AOT president Nitinai Sirismatthakarn said he expects the total number of passengers to increase by 6-7 per cent for the entire year.

“We found the number of passengers at our airports has increased continuously in the first quarter of this year and reached about 38.73 million people, up 4.49 per cent compared to the same quarter of last year. Of them, about 23.19 million were passengers on international flights, which were up 5.30 per cent compared to the same quarter last year, and another 15.53 million were passengers on domestic flights, down 1.20 per cent compared to the same quarter last year.

“The market for Chinese tours is coming back, as seen from the higher number of passengers travelling through Chinese airlines.”

He noted an AOT requirement forbids individual airlines to be more than 20 per cent late on arrivals, departures or cancelled flights, or they will see their next flying slot cut.

“This results in many international airlines competing to arrange promotions to keep their slots and ensure their flight slots at AOT airports are fully occupied at all times. We also anticipate that the tourism industry will continue to be healthy for the whole year, and will encourage an increase in the number of passengers at our six airports by between 6 per cent and 7 per cent, up from the 139.52 million recorded last year,” said Nitinai.

Suvarnabhumi Airport saw the number of passengers jump by 6.22 per cent year on year in the first quarter of this year to 17.65 million, followed by Don Mueang Airport, which saw a 2.8 per cent passenger increase in the first quarter to 10.69 million, and Phuket Airport with 1.09 per cent to 5.34 million passengers.

The number of passengers at Chiang Mai Airport also increased by 9.26 per cent in the first quarter to 3.21 million, while Chiang Rai Airport saw a 5.52 per cent bump to 806,102 people. Meanwhile, passengers at Hat Yai Airport dropped 4.79 per cent in the first quarter to about 1.01 million.

The number of flights across the six airports increased by 4.76 per cent in the first quarter over last year to 233,107, of which 127,951 were international flights, up 7.23 per cent compared to the same quarter last year.

Another 105,156 were domestic flights, up 1.90 per cent. Suvarnabhumi Airport posted the highest number of flights at 98,435, up 6.50 per cent over the same quarter in 2018, followed by Don Mueang Airport with a 2.71 per cent increase in flight numbers to 68,987. The number of flights at Phuket Airport also increased 0.68 per cent in the first quarter to 31,463.

The number of passengers who travelled through low-cost airlines reached 19.02 million in the first quarter of this year, up 6.36 per cent over last year, of which 8.05 million passengers were on international routes, up 16.53 per cent. Another 10.96 million passengers were on domestic routes, down 0.04 per cent from the same quarter last year.

Don Mueang Airport shows the highest number of passengers using low-cost airlines at 10.57 million in the first quarter this year, up 3.74 per cent compared to the same quarter last year, following by Phuket Airport at 2.49 million, up 4.34 per cent; and Suvarnabhumi Airport at 2.37 million, up 27.57 per cent compared to the same quarter last year.

These pre-existing regimes aim to attract multinational companies to place their headquarter activities in Thailand by providing income tax incentives for companies and expatriates in Thailand.

For example, under the IHQ regime, IHQ companies receive a 0 per cent corporate income tax (CIT) rate on qualified income derived from foreign associated enterprises and a 10 per cent CIT rate on qualified income derived from local associated enterprises. “Qualified income” here refers to income derived by the Thai IHQ in the performance of headquarters functions, holding company functions, treasury functions and trading functions.

Thailand’s recent announcement to abolish the pre-existing regimes and to encourage taxpayers to migrate to the new IBC regime by June 1, 2019 was a surprise to taxpayers who currently operate under the ROH/IHQ/ITC regimes.

This change is a result of Thailand becoming an “inclusive framework” (IF) member of the Organisation of Economic Cooperation and Development (OECD)’s Base Erosion and Profit Shifting (BEPS) Project. The BEPS Project involves 15 action plans designed to eliminate structures/transactions that allow multinational companies to move profits from high tax to no/low tax jurisdictions.

As an IF member, Thailand is required to adhere to the following action plans:

l Action 5 – Counter harmful tax practices;

l Action 6 – Prevent treaty abuse;

l Action 13 – Re-examine transfer pricing documentation;

l Action 14 – Make dispute mechanisms more effective.

In order to execute Action 5, the OECD set up the Forum on Harmful Tax Practices (FHTP) to identify countries that offer harmful tax regimes (eg, regimes that allow multinational companies to allocate profits to no/low tax jurisdictions without sufficient substance and transparency). The FHTP identified Thailand’s ROH, IHQ, and ITC regimes as harmful tax regimes. As a result, Thailand abolished the pre-existing regimes and introduced the IBC to replace the pre-existing tax regimes.

Under the IBC regime, approved taxpayers would be able to lower their CIT rates (ie, for qualified income only) to 8 per cent, or 5 per cent or 3 per cent if they incur annual expenditures of Bt60 million or Bt300 million or Bt600 million, respectively.

All ROH/IHQ/ITC privileges will cease after May 31, 2019. Existing ROH/IHQ/ITC companies can continue with the relevant privileges by submitting a regime migration application (ie, with more relaxed conditions, whereby they would only need to incur annual expenditures of Bt15 million to qualify for a CIT rate of 8 per cent) to the Revenue Department within May 31, 2019.

When the IHQ and ITC regimes were introduced, there was much excitement about the expanded scope of qualifying activities/privileges as compared with the ROH regimes, which only offered incentives for headquarters. Many companies, therefore, entered into extensive structural and transactional restructuring and even increased their investments in Thailand. These companies set up regional headquarters or holding companies in Thailand and re-routed trading transactions through Thailand. Now, these companies will have to re-consider their entire group structure and transactional flows.

Due to the IBC’s increased substance requirements, ROH/IHQ/ITC companies will have to consider whether or not they would qualify to migrate to the IBC regime, whether they can increase substance to qualify, or if they need to opt out of the tax schemes completely.

Companies are encouraged to thoroughly examine the implications of each option. For companies that choose to migrate to the IBC, substance requirements are even more critical due to a claw-back rule that allows the Revenue Department to revoke the IBC incentives if companies are non-compliant with IBC conditions for two or more consecutive years.

Moreover, in a case where the IBC privileges are revoked, any expatriate employees entitled to the 15 per cent flat personal income tax rate would be impacted, due to the IBC not meeting the minimum substance requirements.

KORNEEKA KOONACHOAK is a partner, Tax & Legal Services, Deloitte Thailand.

In his closing address at the 52nd annual meeting on Saturday, Nakao said the private sector operations would account for one-third of ADB’s total projects by number by 2024.

“We discussed the importance of expanding to frontier economies and social sectors such as health and education,” he said.

He stressed the need to more closely look at risk and pricing, as well as the real impact on development.

“We are expanding staff resources for private sector operations and risk management, and will increase outposting to resident missions,” he said.

Nakao said an office would be opened in Singapore by the end of this year to facilitate engagement with private sponsors and financiers.

According to Nakao, there was a discussion on the value of equity investment in addition to loan operations, and governors from ADB member countries also supported the greater use of credit enhancement instruments.

Last year, the bank’s new lending, equity investments, and guarantees to private companies amounted to US$3.1 billion (Bt99 billion), a 37-per-cent increase from 2017. On top of that, ADB secured commercial co-financing of $7.2 billion.

“We will continue to expand our private sector operations. We will also target a substantial increase in commercial cofinancing,” he said.

He aimed to achieve the target of every $1 financing from ADB for private sector operations being matched by $2.5 of long-term cofinancing. The governors encouraged the lender to help make projects bankable.

“We will make greater use of risk management products to help projects become bankable,” he said.

“Our private sector operations will widen geographic coverage by entering into new markets. We will also broaden our business reach to support social sectors, namely, education and health, as well as agribusiness companies.”

Nakao offered as examples Papua New Guinea and Timor-Leste, where ADB is providing loans to agribusiness companies to improve the agricultural value chain. The lender recently approved a $100-million Pacific renewable energy programme, which includes credit enhancement for private sector investments in renewable energy in the Pacific.

To improve its Strategy 2030, ADB is working on operational plans in seven priority areas, and action plans for private sector operations and knowledge management. Gender equality and tackling climate change are among the key priorities, he said.

With the target that at least 75 per cent of the number of ADB’s operations will promote gender equality and support climate actions by 2030, the lender will encourage private companies to include gender elements.

Focus on ocean health

During the meeting, the action plan for healthy oceans and sustainable blue economies was launched, ensuring the expansion of financing and technical assistance for projects in this context to $5 billion in the next five years.

“Our oceans are in danger due to increasing water temperatures, untreated wastewater and plastic pollution, and unsustainable fishing practices. Governors stressed the need to pay greater attention to ocean health for the future of the planet, as well as lives and livelihoods of the people,” he said.

Nakao pledged that the ADB would cooperate with regional initiatives by member countries, incorporating advanced technologies, innovation, and new ideas in its projects.

“We should continue to monitor the outcomes through a strong corporate results framework and evaluation,” he said.

At the annual gathering, Nakao repeatedly stressed the importance of sustainable tourism as a key driver of regional growth.

“Tourism is becoming an important contributor to gross domestic product and jobs. An increasing number of Asian people are enjoying tourism. To make tourism sustainable, we must protect the environment, cultural heritage, and communities through appropriate policies and regulations,” he said.

Last year, nearly 350 million international tourists arrived in Asia and Pacific countries, and this number has more than doubled since 2005.

“This region has some of the world’s most beautiful natural landscapes and unique cultural monuments,” he said.

“As tourism continues to expand rapidly, it will be important to pursue sustainable tourism that protects the environment such as forests and coral reefs, preserves local cultures, and benefits local communities.”

According to Nakao, the lender supports sustainable tourism through infrastructure investments, policy reforms, and institutional development. He underscored the importance of attracting good talents to ensure the success of its operations.

“We will promote staff mobility between departments, introduce flexible work arrangements, and continue to strengthen training for managers and staff,” he said.

To improve staff diversity and gender balance, the ratio of female international staff at ADB has increased to 36 per cent, approaching the target of 40 per cent.

“We need a stronger staff base for implementing Strategy 2030. We will continue to recruit fresh talent,” he said.

At the grand opening of the 52nd ADB Annual Meeting on Friday, Nakao said the region would expand by 5.7 per cent this year, and the economy could grow double if the region continues to grow 6 per cent annually.

“Excluding the four newly industrialised economies (Hong Kong, Korea, Singapore and Taipei), Asia and the Pacific is expected to grow 6.2 per cent this year,” he said.

According to the bank’s chief, China is projected to grow at 6.3 per cent for the year while India’s growth will remain solid at 7.2 per cent. Southeast Asia will sustain growth at close to 5 per cent until 2020. In Central Asia, growth will be 4.2 per cent this year. Despite an earthquake in Papua New Guinea last year, the Pacific’s growth is projected to rebound to 3.5 per cent this year.

“Economic growth in the region remains solid, while there is much discussion about a slowdown and uncertainties in the global economy,” he said.

“In some countries, growth is even accelerating. Countries need to continue to pursue prudent macroeconomic policies, implement structural reforms, and invest in human capital and infrastructure.”

According to Nakao, Maintaining open trade and investment regimes is key to vibrant and sustainable growth. In this respect, the ongoing efforts by Asian governments to promote new multilateral trade agreements within the region and beyond are encouraging.

“Trade tensions remain a concern. If tensions escalate, they could seriously undermine consumer and investor confidence and weaken growth in the region,” he said.

“We are now taking steps to implement our Strategy 2030. We are preparing seven operational plans as well as action plans for private sector operations and knowledge management. We are also developing a new corporate results framework to measure progress in implementation.”

At the opening ceremony, Nakao unveiled six core areas ADB will prioritise in the adoption of its Strategy 2030. He stressed the importance of key areas – addressing poverty and reducing inequalities, gender equality, climate change, regional integration, private sector operations, and effective use of concessional resources.

“We will strengthen our support to the poorest and most vulnerable countries in the region including those in fragile and conflict-affected situations and many small island developing states,” he said.

“We are increasing our operations in health and education. We will develop a stronger pipeline of projects integrating gender equality designs into a wide range of operations, including transport, energy, and urban infrastructure.”

By 2030, at least 75 per cent of ADB’s operations will support mitigation and adaptation efforts, Nakao said.

“For countries that are most vulnerable to climate change, we will provide a wide range of assistance. We will also continue to foster regional cooperation and integration. Building on ADB-led subregional cooperation platforms in the Greater Mekong Subregion, Central Asia, South Asia, Southeast Asia, and the Pacific, we will further enhance regional connectivity through transport, energy, and trade facilitation,” he said.

Nakao said the lender would bring its private sector operations closer to clients by outposting more staff to resident missions. To him, ADB will open an office in Singapore by the end of this year to facilitate engagement with private sponsors and financiers.

In regard to using concessional resources, he pledged to continue the lender’s support in poverty reduction, gender equality, climate actions, and disaster prevention and responses. ADB will develop a detailed proposal for the next Asian Development Fund replenishment for grant support covering the period 2021–2024.

“We will also continue to seek strong donor support for our trust funds. We are also mobilising concessional resources from bilateral and multilateral partners including the Green Climate Fund and Global Environment Facility,” he said.

Nakao also stressed the importance of two key topics -ocean health and sustainable tourism.

“Our oceans are in danger. Increasing water temperatures, untreated wastewater and plastic pollution, and unsustainable fishing practices are all damaging the oceans,” he said.

“If we do not act now, by 2050, 90 per cent of the region’s coral reefs will be dead, and there will be no commercially exploitable wild fish stocks left.”

Last year, nearly 350 million international tourists arrived in Asia and the Pacific countries. This number has more than doubled since 2005.

“We can make tourism more human and inclusive by investing in the right skill sets of people. We must also pursue sustainable tourism by protecting nature, the environment, cultural heritage, and local communities,” he said.

“Tourism is important for job creation due to the labour-intensive nature of its services. As robotics and artificial intelligence become more common, there will be a natural desire for more human interactions and seeing real things.”

Prime Minister Voreqe Bainimarama, formally opening the ADB gathering, said Fiji would soon evolve from the hub of the South Pacific to the hub of the entire Pacific Rim.

“The world has come to us,” he said. “We are laying the groundwork to host even bigger gatherings in the years ahead by building up not only our hotels but our convention facilities.”

The premier said a new convention centre would be built with financing from the Fiji National Provident Fund with the capacity to host at least 4,500 people, putting Fiji in position to host annual meetings of the International Monetary Fund and World Bank.

“Fiji has set out a bold vision for our national progress. United in realising that future, the Fijian people have spurred our economy to 10 straight years of economic growth, a new record for Fiji,” he said.

Despite a population of just 900,000, Fiji has high potential with young people making up more than half of the total, Bainimarama pointed out.

“The Fiji of today is built by more than potential alone, far more. Our success is owed to the opportunities we have created in the lives of our people, and to our commitment to forging common identity and forming common purpose,” he said.

The nation has established direct air links to San Francisco, Los Angeles, Hong Kong, Singapore and Tokyo via Fiji Airways, which also flies to all areas of the Pacific Rim except South America, which the national carrier sees as the next frontier.

“Ten years ago, the roads from Nadi to Denarau were narrow and ageing. Telecommunications in Fiji were so underdeveloped, something like that would never have been possible,” the premier said.

Nadi International Airport “was considerably smaller” 10 years ago, he added. “It was less efficient, and you all would have been waiting a lot longer for your baggage off the plane.

“The redevelopment of that airport has not only received international acclaim, but it has been recognised as a leading green airport in the Asia Pacific region.”

Bainimarama called unity the key to greater prosperity.

“We cannot turn our backs on that proven pathway to global growth and development, especially given the present economic forecasts,” he said.

He was confident Fiji could advance to the next level of development in the near future.

“The potential [is there] to not only create prosperity but ensure that prosperity uplifts all people, from the busiest metropolises on the Asian continent to rural communities in islands across the Pacific,” he said.

The prime minister lauded the ADB’s development assistance since 1970, having secured US$524.4 million in loans, $35 million in grants and $33.7 million in technical assistance.

“We are a proud home to the ADB regional headquarters in our capital, Suva. And we are proud to host the ADB annual meeting. But Fiji’s ambition does not end with this meeting. This island is set to undergo a tremendous revival,” he said.

Some of these smaller economies are facing challenges, Nakao told a press conference at the multilateral lender’s annual meeting in Fiji.

“We should pay attention to the fiscal needs of these countries and allocate a larger amount of concessional support to smaller economies,” he said.

Last year, ADB operations continued to grow, with commitments, including loans and grants, reaching US$21.6 billion, up 10 per cent from the $19.7 billion committed in 2017. Direct value-added cofinancing deals signed last year hit a record high of $14 billion, up from $11.8 billion in 2017; disbursements also reached a record level, $14.2 billion, in 2018, some $2.7 billion more than for the previous year.

“The ADB’s total loan and grant commitments last year were $21.6 billion, compared to $13.9 billion in 2013 when I was appointed president of the ADB,” he told the press conference, held as part of the five-day annual meeting.

Nakao stressed the importance of development projects in India, as the nation is one of the largest borrowers from the ADB. In Southeast Asia, he foresees great potential for cooperation with emerging economies including Vietnam. He said the ADB had already reduced lending to China.

Nakao said the bank has been re-engaging with Thailand over the past two years ago, as the Kingdom has not borrowed from it since 2009. Thailand is still part of ADB’s core strategy, he said, hinting at the likely resumption of concessional loans for some projects in the country.

Driven by the increased number of value of projects, Nakao underscored the importance of civil society organisations. To this end, the ADB has been actively negotiating with such groups over the past few years.

Nakao said the bank has been involved in a lot of discussions on addressing key issues including income, access to finance and strengthening institutions.

“Lending is not just about money. It means we do things together and win together,” he said.

At an earlier session yesterday, Nakao unveiled the ADB’s strategy for the Pacific. He stressed the importance of youth in the development of economies around the world.

“ADB is a strong believer in the youth. We recognise that today’s youth are innovative, driven, and agile changemakers who can bring significant value to ADB’s work across the region,” he said.

“Under ADB’s new Strategy 2030, our engagement with youth has evolved from listening to their voices and dreams, to building their capacity and working with them on strengthening our operations.”

Nakao highlighted that more than 2 billion people in Asia and the Pacific are under the age of 30.

“Young leaders are truly a positive force for change in Asia and the Pacific. We have talented entrepreneurs, hi-tech innovators, teachers and changemakers, environmentalists and climate champions, athletes and artists, to name a few,” he said.

Yesterday, the ADB released its annual performance report, which showed the bank’s response to climate change and support for gender equality accelerated last year.

Last year, financing for private sector operations reached new heights, with commitments increasing by 37 per cent to $3.1 billion from $2.3 billion in 2017. Private sector operations’ share of the total signed ADB financing rose to 19.3 per cent from 13.3 per cent in 2017. Education commitments reached a record 7.5 per cent share of total commitments, according to the report.