Investing in ASEAN Association of Southeast Asian Nations asean 2014|2015 • one vision • one identity • one community • | Brunei Darussalam | Cambodia | Indonesia | Lao PDR | Malaysia | | Myanmar | Philippines | Singapore | Thailand | Vietnam | Copyright © Allurentis Limited 2014. All rights reserved. Allurentis is delighted to have been involved in partnership with ASEAN on this, the fourth publication and would like to thank all sponsoring organisations for their kind contributions. We are confident that it will raise awareness with all readers and prove to be an invaluable resource, especially for those wishing to become involved in the extraordinary business opportunities and growth prospects within the Region. Electronic copies of this publication may be downloaded from Allurentis Limited's website at www.allurentis.com, provided that the use of any copy so downloaded, complies with the terms and conditions specified on the website. Except as expressly stated above, no part of this publication may be copied, reproduced, stored or transmitted in any form or by any means without the prior permission in writing from Allurentis Limited. To enquire about obtaining permission for uses other than those permitted above, please contact Allurentis by sending an email to [email protected] | Asia House | Baker & McKenzie | Berry Appleman Leiden | Chandler & Thong | CIMB Bank | DFDL | Diageo | | GSK | HSBC | Kris Energy | Kroll Associates | Marsh | Petrofac | PwC | RMA Group | SICPA Asia Development | Photos courtesy of: www.istockphoto.com | www.123rf.com | www.shutterstock.com ATIONS N SIAN Contents A OUTHEAST Introduction S Promise of new era draws foreign investment 5 Messages H.E. Le Luong Minh: Secretary General 8 US-ASEAN Business Council 9 SSOCIATION OF EU-ASEAN Business Council 10 A UK-ASEAN Business Council 11 Business - Finance - Legal Integration and collaboration - How businesses can capitalise on ASEAN’s growth story - HSBC 13 Corridors and connections - Baker McKenzie 18 The Myanmar frontier: Making it work - PwC 24 The long road ahead: Implementing the Asian Economic Community - DFDL 29 Legal regime of ASEAN - Chandler & Thong-ek Law Offices 34 Challenges for investors to and from frontier markets - Kroll 39 Immigration in ASEAN: Planning for the challenges - Berry Appleman & Leiden 42 Building national capabilities and facilitating trade through secure regional supply chains - SICPA 45 Energy Further investment needed to develop oil & gas resources 47 ASEAN Oil & Gas: Turning a vision into reality - Kris Energy 51 Industry & Manufacturing Manufacturing moves up the value added chain 55 Diageo: Growing responsibly across Southeast Asia - Diageo 60 Emerging market specialist RMA increases ASEAN presence - RMA Group 64 Infrastructure Spending on infrastructure accelerates 68 Railway projects promise huge regional benefits 72 New container ports strengthen ASEAN’s global reach 77 Aviation Focus on airport investment intensifies 82 Region’s aviation expansion surges ahead 87 Aircraft Maintenance Repair and Overhaul (MRO) services continue to grow 90 3 ASSOCIATION OF SOUTHEAST ASIAN NATIONS IT & Telecommunications ASEAN’s digital advance 95 Mining Region seeks sustainable model for its mining sector 99 Agriculture Agriculture is ready to meet its challenges 102 Healthcare Healthcare offers many opportunities for the private sector 106 Education Educational development is a key economic strategy 111 Tourism Tourism is Southeast Asia’s fastest growing sector 113 Country Reference Member country profiles 118 Useful contacts 140 Inside back cover Marsh 141 asean www.asean.org 4 NTRODUCTION I Introduction: Promise of new era draws foreign investment 2015 will be the most significant since the inception of the Association of close to zero in many sectors for trade between Brunei Darussalam, Southeast Asian Nations when the ASEAN Economic Community (AEC) Indonesia, Malaysia, Philippines, Singapore and Thailand. is due to come into being at the end of the year. The single market will provide an unrestricted flow of goods, services, The AEC will initiate a single market, comprised of the ten member investment, skilled labour and a freer flow of capital between the nations, 48 years after the Association was first agreed by its founder members. Many benefits are promised, including access to a larger members - Indonesia, Malaysia, Philippines, Singapore and Thailand. market and a reduction in trade barriers. This is an incentive to global companies setting up in the area, as well as local enterprises. ASEAN membership has seen the economies of these countries and those of Brunei Darussalam, Vietnam, Lao PDR, Myanmar and While more liberalisation is being negotiated, there is a growing Cambodia who joined later, expand and consistently exceed average development of trade flows within the Region itself. Intra-regional trade global GDP growth in recent years. Almost all of the ten ASEAN with Indonesia, Singapore and Thailand in particular is increasing and economies are expected to achieve growth rates of 5% or above in 2014. other markets are also expanding. This growth and the promise of the AEC, are generating a wide range of According to Philippines’ Finance Minister, Cesar V Purisima, the growth opportunities for business and investment. ASEAN continues to work to of inter-ASEAN trade has outpaced the growth of world trade in the past remove trade barriers between member states. Tariffs on goods are now three years. “That just shows the benefits of a more connected, more 5 ASSOCIATION OF SOUTHEAST ASIAN NATIONS harmonised ASEAN, which, if it were a single country, would have the third largest population and a GDP of more than US$2 trillion,” he says. Companies in the Region, particularly those of Singapore, Malaysia and Thailand are going international by expanding first across ASEAN borders and then to the rest of Asia and beyond to Europe and the US. ASEAN is firmly set to be at the crossroads of global business in the twenty first century. Singapore is the fourth highest ranked country in the McKinsey Global Institute’s Connectedness Index, which among other measures tracks inflows and outflows of goods, services and finance. Malaysia in 18th place and Thailand in 36th, also rank in the top 50 most connected countries in the Index. Analysis by Bank of America Merrill Lynch, drawing on national statistics, Some of Asia’s largest Free Trade Export Development Areas are located suggests that in 2013 Foreign Direct Investment (FDI) flows into ASEAN’s in the ASEAN area. These include the Batam Free Trade Zone developed largest economies of Indonesia, Thailand, Malaysia, Singapore and the by Singapore and Indonesia, Thailand’s Southern Regional Industrial Philippines surpassed those going into China. According to the Bank, FDI Estate, Indonesia’s Tanjung Emas Export Processing Zone, the Port Klang inflows into these five countries rose by 7% to US$128 billion, US$4 Free Zone in Malaysia, Vietnam’s Tan Thuan Export Processing Zone and billion more than went into mainland China, an indication of ASEAN’s the Thilawa Special Economic Zone being developed in Myanmar. growing importance in the global economy. The availability of manufacturing and logistical facilities in the Region, in For investors, it is also a question of future potential. Even though all the addition to competitive cost structures, are increasingly drawing the members involved are at different stages of development, they all share attention of investors and multinationals southward from China to the immense growth potential and comprise a major global hub of ten dynamic ASEAN economies. manufacturing and trade. 6 NTRODUCTION I In the long term, ASEAN could be the world’s fourth largest single focused solely on its economic and social development role but also market by 2030, and with lower manufacturing costs than Japan and acts as a political stabiliser, through its network of dialogues on issues China. The Jakarta based Economic Research Institute for ASEAN and ranging from maritime security, health and climate change. East Asia estimates that the combined GDP of ASEAN members could ASEAN executed much influence to spur political change and reform more than double from its present level to US$4.5 trillion by 2030. in Myanmar. The process of change now underway is testimony to ASEAN’s economic vision is ambitious and stretches beyond 2015. In ASEAN’s effective, but little noticed soft power. Myanmar now addition to its own integration, it is the group’s policy to push ahead increasingly open to regional and international investment is likely to with the integration of its many different Free Trade Agreements into emerge as another big winner as a result of the AEC and the many one over arching accord. The goal is to establish by 2015, an umbrella opportunities for increased trade that it will encourage. trade deal known as the Regional Comprehensive Economic With its policy of quiet, cautious and “preventive diplomacy”, ASEAN Partnership (RCEP) with Australia, China, India, Japan, South Korea has managed to achieve peace and stability. Slowly but steadily, its and New Zealand. members are integrating their economies and institutions, making the The round of talks with RCEP which began in May 2013, aims to reach group a respected political force in the Region,” says Willem Blankert, an accord that will create an integrated market across the Asia-Pacific former EU Special Advisor for Relations with ASEAN. of some 3.4 billion people with a combined GDP of US$21.4 trillion. Within a group of nations of such differing ethnicities, cultures, The attractiveness of ASEAN for foreign investment will be further languages, religions and political histories, each step towards integration enhanced by formation of the Trans Pacific Partnership Free Trade has involved lengthy discussion and is likely to continue to do so. Pact. This is being negotiated by Brunei Darussalam, Malaysia, Not every detail may have been addressed by the end of 2015, but the Singapore and Vietnam with Pacific Rim countries which comprise the evolving AEC is a powerful declaration of intent and promises to boost US, Canada, Chile, Peru, Mexico, Australia and New Zealand.