Economy & Trade

Singapore’s FDI Outlook for 2017: Recent Trends and Key Industries

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By: Koushan Das

Singapore offers investors an attractive and stable macroeconomic environment. Rapid industrialization, coupled with pro-FDI policies, has transformed the city-state into a highly attractive location for foreign capital. According to 2016 UN World Investment Report, Singapore FDI inflows stood at US$65 billion in 2015, while FDI in 2016 dropped to US$50 billion. The manufacturing and services sectors are the major contributors to the economy and account for almost 80 to 85 percent of the GDP.

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The Philippines’ Relationship With ASEAN

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Op/Ed by Bob Shead

ASEAN, (the Association of South East Asian Nations), was founded in 1967 “to strengthen further the existing bonds of regional solidarity and cooperation.”  The Philippines was one of the founding member countries when ASEAN was set up in Jakarta, while the ASEAN Economic Community (AEC), which was implemented in December 2015, has a primary purpose to create one of the largest single market economies in the world, facilitating the free movement of goods, services, and professionals between the 10 member states.  As a result, the Philippines relationship and interaction with ASEAN and its members is of key importance to the bloc.

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ASEAN Philippines Links

ASEAN is one of the cornerstones of the Philippines’ foreign and trade policies.  This is manifested in the Philippines policy to promote a more peaceful, stable, and free South East Asia, through the pursuit of different initiatives, in the policy making, economic, trading and functional cooperation activities.  To illustrate, the Philippines actively participates in the shaping of ASEAN’s regional agenda that will ensure the bloc’s relevance and importance in the international arena.  More importantly, the Philippines has constantly affirmed that ASEAN centrality should be promoted at all times, both in the group’s internal and external dealings, and that ASEAN continues to remain as the driver of regionalism, and act as an interlocutor between competing regional powers.  The underlying agenda of this is the Philippines’ strong support to strengthen a regional order that promotes good behavior, international trade and which adheres to internationally accepted norms and rules for the benefit of the region.  This is in line with the development of the AESAN Economic Community (AEC).  

ASEAN is not a supranational organization but rather a regional association.  The member states remain as the reference point of a regional organization that aspires to be both a political and economic community.   ASEAN, as a bloc, does not have a common foreign policy but strives to achieve a common position in issues that affect the region. 

The policy direction taken by the respective member-states is shaped by and grounded on their national interests and agenda.  This has led to friction between countries in ASEAN.   Due to different political, economic, and sociocultural systems of the ten members, there are instances when the member-states take on varying and conflicting positions on issues.  Given this context, the Philippines has to maintain a delicate and diplomatic posture in its relations with other member states, in order to push forward its interest, in particular in sensitive issues like protection and promotion of human rights, democracy, economic and trading issues, territorial and maritime issues, plus other complicated relationship problems.  

There are instances where there is no alignment of interests and agenda, leading to the Philippines, along with other ASEAN member states, tend to take the lowest common denominator, in order to have consensus on issues so as to arrive at an agreement.   Additionally, the Philippines recognizes that there exist differences in the perception and threat analysis that confront the member states.   This was last exemplified in the 2012 ASEAN Foreign Ministers Meeting debacle, where there was a failure to issue a Joint Communique. 

Alongside the multilateral framework in the conduct of Philippine-ASEAN relations, there is also a strengthening of the bilateral and trading ties with fellow member states that happens in parallel.  There is a convergence of national interest, specifically in the traditional security issues, which could be brought about by perceived common threat in the regional environment.  For example, the Philippines and Vietnam have elevated their bilateral ties to that of a strategic partnership.  In a statement released by the Philippine Department of Foreign Affairs following the conclusion of the first meeting of Philippines-Vietnam Joint Commission on Concluding a Strategic Partnership, the two sides “on the basis of amity, mutual respect and cooperation, the bilateral relations are growing in various aspects, including in political, trade and investment, fisheries, marine and oceanic affairs, defense and security cooperation, among others.”   The improvement in the relations between the Philippines and Vietnam is worth noting, given the minimal interaction in the past.   This was originally due to the fact that both countries were members of ASEAN, with the same problems.  Consequently, trading relations between the two countries have also improved.

ASEAN-EU links

The ASEAN Economic Ministers (AEM) and the EU Trade Commissioner met on 10 March 2017 in Manila, for the 15th AEM-EU Trade Commissioner Consultations.  These Consultations were co-chaired by H.E. Ramon Lopez, Secretary of Trade and Industry, of the Philippines, and H.E. Cecilia Malmström, EU Trade Commissioner.  The AEM and the EU Trade Commissioner noted the strong trade and investment in 2016, and the EU remained the largest external source of Foreign Direct Investment (FDI) flows into ASEAN in 2015 with € 23.3 billion.

ASEAN-US links

Recently the US Ambassador to the Philippines, Ambassador Sung Kim hosted a dinner reception at the US Embassy Residence to celebrate 40 years of US-ASEAN relations.  In his address, these were the main points covered:

It all began in 1977 when the US started engaging with the Association of Southeast Asian Nations as a “dialogue partner” to explore areas of cooperation in terms of trade and investment, technology transfer and other areas for mutual economic growth and development.  The partnership is also focused on supporting economic integration, promoting opportunities for women and addressing transnational issues and challenges. 

The US, in fact, was the first non-ASEAN nation to name an ambassador to the regional bloc in 2008, after which a dedicated mission to ASEAN was established in Jakarta, Indonesia.  In the last five years, some $4 billion has been spent by the US on various development projects aimed at benefiting the constituencies of ASEAN member-nations.

This year also happens to be the 50th year of ASEAN, with the Philippines holding the rotating chairmanship.  Certainly, a lot of interest and scrutiny is being placed on the relationship between the US and ASEAN considering recent developments such as the withdrawal of the US from the Trans-Pacific Partnership (TPP) trade deal.

Ambassador Kim also said that the US will continue to promote free trade and is looking at bilateral free trade agreements between member countries of ASEAN, including the Philippines.  

However, former Philippine Socio-Economic Planning Secretary Cielito Habito has suggested that a bilateral deal between the US and ASEAN as a “single party” may be preferable, since a number of the member nations do not have an FTA with the US.  Many are confident, however, that the relationship between ASEAN and the US will continue to flourish for continued peace and stability in the Asia-Pacific region.

Philippines and Indonesia relations – as the HQ for ASEAN

The Indonesia and Philippines relationship have been traditionally close for many years and this relationship has grown stronger during the history of ASEAN, and its established HQ in Jakarta. The two countries are very close allies, and both have supported each of their policies in the region such as democracy and the maritime law in the South China Sea.  Since diplomatic ties were officially established in 1949, Indonesia and Philippines enjoy a cordial bilateral relationship.  Both countries have established embassies in each capital, Indonesia has their embassy in Manila and consulate in Davao City, while Philippines has their embassy in Jakarta and consulate in Manado and Surabaya.  High rank stately visits have been conducted for years.

Additionally, both nations are the founders of ASEAN and the members of the Non-Aligned Movement and APEC.  Both countries are members of the East ASEAN Growth Triangle together with Brunei Darussalam and Malaysia in the BIMP-EAGA.  Both countries are mainly composed of islands.

Bilateral trade has trended positively in recent years.  According to the Indonesian Ministry of Trade, trade has increased from $1.12 billion in 2003 to $2.9 billion in 2009, and $3.89 billion in 2010.  Indonesia is currently the Philippines’ biggest supplier of coal, exporting about 70% of the Philippines’ coal imports.  Although as of June 2016, Indonesian coal exports to the Philippines are currently on a moratorium due to the growing concern of piracy in the Sulu Sea.


BIMP-EAGA (Brunei, Indonesia, Malaysia, and Philippines – East ASEAN Growth Area) was launched in 1994 as a co-operation initiative by Brunei Darussalam, Indonesia, Malaysia and the Philippines, all of which are member countries of the regional Association of Southeast Asian Nations (ASEAN).  The objective behind the creation of BIMP-EAGA is to accelerate economic development in the four countries’ “focus areas” which, although geographically distant from their national capitals, are in strategic proximity to each other, in one of the world’s most resource-rich regions.  The BIMP-EAGA initiative is market driven and operates through a decentralized organization structure involving the four governments and the private sector.

BIMP-EAGA co-operation aims to increase trade, tourism, and investments inside and outside the sub-region by:

Facilitating the free movement of people, goods, and services

Making the best use of common infrastructure and natural resources

Taking the fullest advantage of economic complementation  

BIMP-EAGA covers a land area of 1.6 million square kilometers and has a combined population of 57.5 million.

It comprises the following focus areas – the entire Sultanate of Brunei Darussalam,  the provinces of Kalimantan, Sulawesi, Maluku, West Papua and Papua in Indonesia; the states of Sabah and Sarawak, and the federal territory of Labuan in Malaysia; the island of Mindanao and the province of Palawan in the Philippines.

This sub-region has exceptional natural resources, encompassing two of the world’s largest rainforests (in Borneo and Papua), and biodiverse marine systems in the South China Sea, Celebes Sea, and, Sulu Sea.

BIMP-EAGA has a long history of participation in the global economy, stretching back to the silk route and spice trade between Europe, China and other parts of Asia.  EAGA supplies the export markets of ASEAN, North and South Asia, and the Middle East, following the expansion of its air, shipping, and land transport links, and the development of investment incentives.

Related-Reading-Icon-Asean Link RELATED: ASEAN Briefing Philippines Investment News Archive

The Philippines remains a strong and founding member of the ASEAN grouping, however, the many differing political differences do create problems within the organization.  It would appear that trading relations will become the most important aspect of ASEAN and the Philippines relationship.

The group has spurred economic integration, signing six free-trade agreements with other regional economies.  Yet various experts say that ASEAN’s impact is limited by a lack of strategic vision, diverging national priorities, and weak leadership.  ASEAN’s biggest challenge is negotiating a unified approach to China, particularly in response to its widespread maritime claims in the South China Sea.  Another important aspect is the United States still sees ASEAN as vital to the success of its strategic rebalance and strategic relationship, both politically and economically with Asia.  Likewise, other trading groups and nations, the EU, Russia, Australia, Japan etc, also regard ASEAN as essential in maintaining the trading strength of the individual member states of ASEAN.

Foreign investors should especially be on the look out for infrastructure development projects further linking the Philippines to the rest of Asia, while the Philippines itself is positioning itself both as a BPO service center for ASEAN (and to some extent, China) and as a light manufacturing alternative to Chinese based production. 


Bob Shead is Asia Briefings Philippines Correspondent and is based in Manila. He has 25 years experience as a diplomat in Asia.

Asia Briefing is produced by Dezan Shira & Associates, a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing throughout Asia. For assistance with foreign investment matters in the Philippines, please email or visit

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dsa brochureDezan Shira & Associates Brochure
Dezan Shira & Associates is a pan-Asia, multi-disciplinary professional services firm, providing legal, tax and operational advisory to international corporate investors. Operational throughout China, ASEAN and India, our mission is to guide foreign companies through Asia’s complex regulatory environment and assist them with all aspects of establishing, maintaining and growing their business operations in the region. This brochure provides an overview of the services and expertise Dezan Shira & Associates can provide.

An Introduction to Doing Business in ASEAN 2017
An Introduction to Doing Business in ASEAN 2017 introduces the fundamentals of investing in the 10-nation ASEAN bloc, concentrating on economics, trade, corporate establishment, and taxation. We also include the latest development news for each country, with the intent to provide an executive assessment of the varying component parts of ASEAN, assessing each member state and providing the most up-to-date economic and demographic data on each.

Human Resources in ASEANHuman Resources in ASEAN
In this issue of ASEAN Briefing, we discuss the prevailing structure of ASEAN’s labor markets and outline key considerations regarding wages and compliance at all levels of the value chain. We highlight comparative sentiment on labor markets within the region, showcase differences in cost and compliance between markets, and provide insight on the state of statutory social insurance obligations throughout the bloc. 



ASEAN Market Watch: Investing in Malaysia; Indonesia Pharmaceutical Sector, and Philippines BPO Industry

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Malaysia: World’s best country to invest

According to a recent report by Y&R’s BAV Consulting, The Wharton School, and US News & World Report, Malaysia leads as the best country for investments. The report based on a survey of business decision-makers on corruption, dynamism, economic stability, entrepreneurship, tax environment, innovation, labor force, and technological expertise ranks Singapore a close second. Industry experts believe robust growth, stable inflation rate, and low unemployment rates in the past few years provide a conducive environment for investors. 

Industries such as services, infrastructure, manufacturing, tourism, education, and construction which are the focus of the 2017 Budget and 11MP Economic Plan, are expected to attract majority of the investment. Industry experts believe the country has a shortage of scientific and technical workforce that can still discourage few investors. The average annual labor productivity growth between 2011 and 2015 was 1.8 percent, less than 11MP target of 3.7 percent. Investors seeking to produce for exports and operating in free trade zones will find Malaysia an efficient economy, while on the other hand, accessing local markets will still be challenging for investors due to non-transparent tender processes.

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An Economic & Social Background to the Philippines 2017

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Op/Ed by: Bob Shead

The Philippines is an island nation with a unique geography, a very diverse culture and history.  The country is composed of over 7000 islands, of which approximately 2000 are inhabited, and lies in the western Pacific Ocean.  The Philippines archipelago is divided into 18 regions, the three main island groupings are Luzon (including Manila) in the north, the Visayas in the center, and Mindanao in the south.   The Philippines strategic positioning as a gateway between the Pacific and the rest of Asia, in particular its proximity to the region’s two largest economies, China and Japan, provides it with several vital sea routes for trade and commerce.  However, to the west is the South China Sea, and the subject of China’s expanding footprint in the region.  This dispute, along with China’s ongoing maritime disputes with neighboring ASEAN countries, i.e. the 9 Dash Line (Vietnam, Malaysia, Indonesia, Brunei) is putting bilateral trade between the Philippines and these other ASEAN nations at risk.  Nonetheless, a more recent conciliatory tone from Manila towards Beijing has shown promise that intra-ASEAN and Philippines-China tensions may now be subsiding. As a result, the country is enjoying renewed interest from foreign investors, both in light manufacturing, and service industries such as business process outsourcing.     

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ASEAN Market Watch: Malaysia Export Growth, Indonesia-Saudi Arabia Relations, and Philippines AML Compliance

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Malaysia: Exports in January register strong growth

Malaysia’s exports in January accelerated from the previous month due to high shipments and strong demand from China. Exports rose 13.6 percent with a value of US$15.76 million from a year earlier, according to the Department of Statistics. Analysts say that global trade is also strengthening, with demand for manufactured products from China, Singapore, Indonesia, Thailand, and South Korea. Electrical and electronic goods, which account for more than one third of Malaysia’s exports, increased 11.4 percent from a year earlier, while palm oil and palm based products climbed 23 percent.

Exports to China, Malaysia’s largest trading partner, increased to 31.6 percent year-on-year in January, followed by 18.8 percent to Singapore. Analysts believe that demand for electronics will lessen in the second half of the year, slowing the country’s growth. However, the country’s central, Bank Negara Malaysia, stated that it expects stronger exports and steady domestic demand to keep up with economic growth.

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Cambodia’s FDI Outlook for 2017: Understanding the Challenges and Opportunities Ahead

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By: Dezan Shira & Associates 
Editor: Harry Handley

Cambodia has achieved GDP growth averaging seven percent per year over the past decade. Despite this growth, it remains one of the poorest nations in ASEAN. However, the Cambodian government has been working closely with a number of bilateral and multilateral donors, including the Asian Development Bank (ADB) and the IMF, to improve conditions in the country. One key element of this is the business environment.

As ASEAN’s third smallest economy, Cambodia is often far from the first economy that springs to mind when thinking about foreign investment into Asia. Challenging conditions, including a weak rule of law and underdeveloped infrastructure, contribute to a global ranking of 131st in terms of ease of doing business in the World Bank’s Doing Business Guide.  Despite this poor ranking, 69 percent of respondents in the American Chamber of Commerce’s ASEAN Outlook Survey 2017 believe that the Cambodian business environment is improving.

In order to thrive in this challenging environment, the current conditions, as well as future opportunities and threats in the market, must be understood.

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Malaysia’s FDI Outlook for 2017: Trends and Opportunities

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By Harry Handley

Malaysia, ASEAN’s third largest economy (after Indonesia and Thailand), is well on track to achieve its goal of becoming a high income economy by 2020. Despite modest GDP growth of 4.1 percent in 2016 (below the ASEAN average of 4.5 percent), Malaysia is one of the top performing economies in the region in terms of efficiency and business regulations. This competitive edge has been maintained by continuous reform efforts by the government.

Firms setting up companies in Malaysia are likely to experience higher business costs than in a number of other ASEAN states, caused by the country’s minimum wage, its newly implemented Goods and Services Tax (GST) and paid vacation allowances. However, an advanced infrastructure, highly educated and growing workforce and strong regulatory environment allow Malaysia to service high value add industries effectively and continue to entice overseas investors.

For incumbent firms and potential entrants alike, understanding Malaysia’s current investment trends as well as the factors which will shape its future are of utmost importance. 

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ASEAN Market Watch: Malaysia Manufacturing, Philippines Economic Freedoms, and Singapore SME Digitization

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Malaysia: “Most attractive manufacturing market” status retained

Malaysia retains the top position as the most attractive manufacturing market of choice for future relocations according to the new Cushman & Wakefield “Manufacturing Risk Index 2017” report. The “Manufacturing Risk Index” is an annual survey of the manufacturing sector, which considers investment policies, costs, and risks including political, economic, technological, and environmental risks for their assessment. Malaysia’s ranking is attributed to its infrastructure quality, trade, and logistics performance. 

The report also highlights Asia Pacific’s varying degrees of innovation such as automation and smart manufacturing which offers diversity for manufacturers. Almost half of the top 15 positions in the index are occupied by Asia Pacific countries. ASEAN countries such as Singapore, Thailand, Philippines, and Indonesia are ranked 12th, 14th, 19th, and 20th respectively. Based on the overall assessment, cost remains the most significant criteria for relocation currently, with further changes anticipated as the manufacturing industry moves to Industry 4.0, which incorporates automation and data exchange in manufacturing technologies.

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Thailand in 2017: a Changing Investment Landscape

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By Harry Handley

Bangkok2016 was a challenging year for Thailand, both economically and socially. The death of the much-loved King, His Majesty Bhumibol Adulyadej, clouded a year also blighted by political instability, water shortages, and bearish domestic business sentiment. Although official figures have yet to be released, Thailand’s GDP growth for 2016 is expected to be 3.2 percent, the third lowest in the ASEAN bloc (after Brunei and Singapore).

Despite low business confidence from locals, foreign businesses continue to be attracted by Thailand’s strategic position between China and India, access to the ASEAN free trade area, and the incentives offered by the Board of Investment (BOI). 2017 has been touted by some as a pivotal year for the Thai economy and ‘the year of concrete national reform’, with a major election on the horizon, either at the end of 2017 or the beginning of 2018 dependent of the progress of the royal succession. As such, it is important to review the state of the market at present and identify the key factors that may affect foreign businesses, both incumbents and potential entrants, in Thailand in 2017.

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Electrifying Laos: Opportunities for FDI in 2017

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By Zolzaya Erdenebileg 

While Laos is still one of the poorest members in ASEAN, the country has posted strong growth rates for the past ten years, typically oscillating between seven and eight percent. This places Laos among the fastest-growing economies in ASEAN. The country is rich in resources, particularly agriculture, forestry, hydropower, and minerals. However, infrastructure is still underdeveloped and poverty rates are high. Efficient management of national resources is key to unlocking Lao’s development potentials, and any instability in governance will pose higher risk for potential investors.

Economy snapshot

Laos is forecasted to have reached a growth rate of 6.8 percent in 2016. In 2017, the economy is expected to improve at a slightly faster rate with seven percent. This will make Laos the third fastest growing economy in ASEAN, behind Myanmar and Cambodia. Inflation remains steady at a projected 1.6 percent and 2.3 percent in 2016 and 2017, respectively. Laos runs a negative current account balance, at about 16 percent of GDP in 2016.

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