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Donald Trump in the White House: Implications for the Future of the TPP and Free Trade in ASEAN

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By Dezan Shira & Associates

US president-elect Donald Trump’s opposition to the Trans-Pacific Partnership (TPP) is well-known and the future of the trade deal is now on tenterhooks. For the supporters of the TPP, Trump’s victory has meant that their worst fears are now going to unfold. Opponents of the trade deal are rejoicing at their expectation that Trump will now move quickly to fulfill one of his most controversial campaign promises – to abandon the TPP. Any prospects of the US renegotiating the TPP are not only bleak but also impractical – the trade deal was seven years in the making, meticulously negotiated and involved compromises from several countries on both sides of the Pacific.

Professional Service_CB icons_2015RELATED: Pre Investment and Market Entry Advisory from Dezan Shira & Associates

Implications for ASEAN

So now if the US does ultimately withdraw from the TPP, what implications will this have for free trade in the ASEAN region? Before analyzing this, it should be kept in mind that TPP’s potential failure is unlikely to have any significant immediate economic impact on the region. It was not a trade deal in force, but only offered prospects of newer free trade rules coming into effect in the near future. Instead of being a step backwards, it is more a lack of further progress as far as development of free trade in the region is concerned.

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Indirect Taxation Across ASEAN

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By: Dezan Shira & Associates

Among a myriad of factors which determine competitiveness within ASEAN member states, rates of taxation are a particularly salient judge of character for the treatment of foreign investment. In recent years, corporate income tax (CIT) has become the standard bearer for tax benchmarking, however, foreign investors will be faced with a variety of different taxes in the event that capital is committed. For those importing and exporting, indirect taxation, including value added taxation (VAT) and goods and services tax (GST) are significant forms of tax that should not be disregarded. 

In essence, an indirect tax adds to the price of a purchasable product or a payable service, thereby increasing the cost of that product or service and causing consumers to indirectly pay its rate of taxation. Indirect taxes thus differ from other forms of taxation, such as corporate income and individual income tax; both of which require a business or an individual to pay the applicable amount directly to a government.

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ASEAN Regulatory Brief: Foreign Banks in Myanmar, Thai Minimum Wages, and Increasing SME Aid in Brunei

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Myanmar: Government Approves Licenses to New Foreign Banks

The government recently gave approval to four new foreign banks to operate in the country. The four banks are as follows:

  • Bank for Investment and Development – Vietnam
  • SUN Commercial Bank – Taiwan
  • Shinhan Bank – South Korea
  • State Bank of India – India

With the issuance of these licenses, the total number of foreign banks now allowed to operate in Myanmar has risen to thirteen. A number of banks that have been approved have not opened branches yet, as they fulfill their regulatory compliance obligations. In addition, a number of banks will operate under temporary licenses for a year, and will only become permanent, once they fulfill their obligations to the government. Once the banks have been operationalized, foreign companies will find it easier to access financing, which the World Bank stated was the largest problem for business in Myanmar. The approval for the banks is a part of the government’s larger plan to attract foreign investment into Myanmar.

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ASEAN Market Watch: Malaysian FTAs, Auto Production in Brunei, and Thai Flights to Laos

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Malaysia: FTAs to be Signed in Bid to Boost Economy

Malaysia is expected to sign three more Free Trade Agreements (FTAs) this year according to International Trade and Industry Second Minister Ong Ka. The three FTAs will be with the European Union, Hong Kong and the Regional Comprehensive Economic Partnership (RCEP).

The FTAs are expected to further increase volumes in trade and investment as well as bolstering revenue. The minister further stated that the FTAs will facilitate two-way trade, with zero tax rates and no import duties on almost 90 percent of products. In addition, more FTAs are planned to further help the economy and boost two-way trade. According to data, 65 percent of trade in 2015 was due to FTAs –which removed tax and non-tax barriers. Ong further stated that his could increase to 70 percent this year.

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ASEAN Regulatory Brief: Brunei’s New Finance Rules, Eased Export Restrictions for Myanmar, and a Fight Against Graft in Indonesia

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In this edition of ASEAN Regulatory Brief, ASEAN Briefing takes a closer look at Brunei’s new finance regulations, the US’s eased export restrictions for Myanmar, and a fight against corruption in Indonesia.

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Nationality and Residency Requirements for Directors across ASEAN – Part One

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By: Dezan Shira & Associates
Editor: Steven Elsinga

asean-e1436103044232Directors are a crucial part of every company. Appointed by the shareholders, they are charged with running the company and deciding its day-to-day affairs. They often have the capacity to bind the company as well.

Given the important role that directors have in a company, some countries have chosen to attach nationality or residency requirements to being a director in companies registered within their territory. These differ strongly among ASEAN nations, with the more liberal member states not imposing any requirements, while stricter ones require half the board to be resident in the country.

This two-part article discusses the requirements imposed on directorship in each ASEAN state. Some ASEAN member states follow a two-tier board system. Where relevant, we will discuss these additional institutions as well.

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Foreign Investment Restrictions across ASEAN: An Overview of the Region’s “Negative Lists” – Part Two

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By: Dezan Shira & Associates
Editor: Steven Elsinga

This is the second installment in the series on FDI restrictions in ASEAN. Please click here to read Part One.

The legal regime on foreign investment restrictions differs strongly among the ASEAN member states. Some nations, such as the Philippines or Indonesia, use the model of a Negative List that details which sectors are closed, and which ones have equity caps. China too, follows this model.

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An Overview of IFRS Adoption in ASEAN – Part Three

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By: Dezan Shira & Associates
Editor: Maxfield Brown

ato-tax-refundIn this final installment on the Association of South East Asian Nation’s (ASEAN) adoption of International financial reporting standards, ASEAN Briefing touches on the state of harmonization in the Philippines as well as the regional bloc’s frontier economies. 

Unlike previous installments, nations covered herein present divergent opportunities for investment. The Philippines – an original member of ASEAN 6 – has a long history of financial reporting requirements, and its transition from national GAAP to IFRS is largely representative of previously covered member states.

ASEAN’s frontier economies on the other hand offer investors a relatively blank slate. The absence of preexisting regulatory infrastructure has enhanced and – in several instances – allowed swift and uncompromised convergence with international standards to take place. Although implementation of IFRS promises to reduce compliance costs for wholly owned foreign investment projects, lagging local penetration of accounting practices among other issues mandates a careful selection of local partners.

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State by State – ASEAN and Pennsylvania Trade

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By: Dezan Shira & Associates
Editor: Fernando Vidaurri

Pennsylvania is an important economic player within the US and the world. Once a manufacturing powerhouse, helping pave the way for the industrial development of the US, the state today has transitioned towards a high-tech manufacturing and service focused economy. In 2014 the state was the 10th largest exporter in the nation, reaching US $41 billion in exports in goods and US $15 billion in services.  If the state was a country it would be the 27th largest economy in the world.

One of the areas where trade has been growing the strongest is with countries that have concluded an FTA with the US – the state has seen a 109 per cent increase in exports to this category of countries since 2004. However, the state’s trade with countries outside of the US’s FTA network has picked up as well, and ASEAN has become an important economic partner for Pennsylvania. Moreover, ASEAN as a bloc is a trade partner with enormous scope for growth with the state over the coming decade.

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Brunei Seeks to Improve Business Environment, Diversify Economy Ahead of AEC Compliance

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Brunei has acknowledged the need to diversify its economy away from its current focus on oil and gas industries, particularly with the ASEAN Economic Community soon to be implemented. As such, the government is attempting to foster the creation of new core industries and attract greater foreign investment. The governmental plan “Vision 2035” is part of the official attempt to create a more attractive business environment by developing a stable and economic climate in the country.

Brunei’s economy is still heavily dependent on oil and gas. According to the country’s Minister of Industry and Primary Resources, YB Pehin Dato Hj Yahya, “the oil and gas sector currently makes up close to 67 percent of our Gross Domestic product (GDP); represents close to 90 percent of the government’s revenues; contributes a staggering 96 percent of our exports; but employs less than five percent of our workforce.”

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