Brunei is a member of the Association of Southeast Asian Nations (ASEAN), as association of ten Southeast Asian nations, which has Free Trade Agreements (FTA) with Australia, New Zealand, China, India, and South Korea, and a Comprehensive Economic Partnership Agreement with Japan.

Brunei currently has Bilateral Investment Treaties with Bahrain, China, Germany, India, the Republic of Korea, Kuwait, Oman, and Ukraine. Brunei does not currently have a Bilateral Investment Treaty with the United States. Information on Brunei’s Bilateral Investment Treaties can be found on the Ministry of Foreign Affairs website: http://mofat.gov.bn/Pages/Free-Trade-Agreements.aspx .

Brunei served as the ASEAN Coordinator in negotiations for the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA), which was signed February 2009 in Thailand and entered into force January 2010. Brunei is also negotiating party to the Regional Comprehensive Economic Partnership (RCEP), and was a founding member of the Trans-Pacific Partnership (TPP) trade agreement.

Brunei does not have a Bilateral Taxation Treaty with the United States. Brunei has signed the Tax Information Exchange Agreements with Canada, Iceland, Norway, Finland, Greenland, Sweden, Australia, Denmark and Faroes. Information on Brunei’s tax exchange agreements and treaties can be found on the Ministry of Finance website: http://www.mof.gov.bn/divisions/tax-information-exchange-agreement-tiea.aspx . In 2017, Brunei become a signatory to the OECD multilateral convention on mutual administrative assistance in tax matters.

Investment Incentives

Companies involved in the exportation of agriculture, forestry, and fishery products can apply for tax relief on export profits. Tax exemption may be available for pioneer industry companies. For non-pioneer enterprises, the tax relief period is eight years and up to 11 years for pioneer enterprises.

The corporate income tax rate in Brunei has been reduced from 30 percent (2007 and earlier) to the current rate of 18.5 percent (2015 onwards).

Sole proprietorships and partnerships are not subject to tax. Individuals do not pay any capital gains tax and profits arising from the sale of capital assets are not taxable. Brunei has double-taxation agreements with the United Kingdom, Indonesia, China, Singapore, Vietnam, Bahrain, Oman, Japan, Pakistan, Malaysia, Hong Kong, Laos, Kuwait, Tajikistan, Qatar, and United Arab Emirates. Under the Income Tax (Petroleum) Act, a company is subject to taxes of up to 55 percent for any petroleum operation pursuant to production sharing agreements.

Foreign Trade Zones/Free Ports/Trade Facilitation

Muara Port is Brunei’s main seaport with an established Free Trade Zone called the Muara Export Zone (MEZ), which was established to promote and develop Brunei as a trade hub of the region. The establishment of the MEZ was an initial step towards developing other Free Trade Zones in the country. In Brunei’s 2017 Legislative Council session, the government announced that a 96 hectare area near Muara Port will be designated to be a Free Trade Zone.

Performance and Data Localization Requirements

The Brunei government seeks to increase the number of Bruneians working in the private sector. Brunei’s 2014 Energy White Paper calls for the number of people employed in the energy sector to increase from 20,000 in 2010 to 50,000 in 2035, and for the number of locals employed in the sector to increase from 10,000 to 40,000 during the same period. To advance this goal, all companies competing for a tender in the oil and gas industry are required to have at least half of their employees be Bruneian.

Expatriate employment is controlled by a labor quota system administered by the Labor Department and the issuance of employment passes by the Immigration Department. Brunei allows new companies to apply for special approval to expedite the recruitment of expatriate workers in select positions. According to the Ministry of Home Affairs, the special approval is only available to new companies for up to six months, and covers businesses such as restaurants and shops. The special approval cuts the waiting time for a quota to seven days instead of twenty one.

Currently, Brunei has not announced any specific legislation pertaining to data storage and data localization requirements.

*Brunei’s GDP data obtained from Brunei Darussalam Statistical Yearbook 2015. Data are not available for US-Brunei’s stock FDI positions
Table 3: Sources and Destination of FDI

Data not available.
Table 4: Sources of Portfolio Investment

Data not available.

Burma has signed and ratified several bilateral investment agreements with China, India, Japan, Philippines, and Thailand. It has also signed bilateral investment agreements with Israel, Laos, South Korea, and Vietnam although these have not yet entered into force. Burma has engaged in investment treaty negotiations with Bangladesh, China, Hong Kong, Iran, Mongolia, Russia, and Serbia. Texts of the agreements or treaties that have come into force are available on the UNCTAD website at: http://investmentpolicyhub.unctad.org/IIA/CountryBits/144 .

In 2013, the United States and Burma signed a Trade and Investment Framework Agreement.

Burma does not have a bilateral investment treaty or a free trade agreement with the United States.

Through its membership in ASEAN, Burma is also a party to the ASEAN Comprehensive Investment Agreement, as well as to the ASEAN-Australia-New Zealand Free Trade Agreement, the ASEAN-Korea Free Trade Agreement, and the China-ASEAN Free Trade Agreement, all of which contain an investment chapter that provides protection standards to qualifying foreign investors.

Burma has bilateral trade agreements with Bangladesh, Sri Lanka, China, South Korea, Laos, Malaysia, the Philippines, Thailand, and Vietnam in the Asian region, as well as with a number of Eastern European countries.

Burma has Avoidance of Double Taxation Agreements with the United Kingdom, Singapore, India, Malaysia, Vietnam and South Korea.

Burma does not have a bilateral taxation treaty with the United States.

Investment Incentives

According to the MIL, investors may enjoy corporate tax exemption for seven, five or three years depending on whether investment takes place in underdeveloped, moderately developed or adequately developed regions, although income tax exemption shall be granted only to the investment in promoted sectors such as agriculture, manufacturing, power generation, etc. The detailed list of all types of business which are listed as promoted sectors can be seen at the DICA website: https://www.dica.gov.mm/en/why-invest-myanmar .

All investors must obtain a MIC permit. MIC permit holders are not only entitled to enjoy tax incentives but also the right to use land. With a MIC permit, foreign companies can lease regional government approved land for initial periods of up to 50 years, and two additional consecutive periods of ten years each may be extended.

DICA is officially mandated to coordinate investment promotion under the MIC, although different ministries and agencies promote investment in different sectors ( e.g. the Ministry of Tourism promotes responsible tourism investment). DICA is responsible for encouraging and facilitating foreign investment by providing information, fostering coordination and networks between investors and continually exploring new opportunities in Burma that would benefit both the nation and the business communities. DICA’s head office is in Yangon and it has 14 branches throughout the country including Naypyitaw, Mandalay, Taunggyi, Mawlamyaing, Pathein, Monyaw, Dawei, Hpa-an, Bago, Magway, Loikaw, Myitkyina, Sittwe and Hakha. DICA uses seminars, workshops, investment fairs and other events to promote investment, as well as its website: http://www.dica.gov.mm/en .

Foreign Trade Zones/Free Ports/Trade Facilitation

The Myanmar Economic Zones Law also contains certain investment incentives. Under the law, investors located in an SEZ may apply for income tax exemption for the first five years from the date of commencement of commercial operations, followed by a reduction of the income tax rate by 50 percent for the succeeding five-year period. Under the law, if profits during the third five-year period are re-invested within one year, investors can apply for a 50 percent reduction of the income tax rate for profits derived from such re-investment. In August 2015, the Ministry of National Planning and Economic Development issued new rules governing the SEZs including the establishment of a One-Stop Service Department to ease the approval and permitting of investments in SEZs, incorporate companies, issue entry visas, issue the relevant certificates of origin, collect taxes and duties, approve employment permits and/or permissions for factory construction and other investments.

Performance and Data Localization Requirements

Foreign investors must recruit at least 25 percent of their skilled employees from the local labor force in the first two years of their investment. The local employment ratio increases to 50 percent for the third and fourth years, and 75 percent for the fifth and sixth years. The investors are also required to submit a report to MIC with details of the practices and training methods that have been adopted to improve the skills of Burmese nationals.

Foreign investors are not yet required to use domestic content in goods or technology. Burma is currently developing laws, rules and regulations on information technology (IT), and does not have in place requirements for foreign IT providers to turn over source code and/or provide access to surveillance.

* http://www.mof.gov.mm/en  (Citizen Budget 2016-17)
** Accurate statistical data are limited in Burma, although this capacity is also being developed

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

Accurate statistical data are limited in Burma, although this capacity is also being developed.

BITs or FTAs

Cambodia has signed bilateral investment treaties (BITs) with Austria, Belarus, Bangladesh, China, Croatia, Cuba, Czech Republic, Democratic People’s Republic of Korea, France, Germany, Hungary, India, Indonesia (later terminated), Japan, Kuwait, Laos, Malaysia, the Netherlands, Pakistan, the Philippines, the Republic of Korea, Russia, Singapore, Switzerland, Thailand, Vietnam, and the Organization of the Petroleum Exporting Countries. Future agreements are planned with Algeria, the Belgium-Luxembourg Economic Union, Bulgaria, Egypt, Hungary, Israel, Iran, Libya, Macedonia, Malta, Qatar, Turkey, the United Kingdom, and Ukraine. Cambodia does not have an existing BIT with the United States.

Cambodia has also signed several regional Free Trade Agreements including ASEAN Australia New Zealand Free Trade Agreement, ASEAN India Free Trade Agreement, ASEAN China Free Trade Agreement and ASEAN Investment Comprehensive Agreement. Cambodia is also negotiating ASEAN-Hong Kong, China Investment Promotion and Protection Agreement; Regional Comprehensive Economic Partnership Agreement (RCEP); and ASEAN-Republic of Korea Investment Agreement under the Framework Agreement.

In July 2006, Cambodia signed a Trade and Investment Framework Agreement (TIFA) with the U.S. to promote greater trade and investment in both countries and provide a forum to address bilateral trade and investment issues. In August 2017, the fourth TIFA meeting was held in Washington DC.

Bilateral Taxation Treaties

In the past, Cambodia’s national tax agency, the General Department of Taxation (GDT), has lacked the capacity to collect taxes on a large scale. As a result, many companies avoided paying taxes such as salary tax, value-added tax (VAT), and real estate tax, despite being required to do so under Cambodian laws. The GDT has taken steps, however, to increase tax revenue both by building capacity within the organization and through better implementation of existing tax laws.

Application of Cambodia’s tax laws, while improving, remains inconsistent. In some cases, foreign investors face greater scrutiny to pay taxes than their domestic counterparts. In others, the GDT has been criticized for employing audits and assessing large tax obligations for political purposes.

Cambodia does not have a bilateral taxation treaty with the U.S. The country has entered into taxation agreements with Thailand, Brunei, China, and Singapore. Details of those agreements may be found on Cambodia’s General Department of Taxation (GDT) website here: http://www.tax.gov.kh/en/ir.php .

Investment Incentives

All investments must be registered with the Ministry of Commerce. Cambodia’s Law on Investment and Amended Law on Investment offers varying types of investment incentives for projects that meet specified criteria. Investors seeking an incentive must submit an application to the CDC. Investors who wish to apply are required to pay an application fee of KHR 7 million (approximately USD 1,750), which covers securing necessary approvals, authorizations, licenses, or registrations from all relevant ministries and entities, including stamp duties. Under a 2008 sub-decree, the CDC is required to seek approval from the Council of Ministers for investment proposals that involve capital of USD 50 million or more, politically sensitive issues, the exploration and exploitation of mineral or natural resources, or infrastructure concessions. The CDC is also required to seek approval from the Council of Ministers for investment proposals that will have a negative impact on the environment or the government’s long-term strategy.

Since 2011, tax incentives have been provided for rice farming, paddy rice purchase and the export of milled rice. Meanwhile QIPs are entitled to receive different incentives such as corporate tax holiday, special depreciation allowance, and import taxes exemption on production equipment, construction materials, and production inputs used to produce exports. Investment projects located in designated special promotion zones or export-processing zones are also entitled to the same incentives. Industry-specific investment incentives, such as a three-year profit tax exemption, may be available in the agriculture and agro-industry sectors. More information about the criteria and investment areas eligible for incentives can be found at the following link: www.cambodiainvestment.gov.kh/investment-scheme/investment-incentives.html .

Investment activities excluded from incentives are detailed in the September 2005 Sub-Decree on the Implementation of the Amendment to the Law on Investment. These include the following sectors: retail, wholesale, and duty-free stores; entertainment establishments (including restaurants, bars, nightclubs, massage parlors, and casinos); tourism service providers; currency and financial services; press and media-related activities; professional services; and production and processing of tobacco and wood products. Incentives also may not be applied to investments in the production of certain products if the investment is less than USD 500,000. This includes food and beverages; textiles, garments, and footwear; and plastic, rubber, and paper products. Investors are not required to place a deposit guaranteeing their investment except in cases involving a concession contract or real estate development project.

Foreign Trade Zones/Free Ports/Trade Facilitation

To facilitate the country’s development, the Cambodian government has shown great interest in increasing exports via geographically defined special economic zones (SEZs). In December 2005, the government adopted the Sub-Decree on Special Economic Zones to speed up the creation of the zones by detailing the procedures, conditions, and incentives for investors. The Government is also drafting the law on Special Economic Zones, which is now undergoing technical review within the CDC. There are currently 13 special SEZs, which are located in Phnom Penh, Koh Kong, Kandal, Kampot, Sihanoukville, and near the borders of Thailand and Vietnam. The main investment sectors in these zones include garments, shoes, bicycles, food processing, auto parts, motorcycle assembly, and electrical equipment manufacturing. Twelve more SEZs are under construction.

Performance and Data Localization Requirements

The Law on Investment permits investors to hire foreign nationals for employment as managers, technicians, or skilled workers if the qualifications and/or expertise are not available in Cambodia. According to the Cambodian Labor Law, the number of foreign employees should not exceed ten percent of the total number of Cambodian employees. In practice, companies can request an increase in this ratio from the Ministry of Labor.

Under Cambodian law, most foreign investments and foreign investors are subject to the following taxes: corporate profits tax (20 percent), tax on individual salaries (0 to 20 percent), withholding taxes (4 to 15 percent), value-added taxes (0 to ten percent), and import duties (0 to 35 percent).

Cambodia does not have any forced localization policy that obligates foreign investors to use domestic contents in goods or technology. Cambodia also does not require foreign Information Technology providers to turn over source code. The General Department of Information and Communications Technology (ICT) in the Ministry of Post and Telecommunications oversees ICT-related policy in Cambodia.

According to International Monetary Fund (IMF) data, total FDI in Cambodia as reported by counterpart economies increased by 66.66 percent reaching USD 5 billion in 2016. The number of Cambodian investments outside the country is still quite small compared to inward foreign direct investment. In 2016, Cambodia’s outward foreign direct investment totaled USD 260. Singapore remained the top outward investment destination for Cambodia. The IMF’s 2017 data are not yet available.

NOTE: A discrepancy exists between IMF data and investment figures tracked by The Council for the Development of Cambodia (CDC). While the IMF database did not record any investment value from China in 2016, there were USD 731 million investment values as reported by the Council for the Development of Cambodia. Readers should consult with the CDC’s website for the official FDI as represented by the Cambodian government.

Table 3: Sources and Destination of FDI, 2016

Table 4: Sources of Portfolio Investment

Data not available.

Indonesia has investment agreements with 44 countries, including: Algeria, Australia, Bangladesh, Chile, Croatia, Cuba, Czech Republic, Denmark, Finland, Guyana, Iran, Jamaica, Jordan, Kyrgyzstan, Libya, Mauritius, Mongolia, Morocco, Mozambique, Norway, Pakistan, Philippines, Poland, Qatar, Russia, Saudi Arabia, Serbia, Slovak Republic, South Korea, Sri Lanka, Sudan, Suriname, Syria, Sweden, Tajikistan, Thailand, Tunisia, Turkmenistan, Ukraine, United Kingdom, Uzbekistan, Venezuela, Yemen, and Zimbabwe. Indonesia does not have a bilateral investment treaty (BIT) with the United States.

In 2014, Indonesia began to abrogate its existing BITs by allowing the agreements to expire. By 2017, 23 BITs had expired, including those with Argentina, Belgium, Bulgaria, Cambodia, China, Egypt, France, Germany, Hungary, India, Italy, Laos, Malaysia, Netherlands, Norway, Pakistan, Romania, Singapore, Spain, Slovakia, Switzerland, Turkey, and Vietnam. Indonesia is currently developing a new model BIT.

Under the ASEAN Free Trade Agreement, duties on imports from ASEAN countries generally range from zero to five percent, except for products specified on exclusion lists. Indonesia also provides preferential market access to Australia, China, Japan, Korea, India, Pakistan, and New Zealand under regional ASEAN agreements and to Japan under a bilateral agreement. In accordance with the ASEAN-China FTA, in August 2012 Indonesia increased the number of goods from China receiving duty-free access to 10,012 tariff lines.

Indonesia is currently negotiating bilateral agreements with Bangladesh, Iran, India, Australia, Malaysia, New Zealand, Pakistan, Sri Lanka, South Korea, Turkey, the EU and the European Free Trade Association. In December 2017, Indonesia and Chile signed the Indonesia-Chile Comprehensive Economic Partnership Agreement (CEPA). Indonesia has expressed its desire to conclude the negotiation of the Indonesia-Australia CEPA, Indonesia-EU CEPA, Indonesia-European FTA (Switzerland, Norway, Iceland, and Liechtenstein), Indonesia-Turkey CEPA, Indonesia- Iran Preferential Trade Agreement (PTA), and Indonesia-Malaysia Bilateral Trade Agreement (BTA) by end of 2018.

The ASEAN Economic Community (AEC) arrangement came into effect on January 1, 2016, and was expected to reduce barriers for goods, services and some skilled employees across ASEAN. Indonesia is also participating in negotiations for the Regional Comprehensive Economic Partnership (RCEP), which includes the 10 ASEAN Member States and 6 additional countries (Australia, China, India, Japan, Korea and New Zealand). In February 2018, RCEP entered the 21st round of negotiations, which included discussion on trade in goods, trade in services, investment, economic and technical cooperation, intellectual property, competition, dispute settlement, e-commerce, SMEs and other issues.

The United States and Indonesia signed the Convention between the Government of the Republic of Indonesia and the Government of the United States of America for the Avoidance of Double Taxation and the Prevention of the Fiscal Evasion with Respect to Taxes on Income in Jakarta on July 11, 1988. This was amended with a Protocol, signed on July 24, 1996. There is no double taxation of personal income.

Investment Incentives

Indonesia provides incentive facilities through fiscal incentives, non-fiscal incentives, and other benefits. Fiscal incentives are in the form of tax holidays, tax allowances, and exemptions of import duties for capital goods and raw materials for investment. On April 9, 2018 Indonesia issued an updated tax holiday scheme that exempts certain businesses from paying corporate income taxes under Ministry of Finance Regulation No. 35/2018 and Ministry of Finance Regulation No. 103/2016. The new regulation expands the categories of eligible firms by allowing existing companies to apply for tax holidays for new investments. Previously, only new firms or market entrants could apply. The regulation grants a 100 percent tax holiday reduction, whereas the old regime provided tax holidays on a sliding scale. The period of tax holiday is extended up to 20 years; the minimum investment threshold is IDR 500 billion (36.8 million – five year holiday), while the largest tranche is reserved for investments above IDR 30 trillion (2.21 billion – 20-year holiday). In addition to the tax holiday, the Regulation No. 35/2018 also provide a 50 percent income-tax reduction for the following two years once the period of tax holiday has elapsed. The coverage of pioneer sectors was expanded to include the following seventeen industries:

1. Downstream basic metal;
2. Oil and gas refinery;
3. Petrochemical derived from petroleum, natural gas, and coal;
4. Inorganic basic chemical;
5. Organic basic chemical sourced from agriculture or forestry products;
6. Pharmaceutical raw materials;
7. Semi-conductors and other primary computer components;
8. Primary communication device components;
9. Primary medical device component;
10. Primary industrial machinery component;
11. Primary engine component for transport equipment;
12. Robotic components for manufacturing machine;
13. Primary ship component for shipbuilding industry;
14. Primary aircraft component;
15. Primary train component;
16. Power generation including waste-to-energy power plant; and
17. Economic infrastructures.

Government Regulation No. 9/2016 expanded regional tax incentives for certain business categories in May 2016. Apparel, leather goods, and footwear industries in all regions are now eligible for the tax incentives. In this regulation, existing tax facilities are maintained, including:

• Deduction of 30 percent from taxable income over a six-year period;
• Accelerated depreciation and amortization;
• Ten percent of withholding tax on dividend paid by foreign taxpayer or a lower rate according to the avoidance of double taxation agreement;
• Compensation losses extended from 5 to 10 years with certain condition for companies that are:
  • Located in industrial or bonded zone;
  • Developing infrastructure;
  • Using at least 70 percent domestic raw material;
  • Absorbing 500 to 1000 laborers;
  • Doing research and development (R&D) worth at least 5 percent of the total investment over 5 years;
  • Reinvesting capital; or,
  • Exporting at least 30 percent of their product.

The government also provides the facility of Import Duty Borne by the Government (Bea Masuk Ditanggung Pemerintah /BMDTP) with 0 percent import duty for certain industries to improve industrial competitiveness and public goods procurement. Through the issuance of Ministry of Finance Regulation No.12/2018, 28 imported raw materials for manufacturing plastics, cosmetics, polyester, resins, other chemical materials, machinery for agriculture, electricity, and pharmaceuticals received the facilities up to December 2018.

Research and Development

At present, Indonesia does not have formal regulations granting national treatment to U.S. and other foreign firms participating in government-financed or subsidized research and development programs. The Ministry for Research and Technology and Higher Education handles applications on a case-by-case basis.

Natural Resources

Indonesia’s vast natural resource wealth has attracted significant foreign investment over the last century and continues to offer significant prospects. But a variety of government regulations have made doing business in the resources sector increasingly difficult, and Indonesia now ranks near the bottom, 84^th of 91 jurisdictions in the Fraser Institute’s 2017 Mining Policy Perception Index. In 2012, Indonesia banned the export of raw minerals, dramatically increased the divestment requirements for foreign mining companies, and required major mining companies to renegotiate their contracts of work with the government. The ban on the export of raw minerals went into effect in January 2014. In July 2014, the government issued regulations that allowed, until January 2017, the export of copper and several other mineral concentrates with export duties and other conditions imposed. When the full ban came back into effect in January 2017, the government issued new regulations that again allowed exports of copper concentrate and other specified minerals but imposed even more onerous requirements. Of note for foreign investors, provisions of the regulations require that to be able to export non-smelted mineral ores, companies with contracts of work must convert to mining business licenses—and thus be subject to prevailing regulations—and must commit to build smelters within the next five years. Also, foreign-owned mining companies must gradually divest over ten years 51 percent of shares to Indonesian interests, with the price of divested shares determined based on fair market value and not taking into account existing reserves. The 2009 mining law devolved the authority to issue mining licenses to local governments, who have responded by issuing more than 10,000 licenses, many of which overlap or are unclearly mapped. In the oil and gas sector, Indonesia’s Constitutional Court disbanded the upstream regulator in 2012, injecting confusion and more uncertainty into the natural resources sector. Until a new oil and gas law is enacted, upstream activities are supervised by the Special Working Unit on Upstream Oil and Gas (SKK Migas).

Infrastructure

Since taking office in October 2014, President Jokowi and his administration have made infrastructure development a top priority. The government announced plans to add 35,000 megawatts of electricity capacity by 2019; in 2017 the government revised this target downward to 19,000 megawatts. The Jokowi administration also announced plans to create a maritime nexus, to include the development or expansion of 24 ports and other transportation infrastructure. The Indonesian government is also implementing a PPP scheme to develop broadband internet access throughout the country as part of its “Palapa Ring” initiative. The initiative, which will install over 12,000 kilometers of fiber optic cable, is divided into three segments. The western segment is nearing completion, the middle and eastern segments are expected to be complete by the end of 2019. Following completion of the Palapa Ring, Indonesia plans to deploy HTS (high throughput satellites) to connect remote and frontier areas for internet access, with a predicted value of IDR 7.7 trillion (approximately USD 570 million). The current institutional arrangement for infrastructure development still suffers from overlap of functions, lack of capacity for public-private partnership (PPP) projects in regional governments, lack of solid value-for-money methodologies, crowding out of the private sector from state-owned enterprises (SOE), legal uncertainty, lack of a solid land-acquisition framework, long-term operational risks for the private sector, unwillingness from stakeholders to be the first ones to step in the new and fragile system, and, especially, lack of an institutional champion. Currently infrastructure development is largely taking place through SOEs, with PPPs having only a marginal share of infrastructure projects.

Foreign Trade Zones/Free Trade/ Trade Facilitation

Indonesia offers numerous incentives to foreign and domestic companies that operate in special trade zones throughout Indonesia. The largest zone is the free trade zone (FTZ) island of Batam, located just south of Singapore. Neighboring Bintan Island and Karimun Island also enjoy FTZ status. Investors in FTZs are exempt from import duty, income tax, VAT, and sales tax on imported capital goods, equipment, and raw materials until the portion of production destined for the domestic market is “exported” to Indonesia, in which case fees are owed only on that portion. Foreign companies are allowed up to 100 percent ownership of companies in FTZs. Companies operating in FTZs may lend machinery and equipment to subcontractors located outside of the zone for a maximum two-year period.

Indonesia also has numerous Special Economic Zones (SEZs), regulated under Law No. 39/2000, Government Regulation No. 2/2011 on SEZ management, and Government Regulation No. 96/2015. These benefits include a reduction of corporate income taxes for a period of years (depending on the size of the investment), income tax allowances, and expedited or simplified administrative processes for import/export, expatriate employment, immigration, and licensing. As of mid-2017, Indonesia has identified twelve SEZs in manufacturing and tourism centers, with plans for 25 by 2019. Six SEZs are operational (though development is sometimes limited) at: 1) Sei Mangkei, North Sumatera; 2) Tanjung Lesung, Banten, 3) Palu, Central Sulawesi; 4) Mandalika, West Nusa Tenggara, 5) Lhokseumawe, Aceh and 6) Galang Batang, Bintan, Riau Islands. Six more SEZs are expected to operate in 2018: 1) Kuala Tanjung, North Sumatera; 2) Pulau Asam Karimun, Riau Islands; 3) Merauke, Papua; 4) Melolo, East Nusa Tenggara (NTT); 5) Nongsa, Batam, Riau Islands; and 6) Tanjung Kelayang, Pulau Bangka, Bangka Belitung Islands. In March 2016, the government began the process of transitioning Batam from an FTZ to SEZ in order to provide further investment incentives in Batam. This process is expected to be finished in 2019 and will not affect the status of the neighboring FTZs on Bintan and Karimun islands.

Indonesian law also provides for several other types of zones that enjoy special tax and administrative treatment. Among these are Industrial Zones/Industrial Estates (Kawasan Industri), bonded stockpiling areas (Tempat Penimbunan Berikat), and Integrated Economic Development Zones (Kawasan Pengembangan Ekonomi Terpadu). Indonesia is home to more than 70 industrial estates that host thousands of industrial and manufacturing companies. Ministry of Finance Regulation No. 105/2016 provides several different tax and customs facilities available to companies operating out of an industrial estate, including corporate income tax reductions, tax allowances, VAT exemptions, and import duty exemptions depending on the type of industrial estate. Bonded stockpile areas include bonded warehouses, bonded zones, bonded exhibition spaces, duty free shops, bonded auctions places, bonded recycling areas, and bonded logistics centers. Companies operating in these areas enjoy concessions in the form of exemption from certain import taxes, luxury goods taxes, and value added taxes, based on a variety of criteria for each type of location. Most recently, bonded logistics centers were introduced in 2016 to allow for larger stockpiles, longer temporary storage (up to three years), and a greater number of activities in a single area. By early November 2017, Indonesia had designated 76 bonded logistics centers, with plans to designate more in eastern part of Indonesia. KAPET zones, first announced in a 1996 presidential decree, are eligible for partial tax holidays, certain income tax exemptions and deductions, flexible treatment of amortization of capital and losses, and fiscal loss compensation.

Shipments from FTZs and SEZs to other places in the Indonesia customs area are treated similarly to exports and are subject to taxes and duties. Under Ministry of Finance Regulation 120/2013, bonded zones have a domestic sales quota of 50 percent of the preceding realization amount on export, sales to other bonded zones, sales to free trade zones, and sales to other economic areas (unless otherwise authorized by the Indonesian government). Sales to other special economic areas are only allowed for further processing to become capital goods, and to companies which have a license from the economic area organizer for the good relevant to their business.

In September 2017, the government issued Presidential Regulation 91 on the Acceleration of Business Operations, aiming to reduce and simplify the Indonesian business licensing regime, including in special economic zones. Under this regulation, Indonesia has established national, ministerial, provincial and regional task forces to examine inefficiencies in the process of starting a business, including business licensing practices, the availability of one-stop business registration in SEZs and FTZs, and data sharing between different jurisdictions. The Coordinating Ministry for Economic Affairs, which is leading implementation of the regulation, reports that all Indonesian provinces, FTZs, and SEZs, and more than 90% of regencies (kabupaten) had established one-stop business licensing services by February 2018. Under the new rules, businesses that apply for a license under a one-stop system must begin setting up within 90 days unless given an extension. The regulation also provides that the central government may take control of business licensing if a local government unduly delays business license issuance.

Performance and Data Localization Requirements

Performance Requirements

Indonesia expects foreign investors to contribute to the training and development of Indonesian nationals, allowing the transfer of skills and technology required for their effective participation in the management of foreign companies. Generally, a company can hire foreigners only for positions that the government has deemed open to non-Indonesians. Employers must have training programs aimed at replacing foreign workers with Indonesians. If a direct investment enterprise wants to employ foreigners, the enterprise should submit an Expatriate Placement Plan (RPTKA) to the Ministry of Manpower.

Indonesia recently made significant changes to its foreign worker regulations. Under Presidential Regulation No. 20/2018, issued on March 29, 2018, the Ministry of Manpower now has two days to approve a complete RPTKA application, and an RPTKA is not required for commissioners or executives. An RPTKA’s validity is now based on the duration of a worker’s contract (previously it was valid for a maximum of five years). The new regulation no longer requires expatriate workers to go through the intermediate step of obtaining a Foreign Worker Permit (IMTA). Instead, expatriates can use an endorsed RPTKA to apply with the immigration office in their place of domicile for a Limited Stay Visa or Semi-Permanent Residence Visa (VITAS/VBS). Expatriates receive a Limited Stay Permit (KITAS) and a blue book, valid for up to two years and renewable for up to two extensions without leaving the country. Regulation No. 20/2018 also abolished the requirement for all expatriates to receive a technical recommendation from a relevant ministry. However, ministries may still establish technical competencies or qualifications for certain jobs, or prohibit the use of foreign worker for specific positions, by informing and obtaining approval from the Ministry of Manpower. Foreign workers who plan to work longer than six months in Indonesia must apply for employee social security and/or insurance.

Regulation No. 20/2018 provides for short-term working permits (maximum 6 months) for activities such as conducting audits, quality control, inspections, and installation of machinery and electrical equipment. Provisions of existing regulations such as Ministry of Manpower Regulations No. 16/2015 and No. 35/2015, remain in effect so long as they do not contradict Presidential Regulation No. 20/2018. Any expatriate who holds a work and residence permit must contribute USD 1,200 per year to a fund for local manpower training at regional manpower offices. Some U.S. firms report difficulty in renewing KITASs for their foreign executives. Ministry of Manpower Regulation No. 35/2015 abolished a requirement that enterprises meet a 10:1 ratio of domestic to foreign workers and eliminated the need for work permits for most business travelers. Ministry of Manpower No. 16/2015 abolished the local language proficiency requirement for foreign employees, though foreign employers are required to facilitate language education and practice for expatriate workers. In February 2017, the Ministry of Energy and Natural resources abolished regulations specific to the oil and gas industry, bringing that sector in line with rules set by the Ministry of Manpower.

With the passage of the defense law in October 2012 and subsequent implementing regulations in October 2014, Indonesia established a policy that imposes offset requirements for procurements from foreign defense suppliers. Current laws authorize Indonesian end users to procure defense articles from foreign suppliers if those articles cannot be produced within Indonesia, subject to Indonesian local content and offset policy requirements. On that basis, U.S. defense equipment suppliers are competing for contracts with local partners. The 2014 implementing regulations still require substantial clarification regarding how offsets and local content are determined, and Indonesia has not yet completed production of an official English-language translation. According to the legislation and subsequent implementing regulations, an initial 35 percent of any foreign defense procurement or contract must include local content, and this 35 percent local content threshold will increase by 10 percent every five years following the 2014 release of the implementing regulations until a local content requirement of 85 percent is achieved. The law also requires a variety of offsets such as counter-trade agreements, transfer of technology agreements, or a variety of other mechanisms, all of which are negotiated on a per-transaction basis. The implementing regulations also refer to a “multiplier factor” that can be applied to increase a given offset valuation depending on “the impact on the development of the national economy.” Decisions regarding multiplier values, authorized local content, and other key aspects of the new law are in the hands of the Defense Industry Policy Committee (KKIP), an entity comprising Indonesian interagency representatives and defense industry leadership. KKIP leadership indicates that they still determine multiplier values on a case-by-case basis, but have said that once they conclude an industry-wide gap analysis study they will publish a standardized multiplier value schedule. According to government officials, rules for offsets and local content apply to major new acquisitions only, and do not apply to routine or recurring procurements such as those required for maintenance and sustainment.

WTO/TRIMS

Indonesia notified the WTO of its compliance with Trade-Related Investment Measures (TRIMS) on August 26, 1998. The 2007 Investment Law states that Indonesia shall provide the same treatment to both domestic and foreign investors originating from any country. The government pursues policies to promote local manufacturing that could be inconsistent with TRIMS requirements, such as linking import approvals to investment pledges, or requiring local content targets in some sectors.

Data Localization Requirements

In 2012, Indonesia issued Government Regulation No. 82/2012 requiring certain “public service providers” to establish data storage and disaster recovery centers on Indonesian soil. The regulation went into effect in October 2017 and several ministries have issued data localization regulations, including regulations related to data privacy, peer-to-peer lending, and insurance. As of January 2018, the Indonesian government has prepared a draft amendment to Government Regulation No. 82/2012 that would classify data into three categories: strategic, high-level, and low-level. The draft amendment offers vague definitions of these categories, defining strategic data as data potentially disruptive to the national economy, defense, security, governance, transportation and communication, and/or data that can contribute to humanitarian disaster. The proposed amendment would require that “strategic” data be managed, stored, and processed only in Indonesia. The draft regulation would allow high- and low-level data to be managed, stored, and processed overseas so long as it does not reduce the effective implementation of Indonesian legal jurisdiction. It remains unclear how the proposed regulation would affect existing data localization requirements and what additional requirements may be imposed if the revised regulation is issued.

*Bank of Indonesia, GDP from the host country website is converted into USD with the exchange rate 13.300 for 2017.

**Indonesia Investment Coordinating Board (BKPM), January 2018

There is a discrepancy between U.S. FDI recorded by BKPM and BEA due to differing methodologies. While BEA recorded transactions in balance of payments, BKPM relies on company realization reports. BKPM also excludes oil and gas, non-bank financial institutions, and insurance.

Table 3: Sources and Destination of FDI

Source: IMF Coordinated Direct Investment Survey for inward investment data. World Investment Report 2017 UNTCAD for outward investment data, country specific data for outward investment is unavailable.

Table 4: Sources of Portfolio Investment

Source: IMF Coordinated Portfolio Investment Survey, 2017. Sources of portfolio investment are not tax havens.

The Bank of Indonesia published comparable data.

According to the United Nations Conference on Trade and Development (UNCTAD), Laos has bilateral investment agreements with Australia, Belarus, Cambodia, China, Cuba, Denmark, France, Germany, India, Indonesia, Japan, Republic of Korea, Kuwait, Malaysia, Mongolia, Myanmar, Netherlands, Pakistan, Russia Federation, Singapore, Sweden, Switzerland, Thailand, the United Kingdom, and Vietnam. On February 1, 2005 a Bilateral Trade Agreement (BTA) came into force between the United States and the Government of Laos which contains some investment provisions.

Laos and the United States do not have a bilateral taxation treaty.

Investment Incentives

Laos offers a range of investment incentives depending on the investment vehicle, with particular focus on government concessions and Special Economic Zones. Many of these incentives can be found at www.investlaos.gov.la  and are generally governed by the Investment Promotion Law.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Foreign Investment Law allows for the establishment of Special Economic Zones and Specific Economic Zones (both referred to as SEZs). Special Economic Zones are intended to support development of new infrastructure and commercial facilities and include incentives for investment. Specific Economic Zones are meant to develop existing infrastructure and facilities and provide a lower level of incentives and support than Special Economic Zones. Laos has announced plans to construct as many as 40 special and specific zones, but had only established 12 as of 2018. Some, such as Savan Seno SEZ in Savannakhet and Vientiane Industry and Trade Area SEZ, or VITA Park, in Vientiane, have successfully attracted foreign investors. Others are accused of harboring illegal activities, such as the Golden Triangle SEZ in Bokeo Province that houses the Kings Roman Casino. The Department of Treasury Office of Foreign Assets Control in early 2018 designated the Kings Roman Casino and its owners a Transnational Criminal Organization for engaging in drug trafficking, human trafficking, money laundering, bribery, and wildlife trafficking. More Chinese-invested SEZs are expected to open in the coming years, especially along the China-Laos Railway line, and Thai companies are exploring new SEZ-style industrial parks in Laos.

Generally, the Lao government places a high priority on trade facilitation measures in international fora, particularly as it relies upon trade across its neighboring countries in order to reach sea ports. Nonetheless, Laos has struggled to harmonize its own internal processes. Cross-border trade laws and regulations should be applied uniformly across the entire customs territory of Laos. In reality, however, customs practices vary widely at different ports of entry. With assistance from Japan, the Lao government instituted a new system for electronic collection of customs fees at several major border crossings in 2016, which has been a significant improvement. On several border crossings with Vietnam, Lao and Vietnamese officials jointly conduct inspections to facilitate movement of goods.

Performance and Data Localization Requirements

Laos does not have performance requirements. Requirements relating to foreign hiring are governed by the 2014 Labor Law, though in practice, large investors have been able to extract additional government concessions on use of foreign labor. Some foreign-owned businesses have criticized labor regulations for strict requirements that foreign employees not travel abroad during the first months of their Lao residency.

Laos does not currently enacted laws or regulations on domestic data storage or localization requirements.

*Local GDP statistics from National Institute of Economic Research, investment statistics from Ministry of Planning and Investment.
Table 3: Sources and Destination of FDI

Data not available.
Table 4: Sources of Portfolio Investment

Data not available.

As a member of ASEAN, Malaysia is a party to trade agreements with Australia and New Zealand; China; India; Japan; and the Republic of Korea. During the review period, the ASEAN-India Agreement was expanded to cover trade in services. Malaysia also has bilateral FTAs with: Australia; Chile; India; Japan; New Zealand; Pakistan; and Turkey.

• Reference: https://www.wto.org/english/tratop_e/tpr_e/s366_sum_e.pdf 

Malaysia has bilateral investment treaties with 36 countries, but not yet with the United States. Malaysia does have bilateral investment guarantee agreements with over 70 economies, including the United States. The Government reports that 65 of Malaysia’s existing investment agreements contain Investor State Dispute Settlement (ISDS) provisions. Malaysia has double taxation treaties with over 70 countries, though the double taxation agreement with the U.S. currently is limited to air and sea transportation.

Malaysia has double taxation treaties with over 70 countries, though the double taxation agreement with the U.S. currently is limited to air and sea transportation.

Investment Incentives

The Malaysian Government has codified the incentives available for investments in qualifying projects in target sectors and regions. Tax holidays, financing, and special deductions are among the measures generally available for domestic as well as foreign investors in the following sectors and geographic areas: information and communications technologies (ICT); biotechnology; halal products (e.g., food, cosmetics, pharmaceuticals); oil and gas storage and trading; Islamic finance; Kuala Lumpur; Labuan Island (off Eastern Malaysia); East Coast of Peninsular Malaysia; Sabah and Sarawak (Eastern Malaysia); Northern Corridor.

• The lists of application procedures and incentives available to investors in these sectors and regions can be found at: http://www.mida.gov.my/home/invest-in-malaysia/posts/ 

Foreign Trade Zones/Free Ports/Trade Facilitation

The Free Zone Act of 1990 authorized the Minister of Finance to designate any suitable area as either a Free Industrial Zone (FIZ), where manufacturing and assembly takes place, or a Free Commercial Zone (FCZ), generally for warehousing commercial stock. The Minister of Finance may appoint any federal, state, or local government agency or entity as an authority to administer, maintain and operate any free trade zone. Currently there are 13 FIZs and 12 FCZs in Malaysia. In June 2006, the Port Klang Free Zone opened as the nation’s first fully integrated FIZ and FCZ, although the project has been dogged by corruption allegations related to the land acquisition for the site. The government launched a prosecution in 2009 of the former Transport Minister involved in the land purchase process, though he was later acquitted in October 2013.

The Digital Free Trade Zone (DFTZ) is an initiative by the Malaysian Government, implemented through MDEC, launched in November 2017 with the participation of China’s Alibaba. DFTZ aims to facilitate seamless cross-border trading and eCommerce, and enable Malaysian SMEs to export their goods internationally. According to the Malaysian government, the DFTZ consists of two components:

• An eFulfilment Hub to help Malaysian SMEs export their goods with the help of leading fulfilment service providers;
• An eServices Platform to efficiently manage cargo clearance and other processes needed for cross-border trade
• For more information, please visit https://mydftz.com 

Raw materials, products and equipment may be imported duty-free into these zones with minimum customs formalities. Companies that export not less than 80 percent of their output and depend on imported goods, raw materials, and components may be located in these FZs. Ports, shipping and maritime-related services play an important role in Malaysia since 90 percent of its international trade by volume is seaborne. Malaysia is also a major transshipment center.

Goods sold into the Malaysian economy by companies within the FZs must pay import duties. If a company wants to enjoy Common External Preferential Tariff (CEPT) rates within the ASEAN Free Trade Area, 40 percent of a product’s content must be ASEAN-sourced. In addition to the FZs, Malaysia permits the establishment of licensed manufacturing warehouses outside of free zones, which give companies greater freedom of location while allowing them to enjoy privileges similar to firms operating in an FZ. Companies operating in these zones require approval/license for each activity. The time needed to obtain licenses depends on the type of approval and ranges from 2-8 weeks.

Performance and Data Localization Requirements

Fiscal incentives granted to both foreign and domestic investors historically have been subject to performance requirements, usually in the form of export targets, local content requirements and technology transfer requirements. Performance requirements are usually written into the individual manufacturing licenses of local and foreign investors.

The Malaysian government extends a full tax exemption incentive of fifteen years for firms with “Pioneer Status” (companies promoting products or activities in industries or parts of Malaysia to which the government places a high priority), and ten years for companies with “Investment Tax Allowance” status (those on which the government places a priority, but not as high as Pioneer Status). However, the government appears to have some flexibility with respect to the expiry of these periods, and some firms reportedly have had their pioneer status renewed. Government priorities generally include the levels of value-added, technology used, and industrial linkages. If a firm (foreign or domestic) fails to meet the terms of its license, it risks losing any tax benefits it may have been awarded. Potentially, a firm could lose its manufacturing license. The New Economic Model stated that in the long term, the government intends gradually to eliminate most of the fiscal incentives now offered to foreign and domestic manufacturing investors. More information on specific incentives for various sectors can be found at http://www.mida.gov.my/home/ .

Malaysia also seeks to attract foreign investment in the information technology industry, particularly in the Multimedia Super Corridor (MSC), a government scheme to foster the growth of research, development, and other high technology activities in Malaysia. Foreign investors who obtain MSC status receive tax and regulatory exemptions as well as public service commitments in exchange for a commitment of substantial technology transfer. For further details on incentives, see www.mdec.my. The Malaysia Digital Economy Corporation (MDEC) approves all applications for MSC status. For more information please visit: https://www.mdec.my/msc-malaysia 

In the services sector, the government’s stated goal is to attract foreign investment in regional distribution centers, international procurement centers, operational headquarter research and development, university and graduate education, integrated market and logistics support services, cold chain facilities, central utility facilities, industrial training, and environmental management. To date, Malaysia has had some success in attracting regional distribution centers and local campuses of foreign universities. For example, GE and Honeywell maintain regional offices for ASEAN in Malaysia. In 2016, McDermott moved its regional headquarters to Malaysia and Boston Scientific broke ground on a medical devices manufacturing facility.

Malaysia seeks to attract foreign investment in biotechnology, but sends a mixed message on agricultural and food biotechnology. On July 8, 2010, the Malaysian Ministry of Health posted amendments to the Food Regulations 1985 [P.U. (A) 437/1985] that require strict mandatory labeling of food and food ingredients obtained through modern biotechnology. The amendments also included a requirement that no person shall import, prepare or advertise for sale, or sell any food or food ingredients obtained through modern biotechnology without the prior written approval of the Director. There is no ‘threshold’ level on the labeling requirement. Labeling of “GMO Free” or “Non-GMO” is not permitted. The labeling requirements only apply to foods and food ingredients obtained through modern biotechnology but not to food produced with GMO feed. The labeling regulation was originally scheduled to be enforced beginning in July 2012. However, a Ministry of Health circular published on August 27, 2012 announced that enforcement would be deferred until July 8, 2014. However, there has not been any announcement to date of its enforcement. A copy of the law and regulations respectively can be found at: http://www.biosafety.nre.gov.my/law_regulation.shtml 

Malaysia has not implemented measures amounting to “forced localization” for data storage. The government has provided inducements to attract foreign and domestic investors to the Multimedia Super Corridor but does not mandate use of onshore providers. Companies in the information and communications technology sector are not required to hand over source code.

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

The Philippines has neither a bilateral investment nor a free trade agreement with the United States. The only bilateral free trade agreement it has is with Japan. The Philippines has signed bilateral investment agreements with 39 countries or entities: Argentina, Australia, Austria, Bangladesh, Belgium-Luxembourg Economic Union, Cambodia, Canada, Chile, China, Czech Republic, Denmark, Finland, France, Germany, India, Indonesia, Iran, Italy, Kuwait, Mongolia, Myanmar, Netherlands, Pakistan, Portugal, Republic of Korea, Romania, Russian Federation, Saudi Arabia, Spain, Sweden, Switzerland, Syria, Taiwan, Thailand, Turkey, United Kingdom, and Vietnam.

The Philippines is a member of ASEAN regional trade agreements, including an investment chapter with trading partners Australia and New Zealand, Republic of Korea, India, and China. It also has an investment agreement with Iceland, Liechtenstein, Norway, and Switzerland under the Philippines-European Free Trade Association (EFTA) Free Trade Agreement.

The Philippines has a tax treaty with United States to avoid double taxation and provide procedures for resolving interpretative disputes and tax enforcement in both countries. The treaty encourages bilateral trade and investment by allowing the exchange of capital, goods, and services under clearly defined tax rules and, in some cases, preferential tax rates or tax exemptions.

U.S. recipients of royalty income qualify for preferential tax rates (currently 10 percent) under the most favored nation clause of the United States-Philippines tax treaty. A preferential tax treaty rate of 15 percent applies to dividends and interest income. The Philippine Supreme Court ruled in 2013 that securing a tax treaty relief ruling from the Bureau of Internal Revenue (BIR) is not a legal requirement to qualify for preferential treatment and tax treaty rates; however, based on experience, tax experts generally still advise filing a tax treaty relief application to avoid potential challenges or controversies. Despite efforts to streamline processes, taxpayers find documentation requirements for tax treaty relief applications burdensome. The volume of tax treaty relief applications has resulted in processing delays, with most applications reportedly pending for over a year. Inconsistent taxation rulings are also a concern.

The BIR rules and regulations for tax accounting have not been fully harmonized with the Philippine Financial Reporting Standards. The BIR requires taxpayers to maintain records reconciling figures presented in financial statements and income tax returns. Additional information regarding BIR regulations is available on the BIR website .

The Philippines and United States signed a reciprocal Inter-Governmental Agreement (IGA) in July 2015 for automatic exchange of information between tax authorities to implement the U.S. Foreign Account Tax Compliant Act (FATCA). The bilateral agreement has yet to enter into force pending completion of domestic legal remedies to overcome stringent bank secrecy restrictions to the disclosure/sharing of information.

Investment Incentives

The Philippines’ Investment Priorities Plan (IPP) enumerates investment activities entitled to incentives facilitated by BOI, such as an income tax holiday. Non-fiscal incentives include: employment of foreign nationals, simplified customs procedures, duty exemption on imported capital equipment and spare parts, importation of consigned equipment, and operation of a bonded manufacturing warehouse.

The 2017 IPP provides incentives to the following activities: manufacturing (e.g. agro-processing, modular housing components, machinery, and equipment); agriculture, fishery, and forestry; Integrated Circuit design, creative industries, and knowledge-based services (e.g. IT-Business Process Management services for the domestic market, repair/maintenance of aircraft, telecommunications, etc.); healthcare (e.g. hospitals and drug rehabilitation centers); mass housing; infrastructure and logistics (e.g. airports, seaports, and PPP projects); energy (development of energy sources, power generation plants, and ancillary services); innovation drivers (e.g. fabrication laboratories); and environment (e.g. climate change-related projects). Further details of the 2017 IPP are available on the BOI website (http://boi.gov.ph/ ).

BOI-registered enterprises that locate in less-developed areas are entitled to pioneer incentives and can deduct 100 percent of the cost of necessary infrastructure work and labor expenses from taxable income. Pioneer status can be granted to enterprises producing new products or using new methods, goods deemed highly essential to the country’s agricultural self-sufficiency program, or goods utilizing non-conventional fuel sources. Furthermore, an enterprise with more than 40 percent foreign equity that exports at least 70 percent of its production may be entitled to incentives even if the activity is not listed in the IPP. Export-oriented firms with at least 50 percent of revenues derived from exports may register for additional incentives under the 1994 Export Development Act.

Multinational entities that establish regional warehouses for the supply of spare parts, manufactured components, or raw materials for foreign markets also enjoy incentives on imports that are re-exported, including exemption from customs duties, internal revenue taxes, and local taxes. The first package of the Tax Reform for Acceleration and Inclusion (TRAIN) law which took effect January 1, 2018, removed the 15 percent special tax rate on gross income of employees of multinational enterprises’ regional headquarters (RHQ) and regional operating headquarters (ROHQ) located in the Philippines. RHQ and ROHQ employees are now subjected to regular income tax rates.

Foreign Trade Zones/Free Ports/Trade Facilitation

Export-related businesses enjoy preferential tax treatment when located in export processing zones, free trade zones, and certain industrial estates, collectively known as economic zones, or ecozones. Businesses located in ecozones are considered outside customs territory and are allowed to import capital equipment and raw material free of customs duties, taxes, and other import restrictions. Goods imported into ecozones may be stored, repacked, mixed, or otherwise manipulated without being subject to import duties and are exempt from the Bureau of Customs’ Selective Preshipment Advance Classification Scheme. While some ecozones are designated as both export processing zones and free trade zones, individual businesses within them are only permitted to receive incentives under a single category.

Philippine Economic Zone Authority (PEZA)

PEZA operated 379 ecozones as of November 2017, primarily in manufacturing, IT, tourism, medical tourism, logistics/warehousing, and agro-industrial sectors. PEZA manages four government-owned export-processing zones (Mactan, Baguio, Cavite, and Pampanga) and administers incentives to enterprises in other privately owned and operated ecozones. Any person, partnership, corporation, or business organization, regardless of nationality, control and/or ownership, may register as an export, IT, tourism, medical tourism, or agro-industrial enterprise with PEZA, provided the enterprise physically locates its activity inside any of the ecozones. PEZA administrators have earned a reputation for maintaining a clear and predictable investment environment within the zones of their authority.

Bases Conversion Development Authority (BCDA) and Subic Bay Metropolitan Authority (SBMA)

The ecozones located inside former U.S. military bases were established under the 1992 Bases Conversion and Development Act. The BCDA (http://www.bcda.gov.ph/ ) operates Clark Freeport Zone (Angeles City, Pampanga), John Hay Special Economic Zone (Baguio), Poro Point Freeport Zone (La Union), and Bataan Technology Park (Morong, Bataan). The SBMA operates Subic Bay Freeport Zone (Subic Bay, Zambales). Clark and Subic have their own international airports, power plants, telecommunications networks, housing complexes, and tourist facilities. These ecozones offer comparable incentives to PEZA. Enterprises already receiving incentives under the BCDA law are disqualified to receive incentives and benefits offered by other laws.

Other Zones

The Phividec Industrial Estate (Misamis Oriental Province, Mindanao) is governed by Phividec Industrial Authority (PIA) (http://www.piamo.gov.ph/ ), a government-owned and controlled corporation. Other ecozones are Zamboanga City Economic Zone and Freeport (Zamboanga City, Mindanao) (http://www.zfa.gov.ph/ ) and Cagayan Special Economic Zone (CEZA) and Freeport (Santa Ana, Cagayan Province) (http://ceza.gov.ph/ ). CEZA grants gaming licenses in addition to offering export incentives. The Regional Economic Zone Authority (Cotabato City, Mindanao) (http://reza.armm.gov.ph/ ) is operated by the Autonomous Region in Muslim Mindanao (ARMM). The incentives available to investors in these zones are similar to PEZA, but administered independently.

Performance and Data Localization Requirements

The BOI imposes a higher export performance requirement on foreign-owned enterprises (70 percent of production) than on Philippine-owned companies (50 percent of production) when providing incentives under IPP.

Companies registered with BOI and PEZA may employ foreign nationals in supervisory, technical, or advisory positions for five years from date of registration (possibly extendable upon request). Top positions and elective officers of majority foreign-owned BOI-registered enterprises (such as president, general manager, and treasurer, or their equivalents) are exempt from employment term limitation. Foreigners intending to work locally must secure an Alien Employment Permit from the Department of Labor and Employment (DOLE ), renewable every year or co-terminus with the duration of employment (which in no case shall exceed five years). The BOI and PEZA facilitate special investor’s resident visas with multiple entry privileges and extend visa facilitation assistance to foreign nationals, their spouses, and dependents.

The 2006 Biofuels Act establishes local content requirements for gasoline, which must have a minimum content of locally produced biofuel (5 to 10 percent by volume). There is no other data localization requirement imposed on other goods. The Philippines does not impose restrictions on cross-border data transfers. Sensitive personal information is protected under the 2012 Data Privacy Act, which provides penalties for unauthorized processing and improper disposal of data even if processed outside the Philippines.

*Host Country Statistical Sources:
Philippine Statistical Authority (http://psa.gov.ph/nap-press-release/data-charts )
Bangko Sentral ng Pilipinas (http://www.bsp.gov.ph/statistics/efs_ext2.asp#FCDU )

Table 3: Sources and Destination of FDI

The Philippine Central Bank does not publish or post inward and outward FDI stock broken down by country. Total stock figures are reported under the “International Investment Position” data that the Central Bank publishes and submits to the International Monetary Fund (IMF)’s Dissemination Standards Bulletin Board (DSBB). As of 2017, inward direct investment (i.e. liabilities) is USD 78.7 million, while outward direct investment (i.e. assets) is USD 47.8 million.
Table 4: Sources of Portfolio Investment

The Philippine Central Bank disaggregates data into equity and debt securities but does not publish or post the stock of portfolio investments assets broken down by country. Total foreign portfolio investment stock figures are reported under the “International Investment Position” data that Central Bank publishes and submits to the International Monetary Fund (IMF)’s Dissemination Standards Bulletin Board (DSBB). As of 2017, outward portfolio investment (i.e. assets) was USD 17.4 million, of which USD 1.5 million was in equity securities and USD 15.9 million was in debt securities.

Singapore has 36 bilateral investment treaties (BIT) currently in force. These agreements mutually protect nationals or companies of either economy against non-commercial risks of expropriation and nationalization. It has signed an additional eight BITs that have yet to be implemented.

Singapore has 13 bilateral and nine regional free trade agreements (FTA) currently in force. Singapore has signed free trade/economic cooperation agreements that include investment chapters with Australia, China, the European Free Trade Association (Switzerland, Norway, Liechtenstein, and Iceland), India, Japan, New Zealand, Panama, Peru, South Korea, Costa Rica, the United States, Turkey and Chinese Taipei. Singapore also has agreements with Jordan and the Gulf Cooperation Council (comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates), but these agreements do not contain investment chapters. Singapore is a member of ASEAN and the ASEAN Free Trade Area, which has in force FTAs with Australia and New Zealand, China, India, South Korea, and a Comprehensive Economic Partnership Agreement with Japan. Singapore also has a Trans-Pacific Strategic Economic Partnership Agreement with Brunei, Chile, and New Zealand.

Singapore recently completed negotiations with the European Union and Sri Lanka on bilateral FTAs, and signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Singapore is actively negotiating FTAs with the Eurasian Economic Union (including Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan), the Pacific Alliance (Chile, Colombia, Mexico and Peru), Pakistan, and Ukraine. ASEAN is currently negotiating FTA extensions with India and Japan to cover services and investments, as well as the Regional Comprehensive Economic Partnership (RCEP), which includes ASEAN members plus Australia, China, India, Japan, New Zealand, and South Korea.

Singapore has signed Avoidance of Double Taxation Agreements with 84 countries, but not with the United States. U.S. financial regulations do not restrict foreign banks’ ability to hold accounts for U.S. citizens. U.S. citizens are encouraged to alert the nearest U.S. Embassy of any practices they encounter with regard to the provision of financial services. No other tax disputes have been reported.

Recent major changes to the tax regime include the implementation of OECD’s Common Reporting Standards (CRS), as well as updates to tax incentives and regimes in line with Base Erosion and Profit Shifting minimum standards. Under the CRS, which has been in effect since January 1, 2017, Singapore-based Financial Institutions are required to establish the tax residency status of all their account holders, collect and retain CRS information for all non-Singapore tax residents in the case of new accounts, and report to tax authorities the financial account information of account holders who are tax residents of jurisdictions with which Singapore has a Competent Authority Agreement (CAA) to exchange the information. This will facilitate the automatic exchange of information between Singapore and CAA partners on account numbers, account holder details, account balances on reportable accounts, as well as details of interest, earnings, and proceeds from asset disposals on custodian accounts. As of March 2018, Singapore has concluded 24 bilateral CAAs and is a signatory to the Multilateral Competent Authority Agreement.

Investment Incentives

EDB is the lead investment promotion agency that facilitates foreign investment into Singapore (https://www.edb.gov.sg ), and assists companies in setting up business in Singapore, providing business facilitation assistance in manpower needs, business matching services, overhead costs, and land requirements; and administers government incentives including grants, allowances, awards, tax exemptions, and reduced tax rates for investments in selected sectors (https://www.edb.gov.sg/content/edb/en/why-singapore/ready-to-invest/incentives-for-businesses.html ). The Agency for Science and Technology Research (A*STAR), Singapore’s agency for public research, engages an extensive network of industry partners to co-fund and develop new technologies. (https://www.a-star.edu.sg/About-A-STAR/Science-and-Engineering-Research-Council/Overview ) The National Research Foundation (NRF) provides competitive grants for applied research through an integrated grant management system, (https://researchgrant.gov.sg/pages/index.aspx ). Various government agencies (including Intellectual Property Office of Singapore, NRF, EDB, and Temasek) provide venture capital co-funding for startups and commercialization of intellectual property.

Foreign Trade Zones/Free Ports/Trade Facilitation

Singapore has nine free-trade zones (FTZs) in five geographical areas operated by three FTZ authorities. The FTZs may be used for storage and repackaging of import and export cargo, and goods transiting Singapore for subsequent re-export. Manufacturing is not carried out within the zones. Foreign and local firms have equal access to the FTZ facilities.

Performance and Data Localization Requirements

Performance requirements are applied uniformly and systematically to both domestic and foreign investors. Singapore has no forced localization policy requiring domestic content in goods or technology. The government does not require investors to purchase from local sources or specify a percentage of output for export. There are no rules forcing the transfer of technology. There are no requirements for foreign IT providers to turn over source code and/or provide access to encryption.

Singapore does not have a data localization policy. The industry regulator is the Info-communications Media Development Authority (IMDA), a statutory board under the Ministry of Communications and Information (MCI). Personal data matters are overseen by the Personal Data Protection Commission and are protected under the Personal Data Protection Act (PDPA) of 2014, covering electronic and non-electronic data, and includes provisions that require companies to ensure that the recipient of data transferred to another country is legally bound by “enforceable obligations” to provide to the transferred personal data a standard of protection that is at least comparable to the protection under the Act. Personal data regulation remains a fast-changing regulatory domain and two rounds of public consultations on PDPA were launched in July and November 2017. A new mandatory breach notification regime was proposed, and organizations have to notify users and PDPC if the data breach poses any risk of impact or harm to individuals, and PDPC if the scale of the breach is significant, affecting more than 500 users. (http://privacylaw.proskauer.com/2014/06/articles/international/singapore-issues-new-regulations-in-advance-of-data-protection-law-entering-into-force/ ) (https://www.pdpc.gov.sg/Legislation-and-Guidelines/Public-Consultations )

Note: Exchange rate of S$1.3156/US$1 used for conversion.

*Source: Ministry of Trade and Industry and Department of Statistics, Government of Singapore.
IMF’s Coordinated Direct Investment Survey (CDIS) site does not list outward direct investment data for Singapore. The latest inward direct investment data is from 2016. Host country data lists U.S. investment at US$212.5 billion, about US$38 billion in excess of IMF data. Host country data lists tax havens British Virgin Islands in second place at $90.2 billion, $30.6 billion in excess of IMF data, and Cayman Islands in third place at $80.9 billion, $21.4 billion in excess of IMF data. Japan and Netherlands are at 4^th and 5^th place respectively in host country data, and investment amounts are consistent with IMF statistics.

Table 3: Sources and Destination of FDI

Source for Outward Direct Investment data: Singapore Department of Statistics
Table 4: Sources of Portfolio Investment

In IMF data, $274 billion, or 26.8 percent of total portfolio investment are from unspecified sources (including confidential), of which $102 billion (19.7 percent) of equity and investment funds, and $122 billion (24.1 percent) of debt. The IMF data are consistent with host country data.

The 1966 iteration of the U.S.-Thai Treaty of Amity and Economic Relations allows U.S. citizens, and U.S. majority-owned businesses incorporated in the United States or Thailand, to engage in business on the same basis as Thai companies (national treatment). However, the FBA applies restrictions to U.S. investment in communications, transportation, exploitation of land and other natural resources, and domestic trade in agricultural products.

In October 2002, the United States and Thailand signed a bilateral Trade and Investment Framework Agreement (TIFA), which serves as a forum to discuss bilateral trade and investment issues such as intellectual property rights, customs, market-access barriers, and areas of mutual concern.

Thailand has Bilateral Investment Treaties with Argentina, Bahrain, Bangladesh, Belgium-Luxembourg Economic Union, Bulgaria, Cambodia, Canada, China, Croatia, Czech Republic, Egypt, Finland, Germany, Hong Kong, Hungary, India, Indonesia, Israel, Jordan, Democratic People’s Republic of Korea, Republic of Korea, Lao People’s Democratic Republic, Myanmar, Netherlands, Peru, Philippines, Poland, Romania, Russian Federation (signed, not in force), Slovenia, Sri Lanka, Sweden, Switzerland, Taiwan, Tajikistan (signed, not in force), Turkey, United Kingdom, Vietnam, and Zimbabwe (signed, not in force). Thailand is a member of the Regional Comprehensive Economic Partnership (RCEP), currently under negotiation.

Thailand belongs to the 10-member Association of Southeast Asian Nations (ASEAN), a regional economic bloc covering 600 million populations, which has a free trade agreement among member countries and with Australia, New Zealand, China, India, Korea, and Hong Kong (to be in effect on January 1, 2019). ASEAN has a comprehensive economic partnership with Japan and is pursuing FTA negotiations with the EU, Pakistan, and Canada.

Thailand and the United States established a bilateral tax treaty in 1996. Thailand signed the U.S.-Thailand Foreign Account Tax Compliance Act on March 4, 2016. The legislation, the Act on the Agreement between the Government of the United States of America and the Government of the Kingdom of Thailand to Improve International Tax Compliance and to Implement FATCA, BE 2560, went into effect in October 2017.

Investment Incentives

The Board of Investment (BOI) is Thailand’s central investment promotion authority. BOI offers investment incentives uniformly to qualified domestic and foreign investors with clear application procedures. To upgrade the country’s technological capacity, the BOI now gives more weight to the application on agriculture, food, digital, logistics, education, tourism, and services industries.

Two of the most significant privileges offered by the BOI for promoted projects are:

• Tax privileges, such as corporate income tax exemption, tariff exemption, reduction on import machinery and tariff exemption, or reduction on imported raw material.
• Nontax privileges, such as permission to own land, permission to bring foreign experts to work on the promoted projects, exemption on foreign ownership of companies, and exemption from work permits and visa rules.

Thailand’s flagship investment zone called “Eastern Economic Corridor (EEC),” spanning the provinces of Chachengsao, Chonburi, and Rayong with a combined area of 5,128 square miles, will be built on the existing Eastern Seaboard industrial area that has been an investment destination for 30 years. The Thai government aims to establish the EEC as a primary investment and infrastructure hub in ASEAN, serving as a central gateway to East Asia and to South Asia. The EEC plans call for the creation of new, smart cities, a digital park, a data center, and new facilities for next generation automotive, aviation, robotics, and smart electronics.

The EEC Act provides investment incentives and privileges. Investors will be able to access long-term land leases of 99 years (with an initial lease of up to 50 years and a renewal of up to 49 years) and the PPP approval process will be shortened to three months. The BOI will offer up to 15 years corporate income tax exemption for strategic projects in the EEC. There will be a 17 percent maximum personal income tax for investors, managers, and experts who are employed by companies in target industries with headquarters and facilities situated in the EEC. Investment projects with a significant R&D, innovation, or human resource development component may be eligible for additional grants and incentives.

For more information, contact the Thai Board of Investment, 555 Vibhavadi-Rangsit Road, Chatuchak, Bangkok 10900. Tel: 0-2553-8111. Website: www.boi.go.th .

Foreign Trade Zones/Free Ports/Trade Facilitation

The Industrial Estate Authority of Thailand (IEAT), a state-enterprise under the Ministry of Industry, established the first industrial estates in Thailand, including Laem Chabang Industrial Estate in Chonburi Province (eastern) and Map Ta Phut Industrial Estate in Rayong Province (eastern). Foreign-owned firms have the same investment opportunities as Thai entities, but the IEAT Act requires the IEAT Committee to consider and approve the amount of space/land that a foreign owned firm plans to buy or lease in industrial estates. In practice, there is no record of disapproval for requested land. Private developers are heavily involved in the development of these estates. The IEAT currently operates 9 estates, plus 39 more in conjunction with the private sector in 15 provinces nationwide. Private sector developers operate over 50 industrial estates, most of which have received promotion privileges from the Board of Investment.

The IEAT established 12 special IEAT Free Zones, reserved for the location of industries manufacturing for export only, to which businesses may import raw materials and export finished products free of duty (including value added tax). These zones are located within industrial estates, and many have customs facilities to speed processing. The free trade zones are located in Chonburi, Lampun, Pichit, Songkhla, Samut Prakarn, Bangkok (at Lad Krabang), Ayuddhya, and Chachoengsao. In addition to these zones, factories may apply for permission to establish a bonded warehouse within their premises to which raw materials, used exclusively in the production of products for export, may be imported duty free.

Thailand is focusing on improving trade and investment with neighboring countries, and is establishing Special Economic Zones (SEZs) in many provinces including Tak, Nong Khai, Mukdahan, Sa Kaeo, Trad, Narathiwat, Chiang Rai, Nakhon Phanom, and Kanchanaburi. Business sectors and industries that might benefit from incentives offered in the SEZs include logistics, warehouses near border areas, distribution, services, tourism, labor-intensive factories, and manufacturers using raw materials from neighboring countries.

Performance and Data Localization Requirements

In 2017, Thailand passed into effect the Royal Decree on Foreign Worker Management, which replaces the Foreign Employment Act and the Royal Decree on the Management of Migrant Employment, to manage the employment of foreigners, regardless of the industry, in a more systematic fashion. The new law provided a more clarified definition or “work” and increased as well as offered new penalties for various offences.

Thai law requires foreign workers to have a work permit issued by the Ministry of Labor in order to work legally in Thailand; Thai law also reserves 39 occupations for Thai workers and will not grant work permits for foreigners to engage in these occupations, including lawyers, architects, and civil engineers.

Generally, employers must hire four Thais for every one foreign employee. Foreign private sector employees require work permits, which are granted by the Ministry of Labor with consideration on whether the:

• Job could be done by a Thai employee;
• Foreigner is qualified for the job; and
• Job fits the present economic needs of the Kingdom.

Different requirements apply to companies promoted by the BOI, which typically result in greater flexibility and ease in obtaining work permits for foreign nationals.

Such schemes apply equally to senior management and boards of directors. According to the Foreign Business Act, if a foreigner is the managing partner or the manager, the company is subject to the restrictions applicable to foreign businesses and the Foreign Business License application.

While the employment of foreigners in some sectors are subject to foreign equity restrictions, exceptions from the restrictions of the Foreign Business Act can be granted as promotional privileges by BOI or IEAT, or, as a temporary measure, in the form of government approval issued by the Thai government.

Exceptions can also be provided based on international treaties Thailand to which Thailand is a party. U.S. companies or nationals under the Treaty of Amity and Economic Relations between Thailand and the United States (Treaty of Amity) can be eligible for “national treatment,” where, with some exceptions, they are treated in the same way as Thai nationals.

The RTG does not currently have any specific statutory law governing “forced localization” policy in which foreign investors must use domestic content in goods or technology, but it has encouraged such an approach through additional preference in procurement. While there are currently no requirements for foreign IT providers to turn over source code and/or provide access to surveillance, the RTG is drafting new laws and regulations on cybersecurity and personal data protection that may affect all businesses and consumers in Thailand. Thailand has implemented a requirement to have all debit transactions processed by a domestic debit card network using a proprietary chip. Regarding Thailand’s import permitting process for several agricultural products, such as soybean and milk, there are separate domestic absorption rate requirements to purchase local product at fixed prices.

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

The Thai government does not publish comparable data. Sources of portfolio investment are not tax havens.

Vietnam maintains trade relations with 200 countries, and has 65 bilateral investment treaties (BITs) and 26 treaties with investment provisions. It is a party to five free trade agreements (FTAs) with ASEAN, Chile, the Eurasian Customs Union, Japan, and South Korea. As a member of ASEAN, Vietnam also is party to ASEAN FTAs with Australia, New Zealand, China, India, Japan, South Korea, and Hong Kong. Vietnam finalized an FTA with the European Union in 2015, but the agreement has neither been signed nor ratified. In addition, Vietnam is a member of the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP), which was signed on March 8, 2018. Vietnam is a participant in the Regional Comprehensive Economic Partnership (RCEP) negotiations, which include the 10 ASEAN countries and Australia, China, India, Japan, South Korea, and New Zealand, and it is negotiating FTAs with other countries, including Israel. A full list of signed agreements to which Vietnam is a party is on the UNCTAD website: http://investmentpolicyhub.unctad.org/IIA/CountryBits/229#iiaInnerMenu .

Vietnam has signed double taxation avoidance agreements with 77 countries, listed at http://taxsummaries.pwc.com/ID/Vietnam-Individual-Foreign-tax-relief-and-tax-treaties . The United States and Vietnam concluded and signed a Double Taxation Avoidance Agreement (DTA) in 2016, but the agreement is still awaiting ratification by the U.S. Congress.

There are no systematic tax disputes between the government and foreign investors. However, an increasing number of U.S. companies disputed tax audits resulting in retroactive tax assessments. These cases may stem from Vietnam’s chronic budget deficits and the need to find sources to fill the revenue gap left from falling tariffs and falling oil revenues. These retroactive tax cases against U.S. companies can obscure the true risks of operating in Vietnam and give some U.S. investors pause when deciding whether to expand operations.

In February 2017, the government released Decree 20/2017/ND-CP, effective since May 2017, which introduced many new transfer-pricing reporting and documentation requirements, as well as new guidance on the tax deductibility of service and interest expenses.

Investment Incentives

Foreign investors are exempt from import duties on goods imported for their own use that cannot be procured locally, including machinery, vehicles, components and spare parts for machinery and equipment, raw materials, inputs for manufacturing, and construction materials. Remote and mountainous provinces are allowed to provide additional tax breaks and other incentives to prospective investors.

In addition, projects in the following areas are entitled to investment incentives such as lower corporate income tax, exemption of import tariffs, or land rental: high-tech; research and development; new materials; energy; clean energy; renewable energy; energy saving products; automobiles; software; waste treatment and management; primary or vocational education; or projects located in remote areas or industrial zones.

Vietnam promotes foreign investment in certain priority sectors, and in geographic regions that are remote or underdeveloped. The government encourages investment in the production of new materials, new energy sources, metallurgy and chemical industries, manufacturing of high-tech products, biotechnology, information technology, mechanical engineering, agricultural, fishery and forestry production, salt production, generation of new plant varieties and animal species, ecology and environmental protection, research and development, knowledge-based services, processing and manufacturing, labor-intensive projects (using 5,000 or more full-time laborers), infrastructure projects, education, training, and health and sports development.

Foreign Trade Zones/Free Ports/Trade Facilitation

In recent years, Vietnam has prioritized efforts to establish free trade zones (FTZs). Vietnam currently has approximately 300 industrial zones (IZs) and export processing zones (EPZs). Many foreign investors report that it is easier to implement projects in industrial zones because they do not have to be involved in site clearance and infrastructure construction. Enterprises pay no duties when importing raw materials if they export the finished products. Customs warehouse keepers in FTZs can provide transportation services and act as distributors for the goods deposited. Additional services relating to customs declaration, appraisal, insurance, reprocessing, or packaging, require the approval of the provincial customs office. In practice, the time involved for clearance and delivery can be lengthy and unpredictable.

Performance and Data Localization Requirements

Vietnam does not mandate that businesses hire local workers, including for senior management roles or on the board of directors. However, companies must prove their efforts to hire suitable local employees were unsuccessful before recruiting foreigners. This does not apply to board members elected by shareholders or capital contributors. In February 2016, the government issued Decree No.11/2016/ND-CP, guiding a number of articles of the Labor Code on foreigners working in Vietnam, which entered into force in April 2016. Decree 11 included positive changes, including changes to the conditions, paperwork, and timeline for work permit applications and exemptions, and clarification that the work-permit and exemption-certificate requirements did not apply to foreigners coming to work for less than 30 days with less than 90 days of cumulative working time in one year.

The government does not have a forced localization policy per se, but has been increasingly adopting policies to encourage or require foreign investors to use domestic content in goods and technology. For example, Circular 14/2015/TT-BKHDT applied high tariffs to imported automotive parts to protect domestic production and encourage foreign auto manufacturers to source component parts locally. Another example is Draft Decree 54/2017/ND–CP, proposed in July 2017, which stipulates FIEs can import drugs into Vietnam, but are not permitted to transport, store, or distribute drugs.

There are currently no measures that prevent or unduly impede companies from freely transmitting customer or other business-related data outside of Vietnam. The most important regulation is Decree 72/2013/ND-CP, on the management, provision and use of Internet services and online information. While Decree 72 technically requires organizations establishing “general websites,” or social networks and companies providing online gaming services or services across mobile networks to maintain at least one server in Vietnam, in practice the regulation is only applied to domestic firms, and the only sporadically. It also establishes requirements for storing certain types of data (personally identifiable information of users, user activity logs, etc.), but it is unclear if that information must be stored on a local server. In 2016, the Ministry of Information and Communications (MIC) issued Circular 38/2016/TT-BTTT, one of the implementing circulars of Decree 72. The circular does not require localization of servers, though it does require offshore service providers with a large number of users in Vietnam to comply with local content restrictions. Specific requirements under Circular 38 apply to offshore entities that provide cross-border public information into Vietnam (including websites, social networks, online applications, search engines and other similar forms of services) and that (a) have more than one million hits from Vietnam per month or (b) lease a data center to store digital information in Vietnam in order to provide its services.

However, the government is exploring draft legislation to require data localization for cross-border services. In 2017, the Ministry of Public Security (MPS) released a draft law on cybersecurity that would require Vietnamese users’ data to be stored in Vietnam and would require all cross-border service providers to host servers within Vietnamese territory. The National Assembly is expected to vote on the law in May or June 2018. The Ministry of Finance (MOF) is also proposing draft legislation in 2019 to request cross-border service providers via Internet protocol to have a representative office in Vietnam, citing the necessity of local office requirements for taxation purposes.

There are no requirements that foreign IT providers have to turn over source code and/or provide access to encryption. Vietnam has no international commitments in this area and does not permit cross-border online gaming. Therefore, gaming providers tend to establish a joint venture with a Vietnamese company and locate one server in Vietnam. Regarding financial data localization, Circular 31 requires backup information, but does not impede cross-border data flows.

The MIC is the lead agency for administrative enforcement of cyber-related regulations, including data-storage requirements, though the 2017 draft law on cybersecurity would cede that role to MPS. MPS’s cyber division may now also get involved if there is a suspected criminal violation of data-storage rules.

When Vietnam joined the WTO in 2007, it established minimum commitments on market access for U.S. goods and services, as well as equal treatment for Vietnamese and foreign companies. Vietnam undertook commitments on goods (tariffs, quotas, and ceilings on agricultural subsidies) and services (provisions of access to foreign-service providers and related conditions). It has also committed to implementing agreements on intellectual property (the Trade-Related Aspects of Intellectual Property Rights Agreement), customs valuation, technical barriers to trade, sanitary and phytosanitary measures, import licensing provisions, anti-dumping and countervailing measures, and rules of origin. As part of its WTO accession, Vietnam also committed to remove performance requirements that are inconsistent with the agreement on Trade-Related Investment Measures (TRIMs). The 2014 Investment Law specifically prohibits the following: giving priority to domestic goods or services; compulsory purchases from a specific domestic firm; export of goods or services at a fixed percentage; restricting the quantity, value, or type of goods or services exported or sourced domestically; fixing import goods at the same quantity and value as goods exported; requirements to achieve certain local content ratios in manufacturing goods; stipulated levels or values on research and development activities; supplying goods or services in a particular location; and mandating the establishment of head offices in a particular location.

The government updates, on an ad hoc basis, the list of investment priority high-tech products and companies investing in research and development for items that are entitled to the highest tax incentives and may be eligible for funding from the National High-Tech Development Program. Companies that develop infrastructure for high-tech parks will also receive land incentives.

Table 3: Sources and Destination of FDI

*No IMF Data Available; Vietnam’s Foreign Investment Agency under the Ministry of Planning and Investment (fia.mpi.gov.vn )
**No local data available
Table 4: Sources of Portfolio Investment

*No IMF Data Available; Vietnam’s Foreign Investment Agency under the Ministry of Planning and Investment (fia.mpi.gov.vn )
**No local data available