Malaysia Strengthens Alchohol Regulation
Malaysia has amended the Food and Regulation Act 1985, introducing a slew of changes to alcohol products. Amendments were introduced May 27 and will become effective December 1 of this year. Highlights of the changes are:
- Legal drinking age raised to 21 years from 18 years
- Warning labels need to be displayed on alcoholic drinks
- Alcoholic drinks must be displayed separately from other drinks in shops
- New standard to control availability of Compounded Hard Liquor (CHL) or cheap liquor; such products will be required to be sold in glass bottles with a minimum 700ml content
Authorities have stated that amendments are in line with the Global Strategy to Reduce the Harmful Use of Alcohol, which was signed by the health ministry during the World Health Assembly in 2010. In the near future, authorities have stated plans to raise tax on cheap liquor to US $9.6 (RM40) per liter. Failure to comply with the regulations are expected to attract a maximum fine of US $2,411 (RM 10,000) or up to a jail term of two years.
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.
By: Dezan Shira & Associates
Editor: Maxfield Brown
Thailand – Business Collateral Act
Starting on July 2, 2016, small and medium sized enterprises in Thailand will be provided greater access to loans within the Kingdom. As part of the Business Collateral Act, passed in November of 2015, the scope of currently available credit lines will be broadened while at the same time ensuring those providing loans with the ability mitigate increased risk exposure.
For businesses currently seeking financing, restrictions on collateral within Thailand have been a serious impediment to the acquisition of funding. Under existing laws, the only collateral options available include mortgaging under very limited circumstances or a pledge system that surrenders assets to the lender during the duration of repayment.
Myanmar: Mobile Phone Tax from April 1
The Ministry of Finance’s Internal Revenue Department will impose a 5 percent tax on mobile phone subscribers from April 1. The government attempted to impose the tax from June 2015 but delayed it after strong public opposition. The tax was earlier meant to be imposed on top-up recharge cards. However, the government clarified that the levy would be imposed on phone calls, text messages, and internet usage; the user’s credit balance will reflect the new tax. A mobile phone user will be charged on their total usage amount and not when they top-up. The opening up of the telecommunications industry caused a significant decline in the price of mobile phone sim cards to less than US $2 following the transition from military to semi-civilian government in 2011. The number of sim cards has also increased to 18 million from just around one million, three years ago.
Myanmar has three telecommunications operators: Qatar’s Ooreoo, Norway’s Telenor, and MPT – a joint venture between the telecommunications ministry and Japanese-owned KDDI group. While mobile phone operators do not agree with the tax, they have said that there is not likely to be much impact on usage as sim cards are now much cheaper than they were earlier. The imposition of the tax comes on the same day as the transfer of power from the country’s semi-military government to the civilian-led National League for Democracy administration.
Myanmar: Government Approves Licenses to New Foreign Banks
The government recently gave approval to four new foreign banks to operate in the country. The four banks are as follows:
- Bank for Investment and Development – Vietnam
- SUN Commercial Bank – Taiwan
- Shinhan Bank – South Korea
- State Bank of India – India
With the issuance of these licenses, the total number of foreign banks now allowed to operate in Myanmar has risen to thirteen. A number of banks that have been approved have not opened branches yet, as they fulfill their regulatory compliance obligations. In addition, a number of banks will operate under temporary licenses for a year, and will only become permanent, once they fulfill their obligations to the government. Once the banks have been operationalized, foreign companies will find it easier to access financing, which the World Bank stated was the largest problem for business in Myanmar. The approval for the banks is a part of the government’s larger plan to attract foreign investment into Myanmar.
Malaysia: FTAs to be Signed in Bid to Boost Economy
Malaysia is expected to sign three more Free Trade Agreements (FTAs) this year according to International Trade and Industry Second Minister Ong Ka. The three FTAs will be with the European Union, Hong Kong and the Regional Comprehensive Economic Partnership (RCEP).
The FTAs are expected to further increase volumes in trade and investment as well as bolstering revenue. The minister further stated that the FTAs will facilitate two-way trade, with zero tax rates and no import duties on almost 90 percent of products. In addition, more FTAs are planned to further help the economy and boost two-way trade. According to data, 65 percent of trade in 2015 was due to FTAs –which removed tax and non-tax barriers. Ong further stated that his could increase to 70 percent this year.
Indonesia: Foreign Ownership Laws in Power, E-commerce Other Sectors Relaxed
Franky Sibarani, head of Indonesia’s Investment Coordinating Board (BKPM), said on February 3 that the country will relax foreign ownership rules in three sectors. These sectors include power, e-commerce and retail. The new changes are a part of review by the BKPM on the “negative investment list”, which list a few sectors where Foreign Direct Investment (FDI) is restricted.
Cambodia: Cambodia Ranked as ‘Most Corrupt’ Country in the Region
Transparency International’s 2015 Corruption Perceptions Index (CPI) ranks Cambodia as the ‘Most Corrupt’ country in Southeast Asia. Cambodia score was 21 out a possible 100 points, which is the same as the country’s score in 2014.
Cambodia’s Anti-Corruption Unit Chairman, Om Yentieng dismissed the score. Meanwhile, Preap Kol, executive director of Transparency International (T.I.) Cambodia said that the country’s score landed it in the ‘highly corrupt’ category. Local analysts believe that graft in the judicial system is responsible for the low ranking.
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.
By: Fernando Vidaurri
On December 9, 2015, Myanmar’s new stock exchange – the Yangon Stock Exchange (YSX) – opened with big expectations. However, despite the grand opening and the US $24 million investment, the bourse will not be operational until February of 2016, or later. So is this really the beginning of a new economic era, or is the new move by the administration being rushed before the country is ready?
Myanmar has come a long way from being isolated from the world community under a military regime, to becoming an attractive investment destination. In fact, during the fiscal year 2014-2015 Myanmar managed to attract US $8 billion in FDI despite some economic sanctions still being in place. However, the fact remains that there are still many factors that can keep the country from reaching its full economic potential. Still optimism is prevalent, and with many favorable factors aligning Myanmar seems to be at the right place at the right time for investors.