Philippines

ASEAN Regulatory Brief: Philippines Green Energy Initiatives, Myanmar Industrial Zone Land Use, and Brunei Companies Act Amendments

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Philippines: Tax incentives announced for companies going green

The Philippines Board of Investment (BOI) has announced that it is planning to introduce tax incentives for companies going green. The initiative under the Climate Incentives for Manufacturing (CLIMA) program will target firms in the manufacturing sector. To qualify, enterprises should promote energy efficiency and use technology that reduces greenhouse gas emissions. While the exact nature of the incentives are not known, they are likely to be in the form of capital equipment incentives and income tax holidays.

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Biomass Industry in the Philippines

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Op-ed by Bob Shead

This article will attempt to describe the economic advantages and environmental efficiencies of biomass power generation in the Philippines.  The biomass industry in the Philippines, while still far behind fossil fuel-based power generation, is rapidly advancing.  The term biomass normally refers to biological material that can be used as fuel.  It can be something as simple as a wooden log or more complex like alcohol.  Biomass for millennia has been the primary energy source on the planet. Although it is considered that all fossil fuels such as coal and oil originate from vegetation, they are excluded from the definition of biomass.

Sources of Biomass in the Philippines

The Philippines has large and abundant supplies of biomass resources, including agricultural crop residues, forest residues, animal waste, agro-industrial waste, municipal solid waste and aquatic biomass.  The most common agricultural waste are rice hull, bagasse, coconut shell husk and coconut coir.  This use of commercially produced agricultural residues converted into biofuels is increasing in the Philippines, as fossil fuel prices continue to rise.  Rice husks are perhaps the most important underdeveloped biomass resource that can be fully utilized in a renewable and sustainable manner for generation of electrical power.

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ASEAN Growth to Remain Resilient Despite Regional Vulnerabilities

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By Bradley Dunseith

In April, 2017, the World Bank (WB) released their biannual East Asia and Pacific Economic Update, entitled, “Sustaining Resilience.” As the title suggests, the WB anticipates growth in East Asia and Pacific, including ASEAN states, to remain resilient despite risks from global and regional vulnerabilities. In this article, we go through “Sustaining Resilience” and summarize the WB’s forecast for developing ASEAN states generally as well as their country specific predictions for economic growth.

About the report

The WB predicts that large developing economies will continue to grow moderately while smaller regional economies will benefit from the rapid growth of their neighbors as well as high commodity prices. The WB marked that poverty has continued to decline in most countries and will continue to fall with sustained growth and rising labor incomes. However, the WB report noted that global policy uncertainties means that countries must address macroeconomic vulnerabilities so as to prepare for external shocks to the economy. External shocks – such as changes in US policy – disproportionately affect smaller countries; as such, the WB report strongly recommends small economics to improve the efficiency of their public spending in preparation of needed structural changes.

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ASEAN Regulatory Brief: Malaysia Cabotage Policy, Philippines Tax Reform, and Laos Land Concessions

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MALAYSIA: Sarawak, Sabah and Labuan exempted from cabotage policy

With effect from June 1, 2017 the states of Sarawak and Sabah as well as the Federal Territory of Labuan will be exempted from the cabotage policy. As per the erstwhile policy, only Malaysia-flagged ships were permitted to transport cargo from Peninsular Malaysia to these three territories and vice versa. As a result foreign vessels carrying freight bound for the three territories had to stop at the port of Klang in Selangor state in Peninsular Malaysia in order to transfer the goods to domestic ships for onward shipment to Sarawak, Sabah and Labuan.

The Malaysian transport ministry has announced that the exemption will however not apply to freight transport between Labuan and the states of Sarawak and Sabah. While the domestic shipping industry has protested against the government’s move to end the cabotage policy, it has been welcomed by the local administrations. It is believed that the policy had led to higher prices of commodities and as a result a higher cost of living in the three territories. Observers have stated that now it will be possible to ship goods directly to Sarawak, Sabah and Labuan without having to transfer at a Peninsular Malaysian port.

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The Philippine Economic Zone Authority – Incentives and Assistance

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Op-ed by Bob Shead

The Philippine Economic Zone Authority (PEZA) is a Philippine Government agency, attached to the Philippine Department of Trade and Industry, and is the agency tasked to promote investments, extend assistance, register, grant incentives to and facilitate the business operations of investors in export-oriented manufacturing and service facilities inside selected areas throughout the Philippines, known as PEZA Special Economic Zones.

PEZA oversees and administers Philippine tax exemptions, and other beneficial incentives to foreign investors, developers and operators of, ready to occupy, environmentally friendly, secure and competitively priced Special Economic Zones (see below for a list of Philippine Economic Zones).  PEZA also assists investors who locate in service facilities inside selected areas in the country (areas named as PEZA Special Economic Zones); these are usually Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO) companies.  Other activities also eligible for PEZA registration and incentives include establishment and operations within the Special Economic Zones for tourism, medical tourism, logistics and warehousing services, economic zone development and operation and facilities providers.

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ASEAN Market Watch: Singapore Innovation Fund, Philippines Credit Rating, and Myanmar Tourism

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Singapore: Innovation fund created to fuel growth

As part of its bid to fuel economic growth, Singapore’s government is setting up a S$1 billion (US$718 million) fund to help innovative companies to develop their businesses and expand overseas. Billed as the Makara Innovation Fund, the project is a collaboration between the Intellectual Property Office of Singapore (IPOS) and local private equity firm Makara Capital. According to IPOS, the fund will invest S$30 million (US$21.5 million) to S$150 million (US$107.5 million) each in 10 to 15 companies with globally competitive technologies over the next eight years.

According to Bloomberg’s 2017 innovation index, Singapore ranked sixth ahead of the U.S. and Israel. According to Bloomberg estimates, Singapore has the third-largest number of patents granted per one million inhabitants, trailing only South Korea and Japan. As per latest available data from 2015, Singapore had 10,814 applications for patents, the largest number of any Southeast Asian nation, according to the World Intellectual Property Organization. According to IPOS, the agency plans to double the number of intellectual property experts in Singapore to 1,000 over the next five years and will train 4,000 people a year. It will also assist companies in using intellectual property as collateral for financing. IPOS expects these initiatives to add about S$1.5 billion (US$1.07 billion) in value to Singapore’s economy over the next five years.

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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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ASEAN Regulatory Brief: Singapore-Ghana DTA, Philippines Tax Amnesty, and ASEAN Banking Sector Integration

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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.

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