Governments across ASEAN have been unveiling an array of incentive packages to entice businesses affected by the US-China trade war.
Countries such as Thailand, the Philippines, Malaysia, and Indonesia have introduced tax breaks and initiatives to improve the ease of doing business whereas Vietnam, Singapore, and Cambodia have accelerated business reforms, such as executing free trade agreements (FTAs), and double taxation agreements (DTAs).
We consolidate and briefly discusses the development of each country’s incentives over the past year. The developments showcase how ASEAN members are distinguishing themselves from the fellow competition and what opportunities are available for investors looking elsewhere in Asia.
Thailand introduced a stimulus package called Thailand Plus that covers seven key points which include the introduction of new tax incentives and deductions.
Thailand already offers investors corporate income tax (CIT) exemptions through the Eastern Economic Corridor, but Thailand Plus allows companies to be eligible for further reductions if they invest at least 1 billion baht (US$32 million) and apply for the incentive before 2020.
Investors that are developing advanced technology, engaging in automation systems, or employ highly-skilled individuals in the fields of science, technology, engineering, and mathematics (STEM), can receive tax deductions of up to 200 percent.
Additionally, the government will amend the main law regulating foreign business activities to simplify the process of acquiring visas and work permits and to improve information sharing between the government and relevant state agencies.
Thailand will endeavor to expand its FTA network under Thailand Plus, reviving the Thailand-EU FTA and joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Moreover, special investment zones for companies from South Korea, Japan, China, and the US will be developed.
Foreign investors with a foothold in the country, especially in high-value manufacturing sectors like electronics, automotive, aerospace, and maintenance, repair, and overhaul (MRO) services, could benefit from this latest package.
The Philippines’ CITIRA, and legislative amendments
In September 2019, the Philippines introduced the Corporate Income Tax and Incentives Rationalization Act (CITIRA). CITIRA will gradually reduce CIT from 30 percent to 20 percent over a ten-year period as well as rationalize specific tax incentives. The current CIT of 30 percent is the highest in ASEAN.
The Act is the second phase of the government’s Comprehensive Tax Reform Package program and aims to increase foreign investment, stimulate job growth, and enable domestic small and medium-sized enterprises (SMEs) to be more regionally competitive.
Under CITIRA, the government will also develop new priority regions beyond the National Capital Region, Metro Manila. Investments outside this region could help the country develop its infrastructure and supply chains to compete more readily with other ASEAN countries.
To further encourage foreign investment, lawmakers amended two provisions of the Foreign Investment Act (FIA) of 1991.
The amendments include the removal of the ‘practice of professionals’ from the foreign investment negative list (FINL). This was done to attract more skilled foreign professionals. The other amendments aim to reduce the number of mandatory direct local hires by foreign investors from 50 to 15 and to allow foreign investors to have 100 percent ownership of SMEs.
The government also revized the Public Service Act and the Retail Trade Liberalization Act. The formerly opened utility sectors like telecommunications and transportation to foreign investors. The latter set the minimum paid-up capital at US$200 thousand for foreign businesses looking to invest in the country’s retail industry.
Malaysia’s budget, investment fast track
Read More : Trade War Incentive Schemes in ASEAN
Digital Revolution and Repression in Myanmar and Thailand
Activists have also proactively published social media content in multiple languages using the hashtags #WhatsHappeningInMyanmar and #WhatsHappeningInThailand to boost coverage of events on the ground.
Vietnam: Manufacturing to remain the key driver of growth
We expect robust exports, led by strong global demand for electronics, to continue to underpin solid economic growth over the remainder of this year with GDP forecast to rise close to 8%.
GDP growth was unchanged at 4.5% y/y in Q1. Manufacturing activity surged, while the recovery in service sector activity and construction continued albeit at a more subdued pace as some localised social distancing measures were reinstated.
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