Economy & Trade

The Philippines and Hong Kong – Trade and Economic Relations

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Op/ed by Bob Shead

Hong Kong is the nearest major international city to Manila, and just one and half hour away by flight from the Philippine capital.  The related sea trade routes, across the South China Sea, are always busy and form part of the China Economic Silk Route.  Since the handover of Hong Kong to Mainland China in 1997, the territory has maintained its trade and economic separation from China, under the 50 year, One Country Two Systems, handover agreement.

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ASEAN Market Watch: Philippines FDI Surge, Malaysia Construction Sector, and Laos Tourism Industry

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The Philippines: Fresh FDI surge registered

According to figures released by the Philippines’ central bank, Bangko Sentral ng Pilipinas, the country registered US$685 million in fresh Foreign Direct Investment (FDI) in January, a 13.2% increase from US$605 million registered over the same period in the previous year. The foreign capital received in January is also the highest monthly FDI inflow since a US$744 million FDI inflow in November 2016. The central bank has stated that the fresh FDI surge comes as investors remain optimistic on the growth potential of the country’s economy, which is backed by strong macroeconomic fundamentals.    

The Philippines economy, with an upwardly adjusted 6.9% growth rate, was one of the fastest growing markets in Asia in 2016. Industry watchers and economists have credited the country’s growth successes to large foreign currency reserves and a sound banking system. According to the central bank, the top sources of FDI at the beginning of the year were Germany, Singapore, Hong Kong, the United States, and Japan. Among the largest recipients of foreign capital are electricity, gas, steam and air conditioning supply; construction; wholesale and retail trade; administrative and support service; and financial and insurance services sectors. The central bank expects FDI to reach at least US$7 billion by the end of this year.

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Business Process Outsourcing in The Philippines

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Op/ed by Bob Shead

The Philippines Department of Trade and Industry (DTI) defines BPO as the “delegation of service-type business processed to a third-party service provider.”  The industry is generally divided into the following sectors:  Contact centers, back office services, data transcription, animation, software development, engineering development and game development.

BPO in the Philippines is becoming a key developing industry, primarily due to the relatively low cost of living, and a workforce which composed mainly of young and educated Filipinos with good spoken English language skills.  The majority of international research and data companies have placed the Philippines as the no 1 trending country as the top outsourcing destination.  In 2015, the Philippines replaced Mumbai as the 2nd ranking BPO destination and will in all likelihood continue to maintain a high position in the Top 10 worldwide outsourcing destinations (dominated mostly by Indian cities) in 2017.

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Labuan: Offshore Opportunities in Malaysia

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By Bradley Dunseith

Labuan is an offshore, Malaysian island, which has the benefit of low tax regimes while still retaining the protection of Malaysia’s laws and regulations. This means Labuan entities benefit from nearly all the Double Taxation Agreements (DTAs) Malaysia has signed with over 70 countries while profiting from tax exemptions under the Labuan International Banking and Financial Center (IBFC).

Considered the ‘pearl of Borneo,’ Labuan is located off the coast of the eastern Malaysian state of Sabah and borders Brunei by sea. The territory is strategically located in close geographical proximity to financial capitals like Hong Kong, Jakarta, Kuala Lumpur, and Singapore. Labuan is technically comprised of seven islands – Labuan Island proper and six smaller satellite islands – and enjoys tropical weather. Labuan offers multiple ferry connections to mainland Malaysia and Brunei; its airport is served by two daily flights to Malaysia’s capital Kuala Lumpur and one daily flight to Kota Kinabalu, the Sabah state capital. The island has a deep sea port and is planning to further develop its airport. 

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The Philippines’ Economic and Political Relations With China

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Op-ed by Bob Shead

The focus of this article is a very complicated but important regional issue in ASEAN – the current state of the economic, trade and political relations between the Philippines and the Peoples Republic of China.  The election of Philippine President Rodrigo Duterte in 2016 has in fact changed the strategy and effects of this relationship.  Last year, this relationship was described by the Huffington Post, as the most toxic in Asia, when Duterte’s predecessor, President Aquino was in charge.   However, since President Duterte took office last year, he has extended a hand of economic and political cooperation to China, and his official visit to Beijing last October, was an economically productive visit as it was formative in securing investment and credit line pledges that amounted to approximately US$ 24 billion in business and trade deals for the Philippines. 

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ASEAN Market Watch: Indonesia Automotive Market, Malaysia-India Trade, and ASEAN Manufacturing Sector

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Indonesia: Largest car market in ASEAN

In 2016, 3.16 million cars were sold in the ASEAN region, according to the latest data from ASEAN Automotive Federation. Around 1.06 million cars, 33 percent of the total car sales, were sold in Indonesia. Thailand follows at second place with 768,788 cars. However, Thailand leads in terms of car production among the ASEAN countries. The country produced 1.94 million vehicles, accounting for almost 50 percent of total ASEAN manufacturing. Indonesia produced 1.17 million cars in 2016.

Industry experts believe Indonesia’s dependency on foreign investment for the automobile sector and the lack of components manufacturing industry will impede its manufacturing capabilities in comparison to Thailand’s current manufacturing capacity. Unlike manufacturing, car sales will continue to see a growth in Indonesia due to a growing economy and increase in purchasing power. Malaysia, Philippines, and Vietnam follow Indonesia and Thailand in terms of car sales.

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Podcast: Talking ASEAN Episode 1 – FDI Opportunities in ASEAN, a Look Ahead for 2017

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In the first-ever episode of the Talking ASEAN podcast series, Dezan Shira & Associates’ Dustin Daugherty and Max Brown provide a country-by-country prediction for ASEAN’s foreign investment future. As part of this, the recent progress and prospects for each economy are evaluated in a regional context. 

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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 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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