Regional Round-Up

Your Snapshot of Key Legal Developments in Asia

Issue 3 - Oct/Dec 2013


    What is AEC 2015 and How Does It Impact the ASEAN Company?

    There has been much interest and discussion in the media of late regarding the ASEAN Economic Community ("AEC") 2015. This article presents a general outline of what the AEC is and how it will affect companies in South East Asia once it takes effect in 2015.

    AEC 2015 was conceived as a vision for the economic integration of the countries in the Association of South East Asian Nations ("ASEAN") by 2015. The main objectives of AEC 2015 include: a single market and production base, a highly competitive economic region, a region of equitable economic development, and a regional economy fully integrated into the global economy.

    The AEC began its life as a master plan adopted by ASEAN leaders during the 13th ASEAN Summit in 2007, titled the "ASEAN Economic Community Blueprint" ("Blueprint"). It ambitiously sets out four main aims for the AEC:

    1. Single Market and Production Base – where there shall be a free flow of goods and services, investments, capital and skilled labour. There are twelve economic sectors which will be given priority in integration (including air transport, healthcare products, textiles, electronic goods and tourism); and food, forestry and agriculture will also be given emphasis.

    2. Competitive Economic Region – this relates to the implementation of competition laws/policies in all ASEAN states, strengthening consumer protection, establishing intellectual property regulatory frameworks, developing transportation and other infrastructure to facilitate trade, and completing the bilateral agreements for avoidance of double taxation amongst member states.

    3. Equitable Economic Development – addressing the different levels of development amongst the various ASEAN countries, with a view to accelerate the economic integration of the less-developed countries so that all ASEAN countries can move in a unified manner.

    4. Integration into the Global Economy – ASEAN countries, while strengthening the AEC framework, should also keep a lookout for how their policies impact on and interact with international rules and regulations. For example, free trade agreements between ASEAN members and external countries could be relooked in light of the AEC commitments.

    As to how these plans will be carried out, the Blueprint mentions certain strategic arrangements which have already been set up, which are to be use to drive some of the initiatives. Examples include: the Common Effective Preferential Tariffs for ASEAN Free Trade Area Agreement ("CEPT-AFTA Agreement") which facilitates the free flow of trade throughout ASEAN, and the ASEAN Blueprint for SME Development which is intended to promote the development of small and medium enterprises ("SMEs") in ASEAN countries with a view to increasing economic growth.

    The AEC 2015 will impact how business is conducted in many areas.  For example, companies will face the challenges and opportunities of the free flow of skilled labour among AEC members under the ASEAN Mutual Recognition Arrangement on Services ("MRAS").  It provides that eight service professions (doctors, dentists, nurses, engineers, architects, accountants, surveyors and tourism professionals) may move freely across the 10 ASEAN member states.  Issues that companies will need to consider will include how to properly manage and treat such foreign talent, and how some of these issues can be addressed in employment contracts. 

    The ASEAN Economic Ministers are overall in charge of implementing the Blueprint, with the various relevant sectorial ministers responsible for the commitments under their respective purview. The ASEAN Secretariat monitors the compliance of implementing the Blueprint.

    It is now 2014. The ASEAN countries have about a year left to reach the AEC 2015 deadline.  Much progress has been made by the 10 countries, such as elimination of tariffs, liberalisation of trade in services and removal of many restrictions on investments, although there is much left to be done.  One possible suggestion is to concentrate on implementing the “core” elements of the Blueprint by 2015. Once that is done, the rest of the detailed elements can be followed up with later. 

    While it remains to be seen if the ASEAN countries can meet the 2015 deadline, companies doing business or based in ASEAN should equip themselves with a general knowledge of AEC 2015, as it will likely have an impact on ASEAN based businesses both at the macro as well as the micro level.  


    Circular No. 1707 on Tax Determination of Loans
    Circular No. 1707 was issued by the General Department of Taxation ("GDT") of the Ministry of Economy and Finance on 2 October 2013 in order to provide consistency in the determination of the withholding tax on loan interest for loans with zero interest rate or lower than market interest rates.

    When determining withholding tax, all taxation units ("
    Units") shall not apply deemed interest when determining the withholding tax on loans upon which no interest expense has been recorded, or loans which have lower than market interest rate. Similarly, Units shall not treat such loans as deemed subsidies when determining profit-tax.

    Units must also compare the recorded interest expense against the prevailing interest rate so as to apprehend situations where the recorded interest expense is higher than the market rate. The Units must then adjust the interest expense downwards outside the accounting report, and the difference will be deducted from the interest expense line.

    Prakas No. 959 on Establishment of Joint Working Group for the Draft of Standard Evaluation of Real Estate
    Prakas No. 959 was issued by the Ministry of Economy and Finance on 18 October 2013 to establish a joint working group of eight members for monitoring the draft of the Standard Evaluation of Real Estate in Cambodia. It also sets out the following tasks for the working group:
    • To monitor the draft regulation on Standard Evaluation of Real Estate in Cambodia and the Code of Ethics of the Evaluators;
    • To monitor the application of the Standard Evaluation of Real Estate and the application of the Code of Ethics of the Evaluators;
    • To participate in the drafting of the legal regulations regarding the development of the financial sectors from 2011 to 2020; and
    • To report to and advise the Minister of Economy and Finance.


    China Promulgates Trademark Law
    The Standing Committee of the National People's Congress passed new amendments to the PRC Trademark Law on 30 August 2013, which will come into effect on 1 May 2014. Key features of the new law include:
    • imposing an obligation to uphold the principle of good faith on new filings;
    • raising the maximum statutory damages for infringement to RMB 3 million and raising administrative fines to be up to 5 times the illegal business turnover; 
    • including sounds as registrable trademarks; and
    • allowing multi-class and e-filing applications. 
    There are also substantial procedural changes that IP owners should take note of, including the removal of a party's ability to file reviews on unsuccessful trademark oppositions, which has been replaced with cancellation procedures instead.
    China Amends Consumer Protection Law to Include Data Privacy Protection
    On 25 October 2013, the Standing Committee of the National People's Congress passed an amendment to the law on Protection of Consumer Rights and Interests to add provisions related to the increasing popularity of online transactions. The amendments impose various obligations on business operators to protect personal data held by them, including:
    • obtaining consent from customers prior to collection of their personal data;
    • keeping customer personal data confidential and not to disclose, sell or illegally disclose such data to others; and
    • imposing a burden on such operators to implement appropriate security measures.

    Failure to comply with these new obligations will attract administrative fines of up to 10 times an unlawful gain or RMB 500,000 in the event that there is no gain.

    On a similar note, China is also looking to update its legislation on e-commerce through the issuance of a draft Online Commodity Trading and Related Services Administrative Procedure on 11 September 2013. The objective of this draft procedure is to regulate online commodity and trading conduct to protect both consumers and business operators. Some of the changes include adding a provision that outlines the State Administration of Industry and Commerce's powers to investigate suspected illegal online transactions or services as well as imposing obligations on third party platforms to take action against unscrupulous vendors who mislead consumers or infringe third party intellectual property.


    Indonesian Investment Coordinating Board ("BKPM") Clarifies Application of Negative List to Portfolio Investments
    The BKPM's Regulation No. 5 of 2013, issued in April, provides that a public company will be treated as a foreign direct investment company (Perusahaan Modal Asing or "PMA") if the controlling shareholder of such company is a non-Indonesian investor.  This would include any company originally constituted as a domestic direct investment company (Perusahaan Modal Dalam Negeri or "PMDN").

    The result of this is that indirect and portfolio investments (i.e. those made through the stock market) could bring a company within the ambit of the Indonesian Negative Investment List.  This would bar the company from a range of sectors that are either closed to foreign direct investment or subject to various foreign ownership restrictions.

    However, in September, BKPM issued Regulation No. 12 of 2013 and clarified that indirect and portfolio investments would not cause a company to fall within the scope of the Negative Investment List.  In effect, a PMDN in which the controlling stake is subsequently acquired by a non-Indonesian investor through the stock market, will not be required to convert to PMA status.  Accordingly, it will not be required to comply with the Negative Investment List.

    Please click
    here to read the full Update on this subject.
    Indonesian Court Strikes Down Agreement on Language Grounds
    On 20 June 2013, the West Jakarta District Court issued its decision annulling a contract between an Indonesian borrower and a non-Indonesian lender on the grounds that an Indonesian-language version of the contract had not been executed and that this was in contravention of Article 31(1) of the Indonesian National Language, Flag, Coat of Arms and Anthem Act 2009. 

    Notwithstanding that this decision is currently on appeal to the Jakarta High Court and is therefore not enforceable under Indonesian law until such time as a final and conclusive judgment is issued, its implications on transactions involving Indonesian entities premised on contracts which have not been executed in the Indonesian language are potentially far-reaching.

    Our Firm has issued an Update on this case, in which we provide a summary of the case, as well as discuss the implications for companies doing business in Indonesia.  Please click
    here to refer to the Update.


    Online Secured Transaction Registry Launched
    On 20 November 2013, the State Asset Management Department of the Ministry of Finance officially launched an online system for the registration of moveable property, with a grant from the International Financial Corporation ("IFC"). The online registry was set up to encourage commercial banks and financial institutions to grant loan facilities or provide credit secured by moveable property.

    The registry for security interests in moveable property is Lao PDR's first system which enables businesses and individuals to pledge moveable assets such as vehicles, equipment, crops or even future income as collateral for loans, opening up loan opportunities for micro, small and medium enterprises which previously might not have been able to obtain a loan if they do not own real estate which they can pledge as security.

    VAT Law Amendments to be Approved
    The Lao National Assembly has approved the amendments to the Law on Value-Added Tax ("VAT") at the 6th Ordinary Session which ran from 9 to 27 December 2013, to remove tariffs on materials which Laos cannot produce domestically in preparation for the ASEAN Free Trade Area and ASEAN Economic Community in 2015.

    The 10 percent tariff currently applicable to certain materials and machinery that cannot be produced in Laos will be removed entirely. This move is intended to encourage investment in commercial production of goods and materials, both for domestic sale and for export.

    VAT is an indirect tax collected on the proportion of value added to goods and services occurring in all processes, from production and distribution to service supply and consumption. It is also collected on the value of goods and services imported into Laos.


    Personal Data Protection Act (2010) Comes Into Force

    The Personal Data Protection Act 2010 ("PDPA") came into force on 15 November 2013, and marks the introduction of a data privacy regime in Malaysia. The objective of the PDPA is to regulate the processing of personal data and to safeguard the rights of individuals. It applies to anyone who processes personal data ("data user") of an individual in commercial transactions.

    Essentially, the PDPA establishes 7 personal data protection principles which data users must observe. Related regulations have also been introduced to provide clarification on these principles, as well as laying out the registration requirements and process for data users.

    Data users have until 14 February 2014 to comply with the PDPA. Aside from the negative publicity, penalties for non-compliance with the PDPA include fines of up to RM500,000 for companies and / or fines and imprisonment of up to 3 years for officers of the offending company.

    Certain aspects of this new regime remain unclear as the Personal Data Protection Department has not issued comprehensive guidelines on how the PDPA will be enforced. However, given the consequences of non-compliance, it is important that business review their processes, contracts and standard forms, and implement sound internal policies on personal data processing.

    Proposed Amendments to the Bankruptcy Act

    Under the current Bankruptcy Act 1967 ("Act"), the effect of being declared a bankrupt is effectively a 'financial death penalty', since a bankrupt is prohibited from entering into any dealings or transactions involving his assets. Due to the growing number of bankruptcies, the Attorney General's Chambers has released a Cabinet paper ("Paper") on proposed amendments to the Act.

    One of the key proposed amendments to the Act is to overcome the procedural rigidity and administrative hurdles of the present statutory regime in discharging a bankrupt. The Paper proposes an automatic discharge or release of a bankrupt after a period of time. There will also be new provisions on alternative options for creditors to recover loans based on the insolvency legal framework, such as individual voluntary arrangements and debt repayment schemes.

    The proposed amendments to the Act will not only facilitate the settlement and management of debts more effectively, but may prevent a 'financial death penalty' and social stigma of being declared a bankrupt. Further details of the proposed amendments will be available when a draft Bill is released.


    Watch this space for more updates in the next edition



    Shift to Positive Grant System for Patent Laws

    The patent laws of Singapore were amended last year to transform the patent registration regime from a 'self-assessment' to a 'positive grant' patent system.  The amendments were contained in the Patents (Amendment) Act 2012, which amended the existing Patents Act ("Amended Patents Act"). The Amended Patents Act is expected to come into force from 14 February 2014 onwards.

    Under the Amended Patents Act, only patent applications which have fully positive examination results can proceed to grant. "Fully positive" means that the claimed subject matter of the pending patent application must meet the patentability criteria of novelty, inventiveness and industrial applicability as set out under section 13 of the current Patents Act.

    The existing dual-track system comprising a default "fast track" and an optional "slow track" will no longer be available under the Amended Patents Act. In place of the dual-track prosecution system is a single prosecution track.

    Further details on the new positive grant system are available in our Firm's Update on this subject.  Please click here to access.

    The Development of the Singapore International Commercial Court

    At the start of 2013, Chief Justice Sundaresh Menon mooted the possibility of creating the Singapore International Commercial Court ("SICC") as an international forum for court-based commercial dispute resolution both within and beyond Asia. A committee was formed to study the viability of the SICC ("SICC Committee"), and on 29 November 2013, the SICC Committee submitted its report to the Ministry of Law. The report has since been published as part of a public consultation which is open until 31 January 2014.

    The SICC will be a division of the Singapore High Court and part of the Supreme Court of Singapore.  Decisions of the SICC will be appealable to the Singapore Court of Appeal. The SICC will deal primarily with international commercial disputes.

    Generally, representation of parties will follow the rules of representation before the Singapore High Court, i.e. only members of the Singapore bar can represent parties, although the Court may admit Queen's Counsel or foreign lawyers on an ad hoc basis.  SICC proceedings would generally take place in open court, but certain cases will be kept confidential.  SICC judgements will be enforceable in other jurisdictions through reciprocal enforcement provisions or through a common law action on the judgement debt, similar to ordinary judgements.

    Foreign law will not be treated as an issue of fact, and need not be proven by way of expert evidence.  This is a significant departure from the way in which national courts (in common law jurisdictions) treat foreign law.

    The key features of the SICC are discussed in our Firm's Client Update, together with some preliminary observations about this new development in Singapore's legal landscape. Please click here to read it.

    Employment, Parental Leave and Other Measures Bill

    The Employment, Parental Leave and Other Measures Bill ("Bill") was introduced for first reading in Parliament on 21 October 2013 and was passed on 12 November 2013. Amongst other things, the Bill provides better protection under the Employment Act ("EA") for persons employed in a managerial or executive position who receive a basic monthly salary not exceeding S$2,500 ("PMEs"), enables a wider pool of "non-workmen" to receive protection under Part IV of the EA, and provides clarification to an employee's entitlement to maternity leave, paternity leave and childcare leave.

    The Bill will extend the provisions of the EA (except for Part IV) to additionally cover PMEs. Currently, this group of employees fall within the ambit of the EA only in relation to the payment of their salary. It should be noted that the Bill expressly excludes PMEs from the provisions of Part IV of the EA, which deal with rest days, hours of work and other conditions of service.

    Currently, Part IV of the EA only applies to workmen who are in receipt of a monthly basic salary not exceeding S$4,500 and to non-workmen who are in receipt of a monthly basic salary not exceeding S$2,000. The Bill will increase the salary threshold for non-workmen to S$2,500, thereby increasing the pool of employees who are protected by the provisions of Part IV of the EA.

    The Bill also provides more clarity on an employee's maternity leave, paternity leave and childcare leave. It proposes a new Fifth Schedule to the EA, which will add greater certainty to the number of days of unpaid maternity leave that a female employee is entitled to if she has already taken her first 8 weeks of maternity leave. The Bill also introduces a new Schedule to the Child Development Co-Savings Act which provides new formulae for the calculation of the minimum number of days of maternity leave, paternity leave and childcare leave which an employee is entitled to.

    For a fuller picture of the changes brought about by the Employment, Parental Leave and Other Measures Bill, please refer to our Client Update here.


    Reduced Income Tax Rates for 2013 and 2014

    On 23 December 2013, the Thai Revenue Department announced that it would be reducing personal income tax rates for 2013 and 2014. 

    The new rates include an introduction of a 5%, 15% and 25% rate to the existing tax tiers. Of significance is the reduction of the maximum rate of 37% to 35%. There are now 7 tiers instead of the original 4. The announcement became effective on 24 December 2013.

    Essentially, taxable net income is based on annual income less a deduction of 40% for living allowance (subject to maximum deduction of THB 60,000) and a deduction of THB 30,000 for individual allowance.  There are also taxable deductions such as life insurance, parents allowance, and long-term mutual funds.

    The tax rates are expressed in table form below:

    Net Income (THB)

    New Tax Rate (%)

    0 – 150,000

    Not required to pay tax

    150,001 – 300,000


    300,001 – 500,000


    500,001 – 750,000


    750,001 – 1,000,000


    1,000,001 – 2,000,000


    2,000,001 – 4,000,000


    4,000,001 and higher




    New Decree on Foreign Employees Working in Vietnam

    On 5 September 2013, the Government issued a new Decree No. 102/2013/ND-CP ("Decree 102") which came into effect on 1 November 2013. Decree 102 provides detailed guidance for the implementation of certain provisions in the Labour Code regarding foreign employees working in Vietnam. It replaces Decree No. 34/2008/ND-CP (dated 25 March 2008) as amended by Decree No. 46/2011/ND-CP (dated 17 June 2011).

    Decree 102 provides the procedure for obtaining work permits for foreign employees, as well as the procedure for the applying for certifications of work permit exemption.

    These new procedures are more complex than under the previous regulations. For work permit applications, applicants now have to obtain prior approval for the recruitment of foreign employees from the provincial People's Committee. For work permit exemptions, companies now have to apply for and obtain certification on work permit exemptions for such exempted foreign employees from the local labour authority.

    New Guidelines on Administrative Sanctions for IP Infringement

    On 29 August 2013, the Government issued Decree no. 99/2013/ND-CP on administrative violations in the field of industrial property ("Decree 99") which came into effect on 15 October 2013. Decree 99 replaces Decree no. 97/2010/ND-CP (dated 21 September 2010).

    Decree 99 distinguishes between fines payable by organisations and individuals: an organisation infringing intellectual property rights ("IPR") will be subject to an administrative fine of VND500,000,000, while an individual infringing IPR will be subject to a smaller fine of VND250,000,000. The values of the goods or services for which the IPR are infringed will be taken into account for the determination of the administrative fine.

    Decree 99 also withdraws the authority of the Competition Authority of Vietnam to deal with IPR infringements. Only scientific and technological inspectorates, information and communication inspectorates, market management officers, customs officers, and people's committees are vested with the authority to deal with and settle IPR infringements.

    New Decree on E-Commerce Activities

    On 16 May 2013, the Government issued Decree no. 52/2013/ND-CP on e-commerce ("Decree 52") which came into effect on 1 July 2013, replacing Decree no. 57/2006/ND-CP (dated 9 June 2006).

    Under Decree 52, enterprises, organisations, and individuals wishing to set up e-commerce websites for online sales are only required to notify the Ministry of Industry and Trade ("MIT") online at its e-commerce management portal upon the setting up of the website.

    Decree 52 also establishes a registration process for the setting up of websites providing e-commerce services, under which approval from the MIT must be obtained. Furthermore, the operators of such websites must submit periodic reports to the MIT.

    Enterprises operating in e-commerce shall be obliged to comply with regulations regarding (a) confidentiality and protection of personal information provided by online consumers, and (b) security of online payment.

    Please note that whilst the information in this Update is correct to the best of our knowledge and belief at the time of writing, it is only intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice.
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