India
Indonesia: Largest car market in ASEAN
In 2016, 3.16 million cars were sold in the ASEAN region, according to the latest data from ASEAN Automotive Federation. Around 1.06 million cars, 33 percent of the total car sales, were sold in Indonesia. Thailand follows at second place with 768,788 cars. However, Thailand leads in terms of car production among the ASEAN countries. The country produced 1.94 million vehicles, accounting for almost 50 percent of total ASEAN manufacturing. Indonesia produced 1.17 million cars in 2016.
Industry experts believe Indonesia’s dependency on foreign investment for the automobile sector and the lack of components manufacturing industry will impede its manufacturing capabilities in comparison to Thailand’s current manufacturing capacity. Unlike manufacturing, car sales will continue to see a growth in Indonesia due to a growing economy and increase in purchasing power. Malaysia, Philippines, and Vietnam follow Indonesia and Thailand in terms of car sales.
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By Mike Vinkenborg
On December 30, 2016 Singapore and India agreed on amending their Double Taxation Avoidance Agreement (DTAA) for capital gain income. With the new agreement, which will implemented on April 1, 2017, India aims to tackle investments coming into the country through shell companies and prevent tax avoidance. This follows the agreements reached by India and Mauritius in May 2016 and India and Cyprus in November that year, when they similarly amended their respective DTAAs by implementing a Limitation of Benefits (LOB) clause. The India-Singapore DTAA, last amended in 2005, had the provision that any changes in the Mauritius treaty would automatically apply to the Singapore DTAA. All three DTAA amendments will come into effect on April 1, 2017.
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Singapore: Authorities Seek More Time to Revise Tax-Treaty with India
The Singaporean authorities are asking for more time to revise its 1994 tax treaty with India, citing the need for additional time for its investors to shift to source-based taxation. However, Indian authorities have rejected any further delay in the revision of the treaty, which would help prevent Singapore – the top source of FDI into India – from being used as a shelter to avoid taxes. The development comes in the wake of the recent revision of the India-Mauritius tax treaty, which closed a popular loophole used by investors to avoid taxes on capital gains made in India.
Singapore’s revenue officials have asked for additional time beyond March 31. India, on the other hand, wants to revise the treaty before April 2017 – when its revised tax treaty with Mauritius comes into effect. Singapore is the largest FDI source for India at US$13.69 billion.
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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.
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A new section of the planned Asian highway linking India, Myanmar, and Thailand has become operational. The 25.6 kilometer roadway will reduce travel time between Thinggan Nyenaung and Kawkareik from three hours to 45 minutes.
The newly opened section of the highway is located in the East-West economic corridor of the Greater Mekong Subregion (a development project implemented in 1992 by the World Development Bank and consisting of Cambodia, Laos, Myanmar, Thailand, Vietnam, and Yunnan Province, China). It is hoped that the road will help to further grow trade between Myanmar and Thailand and build stronger relationships between the people in the region.
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Trade between ASEAN and India has seen strong growth over recent years. In 2014, total trade amounted to US$77 billion, a significant increase over the US$44 billion seen during 2009-10. Over the past decade, bilateral trade has increased at an average annual rate of a blistering 23 percent.
A key factor for this rising tide of trade has been India’s “Act East” policy, which has reaffirmed India’s plans to engage more substantially with the economies of its Southeast Asian neighbors. An additional reason, as pointed out by Indian External Affairs (East), Secretary Anil Wadhwa, has been the ASEAN-India Trade in Goods Agreement, which was signed in 2010.
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By Nishant Dixit
The 2015-2016 Indian budget includes a proposal to set up manufacturing hubs in CLMV countries. The CLMV includes four Southeast Asian nations – Cambodia, Myanmar, Laos, and Vietnam, which are seeing the highest foreign direct investment growth in the region, especially in manufacturing.
As India seeks to deepen economic partnerships with Southeast Asia under an “Act East” policy declared by Prime Minister Modi, it has prioritized CLMV economies. The commerce ministry has sought Rs. 100 crore (US$16.1m) in budgetary allocations for a Project Development Fund to oversee investment in the CLMV manufacturing hubs.
There is a history of industrial cooperation between India and the CLMV countries. Major Indian investment in Vietnam includes large projects such as oil exploration, power generation, and chemical manufacturing. In January 2015, there are a total of 84 projects funded by Indian investments in Vietnam. The EXIM bank of India has contributed a total of 20 Letters of Credit worth US$ 1 billion in CLMV countries towards power, irrigation, and manufacturing projects.
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In this issue:
- Outlook on ASEAN Investment 2015
- Key Industries for Investment in ASEAN
- Opportunity in the ASEAN-India Free Trade Area
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Nov. 21 – The new issue of Asia Briefing Magazine, titled The 2014 Asia Tax Comparator, is out now and will be temporarily available as a complimentary PDF download on the Asia Briefing Bookstore throughout the months of November and December.
The opportunities to sell to the Asian consumer have never been more pronounced than they are today, and those opportunities will continue to expand and develop over the next three decades. Key to understanding and accessing this massive, dynamic new consumer market is the ability to understand the underlying tax treatments. To that end, we are pleased to present our third annual “Asia Tax Comparator” as Asia Briefing Magazine’s final issue of 2013.
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Oct. 16 – Indian Prime Minister Manmohan Singh announced at the 11th Annual India-ASEAN Summit his country’s readiness to sign an ASEAN-India FTA in Services and Investment by December. If all goes as planned, the FTA will take effect in July 2014. India’s dedication to the region was further emphasized by PM Singh’s plan to open a dedicated mission and appoint a fulltime ambassador to the ASEAN Secretariat in Jakarta.
“Today, we stand on the threshold of the third decade of our engagement. In keeping with our substantial achievements, the recent elevation of our ties to a strategic partnership and the rich potential of our cooperation, I feel it would be appropriate for me to take this opportunity to announce that India will soon set up a separate mission to the ASEAN in Jakarta with a full time resident ambassador,” said Singh.
An India-ASEAN FTA in goods has existed since 2010, amounting to over US$80 billion. This additional services and investment FTA is estimated to increase total annual trade to over US$100 billion in the coming years.
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ASEAN BRIEFING
