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Banking remains a highly profitable sector in Indonesia despite being limited in its reach. Leading banks’ average profits were the highest amongst major economies in 2012, according to Bloomberg data, a remarkable feat in an era of falling bank profits globally. Credit plays a modest role in the Indonesian economy, with loans amounting to 32.85% of GDP. This is considerably lower than in many neighbouring countries such as Malaysia (113.5%) and China (130%). Total credit has been growing rapidly in recent years, with a 24.4% increase in 2011, 23.9% in 2012 and 20.7% growth in the first half of 2013. Bank profits have remained consistently high, with a return-on-assets ratio of 3.09% by October 2013, which is more than double the regional average. Although rapid growth has put some strain on the banking sector, Indonesian banks continue to be well capitalised, with a capital adequacy ratio of 18.48% in October 2013, well above the central bank’s floor. Following over a decade of high profitability and fragmentation, the banking sector faces the twin challenges of increasing intermediation with the real economy and gradually lowering margins. As larger, more efficient banks capitalise on their positions, smaller lenders will need to innovate and study potential mergers and acquisitions to sustain their positions. Over the medium term, as the banking system faces increased ASEAN-wide competition, Indonesian banks will need to work at improving their efficiency. This chapter contains a banking viewpoint from Agus D W Martowardojo, Governor, Bank Indonesia; and an interview with Alan Richards, CEO, HSBC Indonesia.

Featuring a legal framework viewpoint from Yuthana Promsin, Partner and Co-founder of Jus Laws & Consult, this chapter examines Thailand’s status as a regional investment hub while guiding business investors through the legal system, with particular focus on foreign ownership.

Featuring a tax viewpoint from Andrew Jackomos and Paul Ashburn, Senior Partners at BDO Advisory, this chapter explains Thailand’s tax framework and how investors can prepare for the transition into the tax regime under the ASEAN Economic Community.

A long-awaited switch to digital TV and the expansion of the numbers of TV channels is taking place, bringing with it greater openness and competition within the nation’s leading media platform. Thailand also continues to develop its production side, with demand for content likely to surge as the new channels come on air, drawing on the country’s strong tradition in film and IT. Four of the six free-to-air channels are owned and operated by state bodies. The other two, which are private channels, typically draw the highest viewing figures. With frequencies assigned to the existing six channels, there has been no space left for new entrants, and broadcasters have had to move into the cable and satellite space. This will change with the implementation of the digital master plan. There is likely to be some consolidation as the number of channels expands, while those outfits with deeper pockets are likely to survive longer in an increasingly competitive environment. However, media is changing, too, and becoming more diversified and less state controlled, meaning there are plenty of opportunities for foreign investors.

The agriculture sector’s contribution to GDP has fallen from an average of 32.19% during the 1960s to 23.2% in 1980 and 9% in 2000. However, by 2007 the share had risen to 10.7%, and recent estimates have suggested that the sector now accounts for some 13% of GDP. With its products renowned throughout the world, particularly its rice, Thailand has also been an important international granary at times of global food need. Today, however, the sector faces some important challenges as it seeks to develop further. Debate surrounds the role of the state in the sector’s future, particularly regarding the government’s rice support policies. Locally, raising productivity and managing the agricultural labour market are also proving challenging. Despite a reduction in the number of farmers, the sector has been able to reverse the long-term decline in its share of GDP thanks to a shift in policy towards higher-value, more specialised products, as well as increased mechanisation, diversification, and productivity. The political framework governing agriculture, particular the rice and rubber segments, is still the source of some risk. Despite challenges, however, Thailand remains a global agricultural player. There is much to be developed, which could create major opportunities for investors in the years to come. This chapter contains an interview with Krisda Monthienvichienchai, CEO and President, Mitr Phol.