European Union

ASEAN Regulatory Brief: Malaysia-EU Trade, Myanmar Insurance Sector, and Indonesia Tax Compliance

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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.

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ASEAN Market Watch: Philippines FTA with EFTA States, Myanmar Retail Sector, and Google-Indonesia Tax Settlement

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Philippines: Free Trade Agreement with European Free Trade Association Expected in August 2017

The Philippines’ government is expected to complete ratification of its Free Trade Agreement (FTA) with the four-nation European Free Trade Association (EFTA) by August 2017. The four countries include Switzerland, Iceland, Liechtenstein and Norway. The agreement is currently with the Department of Foreign Affairs and will later be sent to the Senate for ratification. This is part of the Philippines’ three-pillar strategy of widening and strengthening its access to Europe – one of the country’s biggest market.

Trade between EFTA states and the Philippines remained stable worth around US$ 850 million in 2015. As per the FTA, EFTA states will abolish all custom duties on industrial products, including fish and other marine products from the Philippines. In turn, Philippines will gradually eliminate custom duties on industrial products, fish and other marine products from EFTA states over a 10-year period. The Philippines is also currently negotiating a FTA with the European Union (EU), which will be in effect once internal procedures are completed.

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Brexit Implications for ASEAN Based Investors

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ASEAN BrexitBy: Maxfield Brown

In a victory that stunned analysts around the world, the UK has voted to exit the European Union (EU) by a margin of 52 to 48 percent. In addition to producing significant implications for investors across Europe, the interconnected nature of the global economy leaves businesses across the world exposed. ASEAN is no exception. Currency markets within the South East Asian bloc have already seen swift valuation changes, and the pending exclusion of the UK from the EU’s network of trade negotiations in ASEAN is likely to have a long term impact on trade within the region.

For European investors maintaining operations throughout ASEAN or British parties considering investment, it will be of utmost importance to monitor developments within the region closely in order to ascertain their likely exposure to Brexit fallout.

Short-Term Considerations: Foreign Exchange Volatility

As markets within ASEAN know all too well, currency volatility is one of the most immediate externalities associated with economic crisis. Despite the Pound Sterling being separated from the Euro, the mere threat of a Brexit was enough to depreciate the Pound by 7 percent against the US dollar during voting. As polls closed, ASEAN currencies have also seen substantial rises in their value against the United Kingdom.

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Labor Mobility in ASEAN: Current Commitments and Future Limitations

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asean laborBy: Alexander Chipman Koty 

With the establishment of the ASEAN Economic Community (AEC) at the end of 2015, ASEAN achieved a significant milestone in the region’s growing political, economic, and cultural integration. As set out in 2007’s ASEAN Economic Blueprint, the AEC seeks to “transform ASEAN into a region with free movement of goods, services, investment, skilled labour, and freer flow of capital.” While considerable progress has been made in liberalizing and normalizing the region’s standards in most of these areas, establishing the free movement of skilled labor lags appreciably behind.

Although ASEAN has clearly stated its goal to promote skilled labor mobility, current policies not only trail the European Union, where freedom of movement is essentially unencumbered, but also less ambitious regional trade agreements such as the North America Free Trade Agreement (NAFTA) and the Caribbean Community (CARICOM). The lack of a cohesive regional framework, nationalist and protectionist policies, and middling political will impede ASEAN’s skilled labor mobility. However, employers can still take advantage of policies that facilitate the hiring of skilled workers in certain sectors to address the frequent skilled labor shortages found within ASEAN countries.

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AEC in Practice – What Can Foreign Investors Do Now?

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By: Mareike Entzian

Much like the European Union, the ASEAN Economic Community is founded on several unchanging pillars. The community is supposed to create a single market and production base, support one another in increasing competitiveness, close gaps of an economic nature and other disparities, and to further integrate with the global economy. 

In a previous article , we laid out the relationship between ASEAN’s largest markets and Germany, and we will now explain what investors can do to act on this potential. In a survey conducted by Germany Trade and Invest, German firms operating within ASEAN indicate that they are excited by new opportunities presented by the AEC and are ready to seize them. However, unlike their invested counterparts, companies not yet operating in the region continue to register reservations about committing capital. This hesitance has led German firms to fall behind other competitors, such as Japan, who have been successfully leveraging tariff removals and other benfits of found within the region.

To understand the AEC, it is paramount to be aware of its geopolitical background as well its fundamental differences to the European Union. Once it is clear that, although on paper the AEC looks like the European Union, it remains a long way from the EU’s level of integration, it becomes clear what investors can do to operate successfully.

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Germany’s Trade with ASEAN – a Look Ahead Part One

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By: Mareike Entzian

As 2015 has come to an end, both Germany and ASEAN can reflect back on an impressive year of trade relations. In a climate of global uncertainty, both geographical regions managed to expand trade and sign several important trade agreements. With its population of roughly 622 million people, the ten ASEAN nations present a stable political environment and a growing middle class, whose purchasing power will rise over the next years. The countries present a formidable export market for German goods, as well as a stable investment climate for production and outward FDI.

Most recently, Germany, as part of the European Union, entered into a Free Trade Agreement with Vietnam. A declaration on the agreement was signed in early December 2015 and entry into force is expected – even by conservative estimates – as soon as 2018. ASEAN still counts as one of the most important growth markets for German industry and there remains untapped potential, especially in the green energy sector. The following will give an overview of the most important ASEAN nations and their trade relationship with Germany. For the next years, growth will undoubtedly continue and businesses will move away from the traditional low cost markets, like China, to ASEAN nations.

This first installment of a two part article series will examine Germany’s trade with the dynamic ASEAN region.

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EU Gets a Handle on Cambodian Re-Exported Bicycles with New Tariff

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Cambodia_08_-_116_-_Angkor_Thom_(3228076623)The European Union has imposed a 48.5 percent duty on Cambodian bicycle exports to put the brakes on Cambodia flooding the market with Chinese-sourced models dumped in the single market at below cost price.

The tariffs on exports from Cambodia have been imposed in tandem with those from Pakistan and the Philippines. Such levies had also been in place on Indonesia, Malaysia, Sri Lanka, and Tunisia, where companies had allegedly been engaged in trans-shipment and assembly operations only in order to avoid the high rate.

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EU-Singapore Finalize Free Trade Agreement

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SINGAPORE – The European Union (EU) and Singapore have finalized their negotiations on a free trade agreement (FTA). Singapore expects that exporters of electronics, pharmaceuticals, chemicals, and processed food products will especially benefit from the completion of the FTA.

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EU Lends its Support to ASEAN Over South China Sea Disputes

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May 24 – Officials in the Philippines Department of Foreign Affairs (DFA) have recently confirmed that senior officials from the Association of Southeast Nations (ASEAN) met with officials from the European Union (EU) in Vietnam’s Ho Chi Minh City to discuss the issue of territorial disputes in the South China Sea.

Currently there are numerous overlapping territorial claims in the South China Sea, with the Philippines recently initiating arbitrary proceedings before the United Nations Convention to clarify the status of maritime zones in the area.

The DFA has released a statement noting that the EU supports “the peaceful settlement of disputes in the South China Sea in accordance with international law, including the United Nations Convention on the Law of the Sea (UNCLOS).”

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EU Removes Sanctions Against Myanmar

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Apr. 25 – On Monday this week, the foreign ministers of the European Union (EU) permanently ended the majority of its sanctions against Myanmar. The sanctions have already been suspended for nearly a year, with support for removing them permanently growing in step with recent democratic, economic and human rights reforms in the country.

The move follows in the wake of the United States removing most of their sanctions against Myanmar over the past year, as leaders on both continents seek to reward and further facilitate reforms by Myanmar President Thein Sein. The EU’s arms embargo on Myanmar will continue to stay in place, however, and will not be reviewed for another year.

While the policies of President Thein Sein have largely been welcomed by the international community and businesses looking to invest in the country, several concerns have lingered, especially those regarding the government’s mistreatment and lack of protection of minority groups. This was also noted by EU foreign ministers, who cited “significant challenges” in this and other areas.

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