RISK CONSULTING Moving toward AEC: Impact to Internal Audit By: Prawin Kurowat and Term Techasarin The Institute of Internal Auditors of Thailand Annual Seminar 2012 9 August 2012 ADVISORY
Panel Mr. Prawin Kurowat Director of Internal Audit and Risk Management Minor International Public Company Limitedit Mr. Term Techasarin Partner, Risk Consulting KPMG Phoomchai Business Advisory Limited it 1
ASEAN Economic Community ( AEC ) The AEC Blueprint will transform ASEAN into a single market and production base, a highly competitive economic region, a region of equitable economic development, and a region fully integrated into the global economy." Declaration on the ASEAN Economic Community ASEAN cooperation Political cooperation Social cooperation Economic cooperation 2
AEC Blueprint SINGLE MARKET AND PRODUCTION BASE COMPETITIVE ECONOMIC REGION EQUITABLE ECONOMIC DEVELOPMENT INTEGRATION INTO THE GLOBAL ECONOMY 3
AEC Blueprint: Single Market and Production Base 5 Core Elements starting in 2015 goods services investments capital skilled labors 12 Priority Integration Sectors Agro-based products Healthcare Air travel Rubber-based based products Automotives Textiles and apparel E-ASEAN Tourism Electronics Wood-based products Fisheries Logistics - ASEAN Framework Agreement for the Integration of Priority Sectors) ) 4
AEC Blueprint: Single Market and Production Base (cont.) goods services investments capital Elimination of Tariffs, e.g. Eliminate import duties on all products except for the Sensitive and Highly Sensitive lists Action i. of Item 13, AEC Blueprint Elimination of non-tariff barriers Item 14, AEC Blueprint Rules of Origin - Item 15, AEC Blueprint No restriction to service suppliers in providing services and setting up a company across national borders, subject to domestic regulations Allow 70% equity participation in service business by 2015 Action v of Item 21, AEC Blueprint Not completely free, activities that may interfere national public safety still be subject to domestic legal restrictions. Engineering, nursing, architectural, surveying qualifications, tourism professional, accountancy services Protection of transfer or repatriation of capital, profits, dividends, etc. Item 27, AEC Blueprint Harmonize investment policies ASEAN Capital Market Development and Integration Facilitate the flows of payments and transfer of current account transactions Item 32, Action i., AEC Blueprint skilled labors Facilitate issuance of visas and employment passes for ASEAN professional and skilled labors Item 33, Action i. AEC Blueprint To support the free flow of services 5
AEC Blueprint: Competitive Economic Region To foster ASEAN Community to be a highly competitive economic region with economic stability by enhance competitiveness in 6 following factors: Competition Policy Consumer Protection Intellectual Property Right (IPR) Infrastructure Development Taxation E-Commerce 6
AEC Blueprint: Equitable Economic Development There are 2 components to equitable economic development. SME Development Initiative for ASEAN Integration (IAI) The main reason for equitable economic development is to close the gap for the less developed countries in order for all ASEAN members to increase their competitiveness and gain the most benefits from the formation of ASEAN Economic Community. 7
AEC Blueprint: Integration into the Global Economy Coherent Approach towards External Economic Relations Shall work towards maintaining ASEAN Centrality in its external economic relations. Enhanced Participation in Global Supply Networks Shall enhance participation by adopt internal best practices and standards and develop comprehensive technical assistant package for less developed countries. 8
Thai Corporate : SWOT Analysis STRENGTHS Approximately 40 million labor force Leading Rubber Exporters Location, 10 Gateways, 4 countries High craftsmanship WEAKNESSES Expensive labor cost Low business efficiency and productivity Low utilization of technology Lack of R&D and Innovation Agro-based resources Establish Regional and Global brand and production based Investment t within AEC Countries Bio, Nano, Material-technology, to support new product development OPPORTUNITIES Language barrier Mobilization of skilled labor to other countries Focus of Foreign investment Adequacy of Infrastructure to support logistic THREATS 9
Thai Corporate : PEST Analysis POLITICAL Political issues Government policy Tax, Law and Regulations ECONOMIC Expensive labor cost Foreign currency ASEAN +3/+6 Thailand focus on Myanmar, Global investment focus on Indonesia Aging society Safety, Health and Environmental focus Climate Changes SOCIAL Utilization of Production Technology Innovation and R&D E-Commerce TECHNOLOGY
Thai Corporate : Risk Management Consideration STRATEGY OPERATIONAL FINANCIAL COMPLIANCE Competition Economic Politic Innovation E-Commerce Social Quality standard Supply chain management Logistic Skilled labor Technology Product / Service Cost Foreign currency Investment and financing cost Accounting Information and Financial Reporting Tax Law and regulation Environment, Safety, and Health 11
Impact to Internal Audit PEOPLE PROCESS TECHNOLOGY GOVERNANCE 12
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