The measure applies to those properties that have gained in value as a result of their proximity to government transport projects and, under the draft bill, will be subject to tax at a rate of no more than 5 per cent of the amount by which they have appreciated.

In response to the decision of the Cabinet yesterday, property developers said the tax amounts to double taxation and would increase the cost of developing residential projects. This would make it costlier for many people to buy a home, they said.

Pornchai Thiraveja, financial policy adviser of the Fiscal Policy Office and finance spokesman, said that it is fair to collect tax from those land owners whose land and condominiums for commercial purposes have gained in value because of government-led transport projects.

Under the draft bill, individuals or juristic persons who own land or condominiums worth more than Bt50 million sited near such projects are subject to pay the windfall tax. The bill stipulates that the affected properties are located within 5 kilometres of transport routes extending from high-speed trains, double-track railways and mass rapid transit (MRT) systems to ports, airports and motorways and other projects defined in the ministerial regulations.

The tax will be collected by the Department of Land and local administrative organisations in areas where the government transport projects are situated. This will be carried in one of two ways. The first method would see collection during the time of the development of a project, arising from the sale or transfer of land and condominiums located around such projects.

Alternatively, a one-time collection would be made once a project is completed. The tax collected will be sent as contributions to state revenue.

The honorary president of the Thai Condominium Association, Prasert Taedullayasatit, who is also chief executive officer of Pruksa Real Estate Plc, said that when the government introduces the windfall tax, it would mean double taxation applies and this increases the cost of developing residential projects. In turn, this means people will have to pay more to buy a home.

Currently, land developers have to pay a 2 per cent transfer fee when buying undeveloped land from the land owners, a 1 per cent mortgage fee, and a special business tax of 3.3 per cent, as well as corporate income tax. Home buyers have to pay a transfer fee of 2 per cent of the home’s value and a mortgage fee of 1 per cent.

Prasert said suggested that the government could collect additional tax that reflects the increased value of land arising from infrastructure improvements, so it did not need a windfall tax.

He said the Treasury Department of the Finance Ministry revised land appraisals every four years, and these revisions reflect how the land values have benefited from infrastructure projects. If the government wants more revenue from land development, it does not need new tax legislation but only has to revise land appraisals every year, he said. Normally, officially appraised land values are 5-20 per cent lower than market prices, depending on location. In some locations, the market price may be lower than the appraised value but in some locations it may be 100 per cent higher.

He also said the government should concentrate on the land and building tax, which is expected to come into force in the next few years.

If the tax takes effect, it will increase the cost for property developers with sites around the mass transit projects that are undergoing construction. The increased costs will be passed on to the home buyers. That means it will be become harder for ordinary people to buy a home and such an outcome conflicts with a government policy that encourages home ownership for Thais, Prasert said.

“We will propose that the National Legislative Assembly (NLA) look into these concerns and give thorough consideration to the matter when the legislation comes before the NLA,” he said.

At the same meeting, the Cabinet also approved a draft bill on the use of private trusts as a tool for the affluent to manage their wealth and prevent them from transferring assets overseas, Pornchai said.

The draft bill considers trusts as representing a legal relationship of assets involving three parties: the founders of the trusts, trustees and beneficiaries.

While the trust founders can be either trustees or beneficiaries, trustees will not be allowed to be beneficiaries. Beneficiaries can be either individuals or groups of people.

Based on the draft bill, trustees who manage assets, as set out in the trust objectives, for the gains of the beneficiaries must obtain approval to operate their business from the Securities and Exchange Commission, which will supervise them and issue them with licences.

Each trust must last no more than 100 years.

Trusts, under the draft bill, must aim to manage private assets and not raise capital from the public. The management of the trusts will come under the laws on trusts for transactions in capital markets.

Trusts will be a new option to manage private assets in the country more efficiently and enable people to pass their wealth on to their heirs.

In another measure endorsed by the Cabinet yesterday, it approved the Social Enterprises Act, which offers tax incentives for companies that conduct business the social enterprises concept. The legislation is aimed at encouraging growth in the number of such enterprises to 10,000 within 10 years of the Act taking effect. Meeting this target would result in the creation of than 19 million jobs, Kobsak Pootrakool, Minister of the Prime Minister’s Office, said yesterday.

Somkid will also meet with suppliers of aerospace and automotive components as well as robotics and automation companies in Aichi and Mie prefectures to seek their investment in Thailand.

Opec and its producer allies set aside political differences and agreed on June 22 to an oil output increase of around 1 million b/d, but question marks remain around how much real volume will hit the market given that several countries are pumping at full capacity and some cannot raise production even if they want to.

The supply side risks, meanwhile, have intensified. Political turmoil in Libya has severely disrupted production there, the US has announced that it intends to fully eliminate Iranian oil exports from the market starting November, and Venezuelan production is in freefall – the International Energy Agency expects its output to drop from the current level of 1.36 million b/d to 800,000 b/d by the end of 2019.

The front-month ICE Brent futures contract, which settled at $75.32/b after the Opec announcement – off the $80/b level it had touched a month earlier – has since risen and is again flirting with that level.

After a long and contentious meeting in Vienna, Opec and its non-Opec allies led by Russia announced that they would place an additional 1 million b/d supply in the market in the second half of 2018. The new individual oil production caps are due to be set by a six-country monitoring committee chaired by Saudi Arabia and Russia, which is due to meet in September.

S&P Global Platts Analytics expects the deal to result in a net realized increase in Opec production of 700,000 b/d, largely from Saudi Arabia, which according to Platts Analytics holds most of Opec’s two million b/d spare capacity.

By Opec’s own estimate, global demand is expected to average two million b/d higher in the second half of 2018 than in the first six months of the year. Opec’s figures suggest the market needs more than 33 million b/d of its crude to balance the market in the second half, compared with current levels of 31.7 million b/d.

So a 700,000 b/d real increase would leave the market short, even without the additional supply disruption risks.

Opec member Libya’s state-owned National Oil Corp warned on July 1 that the country could lose up to 850,000 b/d of its crude oil production – nearly 90 per cent of total output – if the blockade of its eastern oil export terminals is not lifted.

The self-styled Libyan National Army has been in control of the main eastern oil ports since June 22 and handed over operations to NOC’s rival oil company, known as NOC East. It has prevented any ships from loading crude.

But the biggest potential supply shock, and one that will have serious ramifications for Asian oil importers, would be from US’ hardline approach to Iranian oil supplies.

The US State Department on June 26 said it is taking a hard line on Iran sanctions enforcement and Iran’s oil buyers should not expect any waivers to US sanctions that snap back in November.

The Obama administration, in contrast, granted sanctions waivers to countries in 2012-15 as long as they demonstrated significant reductions in Iranian oil imports every six months.

The announcement has created uncertainty for top Asian oil importers China, India, Japan and South Korea – which combined take in around 60-65 per cent of Iranian exports.

While Asian governments are still seeking clarity on the latest US stance, they have asked their oil companies to prepare a roadmap for alternative supply sources.

At least one Japanese refiner has said it is considering suspending Iran imports from the August loading program amid sanction fears and in India refiners have been told that the Euro payment mechanism that they were using to make payments for Iranian oil will no longer be available to them.

China, which has always maintained oil imports from Iran, has been quiet about the latest US stance. Beijing may have decided to adopt a wait and watch approach as it battles an ongoing trade war with the Trump administration.

Though, according to a senior state oil company executive, China is reportedly pushing for a system where purchases from Iran are insulated from the dollar-denominated system and payments are made through banks that qualify, implying that it intends to maintain its imports from the Persian Gulf supplier.

It is highly likely that Saudi, Iraqi and UAE barrels will replace some of the lost Iranian barrels in the Asian market. And as Iran faces the prospect of losing market share, it has stepped up its rhetoric against arch rival Saudi Arabia and warned that any attempts by the Saudis or other Opec members to produce above their quota would be in breach of the recent agreement and would undermine the unity and independence of Opec.

So, the world not only faces supply risks, but also the possibility of a broken Opec that is unable to control the oil markets.

Contributed by MRIGANKA JAIPURIYAR, Editorial Director, Asia Energy S&P Global Platts

It is a challenge for leaders to reconsider whether their current business and operating models are still efficient for the changing environment.

Businesses should imagine how innovation can disrupt their existing operating model. Technology is no longer the single celled organisms or collective single-celled but it becomes functioning organic network that is engaged into every angles of business throughout strategy, and operational processes. The disruption impacts business model through 3 key areas; responding to customer needs, new way of working and new forms of value.

Responding to customer needs

Customer is one of the most crucial factors changed by technology. Considering the rising of data and choice availabilities online, customers’ expectation and behavior vary over time given more knowledge, more data and more choices easily obtained. Business should be ahead of customers in terms of speed and various channels of services offering to meet dynamic needs of customers.

To do this, operating model should be adopted beyond a product-channel orientation, but more into a customer-centric focus. Modernized and digitalized customer-center platform enables operation’s capability to speed up the response to customer in every service level, recognize and resolve problems in a timely manner. Omni Channel strategy, one of technology evolution for retailers, is a development of multi- and cross- channels which serve customer beyond e-commerce but more into customer experience. Customer’s online and offline shopping journey are automatically recorded and integrated into back office operation. Each customer’s shopping process could be closely tracked to generated buying history including item viewed and purchased, time spent and channels accessed, i.e. mobile device, browser or even at the store for future online/offline purchase and also items reordering.

New Way of Working

Technology creates a possibility of new collaboration, communication and information flow. Cloud-based, Chatbots, AI/Cognitive tools and other online applications enable more comprehensive ways to communicate, to access real time data and to fasten knowledge transfer across business units and organizations. Collaboration could be promoted within and across functions and also partnership with the external in order to maximize the resource pool, knowledge sharing and technology investment.

New operating model should be designed to promote a collaborative culture which builds more responsive service delivery network. Front-, middle- and back- office operations can be reorganized to perform as one team to enable a spread of information and personnel across all functions/business units. In parallel, for external collaboration, the model should be able to determine how much ecosystem alliance; partnership should be made to create a maximum benefit for organization as overall.

New Forms of Value

As mentioned above, the value of technology-enabled operating model create integrated and efficient sets of process and activities as well as talent and new technology enhancement. In addition, technologies such as interactive data visualization and business intelligence could enhance controlling and monitoring performance since it generates real time and precise management dashboard, streamlining information flow, visualized reporting and provide predictive information to support decision making.

In the digital age, technology challenges companies to be leaner, faster, and well-operate at a maximum level. Even digital transformation and innovation might be a significant investment, Deloitte believes that it would create much greater return in a long term, just like what startups are investing. The result of new operating model development and a digital support for lean cost structure will potentially lead to business growth and the high value in all parts of the value chain. It depends on how ready your businesses are to ride the digital tide and get ahead of the changing world.

Contributed by KESSARA SAKMANEEVONGSA, Partner, Consulting Services, Deloitte Thailand

Pointing to the tourism industry, Yunyong said the dive boat disaster that claimed the lives of dozens of Chinese visitors off Phuket last week was unlikely to harm the key economic driver, but the government must act to rebuild confidence in the safety of tourism services.

The SCB Economic Intelligence Centre (EIC) has revised up its projection for economic growth, due increased export and tourism incomes, along with rising investment.

The centre predicts gross domestic product will expand 4.3 per cent year on year from the previous forecast of 4 per cent, Yunyong said.

Regarding household income, he said there were signs of broad-based growth, with the EIC researchers citing an expected boost from farm incomes that began rising in the second quarter of the year. Incomes had earlier contacted for nine consecutive months, he said.

Adding to the optimism is that the average wages of workers outside the farm sector have continued to improve since the beginning of the year. They rose 4 per cent in the first four months after being flat in the previous two years.

The slower growth in wages had been caused by the loss of three million overtime shifts in the past four years as factories adopted automation and robotics systems, Yunyong said.

However, he said the headline figures do not adequately reflect the reality of the household debt burden.

Household debt to GDP was 80.8 per cent and 78 per cent in 2015 and 2017, respectively, and it is expected to drop further to 77.6 per cent this year.

However, for those families coping with debts, the ratio of average debt to annual income has been accelerating at a steady pace. Debt to income was 82.7 per cent in 2015, rising to 94.7 per cent last year, said Yunyong, citing a survey conducted by the National Statistical Office.

“As a result, the benefits from rising incomes will not spill over to consumption as much as they should, as families have to pay off large debts” he said.

Consumption has not seen a broad-based increase. The consumption index expanded 3.9 per cent in the first five months of this year, but the gains were largely concentrated in Bangkok and among higher-income groups. It is expected to grow 3.5 per cent for the full year.

Regarding the outlook for private investment, the EIC forecast it would expand at a moderate rate of 3.5 per cent, supported by public investment and the upcycle in exports. Overseas shipments are expected to rise 8.5 per cent in dollar terms.

As for the risks arising from an escalation in global trade tensions, Yunyong said they had increased in the second half of this year. However, the impact on Thailand’s exports would be limited.

Tourism, one of the key engines for the economy, is expected to expand, Yunyong said. The dive boat disaster – in which 42 Chinese tourists died and a further 14 went missing – is “unlikely to hamper tourism”, he said.

However, the government must respond to the catastrophe decisively, Yunyong said.

He suggested that in the short run, the government has to investigate the cause of the accident in which the boat sank in rough seas on the way back from a popular snorkelling site on Thursday.

“The government must also rebuild confidence among tourists, demonstrating that lessons have been learned from this tragedy and that steps have been taken to prevent a recurrence,” Yunyong said.

No tour bookings have been cancelled since the accident, although it is low season, he said.

He said Thailand would likely welcome 38.2 million foreign visitors this year, up 8 per cent from 2017.

Tourism grew 13 per cent in the first five months of this year, with 27 per cent growth among Chinese travellers.

Public investment is expected to expand 10.7 per cent after a contraction of 1.2 per cent last year. Yunyong expects the central bank will not increase its policy rate from the current 1.5 per cent this year, given the absence any inflation threat.

Japanese start-ups will be encouraged to expand their businesses to and in Thailand, under the “JETRO Innovation Programme”, at the upcoming event.

“CEBIT ASEAN” will be held from October 18 to 20 at IMPACT Exhibition and Convention Centre in Muang Thong Thani.

The signing of the letter of intent is a significant step in the strategic alliance between JETRO and CEBIT ASEAN, strengthening the business alliances in Thailand between Thai and Japanese partners.

This collaboration is in line with JETRO’s three prioritised areas: upgrading industrial competitiveness, activation of the local economy, and globalisation of Thai companies.

“JETRO is committed to supporting digital-industry development contributing to Sustainable Development Goals. We expect to see this collaborative effort leading to new and innovative business partnerships between Thailand and Japan,” said JETRO Bangkok president Hiroki Mitsumata.

CEBIT ASEAN is billed as the IT event for digital business in Thailand.

The show is a “geo-clone” of the most successful and renowned trade show in the technology and digital industry, CEBIT, which is held annually in Hanover, Germany.

CEBIT ASEAN features an exhibition and a conference programme.

Plans for the show also include international pavilions where exhibitors from Europe and Asia band together to showcase their products and innovations.

Thus far, seven sovereign issuers around the world have sold green bonds for a combined equivalent of US$25.5 billion (Bt844 billion) and Moody’s expects the pace of issuance to accelerate as governments seek to promote sustainable policy agendas, encourage private capital into low-carbon and climate-resilient infrastructure, as well as signal their commitment to the Paris Agreement.

“Green-bond issuance provides a strong signal of a government’s commitment to its climate and environmental policy agenda and, in particular, how it intends to raise capital to implement its Paris Agreement commitments,” said Rahul Ghosh, a senior vice president at the ratings company.

The Moody’s report is titled “Green Bonds – Sovereign: Sovereign green bond market on course for critical mass, but challenges remain”.

Growth improved in the first half of the year and was more broad-based, driven by the external sector from both merchandise exports and tourism, which continued to expand at a high rate, EIC said.

This resulted in domestic private demand beginning to recover in conjunction with consumption and investment, while public investment resumed growth after having contracted at the end of last year, the centre added.

EIC now projects that the value of merchandise exports for the whole year will grow 8.5 per cent.

However, risks from a trade war will possibly worsen, which may affect global commerce and Thai exports in the period ahead, it warned.

It is therefore increasingly important for exporters to have coping strategies, such as finding new markets or preparing for potentially higher competition in some markets, the centre stressed.

EIC views that household income will likely continue expanding in the latter half of the year, thanks to both domestic and external demand, both of which are expected to grow and lead to higher demand for labour.

That said, it believes spending growth of low-income households may take time to recover, as household income has only just started to recover after not having increased for a long time, while household debt rose significantly and remains at a high level.

The SET Index’s movement was in a similar direction to other stock exchanges in the region.

The average daily trading value of the SET and the Market for Alternative Investment last month was Bt57.39 billion, some 34.3 per cent higher than in the same period last year, the SET said.

During the first half of 2018, foreign investors sold a net Bt179.84 billion of Thai shares.

The value of their holding slightly declined from around Bt4.85 trillion at the end of last year, and accounted for 29.73 per cent of total market capitalisation, compared to 30.84 per cent on December 31.

SET president Pakorn Peetathawatchai said the SET Index had declined in the same direction as the global market, causing the forward P/E ratio to reduce to 14.57 times, affected by concerns over trade conflicts and monetary-policy manoeuvres of the US central bank. However, the Thai economy still looks promising, driven by internal factors including the government’s accelerated investment and improving private investment, he added.