invest asean: a foreign business executive’s guide to emerging asia 2015 preview

8/21/2019 Invest ASEAN: a Foreign Business Executives Guide to Emerging Asia 2015 Preview

1/14

Invest ASEAN:A Foreign Business Executives

Guide to Emerging Asia

2015

I. Why ASEAN is Important for Your Asia Business Strategy

II. Navigating ASEAN

III. The Impact of ASEAN upon China

IV. The Impact of ASEAN upon India

V. Strategies for Establishing and Operating a Business in ASEAN

Produced in association with
http://../Applications/Adobe%20InDesign%20CS6/Adobe%20InDesign%20CS6.app/Contents/MacOS/Vietnam%20Tax%20Guide%202014.pdfhttp://www.aseanbriefing.com/


2/14

2 - ASEAN BRIEFING | Invest ASEAN: A Foreign Business Executives Guide to Emerging Asia 2015

Contributors to and editors of this guide include the staff and consultants at Dezan Shira & Associates ASEAN and ASEAN Briefing: Chris

Devonshire-Ellis, Edward Barbour-Lacey, Shawn Greene, Matthew Zito, and Samuel Wrest. This guide was designed by Jessica Huang.

2014 Asia Briefing

Follow us on Twitter @DezanShira,@ASEAN Briefing

Join us on Facebook

Visit us on LinkedIn
https://twitter.com/DezanShirahttps://twitter.com/ASEANBriefinghttps://www.facebook.com/DezanShirahttps://www.linkedin.com/company/dezan-shira-&-associateshttps://twitter.com/ASEANBriefinghttps://twitter.com/DezanShirahttps://www.linkedin.com/company/dezan-shira-&-associateshttps://www.facebook.com/DezanShira


3/14

Dezan Shira & Associates Offices

Dezan Shira Asian Alliance Members

INDIA

THAILANDVIETNAM

CHINA

INDONESIA

PHILIPPINES

SINGAPORE

MALAYSIA

INDIA

THAILANDVIETNAM

CHINA

INDONESIA

THE PHILIPPINES

SINGAPORE

MALAYSIA

Mumbai

Beijing

ShanghaiSuzhou

Ningbo

Hong Kong

ShenzhenGuangzhou

Hanoi

Ho Chi Minh City

Zhongshan

Hangzhou

SingaporeKuala Lumpur

Jakarta

Manila

Tacloban

Bangkok

Tianjin

Qingdao

Dalian

Delhi

About Dezan Shira & Associates

At Dezan Shira & Associates, our mission is to guide foreign companies through Asias

complex regulatory environment and assist them with all aspects of establishing,

maintaining and growing their business operations in the region. With over 20 years

of on-the-ground experience and a large team of professional advisers, we are your

reliable partner in Asia. Since its establishment in 1992, Dezan Shira & Associates has

grown into one of Asias most versatile full-service consultancies with operational

offices across China, Hong Kong, India, Singapore, and Vietnam, as well as liaison

offices in Italy, Germany, and the United States, and partner firms across the ASEAN

region.

Your Partner for Growth in Asia
http://www.dezshira.com/officehttp://www.dezshira.com/officehttp://www.dezshira.com/office/indiahttp://www.dezshira.com/office/thailand.htmlhttp://www.dezshira.com/office/vietnamhttp://www.dezshira.com/office/chinahttp://www.dezshira.com/office/indonesia.htmlhttp://www.dezshira.com/office/philippines.htmlhttp://www.dezshira.com/office/singapore.htmlhttp://www.dezshira.com/office/malaysia.htmlhttp://www.dezshira.com/office/indiahttp://www.dezshira.com/office/thailand.htmlhttp://www.dezshira.com/office/vietnamhttp://www.dezshira.com/office/chinahttp://www.dezshira.com/office/indonesia.htmlhttp://www.dezshira.com/office/philippines.htmlhttp://www.dezshira.com/office/singapore.htmlhttp://www.dezshira.com/office/malaysia.htmlhttp://www.dezshira.com/officehttp://www.dezshira.com/officehttp://www.dezshira.com/officehttp://www.dezshira.com/officehttp://www.dezshira.com/officehttp://www.dezshira.com/office/hong-kong.htmlhttp://www.dezshira.com/officehttp://www.dezshira.com/officehttp://www.dezshira.com/officehttp://www.dezshira.com/officehttp://www.dezshira.com/officehttp://www.dezshira.com/officehttp://www.dezshira.com/officehttp://www.dezshira.com/officehttp://www.dezshira.com/officehttp://www.dezshira.com/officehttp://www.dezshira.com/officehttp://www.dezshira.com/officehttp://www.dezshira.com/officehttp://www.dezshira.com/officehttp://www.dezshira.com/officehttp://www.dezshira.com/officehttp://www.dezshira.com/http://www.dezshira.com/http://www.dezshira.com/office/singapore.htmlhttp://www.dezshira.com/office/thailand.htmlhttp://www.dezshira.com/office/philippines.htmlhttp://www.dezshira.com/office/malaysia.htmlhttp://www.dezshira.com/office/indonesia.htmlhttp://www.dezshira.com/office/hong-kong.htmlhttp://www.dezshira.com/office/vietnamhttp://www.dezshira.com/office/indiahttp://www.dezshira.com/office/chinahttp://www.dezshira.com/office


4/14


Why ASEAN?

The Association of Southeast Asian Nations (ASEAN) is a regional political and

economic bloc made up of ten countries Brunei, Cambodia, Indonesia, Laos,

Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. As a trade bloc

situated between China and India, ASEAN is effectively the third Asian dragon

in terms of its development as an emerging economy. The ASEAN nations are a

particularly diverse grouping, arguably the most diverse in the world in terms of

economic and political systems, socio-cultural customs and characteristics, and

levels of economic development. Collectively, ASEAN has a combined GDP of

approximately US$2.4 trillion. If it were a country, it would be the seventh largest

in the world in economic terms, between the United Kingdom and Brazil.

Businesses are increasingly buying into the potential of ASEAN as an investment

destination and/or market for consumption. There are, of course, many different

reasons for investing in ASEAN, yet perhaps the most attractive is the regions

robust rate of economic growth. It has one of the worlds most positive growth

trajectories, having enjoyed impressive growth for more than a decade GDP morethan doubled in size from US$1.1 trillion to US$2.3 trillion in just six years between

2006 and 2012 and grew by 313 percent between 2001 and 2013.

The regions rising economic wealth and large population of approximately 617

million people (around 60 percent of whom are under the age of 35) will continue

to drive consumerism in the foreseeable future. ASEANs middle class is in dramatic

ascendance, with Vietnams middle class alone expected to increase from 2 million

to 33 million by 2020. Domestic consumption in ASEAN constitutes a larger share

of GDP than in the BRIC countries (53 percent versus 44 percent in 2012), which will

help to sustain growth even against the background of a slowing global economy.

By and large, ASEANs long-term prospects are extremely positive. The regions

economic growth will be bolstered by growing intra-regional trade and high

consumer confidence. Overall, Asias emerging markets are forecast to be the

fastest-growing in the world through 2020, and the ASEAN economy will reach

US$4.7 trillion by the end of the decade.

ASEAN is developing as an excellent starting point for reaching out to Asias

developing markets, with benefits extending beyond simply setting up a physical

presence in the bloc. An ASEAN-based company enjoys not just the automatic tax

and free trade benefits of intra-ASEAN trade, but will also be able to take advantage

of, once they come into effect, all the free trade and double tax agreements that

ASEAN is currently negotiating with China, India, Australasia, Japan and South Korea.

Chris Devonshire-Ellis

Founding Partner

Dezan Shira & Associates

Singapore Office

Contact Dezan Shira & Associates

[email protected]

www.dezshira.com
http://www.dezshira.com/personnel/chris-devonshire-ellis.htmlhttp://www.dezshira.com/personnel/chris-devonshire-ellis.htmlhttp://www.dezshira.com/personnel/chris-devonshire-ellis.htmlhttp://www.dezshira.com/personnel/chris-devonshire-ellis.htmlhttp://../Applications/Adobe%20InDesign%20CS6/Adobe%20InDesign%20CS6.app/Contents/MacOS/InDesign%20ClipboardScrap.pdfhttp://../Applications/Adobe%20InDesign%20CS6/Adobe%20InDesign%20CS6.app/Contents/MacOS/InDesign%20ClipboardScrap.pdfhttp://../Applications/Adobe%20InDesign%20CS6/Adobe%20InDesign%20CS6.app/Contents/MacOS/InDesign%20ClipboardScrap.pdfhttp://../Applications/Adobe%20InDesign%20CS6/Adobe%20InDesign%20CS6.app/Contents/MacOS/InDesign%20ClipboardScrap.pdfhttp://www.dezshira.com/personnel/chris-devonshire-ellis.html


5/14

Invest ASEAN: A Foreign Business Executives Guide to Emerging Asia 2015 |ASEAN BRIEFING- 5

Contents

1.Why ASEAN is Important for Your Asia BusinessStrategy ..................................................................4

The ASEAN Economic Community .......................................................................................................5

The RCEP and TPP ............................................................................................................................................ 6

Conclusion ............................................................................................................................................................7

2.Navigating ASEAN ............................................... 8Taxation.................................................................................................................................................................. 9

Double Taxation Agreements ................................................................................................................ 10

Ease of Paying Taxes..................................................................................................................................... 11

Development Zones..................................................................................................................................... 12

Country Profiles............................................................................................................................................... 13

3. The Impact of ASEAN upon China......................50China-ASEAN FTA .......................................................................................................................................... 54

Emerging Challenges for China ............................................................................................................56

Strategy for China-based Manufactures ......................................................................................... 60

4. The Impact of ASEAN upon India.......................62India-ASEAN FTA ............................................................................................................................................ 64Foreign Trade.................................................................................................................................................... 66

5. Strategies for Establishing and Operating aBusiness in ASEAN..............................................68

ASEAN: Where to Begin? .......................................................................................................................... 69

Assessing ASEAN as a Global Manufacturing Alternative ....................................................72

Singapore: The Gateway to ASEAN .................................................................................................... 73

Vietnam: Asias Next Manufacturing Powerhouse After China ......................................... 79Conclusion ......................................................................................................................................................... 87
http://../Applications/Adobe%20InDesign%20CS6/Adobe%20InDesign%20CS6.app/Contents/MacOS/InDesign%20ClipboardScrap1.pdfhttp://../Applications/Adobe%20InDesign%20CS6/Adobe%20InDesign%20CS6.app/Contents/MacOS/InDesign%20ClipboardScrap1.pdf


6/14

Why ASEAN is Important forYour Asia Business Strategy

The ASEAN Economic Community

The RCEP and TPP


7/14


The ASEAN Economic Community:An Ambitious Step Forward

In spite of the regions massive diversity and the lingering historic tensions between

certain countries, attempts to integrate the ASEAN region have grown increasingly

ambitious in recent years. Deeper economic interdependence has helped to propel

forward more comprehensive regional cooperation and as a result, ASEAN as an

organization is quite unrecognizable from the five-country security union set up in

1967 by Indonesia, Malaysia, the Philippines, Singapore, and Thailand.

ASEANs most far-reaching effort at regional integration to date the ASEAN

Economic Community (AEC) is scheduled to be implemented on December

31, 2015. The four main goals of the AEC are to establish a single market and

production base, a highly competitive economic region, a region of equitable

economic development, and a region fully integrated into the global economy.

The AEC will encourage the free movement of goods, services, skilled labor, capital,

and investment within ASEAN countries, as well as developing competition policy,facilitating e-commerce, and protecting intellectual property.

The game-changing AEC will transform the economic landscape of the region and

as such has wide-ranging economic consequences for investors. It will help ASEAN

to become more open, dynamic, and competitive through the full elimination of

tariff and non-tariff barriers, therefore significantly augmenting the attraction of

ASEAN as a single investment destination and consolidating the importance of

ASEAN as an economic bloc. By joining together, ASEAN markets and companies

can take advantage of their diversity and the complementarity of their economies

in order to increase their competitiveness and efficiency.

The ambitiousness of the AEC is admirable, yet there are growing concerns that the AEC

deadline may not be met. The problems encountered by ASEAN are rarely a result of a

lack of inspiration or vision, but are more often due to compliance and implementation

difficulties. Although the more economically developed countries in the region are

already in compliance with new tariff regulations, Cambodia, Laos, Myanmar, and Vietnam

may need more time to prepare themselves for economic reform.

Currently it is estimated that the liberalization and facilitation of the free flow of

goods, services, skilled labor, capital, and investment have been 85 percent achieved.

Whether or not all of the AEC targets are met by the end of 2015, what has been

achieved so far is a milestone accomplishment and will inevitably continue to be

built upon.


8/14


The RCEP and TPP: The Future ofthe ASEAN Economy?

As well as working towards the AEC, the ASEAN countries are also currently

negotiating ambitious multilateral free trade agreements (FTA) such as the Regional

Comprehensive Economic Partnership (RCEP) and the Trans-Pacific Partnership

(TPP). Both sets of negotiations have been complex and long-winded, having had

to contend with economies at different stages of development and the protectionist

attitudes of some countries regarding sensitive sectors of their economies.

Twelve countries throughout the Asia-Pacific region are currently in United States-

led negotiations regarding the TPP Australia, Brunei, Canada, Chile, Japan, Malaysia,

Mexico, New Zealand, Peru, Singapore, the U.S., and Vietnam. If these negotiations

are successfully concluded, the partnership will represent approximately two-fifths

of world GDP. As well as including typical FTA content such as the reduction of tariffs

in key sectors of the economy, the TPP will extend its scope to include a demanding

set of commitments regarding intellectual property protection, environmentalstandards, and digital commerce rules.

On the other hand, the RCEP aims to pull all six of the ASEAN+1 FTAs together in

order to form an integrated regional agreement involving the 10 ASEAN countries

plus Australia, China, India, Japan, New Zealand, and South Korea. The RCEP, which

would account for nearly half of the worlds population and approximately one-third

of global GDP, is likely to be more flexible than the TPP in order to accommodate the

vastly different levels of economic development among the negotiating countries

(for example, Singapores GDP at purchasing power parity per capita is 37 times

higher than that of Myanmar, according to International Monetary Fund estimates).

The implementation of the AEC next year and possible future implementation of

the RCEP and TPP are something to look forward to and will help to consolidate

ASEAN as a production hub by optimizing global supply chains for companies

headquartered both within and outside of ASEAN.


9/14

Invest ASEAN: A Foreign Business Executives Guide to Emerging Asia2015 |ASEAN BRIEFING- 9

Conclusion

Southeast Asia is not immune to the struggles of the global economy and naturally is

home to challenges and risks like any other region. Nevertheless, against a backdrop

of massive diversity, the features that most of the countries share growing middle

classes, quick urbanization and industrialization, young populations, improving

infrastructure are driving rapid and robust economic growth in the region. The

coming together of the ASEAN countries offers a whole range of important and

valuable opportunities for investors, and the time to act is now.

To discover more about our services, click the links below:

Pre-investment and entry strategy advisory

Business advisory services

Audit and financial review

Are you ready for ASEAN?

Asia Briefing Magazine

January & February Issue, 2013

Download
http://www.dezshira.com/http://www.dezshira.com/http://www.dezshira.com/http://www.dezshira.com/http://www.dezshira.com/http://www.dezshira.com/http://www.asiabriefing.com/store/book/are-you-ready-for-asean-2015-392http://www.asiabriefing.com/store/book/are-you-ready-for-asean-2015-392http://www.asiabriefing.com/store/book/are-you-ready-for-asean-2015-392http://www.asiabriefing.com/store/book/are-you-ready-for-asean-2015-392http://www.asiabriefing.com/store/book/are-you-ready-for-asean-2015-392http://www.dezshira.com/http://www.asiabriefing.com/store/book/are-you-ready-for-asean-2015-392http://www.asiabriefing.com/store/book/manufacturing-in-vietnam-to-sell-to-asean-china-425http://www.asiabriefingmedia.com/storehttp://www.asiabriefingmedia.com/storehttp://www.asiabriefingmedia.com/store


10/14

Navigating ASEAN

Taxation, Development Zones and Payroll Processing

Country Profles


11/14


Since the ASEAN Economic Community (AEC) Blueprint was first signed in 2007, a

number of key changes have taken place and even more are in the works. According

to The Economist, ASEAN is potentially the most diverse regional grouping in

the world with members ranging from communist to capitalist, authoritarian to

democratic, and developed to developing.

Nevertheless, businesses and investors agree that ASEANs future growth potential

is undeniable. With the 2015 deadline for integration into the ASEAN EconomicCommunity (AEC) just around the corner, it is increasingly important for businesses

looking to tap the growing ASEAN market to understand the diverse set of countries

that make up ASEAN, and the great complexity of doing business that comes with

that. In the country profiles that follow, readers will discover a concise introduction

to the ten ASEAN countries, covering their history, economy, development zones,

and visa and taxation systems.

Taxation

A countrys taxation system includes its corporate income tax (CIT), individualincome tax (IIT), withholding tax, and indirect taxes such as value-added tax ( VAT)

or goods and services tax (GST).

Taxation rates, particularly corporate income tax, are often a source of competition

between countries with lower rates generally more attractive to businesses and

foreign investors. Debate continues within economic literature on the costs and

benefits of tax competition and tax harmonization the standardization of tax rates.

Currently in force in the European Union, the idea of tax harmonization has been

floated in ASEAN for several years but has yet to be realized.

It remains to be seen how ASEAN will choose to tackle the issue of taxation upon

integration. Within the AEC Blueprint, which outlines the steps to integration, only

two clauses mention taxation directly:

Strengthening ASEAN Capital Market Development and Integration:

Enhance withholding tax structure, where possible, to promote the

broadening of investor base in ASEAN debt issuance.

Promote ASEAN as an integrated investment area and production network:

Work towards establishing an effective network of bilateral agreements

on the avoidance of double taxation among ASEAN countries.


12/14


Although tax rates vary widely across the region, the past decade has seen a general

downward trend especially in the years since the AEC Blueprint was inked. Brunei

continues to maintain zero individual income tax, while rates go up progressively

to 37 percent in Thailand. Corporate tax rates range from 17 percent in Singapore,

one of the lowest in the world, to 35 percent for some foreign entities in Myanmar.

ASEAN has made large strides towards eliminating intra-regional trade barriers.

According to the AEC scorecard, the implementation rate for 2008 to 2011 was 67.5percent. In particular, tariff barriers have been largely eliminated although some

significant non-tariff barriers remain. Under the Common Effective Preferential Tariff

(CEPT) scheme, which paves the way for the elimination of customs tariffs between

ASEAN countries, tariffs on 99 percent of trade between the ASEAN-6 were gone by

2010. In 2012, overall average intra-regional tariff rates were as low as 0.55 percent.

Double Taxation Agreements

Under the AEC Blueprint, ASEAN was scheduled to complete its network of double

taxation avoidance agreements by 2010, although gaps still remain. Double taxation

avoidance agreements (DTAs), which prevent the same income from being taxed

by two or more jurisdictions, save significant money for multinational companies

and encourage cross-border trade. Among the ten countries, only Cambodia has

yet to sign any DTAs with its fellow ASEAN members. Malaysia has DTAs with all

members except Cambodia.


13/14


Individual Income Tax Comparison

Individual income tax (IIT) rates and regulations vary considerably across ASEAN.

Here, we provide a visual representation of the differences in IIT that exist between

each of the organizations nations. It is important to remember that these graphs

are based upon estimates and the exchange rate at the time of writing, and should

not be used to make any meaningful IIT calculations.

A key issue when determining individual income tax liabilities for foreigners is

residency. Each jurisdiction in ASEAN has their own rules in this regard, and it may

affect a persons eligibility for paying IIT. For details relating to a specific country,

you can contact the tax experts at Dezan Shira & Associates at [email protected].

Individual Income Taxes Chart

Tax

Rate

0%

10%

20%

30%

40%

0 10,0005,000 20,000 40,000 80,000 160,000

Brunei

Cambodia

IndonesiaLaos

Malaysia

Myanmar

Philippines

Singapore

Thailand

Vietnam


14/14


Development Zones

Within each country, taxation rates may also vary by region or industry due to special

tax incentives provided by the government and the presence of designated

business friendly economic development zones. Preferential tax policies, ease of

access to domestic markets, strong institutions, and resource support are just some

of the benefits of locating ones business in a development zone. With significant

variation in the terminology and conditions of development zones around ASEAN,

it is important for businesses to understand what a particular zone can offer.

Choosing a development zone within ASEAN can potentially provide a low costs

manufacturing base for the regional markets that extends beyond Southeast Asia

to China, India and the Pacific.

Work Visa and Permit ProceduresDiversity within ASEAN also extends to the legal procedures and requirements

governing the employment of foreign workers. Documents typically required

include a special work visa, a work permit, and/or a residence permit. Countries

may also offer some form of short-term business visa, which may have restrictionson full-time employment, but permits certain business-related activities.

Payroll Processing

As more multinational companies are expanding their operations to numerous

countries in Asia, they are increasingly transitioning towards an outsourced model

for handling their payroll and HR administration. The traditional country-by-country

model struggles with complex and inefficient communication between many local

offices, and the global managed model may lack the expertise in, and sensitivity

to, the diverse local statutory requirements and customs. Instead, a new breed of

pan-Asia integrated payroll outsourcing models is quickly becoming the preferred

system for multinational companies in this diverse region.
http://www.dezshira.com/services/payroll-human-resource-serviceshttp://www.dezshira.com/services/payroll-human-resource-services