An Introduction to Doing Business in ASEAN 2017...AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2017 3...
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Years 1992-2017 Doing Business in ASEAN 2017 An Introduction to
Transcript of An Introduction to Doing Business in ASEAN 2017...AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2017 3...
Years1992-2017
Doing Business in ASEAN2017
An Introduction to
This edition of Doing Business in ASEAN was produced by a team of professionals at Dezan Shira & Associates, with Samuel Wrest as Managing Editor and Maxfield Brown as technical editor.Creative design of the guide was provided by Jessica Huang, Kking Lu and Belén Rodríguez.
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DisclaimerThe contents of this guide are for general information only. For advice on your specific business, please contact a qualified professional advisor. Copyright 2017, Asia Briefing Ltd. No reproduction, copying or translation of materials without prior permission of the publisher.
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3AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2017
About Dezan Shira & AssociatesAt Dezan Shira & Associates, our mission is to guide foreign companies through Asia’s complex regulatory environment and assist them with all aspects of establishing, maintaining and growing their business operations in the region. Since its establishment in 1992, Dezan Shira & Associates has grown into one of Asia’s 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. With over 25 years of on-the-ground experience and a large team of professional advisers, we are your reliable partner in Asia
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4AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2017
Chris Devonshire-Ellis is the Founding Partner and Chairman of Dezan Shira & Associates, which he established in 1992. Advising foreign investors about the legal and tax protocols throughout Asia, the firm has developed from a small office in Shenzhen to 28 offices throughout China, ASEAN and India, with additional client liaison offices in Europe and the United States.
Chris also founded the Asia Briefing publishing house in 1999, and produces the titles Asia Briefing, ASEAN Briefing, China Briefing, India Briefing and Vietnam Briefing. He is based in Singapore.
Over the past 25 years, the global supply chain has shifted from its manufacturing bases in the United States and Europe to an Asian base dominated by China. That China has developed so quickly and so fast over this period has not purely been down to government policies per se, the demographic dividend that the country has enjoyed over this period as a cheap and large supplier of mass labor has been the main driver in this phenomenon.
However, this dynamic is now changing. China is aging, and is currently in a transition between being the world’s largest manufacturing base to becoming the world’s largest consumer market. This has major implications as the country becomes more expensive for manufacturing, moving its production line further into high-tech and as Chinese consumers become wealthier. This also has implications for the future dynamics of foreign investment into the country; on one hand, China will become a significant consumer of products, on the other, it will become increasingly expensive as a low-medium end manufacturing base.
However, this coincides with the emergence of the only other country that has the potential to match China; that of India, where interestingly, the worker/age demographic is now coming through. Indian workers are available today for the same price as a Chinese worker 15 years ago, and, if not in quite as large numbers, certainly significant enough to impact upon the global supply chain.
This demographic shift will see “Made in India” surpass “Made in China” in mass produced products over the next decade. Factories will shift part of their global supply chain to India as a result and the country will become increasingly important over the next decade as concerns foreign direct investment related to global consumer demand.
Executive Summary
CHRISChairman
Dezan Shira & Associates
5AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2017
Right in the middle of this mix will be Vietnam, Indonesia, the Philippines, Malaysia, and Thailand, whose membership in ASEAN provides them with free trade agreements with both China and India, as well as the applicable tax and duty benefits these FTAs also bring. This will see production begin to leech away to the larger ASEAN nations. Singapore will continue to develop as an Asian regional hub, and at the expense of Hong Kong, which is increasingly becoming a China-only play.
Emerging markets such as Cambodia, Laos, and Myanmar, while exotic, demonstrate a lack of infrastructure that remains an operational concern and it will be ten years at least before these nations are able to offer a competitive advantage except for the most hardy of investors.
This means that the global supply chain is now, rather like the ripples caused by a stone being thrown into a pond, emanating outwards from China into the rest of Asia, and to India and ASEAN in particular. Corporate executives faced with decision making processes when it comes to Asia now must, more than ever, be aware and conversant with the details of Asia’s numerous double tax and free trade agreements, including those that do not directly involve the United States and Europe. Foreign investors can now take part in the ASEAN free trade area simply by placing a subsidiary there. Meanwhile, tax advisors are well advised to keep abreast of new potential agreements such as the RCEP and TPP proposals.
ASEAN offers a triangular approach to the future of foreign investment into Asia. Not only does it possess a significant middle class in its own right, and a huge diversity of both talent and opportunity, but it also possesses extremely important free trade agreements with China and India. This combination will shift the way the global supply chain and manufacturing base operates.
Investing in Asia is now far more tax sophisticated and geographically varied than it was, and offers both more options and interesting solutions for growth as a result of this than has ever previously been the case. With a plethora of choices now available throughout the Asian region, both for the SME and the MNC, the future of the global supply chain is now directly linked to Asia. The winners will be the corporates and individuals that can both understand and operate throughout the entire region, and this has now become both the challenge and the marker for it being an “Asian” century.
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6AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2017
Table of Contents
Preface 04
Part 1 | An Introduction to ASEAN 11
ASEAN 5 at a glance 13
Understanding ASEAN’s free trade agreements 14
ASEAN’s 2015 AEC compliance deadline – what it actually means
16
The ASEAN-India Free Trade Area 17
The ASEAN-Australia-New Zealand Free Trade Agreement 19
Why ASEAN matters for your China business 21
Opportunity: how international companies can use ASEAN to access China & India
24
Part 2 | Country profiles 26
Brunei 27
Investment vehicles available to foreign investors 28
General steps for setting up a business 29
HR issues 30
Taxation 31
Summary 31
Cambodia 32
Investment vehicles available to foreign investors 33
General steps for setting up a business 34
HR issues 35
Taxation 36
Summary 37
7AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2017
Indonesia 38
Investment vehicles available to foreign investors 39
General steps for setting up a business 41
HR issues 42
Taxation 43
Summary 44
Dezan Shira Asian Alliance: Indonesia 45
Laos 46
Investment vehicles available to foreign investors 47
General steps for setting up a business 48
HR issues 49
Taxation 50
Summary 50
Malaysia 51
Investment vehicles available to foreign investors 52
General steps for setting up a business 54
HR issues 55
Taxation 56
Summary 57
Dezan Shira Asian Alliance: Malaysia 58
Myanmar 59
Investment vehicles available to foreign investors 60
General steps for setting up a business 61
HR issues 62
Taxation 63
Summary 63
8AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2017
The Philippines 64
Investment vehicles available to foreign investors 65
General steps for setting up a business 67
HR issues 68
Taxation 69
Summary 69
Dezan Shira Asian Alliance: the Philippines 70
Singapore 71
Investment vehicles available to foreign investors 72
General steps for setting up a business 72
HR issues 74
Taxation 75
Summary 75
Dezan Shira & Associates Singapore 76
Thailand 77
Investment vehicles available to foreign investors 78
General steps for setting up a business 80
HR issues 81
Taxation 82
Summary 83
Dezan Shira Asian Alliance: Thailand 84
Vietnam 85
Investment vehicles available to foreign investors 86
General steps for setting up a business 87
HR issues 88
Taxation 91
Summary 91
Dezan Shira & Associates Vietnam 92
9AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2017
Part 3 | Navigating ASEAN’s Business Environment 93
Taxation 94
Individual income tax 95
Corporate income tax 96
Double taxation agreements 97
Withholding tax and profit repatriation 98
Permanent Establishments 99
Conclusion 100
Foreign exchange volatility in ASEAN 101
NDF markets 102
Strategic planning 102
Development zones 104
Benefits of locating in development zones 104
Factors to consider when choosing a zone 105
The accelerating trend towards outsourcing payrollprocessing work in Asia
107
Audit and compliance in ASEAN 109
Audit and compliance in Indonesia 109
Audit and Compliance in Malaysia 110
Audit and compliance in Thailand 112
Audit and compliance in Philippines 113
Audit and compliance in Singapore 115
10AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2017
Part 4 | Case Studies: ASEAN as a Platform for Asian Growth
118
Assessing ASEAN as a Global Manufacturing Alternative 119
Salary Comparisons and Investor Trends 119
China – ASEAN Wage and Tax Cost Comparisons 121
Singapore compared with Hong Kong 125
Hong Kong Trade 126
Singapore Trade 127
Operational costs compared 128
Singapore vs Hong Kong: future outlook 129
Sourcing Products in ASEAN 130
Applicable treaties in ASEAN 130
Singapore as ASEAN’s financial & management hub 132
133AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2017
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Years1992-2017
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