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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An Introduction to Doing Business in ASEAN 2017

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By: Dezan Shira & Associates

An Introduction to Doing Business in ASEAN 2017, the latest publication from Dezan Shira & Associates, is out now and available for complimentary download through the Asia Briefing Publication Store.

What happens in and around ASEAN is one of the key factors increasingly impacting upon China and India trade flows, as well as the rest of Asia. While the ASEAN trade bloc has been in existence since 1967, it has really shown its importance in trade and commercial business flows since the rise of China over the past three decades, and through its response to China’s changing domestic demographics. Those changes – an aging and increasingly consumer demanding China – have been skillfully adapted by ASEAN to place the future of global manufacturing, and where it takes place, firmly within its own orbit.

Simply put, free trade agreements that came into effect with China and India in 2010 changed the face of Asian trade and production, and are continuing to do so. For example, bilateral trade figures between China and ASEAN’s Big Five of Indonesia, Malaysia, Philippines, Singapore, and Thailand have multiplied by factors of 500 percent since the agreement was signed. With the smaller ASEAN nations of Cambodia, Laos, Myanmar and Vietnam coming into line with their own compliance of ASEAN customs duty reductions at the end of 2015, the entire bloc offers close to zero import-export tariffs for much of emerging Asia, including the giant markets of China and India, possessing some 500 million middle class consumers between them. ASEAN therefore represents a massive trade bloc possessing free trade agreements of global strategic importance. The question of accessing ASEAN for the benefit of North American, European and other global purchasing and manufacturing executives is a key function of this report.

An Introduction to Doing Business in ASEAN 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 in our “Important Updates” section 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. Additional research and commentary on ASEAN’s relationships with China, India and Australia is also provided.


  • An introduction to ASEAN 
  • Country profiles
  • Case studies: ASEAN as a platform for Asian growth

Our practice, Dezan Shira & Associates, has taken giant steps into the ASEAN market through the establishment of offices throughout the region, in addition to the creation of a unique alliance of firms. That, coupled with our existing long experience of handling foreign investment into China and India, puts us in a unique position of truly understanding how Asia works and how to maximize its free trade benefits.


Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is 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 in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email or visit

Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.


Related-Reading-Asean Book Title

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 Regulatory Brief: Building Fines in Myanmar, Air Cargo Subsidies in Indonesia, and Quality Inspection in Laos

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Myanmar: Hefty Fines for flouting building regulations

From April 1, building owners in Mandalay will face hefty fines if their buildings violate government regulations or have been constructed without a valid permit. As per the Mandalay City Development Committee (MCDC) building rules section 10 (a), (b), (c), the new fine rates for buildings constructed beyond the permit stipulations or without approval are US$10.89 (K15,000) per square foot for reinforced concrete buildings and US$7.26 (K10,000) per square foot for brick nogging buildings. The penalty for business and contract buildings will be US$10.89 (K15,000) per square foot, while for other buildings it will be US$5.81 (K8,000) per square foot.

Earlier, builders violating the norms could easily pay a small fine and continue flouting guidelines. The MCDC hopes that the new fines will force builders to construct in accordance with the regulations. In some cases, the fines can be higher than the value of the building depending on the violation. The MCDC also stipulated that buildings for business use should include parking lots, fire extinguishers, and automated fire extinguishing systems.

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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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ASEAN Regulatory Brief: Indonesia Transfer Pricing Rules, Singapore-Laos Cooperation, and Thailand 4.0 Strategies for SOEs

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Indonesia: New rules for transfer pricing

The Indonesian government approved a new Minister of Finance regulation, MoF 213/2016, on new rules for transfer pricing documentation, effective January 2017. The new decree stipulates that firms doing cross-border transactions with affiliates must prepare transfer pricing documents detailing their global structure and payments. The move aims to match global standards and curb tax avoidance. Multinationals with annual turnover of at least US$822.74 million (IDR 11 trillion) must prepare a country-by-country (CbC) report with information about their affiliates, revenue, profits, income tax paid in different jurisdictions, retained earnings, and assets. The companies are also required to prepare a master file and a local file, which should include its Indonesian company details, structure, assets, and transactions.

Companies with annual gross revenue of more than US$377,000 (IDR 50 billion) or accumulated transactions of more than US$150,800 (IDR 20 billion) for tangible assets and US$37,700 (IDR 5 billion) for intangible assets need to prepare only the master and local files. Transactions with tax residents in countries with a lower statuary rate than that of Indonesia’s 25 percent are also required to prepare the master and local files. The government is also offering companies to settle previous tax disputes by paying a penalty under an amnesty program until March 2017.

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ASEAN Regulatory Brief: Cambodia Tax Regulations, Laos Foreign Currency Loans, and Philippines-Cambodia Bilateral Relations

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 Cambodia: New Tax Regulations for Multi-activity Businesses

The Ministry of Economy and Finance (MEF) in October introduced notification Prakas 1127 detailing updated requirements for companies carrying multiple business activities including one or more Qualified Investment Projects (QIP). A QIPs is an investment project that has been issued a Final Registration Certificate (FRC). In order to qualify as a QIP, the investor has to register the project with the Council for the Development of Cambodia (CDC) or Provincial Municipals Investment Sub-Committee (PMIS) to receive the FRC. Businesses that will be affected include those that have more than one QIP, those that carry out more than one business activity subject to different rates of tax on profit and companies that are involved in QIP and non-QIP business activities.

This notification also applies to businesses carrying out the aforementioned activities that were incorporated before October 11. Such businesses will have to register their business activities separately with the General Department of Taxation (GDT) within 15 days of starting the activity and get a separate Value Added Tax (VAT) and Tax Identification Number (TIN). These business will also have to submit monthly and annual tax returns for the registered business activity.

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ASEAN Regulatory Brief: Philippines Disaster Coverage, Cambodia Tax Amendments, and Singapore-Laos DTAA

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Philippines: Government Considers Mandatory Disaster Coverage

The Philippines government is considering a mandatory household and business insurance cover against natural disasters. While some individuals take out policies against natural threats, the Philippine Insurers and Reinsurers Association (PIRA) state that a mandatory scheme allows for the significant amount of funds required to meet the large claims that are likely to be made.

The developments come in the context of the Philippines being prone to natural disasters like typhoons and flooding. The Super Typhoon Haiyan, three years ago, cost the economy around US$ 14 billion, out of which only US$ 2 billion was covered by insurance. A study by international insurer Lloyd’s City Risk Index 2015-25 showed that around half of Manila’s GDP of US$ 201 billion is at risk of being lost due to a natural calamity without any insurance coverage. The proposal is backed by private sector insurers as well as the World Bank. If passed, the bill would boost the insurance industry.

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ASEAN Market Watch: Malaysia Tourism, Thailand’s Railway Network, and Laos’ Economic Growth Forecast

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Malaysia: Incentives on Offer to Attract More Chinese Tourists

After the Philippines, Malaysia is all set to lure Chinese tourists with a raft of initiatives. Earlier this year, Malaysia signed a Memorandum of Understanding (MoU) with Chinese e-commerce company Alibaba, which allows Chinese consumers to access Malaysian tourism and services on its website. In addition, the Malaysian government launched an e-visa programme to ease entry restriction for Chinese tourists. At present, the government allows visa-free entry for Chinese tourists staying for 15 days or less.

China currently has the largest outbound tourism market. In 2015, around 120 million Chinese nationals traveled abroad, with Malaysia a key destination. Chinese tourists to Malaysia were 1.68 million in 2015, a 4 percent increase from the previous year. In 2016, inbound traffic from China continued to increase. This is shown by an upsurge in the number of flights. For example, AirAsia has increased weekly flights from Beijing and Shanghai to Kuala Lumpur. The government has set a target of bringing 30.5 million visitors by the end of 2016. Other initiatives include investing in transport infrastructure. A high-speed rail service between Malaysia and Singapore is expected to be completed in 2026. An integrated transport system is also planned in Penang which is expected to increase tourist activity.

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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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Indonesia Promotes ASEAN Minimum Wage

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By: Maxfield Brown

Indonesia has announced its intention to propose a regional minimum wage for ASEAN during a recent World Economic Forum event held on the first and second of June in Kuala Lumpur. During the event, Indonesian officials cited wage disparities between low cost production hubs such as Vietnam and those economies with more expensive labor forces, and  expressed concerns that these differences could result in a race to the bottom and ultimately lead to the exploitation of workers. The specifics of Indonesia’s proposal are expected to be released at the upcoming ASEAN manpower ministers’ meeting.

Surprisingly, there has been considerable fanfare behind the idea of an ASEAN minimum wage, with Cambodia and Vietnam among those showing support. However, the extent of regional commitment remains to be seen as nations continue to compete for capital inflows brought on by a number of pending trade agreements and relatively competitive workforces. Beyond doubts over the willingness of nations to implement a minimum wage, questions also arise over the current capacity of ASEAN as a whole to institute regional standards of this magnitude.

From the perspective of investment, collective commitments to a regional wage minimum bring up important questions over the structure of wage floors within ASEAN. With regard to regulation as a whole, talk of a minimum wage also necessitates reflection on the ability of ASEAN’s current treaty structure to institute and enforce regulations of this magnitude. 

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