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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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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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The State of ASEAN M&As in 2016

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By: Dezan Shira & Associates
Editor: Maxfield Brown

In its most recent investment report for 2016, ASEAN has focused heavily upon the intertwined issues of mergers and acquisitions (M&A). The report sheds light on the use of these tools by international investors as well as states within the bloc, providing insight on sentiment of varying parties. For those seeking to enter the region for the first time, understanding these trends is sure to provide important insight in the formation of effective entry and expansion strategy.

Mergers & Acquisitions

While foreign direct investment is often directed towards establishing new operations within a given country, M&As involve the purchase of or integration with a local company. This can present a number of benefits to investors stemming from the preexisting structure, connections, and reputation of the local company’s business. With a preexisting workforce, facilities, and supply chain, the M&A process allows companies to tap into market opportunities in real time. This can prove to be a important tool for those seeking to enter the market before their competition or gain access to sectors with limited access to investment. 

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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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ASEAN’s Winners and Losers under TPP

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By: Dezan Shira & Associates
Editor: Fernando Vidaurri

Earlier this month, 12 countries in the Asia Pacific region signed the Trans-Pacific Partnership (TPP) which ranks as the biggest trade agreement in history – signatory countries account for 40% of total global output. While the treaty still must be ratified by each and every party to it, its initial passage represents a monumental moment in the integration of economies on each side of the Pacific.

Four countries in the ASEAN region are among the signatories of the agreement; Brunei, Malaysia, Singapore and Vietnam, with additional member countries interested in joining the free trade area in the future. In this article we will look at who are the biggest beneficiaries in the region, the effects the treaty will have on intra-regional trade, as well as the impact on investment opportunities in non-TPP signatory ASEAN states because of this landmark trade deal.

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State by State – ASEAN and Connecticut Trade

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By: Dezan Shira & Associates
Editor: Maxfield Brown

Connecticut – known for its financial services and high end manufacturing – is rapidly emerging as an important trading partner for the ASEAN region. Since 2007, strong export growth (up 60 percent) and advancing firm participation in trade (up 49 percent) have deepened the states ties to international markets and increased ASEAN bound exports to US $1.32 billion. With 30 percent of the state’s business leaders identifying Asia as their market of choice for expansion, ASEAN’s share of Connecticut exports – currently standing at 5 percent – is only set to increase.

Advancing exports will likely center around Connecticut’s comparative advantage in manufacturing. As of 2014, top exports to ASEAN included transportation equipment, computers and electronic products, fabricated metal products, machinery, and chemicals. In the face of an emerging middle class and increased scaling of production in many ASEAN states, Connecticut’s ability to produce high value added components and complex finished goods is bound find traction in both the public and private sectors.

Although opportunities exist throughout the regional bloc, the inclusion of several ASEAN states within the TPP presents unique opportunities for exporters. Below are some of the most promising bilateral trading partnerships between the nutmeg state and the ASEAN Region.

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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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State by State – ASEAN and Ohio Trade

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By: Dezan Shira & Associates
Editor: Fernando Vidaurri

Ohio is the 7th largest economy in the US and a big part of this has been thanks to the trade relationships Ohio-based companies have with other countries. The state has been keen to take advantage of its manufacturing, logistics and agricultural capabilities. Ohio has also strategically taken advantage of FTAs negotiated by the US with partner countries to leverage these treaties into beneficial trade relationships.

ASEAN in particular has seen a large growth in trade flows with the state. In 2014, Ohio exported US $2.77 billion in goods and services to the region, a 7.3 percent increase from the previous year. Imports to the state meanwhile, increased by 6.5 percent to reach US $5.01 billion. While these numbers are significant, they represent only 7.1 percent of imports and 5.4 percent of exports out of the state.

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Singapore Issues Further Updates to its FATCA Regulations

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The Inland Revenue Authority of Singapore (IRAS) has released new information on its website relating to compliance with the Foreign Account Tax Compliance Act (FATCA).

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The Philippines Signs IGA on FATCA with the United States

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On July 15, the Philippines entered into an Intergovernmental Agreement (IGA) on tax information sharing with the United States in order to comply with the U.S. Foreign Account Tax Compliance Act (FATCA).

FATCA requires all financial institutions outside of the United States to periodically transmit information on financial accounts held by American persons to the U.S. Internal Revenue Service (IRS), or face a 30 percent withholding tax on payments made from the U.S. The agreement is an attempt to add greater transparency in financial accounts in order to curb offshore tax avoidance and evasion.

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