ASEAN Regulatory Brief: Philippines Contractualization Law, Cambodia Customs Seal, and Malaysia Foreign Worker Levy

Philippines: Policy on labor contractualization approved

The Philippines government approved a new Department of Labor and Employment (DOLE) regulation, Order No. 168 on contractualization, after it was submitted on December 29, 2016. The new law amends the provisions of the labor code and legalizes subcontracting or outsourcing labor through third party agencies. This will allow principal employers to hire contractual labor, but only through service providers. These providers will be responsible for regularizing workers rather than the employer. Higher financial requirements will be imposed on service providers to eliminate unreliable subcontractors and ensure payments for laborers. The government believes that the change will address issues of labor abuse.

Several labor groups have opposed the directives, believing the change will only further legitimize contractualization in a different form and not eliminate it. The groups are lobbying for direct hiring and to prohibit third party hiring by banning fixed-term employment. They have asked President Rodrigo Duterte not to implement the directive and to issue an order banning all forms of fixed employment contracts, thereby fulfilling his campaign promise of eliminating contractualization. In the first five months of Duterte’s term, the government regularized 25,000 contractual workers, which is less than 10 percent of the total workforce.

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Cambodia: New customs seal to curb trade in illicit goods

On December 26, 2016, Cambodia’s General Department of Customs and Excise (GDCE) announced that a new customs seal will be required for all alcohol, watches, and smartphones imported into the country worth at least US$50. The new seal contains invisible text, an invisible logo, microtext, and a secret mark that can only be seen when exposed by a laser. The measure, which came into effect on January 1, is designed to combat trade in illicit and counterfeit goods and generate revenue, as the new seal will be considerably more difficult to counterfeit than the previous one. Offenders who are caught not using the seal will need to pay relevant taxes and are subject to additional fines. Markets in Cambodia are rife with illicit and counterfeit goods, and are often subject to raids by police. The move towards a more technologically sophisticated seal has been welcomed by the business community, as legitimate sellers often struggle to compete with the low prices of counterfeit goods.

Malaysia: Employers required to pay foreign worker levy

Employers hiring foreign workers are now required to pay for levies rather than deducting the employee’s wages, effective January 1. The new regulation was announced by Malaysian Home Minister Datuk Seri Ahmad Zahid Hamidi. According to Hamidi, the new law will make employers fully responsible for their foreign hires. Officials have stated that this has been done to prevent abuse of foreign workers, who are often subject to human trafficking. Many employers confiscate passports and restrict the movement of migrant workers without paying the basic minimum wages.

However, the Malaysian Employers Federation (MEF) has requested the Prime Minister to intervene in the issue, stating that almost all of Malaysia’s industries were against the new law. Further, they stated that the industries that hire foreigners were ones that locals were not interested in. Similar comments were made by the SME Association of Malaysia and the Malaysian Iron and Steel Industry Federation. The move is likely to hurt potential foreign workers, as Malaysian companies will be more hesitant to hire them. Manufacturing companies have stated that they will likely automate certain processes, while other companies have stated that they will pass the additional costs onto consumers.

Human Resources in ASEAN
In this issue of ASEAN Briefing, we discuss the prevailing structure of ASEAN’s labor markets and outline key considerations regarding wages and compliance at all levels of the value chain. We highlight comparative sentiment on labor markets within the region, showcase differences in cost and compliance between markets, and provide insight on the state of statutory social insurance obligations throughout the bloc.

The 2016/17 ASEAN Tax Comparator
In this issue of ASEAN Briefing, we examine regional taxation in ASEAN through a comparison of corporate, indirect, and withholdings taxation. We further present an overview of the compliance environments found across the region and analyze ASEAN’s tax environment in the context of the time and documentation required in each country.

Annual Audit and Compliance in ASEAN
For the first issue of our ASEAN Briefing Magazine, we look at the different audit and compliance regulations of five of the main economies in ASEAN. We firstly focus on the accounting standards, filing processes, and requirements for Indonesia, Malaysia, Thailand and the Philippines. We then provide similar information on Singapore, and offer a closer examination of the city-state’s generous audit exemptions for small-and-medium sized enterprises.

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