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.
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.
Singapore – Ghana sign Double Taxation Avoidance Agreement
Singapore and Ghana have signed a Double Taxation Avoidance Agreement (DTA) on March 31, 2017. The agreement aims to reduce double taxation and tax disputes by clarifying the taxation rights on all types of income flows arising from cross-border business between the two countries. The DTA aims to reduce trade and investment barriers and increase trade flows between the two countries.
The agreement stipulates that withholding taxes on dividends, interest, and royalties will not exceed seven percent, while withholding taxes on services will be capped at 10 percent. All rates will come into effect on or after January 1, following the year when the DTA comes into force. The DTA will come into force after its ratifications by the two countries.
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.
Malaysia – EU trade to grow by 20-30 percent
Malaysian and EU authorities expect the proposed Malaysia-European Union (EU) Free Trade Agreement (FTA) will increase trade volumes from 10 percent to 20-30 percent. The growth is based on EU’s existing FTA with South Korea, which grew by 35 percent in the last five years. Both South Korea and Malaysia have similar EU trade volumes. Both parties are pushing to implement the agreement by the end of 2017. The countries met at the ASEAN Regional Seminar on Transit and Transshipment along with eight ASEAN member states.
Malaysia’s trade with EU has moved away from being a participant country to sharing best practices, especially in the area of export control after they implemented the Strategic Trade Act (STA) 2010. The act is an export control law that encourages exports of strategic items. Both parties also focused on trade laws, transit and transshipment regulations, regional cooperation, and challenges in building strategic trade controls. EU is Malaysia’s third largest trading partner, with the last three years witnessing a positive trade balance and a growing number of EU companies investing in Malaysia.
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.
Singapore: Government proposes new cybercrime laws
The Singapore government will include four major amendments to the Computer Misuse and Cybersecurity Act in view of growing cyber threats. Once the Bill is implemented, it will criminalize trading of personal information such as credit card details, medical information, and banking information, even if no hacking was involved to gain such information. Buying or selling of hacking tools and software with criminal intent will also be considered an offence. Overseas committed offences will also fall under the ambit of the amended Act. Any act that causes illness, injury or death, and disruptions to essential services, national security, and Singapore’s foreign relations will be considered an offence.
According to a new section in the bill, multiple unauthorized access to one computer for a period of 12 months or less will be treated as a single offence. Treating multiple unauthorized acts as a single offence will lead to a heavier penalty. The maximum penalty under the Computer Misuse and Cybersecurity Act varies from US$5,000 fine and two years’ imprisonment, to a US$100,000 fine and 20 years’ imprisonment depending on the crime. Last amended in 2013, the government plans to introduce a new Cybersecurity Act in the middle of 2017 after public consultations.
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 firstname.lastname@example.org or visit www.dezshira.com.
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Dezan 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 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.
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.
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.