Doing Business in ASEAN a cheat sheet

Introduction
ASEAN is the Association of South East Asian Nations comprising
the State/Government of Brunei Darussalam, the Kingdom of
Cambodia, the Republic of Indonesia, the Lao Peoples Democratic
Republic, Malaysia, the Union of Myanmar, the Republic of the
Philippines, the Republic of Singapore, the Kingdom of Thailand
and the Socialist Republic of Viet Nam.
In the course of consulting and advising investors internationally,
there has always been reference to the two biggest economies in
Asia China and India; and a tendency to compare the same. This
leads to critical mistakes. To those who have done business in
India, doing business in ASEAN should indeed be familiar. China,
in spite of its size and provinces (states), are commonly linked by
Mandarin and communist governance. India, on the other hand,
does not really have a common language in Hindi and is
democratic with a quasi-federal system of governance. ASEAN is a
far better example for comparison to India and vice versa.
The ASEAN Economic Community (AEC) was formed to transform
ASEAN into a stable, prosperous, and highly competitive region
with equitable economic development, and reduced poverty and
socio-economic disparities. The AEC is to be established in 2015
and is one of the pre-cursors to the ASEAN Community in 2020.
The AEC aims to establish ASEAN as a single market and
production base which comprise the following:

1.

Free flow of goods

2.

Free flow of services

3.

Free flow of investment

4.

Freer flow of capital; and

5.

Free flow of skilled labor.

Eyes are focused on ASEAN with many professional firms already
developing direct or indirect presence in these countries.
The benefits and challenges of doing business in each of these
jurisdictions are set out below. The richest nations ranking is
based

on

GDP

(PPP)

per

capita

2009-2013

from

https://www.gfmag.com/global-data/economic-data/richestcountries-in-the-world.
All jurisdictions provide for business entry as sole proprietor,
partnership, private limited company, public limited company and
branch/liaison office. Some jurisdictions like Indonesia may permit
only

foreign

investment

limited

liability

companies

and

representative office and have been mentioned separately. Nearly

all ASEAN countries project themselves to be at the heart of South
East Asia.
Understanding of culture and customs cannot be stressed enough
while doing business in South East Asia.

Singapore

It is the best destination to operate business in Asia from. Several

common and oft repeated factors that contribute to this are
business friendliness and integrity, regulatory transparency,
corruption free environment, political legal and financial stability,
infrastructure, business integrity and cosmopolitanism. However,
this is not all. The thrust in the past was on finance. Singapore
has already established its reputation in finance and being a
nation that favors automation and technology, it has now trained
its focus not only on technology and finance, but towards fintech
as well. Three articles have been published on business in through
and around Singapore under LinkedIn Posts under the headings:
Doing Business in India from Singapore; Gateway to Asia:
Singapore | Hong Kong and China India Investments: Sino-Indian
ties or see no Indian ties (contains a para on benefits of investing
through Singapore).
Singapore is the 3rd richest nation in the world according to
Global Finance and is the first in many areas and remains relevant
by constantly reinventing itself. The political system is a
parliamentary representative democratic republic. The legal
system follows common law. Singapore recognizes 4 languages
English, Mandarin, Malay and Tamil. English is probably most
spoken and used widely.

Investment
As is the case with highly developed economies and countries, the
investment climate in Singapore is open and highly favorable with
a

regulatory

environment only in

the

sectors

of

finance,

professional services, telecom, real property, energy and media.

There are no restrictions on reinvestment or repatriation of

proceeds. Primary reasons for investment into Singapore are
taxation, sophisticated workforce, infrastructure and connectivity
to ASEAN, double taxation avoidance and free trade agreements
with most countries in the world.

Challenges
The challenges of doing business in Singapore is that it is highly
regulated and failure to comply leads to swift implementation of
legal justice. Depending upon the industry or sector, there are
licenses that need to be obtained. Therefore for businesses
seeking to acquire a local company, it is not so much the due
diligence of the target company but the post-integration and postacquisition compliance that matter more for success.
Many Singapore companies, as well as foreign owned ones, have
foreign

operations.

Where

local

participation

is

required,

shareholders agreement should be carefully drafted.

Benefits
Tax benefits, safety, ease of doing business. Singapore has DTAAs
signed with over 75 countries and many others pending
ratification. See end of this article for other benefits as well.

Malaysia
Malaysia ranks fifty fifth amongst the richest nations. The
dominant religion is Islam. The political system in the country is a
constitutional monarchy under the Westminster parliamentary
system and is categorized as a representative democracy. The law

of Malaysia is mainly based on the common law legal system. The

constitution of Malaysia also provides for state laws, secular laws
(criminal and civil) and Sharia laws. The national and official
language is Bahasa Malaysia or Malay. Local language in court
proceedings is a requirement for Courts, at least lower courts,
though they may waive it. Contracts may be in English though
government contracts may contain both languages.

Investment
Economic growth of Malaysia is driven by agriculture, mineral
resource, electrical and electronics, forestry, oil and gas. Malaysia
ranks highly in ease of doing business and its strengths lie in
getting credit and protecting investors. Infrastructure is well
developed and Malaysia even exports related services. 100%
foreign equity participation in permitted in certain healthcare and
educational

services,

telecommunications

department

Application

and

specialty

stores,

Service

Providers

(ASP),

accounting and taxation services, courier services.

Many companies take full advantage of setting up company in
Singapore and working in Malaysia where they gain from cheaper
labour, land and costs. This is mutually beneficial as smarter
companies can continue benefit from projecting its Asia-Pac HQ in
Singapore as it main base. While engaging in contracts in
Malaysia, it may be useful to note that dealing with decisionmakers

or

senior

expeditious business.

management

result

in

efficacious

and

Malaysia has extensive and progressive legislation in the field of

intellectual

property rights protection. There are monetary

threshold restrictions on real property ownership and approval

would be required. There are exceptions as well.

Challenges
Incorporation as well as approval process and permits can take
time. Local equity participation apply for various permits and
licenses. On internal front, its airline industry has not received the
best of attention or feedback. The recent issues of proprietary and
political imbroglio has also not helped in the presenting the best
side of Malaysia.

Tax
Malaysia provides tax incentives for private limited companies
and public limited companies. Malaysia has DTAAs with over 70
countries. Capital gains are taxed on real property gains and on
exercise of employee stock options.

Vietnam
Vietnam ranks 132 amongst the richest nations. It is the only
other communist state in SEA. The law in Vietnam is based on
communist legal theory and French civil law. Vietnamese is the
official language and official documentation are in Vietnamese.
English is not commonly used as a language for business
communication. Lawyers play an important role.

Investment

Vietnam

is

an

important

manufacturing

hub

for

many

international companies. Agriculture and seafood produce form

major part of the economy along with mineral wealth and oil and
gas reserves, making it attractive for global investors. 100% FDI is
permitted along with investment through Joint Stock Company or
a business cooperation contract with a local partner. However, FDI
requires an investment certificate that sets out the scope that the
firm is allowed to cover. Time taken for registering a business in
Vietnam can vary substantially from two to eight months
depending on the complexity of the industry and the number of
licenses required. Investors can apply directly to the authorities or
through a lawyer.
Though

Vietnam

has

comprehensive

legislation

relating

to

protection of IP, enforcement is an issue. On real property,

foreign-owned entities are not allowed to own land, but can enter
into leases.

Challenges
Local experts are a must while doing business in Vietnam.
Documentation is in Vietnamese and multiple authorities/agencies
may be involved for various licenses. Registering local entity
procedures and obtaining of approvals are cumbersome. Due
diligence reports may return many documents unfound or
unfounded. Foreign ownership are capped at 30% (banking), 49%
(public company), may not exceed 51% for some restricted
industries, or is even prohibited altogether for some sectors.

Tax

Vietnam has DTAAs with about 38 countries. Capital gains tax is

levied.

Indonesia
Indonesia ranks 122 amongst the richest nations. The dominant
religion is Islam. The political system in the country is a republic
with a presidential system. Law of Indonesia is based on a civil
law system, intermixed with customary law (known as adat law)
and the Roman Dutch law. These three systems co-exist along
with new laws. The main language is Bahasa Indonesia, a variant
of Malay which also functions as an official language for
transactions and commercial documents. Local language in
contract is a requirement for Courts.

Investment
Economic growth of Indonesia is driven by performances in
agriculture, mineral resources, coal, oil and gas. Nearly every
sector has restrictions on foreign investment and participation.
High priority economic sectors may be entitled to income tax
benefits or tax holidays. There are Forex controls on repatriation
of amounts. Infrastructure is a major target sector for investment.
Foreign investment can own up to 100% of their business only in
certain and very limited sectors.
Though Indonesia provides for intellectual property protection, the
process of enforcement and defense is slow. Foreigners cannot
own land in Indonesia. Many use convertible lease agreements or

try to obtain strata title. These are however not established

means.

Challenges
There are limits and investment caps across a variety of industries
which range from 0% to 100%. Limited infrastructure increases
the cost of doing business. However, Indonesia may have
separate agreements with different countries, such as China on
Chinese products, on taxation of products imported. Indonesia
ranks 128th out of 185 countries in the World Banks Doing
Business

rankings.

Contract

enforcement

and

legislative

transparency are major issues along with poor access to credit

and high taxation. Incorporation process is protracted requiring at
least 2 shareholders for companies. Transparency is an issue.
Extensive due diligence is recommended.

Tax
Indonesia has DTAAs with over 50 countries. Capital gains are
taxable as ordinary income and capital losses, deductible. Process
of paying tax is rather onerous.

Thailand
Thailand formerly known as Siam ranks 85 amongst the richest
nations. The religion followed by Thais is Buddhism. As of 2015,
the Kingdom of Thailand continues to be under military rule. The
law of Thailand is civil law with some sources of common law.
General contracts can be in English and government contracts in
Thai.

Investment
Thailand is the second largest economy in SEA and considered an
emerging economy. It is ranked the 5th easiest place to do
business in Asia. Tourism industry is substantial. Thai government
incentives

for

FDI

focuses

on

research

and

development,

innovation and value creation investment. List of promoted

sectors are - agriculture and agricultural products, mining,
ceramics and basic metals, light industry, metal products,
machinery and transport equipment, electronic industry and
electric appliances, chemicals, paper and plastics, services and
public utilities.
Thailand has progressive legislation in the field of intellectual
property rights protection though enforcement used to be an
issue. On real property, foreign-owned entities are not allowed to
own land unless special conditions are met. Foreign nationals may
buy condominiums units in Thai condos (shares in condominium
corporations) subject to a cap of 40% of the units acquired by
foreigners.

Challenges
Political stability and world markets affect Thailand investment
outlook. Thailand is also subject to many a political unrest, strikes
and bombings. Corruption remains an issue.

Tax
Income in Thailand from capital gains is taxed the same as
regular income. If an individual earns capital gain from security in

the Stock Exchange of Thailand, it is exempted from personal

income tax.

The Philippines
The Philippines ranks 127 amongst the richest nations and is the
only Christian nation in Asia. The Philippines is a unitary
presidential constitutional republic, with the President of the
Philippines acting as both the head of state and the head of
government. The Philippine legal system is a blend of customary
usage, civil law and common law systems. Constitutional law,
procedure, corporation law, negotiable instruments, taxation,
insurance, labour relations, banking and currency follow common
law. English and Filipino are the official languages.

Investment
Agriculture constitutes the largest part of the economy. The
Philippines is known for its workforce export. Investment by
public-private participation in aviation, infrastructure, transport,
water, healthcare and education is highly encouraged. Investment
in to the Philippines is controlled with no FDI in certain sectors
such as mass media, practice of professions, retail trade, and with
local participation in others such as recruitment, construction,
advertising, natural resources, gambling, finance. 100% FDI is
permitted subject to stringent conditions.
The Philippines has made substantial progress in protection of IP
and taken steps to bolster IPR by passing laws to improve and
streamline enforcement.

Foreign-owned entities are not allowed to own land, but can enter
into leases. Foreign nationals may buy condominiums units in
Philippine condos (shares in condominium corporations) subject to
a cap of 40% of the units acquired by foreigners.

Challenges
Local experts are a must while doing business in the Philippines.
Registering local entity procedures and obtaining of approvals are
cumbersome. There are many limitations to investing in the
Philippines. Contract enforcement is slow. Business is conducted
in a hierarchical structure and on consensual basis. Due diligence
reports may return many documents unfound or unfounded.

Tax
The Philippines has DTAAs with about 36 countries. Capital gains
tax is levied and there are various withholding tax rates.

Myanmar
Myanmar, erstwhile Burma, ranks 162 amongst the richest
nations, but this means little and is considered by many as the
last bastion of FDI. There is no official religion but Buddhism is
followed by majority of the population. Though the country is
making overtures towards democracy, the political system is
currently in the hands of the military. The opposition does not
appear to have a succession or continuing plan. The legal system
is based on English common law, with many systems outdated
and in the process of overhaul. The official language is Burmese.
Business documentation may be in Burmese.

Investment
The economy is one of the least developed in the world. The
major investors have been China, South Korea and India. Tourism
is an area for foreign investment. Myanmar is rich in semiprecious stones, natural resources, oil and gas. The key FDI
sectors are infrastructure (roads, power, telecommunications and
logistics), oil and gas, manufacturing, mining, real estate, hotel
and tourism. Business proceedings could be protracted and
impeded by bureaucracy. Due diligence and definition of risk
should be indigenised. Up to 100% foreign investment can be
received in private limited companies. Some of the prohibited
sectors relate to teak, forest plantations, petroleum and natural
gas

pearls,

jade

and

precious

stones,

postal

and

telecommunications services, air and railway transport services,

banking and insurance services, broadcasting and television
services, metals, security and defense.
Intellectual property laws do not exist. Alternate protection may
be sought in other laws. Foreign-owned entities are not allowed to
own land, condos, apartments or any type of property in Myanmar
under the current law, but can enter into leases.

Challenges
As is the case with many underdeveloped and developing
countries, cost of stay in luxury hotels are comparable to
developed

countries.

Cost

of

experienced

and

skilled

professionals are also at a premium. Infrastructure and skilled

workforce is an issue. Justice meted may be ambiguous and not
necessarily independent of the Government.

Tax
Myanmar has DTAAs with about 10 countries and 8 of them have
been notified. Capital gains tax is levied and there are various
withholding tax rates.

Brunei Darussalam
Brunei is the fifth richest nation owing to its petroleum and
natural gas fields. The official religion is Islam. The political
system in the country is governed by the constitution and the
national tradition of the Malay Islamic Monarchy. It has a mixed
legal system based on English common law and Islamic Shariah
law; the latter supersedes the former some cases, for instance,
the sharia-based penal codes applies to Muslims and non-Muslims
and exists in parallel to the existing common law-based code.
Malay is the standard language, but English is widely used as a
business and official language.

Investment
The investment climate in Brunei is open and highly favorable
with limitations in the sectors of certain fields. The Government
has been making an effort to diversify the economy and turn
Brunei into a banking center as well as an international offshore
financial center. National food security and those based on local
resources require local participation. Industries for the local
market not related to national food security and industries for
total export can be totally foreign owned. Intellectual property
protection is consistent with international norms. Areas of
investment promoted by Brunei are: agri-food; downstream oil
and gas and energy intensive industries; information and

communication

technology;

life

sciences

(pharmaceutical,

cosmetics, and functional health food and health supplements);

light manufacturing; services, such as financial services and
tourism; and other activities that may be technology driven.
Though there are IP laws, enforcement is an issue. Local partners
are required for land purchase.

Challenges
The challenges of doing business in Brunei are relatively high cost
of doing business; shortage of skilled and unskilled workers and
lack of competitiveness of local products. Increase in institutional
capacity of the government, including service delivery, and
finance sector development need to be more effective. Other
areas that need addressing are investor protection, ease of
obtaining credit, and ease of doing business.

Tax
Brunei has DTAAs with about 20 countries. There is no capital
gains tax. However, where the Collector of Income Tax can
establish that the gains form part of the normal trading activities,
they become taxable as revenue gains. The Government of Brunei
Darussalam has also signed the Tax Information Exchange
Agreement (TIEA). Unlike DTAAs, the objective of TIEA is to
promote

cooperation

information

between

in

tax matters

the

signatory

through

exchange

countries

especially

cooperation in countering abuses of the financial system.

Cambodia

of

Cambodia ranks 142 amongst the richest nations though the UN

has classified Cambodia as a least developed country. It is
arguably the fastest growing economy in Asia. The official religion
is

Buddhism

and

the

political

system

in

the

country

is

constitutional monarchy where the governing powers of the

monarch are contained by the Constitution. The legal system is
primarily based on civil law system (influenced by the UN
Transitional Authority in Cambodia), customary law, Communist
legal theory, and common law. Khmer or Cambodian is the
standard language as well as the official language.

Investment
Economic growth of Cambodia is driven by performances in
garment manufacture, tourism, paddy and milled rice, and
construction.

Infrastructure

is

major

target

sector

for

investment. Foreign investment can own up to 100% of their

business or enter into joint ventures except in except in the
sectors of cigarette manufacturing, movie production, rice milling,
gemstone mining and processing, publishing and printing, radio
and television, wood and stone carving production, and silk
weaving. Investors invest in Cambodia for its low wages, liberal
government policy on business, access to larger markets, and a
country that offers extensive opportunities for tourism.
Intellectual property protection is consistent with international
norms and Cambodia is a member of the World Intellectual
Property Organization and the Paris Convention for the Protection
of Industrial Property, and is a party to the ASEAN Framework
Agreement on Intellectual Property Cooperation.

Land in Cambodia must be registered under a local person and

locals are needed to oversee the development.

Challenges
Cambodians working in export sectors are typically recruited from
among the rural poor. Trade, employment and poverty reduction
are tightly linked in Cambodia. As a small and open economy that
is highly dollarized, Cambodian economy is immediately affected
by any changes in oil prices. Though the political environment
appears stable, corruption and controversies are major factors.
The administrative process for acquisitions can be highly complex
and time consuming. Health care, limited infrastructure, low
government salaries are some of the challenges of doing business
in Cambodia.

Tax
Dividends,

royalties

(including

rent

and

other

payments

connected with the use of property) and interest paid to a nonresident are subject to withholding tax. Other non-resident
payments

include

withholding

tax

on

compensation

for

management or technical services. Cambodia is not a party to

any double tax agreements. Accordingly, no tax treaty relief from
withholding tax is available.

Laos
Laos or the Lao Peoples Democratic Republic is one of the
poorest countries in SEA and featured as a developing nation. It is
a communist state with a civil law system. The religion is
Buddhism. Economy is mainly agrarian and natural resource

exports. The legal system is based rule of the only party in Laos,
the Lao Peoples Revolutionary Party. The official and dominant
language of Laos is Lao and laws are in Lao language. French is
also used for communication.

Investment
Economic growth of Laos is driven by agriculture which accounts
for 85% and tourism. Infrastructure is a major target sector for
investment. The scope of investment lies in natural resources,
tourism and agri-business from fertile agricultural land. It is a
substantial supplier of hydroelectricity to China, Vietnam and
Thailand. Legal entities take the form of partnerships, private and
public limited companies.
Comprehensive IP law is much needed. There is a Prime Minister
Decree on trademarks and patents for protection, but no
copyright protection in Laos. IPR is still under development. On
real property, land in Laos cannot be owned by non-residents but
can be leased.

Challenges
There are many challenges to doing business in Laos. Human
rights and corruption are major issues. The infrastructure in Laos
is underdeveloped and more so in the rural areas. Legal recourse
and enforcement could be arbitrary. Work force is unskilled,
though low cost.

Tax

Laos has DTAAs with 8 countries: 5 ASEAN countries, N & S Korea

and China and is in negotiations with Singapore and India.

Advantages of accessing ASEAN from Singapore

Some of the main benefits for foreign entities and individuals
doing business in through and around Singapore are:

Strategic location.

Long term business success due to stability of DTAA

implementation and limitation of benefits giving high credibility.

Investing in Singapore for accessing international Stock

Exchanges as well as reinvestment into ASEAN (as holding
company).

Access

Singapore

and

international

funds

with

representative in the Singapore company to invest in ASEAN.

Investor comfort, confidence and safety towards ASEANincorporated, Singapore-promoted companies doing business in
ASEAN.

Easier to raise global funds.

Governance premium by Singapore based entities.

High quality and sophisticated work force and service.

Intellectual property assets maintained in Singapore for

worldwide deployment and centralized portfolio management.

First point of protection of investor value into ASEAN.

A second listing in SGX, a more conservative markets, after

US, Europe and/or Australian markets provides excellent hedging
and safer market. SGX is also an advantage to investors and
promoters who wish to keep their investments voluntarily locked
in for longer periods.

Home for family offices (private wealth).

Tax:

For profits up to $S300,000 Singapore corporate tax

rate is below 9% and capped at 17%

5 year tax holiday subject to qualifiers

India corporate tax rate is 30% for residents and 40%

for non-residents (goes up beyond 60%)

Annual turnover of less than S$5 million are exempt

from audit requirements

Dividends distributed by the Indian Subsidiary to the

Singapore Holding is not subjected to withholding tax in India,
subject to conditions.