calculate taxes based on retail prices instead of the ex-factory prices of the Thailand Tobacco Monopoly (TTM) for local cigarettes and CIF (cost, insurance and freight) prices for imported cigarettes.
The point of this episode is that Asean member states need to get their customs regulations in line not only with international standards but with the coming AEC standards. Expect that during the first two years of the AEC, there will be a number of customs difficulties.
Another feature of the AEC is that it will allow the mobility of skilled labor between member states. A recent seminar indicated that the workforce in Thailand might be falling behind in the necessary skills to compete.
Thailand may have an oversupply situation in the mid-level sector from stiff competition from Filipino and Vietnamese workers. Seminar experts said Filipinos were excellent in English, while the Vietnamese were hard-working and patient, implying that Thai workers are deficient in these areas.
"Skills alone are not the crucial factor in making Thai workers superior to Singaporeans or Malaysians - we need to improve the Thai workers' English," a seminar speaker said.
Weerawat Wannasiri, head of the Federation of Private Vocational Schools of Thailand, said establishment of the Asean Vocational College was under way to accommodate the Asean Economic Community in 2015, which will make travel and employment among member countries easier, with higher salaries and better incentives. The frontier of AEC integration will be at customs and skilled workers will face new challenges along with increased opportunities.
The combined gross domestic product of Asean countries currently place the group in ninth place globally. One can expect its ranking to increase in the build up to the AEC in 2015.
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