By Mike Vinkenborg
With the government of Myanmar recently passing its new Investment Law, taking effect in April 2017, the country is showing its continued commitment to attracting foreign investment. After reopening its economy in 2012 following several political reforms beginning the year before, Myanmar has been receiving significant increases in foreign direct investment, reaching a high of US$9.5 billion in the 2015/2016 fiscal year ending in March. To put this in perspective, the total amount of FDI added up to only US$329.6 million in 2009/2010, the year before the military ceded power. While oil, gas, and energy remain the sectors with the highest FDI inflows, investments into Myanmar’s manufacturing industry are rapidly gaining traction, having risen from just US$33.2 million to over US$1 billion in the same period, and hitting a high of US$1.8 billion in 2014.
As China strives to move up the value chain and focus more on high-end manufacturing, the country’s wages have risen to the point where many garment manufacturers are looking to invest elsewhere. Cambodia and Vietnam have already established themselves as alternatives, and now Myanmar is bringing a new labor force to the competition. Clothing exports have already gone up from US$337 million in 2010 to US$1.46 billion in 2015. And now that the economic sanctions by the EU and US have been lifted, the Myanmar Garment Manufacturers Association (MGMA) has set a target for exports to increase to US$12 billion by 2020. Doing so would create an estimated 1.25 million new jobs, a sharp increase from the approximately 250,000 people currently working in the garment industry.
Philippines: Free Trade Agreement with European Free Trade Association Expected in August 2017
The Philippines’ government is expected to complete ratification of its Free Trade Agreement (FTA) with the four-nation European Free Trade Association (EFTA) by August 2017. The four countries include Switzerland, Iceland, Liechtenstein and Norway. The agreement is currently with the Department of Foreign Affairs and will later be sent to the Senate for ratification. This is part of the Philippines’ three-pillar strategy of widening and strengthening its access to Europe – one of the country’s biggest market.
Trade between EFTA states and the Philippines remained stable worth around US$ 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.
By Alexander Chipman Koty
The Myanmar Investment Commission (MIC) recently announced that the country’s new Investment Law will come into force for the financial year starting April 2017. The Investment Law, which passed the lower house of Myanmar’s legislature on September 28th and the upper house on October 5th, was signed by President Htin Kyaw on October 18th and represents further liberalization of the Southeast Asian nation’s foreign investment laws and rapidly changing economic environment.
While the exact contents of the new law have yet to be finalized, many of its key features have already come to the surface. The Investment Law combines the previous Myanmar Citizen’s Investment Law with the Foreign Investment Law, ending Myanmar’s status as the only ASEAN member with separate investment laws for citizens and foreigners. Changes to Myanmar’s previous investment regulations include a new approval process with the MIC, updates to the distribution and length of various tax incentives, and further easing of foreign access to land leases. Although it remains a challenging destination for investment due to ongoing political uncertainty and a relatively undeveloped legal and regulatory framework, the new Investment Law reflects Myanmar’s continued commitment to attracting foreign direct investment.
By: Dezan Shira & Associates
Myanmar’s Ministry of Labour, Immigration and Population has extended e-visas to three overland crossings with the Kingdom of Thailand. Following a limited introduction of e-visas at select airports in July, the rollout of e-visas at land crossings has been applied since September 1st. The move is set to significantly reduce application times, and is being rolled out as part of a larger push to replace in person applications that were previously required.
Overland Crossings Set to Accept e-Visas
While more crossings are to be included in the near future, the three crossing that currently accept e-visas include Tachileik, Myawaddy, and Kawthaung. Similar to the rollout of e-Visas for aviation, the introduction of the e-visa program at land crossings is to be gradually expanded as athourities optimize their internal system.
- Tachileik: Located in the north of the country, Tachileik is a key point of transit for those traveling between Laos and Myanmar via Thailand.
- Myawaddy: Located in Central Myanmar, this crossing has become a hub for the transit of gems and other mineral resources flowing out of Myanmar.
- Kawthaung: The southern most crossing that has been opened to the land e-visa program. Primarily used as a transit point for tourists crossing between the two countries, the area is also known for agriculture products including: rubber, betel nut, cashew nut, coconut and oil palm.
By: Dezan Shira & Associates
Among a myriad of factors which determine competitiveness within ASEAN member states, rates of taxation are a particularly salient judge of character for the treatment of foreign investment. In recent years, corporate income tax (CIT) has become the standard bearer for tax benchmarking, however, foreign investors will be faced with a variety of different taxes in the event that capital is committed. For those importing and exporting, indirect taxation, including value added taxation (VAT) and goods and services tax (GST) are significant forms of tax that should not be disregarded.
In essence, an indirect tax adds to the price of a purchasable product or a payable service, thereby increasing the cost of that product or service and causing consumers to indirectly pay its rate of taxation. Indirect taxes thus differ from other forms of taxation, such as corporate income and individual income tax; both of which require a business or an individual to pay the applicable amount directly to a government.
Myanmar: India to Setup an SEZ in Sittwe
VK Singh, India’s Minister of State for External Affairs, announced India’s plans to build a Special Economic Zone (SEZ) in the Burmese city of Sittwe. The announcement was made at the India-ASEAN Foreign Ministers meet in Laos. The SEZ proposed by India will reportedly by located about 50 miles (80kms) south of Sittwe and will provide competition to the Chinese SEZ.
The Indian government aims to expand India’s footprint in the Southeast Asian region. India has already build a port in Sittwe. The plan to build the SEZ comes as a backdrop to China’s plan to build several roads and ports, as a part of their One Belt One Road Initiative. Myanmar is developing rapidly as its economy opens up with several countries investing in the country to gain influence in the region. The investments bode well for investors that plan to enter or are currently in Myanmar, as they will likely benefit from increased infrastructure.
Singapore: Government Implements New Bankruptcy Laws
Singapore’s new bankruptcy laws have been in effect since 1 August 2016. The rules were created to enable a more rehabilitative environment for bankruptcies. Under the new laws, the minimum debt owed by a person before being declared bankrupt has been increased to SGD $15,000 (US$11,158) from SGD $10,000 (US$7,438).
The new laws also provide a timeline for resolving bankruptcies. A first-time bankruptcy will now be discharged in five years, once creditors have been paid off. The payout to creditors is based on the bankrupt individual’s earning potential. The new laws also mandate that institutional creditors nominate private trustees when applying to make a debtor to be declared bankrupt.
The news laws seek to improve the business climate in the country through the streamlining of the bankruptcy processes. Changes are also touted as means of improving the quality of debt available in the market.
By: Dezan Shira & Associates
Editor: Cameron Gilchrist
The IMF projects Myanmar to be the world’s fastest growing economy in 2016, with GDP forecast to advance by 8.6 percent. Still considered a frontier economy, Myanmar is at a young but developing stage for foreign direct investment (FDI) within ASEAN. Not only does the nation offer fertile land, bountiful resources, and a strategic geographic location, but the Government is increasingly committed to encouraging foreign investment through major economic and political reforms. The reform process began in 2011 and has successfully increased trade and FDI, contributing to 8.3 percent real GDP growth in the 2013/14 fiscal year, which topped the preceding year’s 7.3 percent growth.
Although reforms have been successful in augmenting Myanmar’s economic growth and attracting foreign investment, the regulatory environment remains complex. In 2012, Myanmar released the Myanmar Foreign Investment Law to address the rights and duties of foreign investors. More recently, Myanmar has seen the passage of the Special Economic Zone Law which was passed in 2014, offering numerous FDI incentives. Further, the 102 year old Companies Act, which serves as the country’s foundation for investment, is currently under revision in parliament.
Myanmar: Tourism Industry Expected to Grow to See 7 Million Annual Customers by 2021
Projections indicate that Myanmar’s tourism industry will attract around 7 million tourists by 2021. This increased footprint is expected to generate revenue of around US$9 billion by 2021. The projections are based on the 2nd National Development Plan (2016-2021). The Ministry of Hotels and Tourism plan to grant more licenses for guesthouses, tours and tour guides to cater to the increased demand.
The projections bode well for businesses that intend to invest in the tourism sector in Myanmar. The increasing demand coupled with the government initiatives will enable investors to make significant gains in the market. The latest projections follow a trend of steady growth seen over the past five years. The industry’s earnings in 2013 were US$926 million and reached US$21 billion in 2015.
RELATED: Corporate Establishment Services from Dezan Shira
Thailand: PM Releases Details of Thailand 4.0 Policy
General Prayut Chan-o-cha, the Thai Prime Minister, recently released details of the Kingdom’s Thailand 4.0 policy. The policy is structured to convert Thailand into a value-based economy through adopting a new economic model for development. The policy aims to convert the country’s traditional farming techniques to smart farming, SMEs to smart SMEs, and traditional services to high-margin services. The policy also sets out to encourage innovation and boost integration with technology.
To implement these strategies, Thailand 4.0 targets 10 industrial groups as new engines of growth, of which around seven industries are expected to form the crux of the digital economy. The new policy’s primary objective is to pull Thailand out of the middle-income trap and assist in creating a high-income society. The policy highlights the government’s attitude towards to mechanization and digitization. These developments bode well for technology-oriented businesses that wish to invest in Thailand in the coming years.
RELATED: ASEAN’s Sharing Economy: Understanding Your Opportunities
Singapore: Economy Witnesses Service-Sector Driven Growth
The economy of Singapore grew at a blistering pace in the second quarter (Q2) of 2016. Growth comes on the heels of a rally in the service industry, which recovered and posted strong growth in Q2. The Gross Domestic Product (GDP) of Singapore increased by 0.8 percent from the first quarter (Q1). Singapore is dependent on the service industry which contributes nearly 69 percent of its GDP.
The service industry grew at 0.5 percent in Q2, compared to a 4.8 percent contraction in the previous three months. This marks an upturn in the economic environment in the country. However, economic analysts note that the growth of the services industry did not factor in the Brexit referendum. Businesses interested in the services industry in Singapore should ensure that they regularly monitor global economic changes and keep an eye on the economic growth to optimize their operating strategy in
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Annual Audit and Compliance in ASEAN
For the first issue of our ASEAN Briefing Magazine, we look at the different audit and compliance regulations of five of the main economies in ASEAN. We firstly focus on the accounting standards, filing processes, and requirements for Indonesia, Malaysia, Thailand and the Philippines. We then provide similar information on Singapore, and offer a closer examination of the city-state’s generous audit exemptions for small-and-medium sized enterprises.
The Trans-Pacific Partnership and its Impact on Asian Markets
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Myanmar: Government Plans Policy to Pursue Tax Evaders
Myanmar’s Internal Revenue Department plans to implement a policy that will increase taxes and penalize tax evaders. Government officials have stated that over several years tax evaders have not been penalized. The department has now approached the relevant ministries to find ways to prosecute such evaders. Tax authorities are presently collecting taxes that have not been paid in years. With more foreign investment in the country, companies are reminded to keep a track of their activities and file taxes to avoid penalties for non-compliance.
Companies that are found to evade tax will face a monetary penalty of not more than 10 percent of the tax, detainment for questioning, or prosecution as prescribed under the Income Tax Law. Similarly tax evaders will face a penalty of not more than 10 percent of the tax, imprisonment, and/or a US $85 (Ks 100,000) under the Commercial Tax Law. Under the Law for Special Goods, tax evaders will be penalized US $4,257 (Ks 5 million) and the goods will be kept for public welfare. Myanmar collected over US $3 billion (Ks 4 trillion) in taxes in 2014-15. Around US $1.7 billion (Ks 2 trillion) has been collected in the first half of the 2015-16 fiscal year.