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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Myanmar: Retail Sector to Receive Boost following Lifting of US sanctions

Myanmar’s retail industry is expected to get a boost from the lifting of US sanctions as it will allow for foreign investment. The official end of the restrictions was formalized on October 7 and confirmed by the US Treasury, unblocking sanctioned properties, removing various banking restrictions and reporting requirements for investment. Exporters and manufacturers are expected to be the main beneficiaries, but the retail sector is also expected to see Western brands seeking local partners.

With the easing of restrictions, local partners will find it easier to find international firms looking to enter the country, but due diligence will be needed as per industry analysts. Several brands have already entered the market in recent years including KFC, Pizza Hut and Gloria Jean’s Coffees. Japanese retail company Aeon was the first foreign retail chain to gain access to the market this year. It partnered with Creation (Myanmar) Group to open stores in Yangon and Mandalay. In addition, demand for retail space, which is in shortage, is expected to go up following Aeon’s lead. While the trend of shifting from local stores to large retail centers will take time, the pattern is already changing in major urban centers. The wider range of products, particularly foreign brands is expected to further quicken the process.

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Indonesia: Google to Settle Tax Dispute with Indonesia

Google is expected to settle a tax dispute with Indonesia for around US$ 73 million in the next two weeks. Indonesian tax authorities were earlier seeking around US$ 367 million in back taxes. Tax authorities were seeking the latter amount in 2015 in taxes and fines from digital advertisement revenue.

Most revenue generated by Google in Indonesia is booked at its Asia Pacific headquarters in Singapore. As Indonesia pursues multinational corporations for tax avoidance, it is also wooing foreign investment by deregulating several sectors. It is also understood that Google will have agree to a new calculation of profits made in the country. Google officials have been meeting tax officials since September to resolve the issue. If the settlement is successful, other ASEAN countries are likely to aggressively pursue big internet companies such as Google for back taxes.



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