ASEAN Market Watch: Booming Regional Retail, Improved Prospects for Malaysian Manufacturing, and the Coming of Age of Cambodian Special Economic Zones

ASEAN: Indonesia, Malaysia Top List in Retail Index

Indonesia and Malaysia made it to the top five in the Global Retail Development Index (GRDI) of 2016. The GRDI ranks the top 30 developing countries for retail investment on a scale of 0 to 100; the higher the score – the more important it is to enter the market. The index scores are based on four variables: country and business risk, market attractiveness, market saturation and time pressure. The rest of the countries that made it to top five list are all Asian countries including China, India and Kazakhstan.

The study concluded that the reason for the retail boom in Indonesia and Malaysia was due to a strong demand for shopping, driven by e-commerce. The e-commerce sector in the Asian region grew by 3.57 percent in 2015 with a value of US $878 billion. The index also classifies other ASEAN countries in the following categories:

• Huge market (cities and population): Indonesia
• Outsourcing industry: Philippines
• Business-friendly environment: Malaysia
• Low market saturation; highest GDP growth: Vietnam

RELATED: Pre Investment and Market Entry Advisory from Dezan Shira & Associates

Malaysia: Manufacturing Sector Expected to Recover

Malaysia’s manufacturing sector is expected to recover according to International Trade and Industry Minister Datuk Seri Mustapa Mohamed. The development comes after a study by the Malaysian Investment Development Authority (Mida) along with two universities which also stated that the previous year was a good year for electronics and semiconductors. The manufacturing output fell to its sharpest rate of decline in the past three and a half years due to poor market conditions and low demand. The slowdown in electronics, which constitutes 35 percent of the country’s exports significantly affected Malaysia’s manufacturers.

Analysts have also stated that manufacturers must adopt automation and smart manufacturing concepts to be successful. Malaysia’s currency, the ringgit was also weak which meant that imported raw material costs increased, leading to a rise in input prices. Due to this purchasing prices also rose at the highest level since February. While exports rose slightly, domestic demand continues to shrink. Nevertheless, government officials stated that incentives for the manufacturing sector are favorable and that no changes are planned. While the officials believe the sector will rebound, it remains to be seen if this happens, as forecasts are likely to be negative in the short to medium term.

 RELATED: Singapore & Australia Announce FTA Upgrades

Cambodia: 100^th Factory Inaugurated in Sihanoukville SEZ

Cambodia’s Prime Minister Samdech Techo Hun Sen inaugurated the 100^th factory in the Sihanoukville Special Economic Zone (SSEZ). The SEZ, which is jointly operated by China based Jiangsu Taihu Cambodia International Economic Cooperation Investment Co., Ltd and the Cambodia International Investment Development Group Co. Ltd in the port city of Sihanoukville. The SSEZ is part of Cambodia’s economic development plan, with Cambodia attempting to attract foreign investors to the zone. Presently, companies from China, US, Japan, France, South Korea, Ireland, Vietnam and Thailand have factories in the zone. The SSEZ is part of China’s Belt and Road Initiative to increase connectivity and cooperation between China and the rest of Eurasia.

Cambodia began building SEZ projects in 2006. The government has so far approved 33 SEZs, 11 of which are operational while the rest are under construction. These zones are mainly located on the borders with Thailand and Vietnam, with some on the outskirts of Phnom Penh and in coastal provinces. The country’s economy is growing rapidly, with the industrial sector growing at 11.7 percent in 2015. The Asian Development Outlook 2016 states that the country’s large supply of cheap labor has attracted significant FDI into the making of garments and footwear for export, with average monthly salaries just US $140 a month. Cambodia’s government hopes to boost economic development by building SEZs and see it as important to bring infrastructure, jobs, skills and productivity.

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.

The Trans-Pacific Partnership and its Impact on Asian Markets
The United States backed Trans-Pacific Partnership Agreement (TPP) includes six Asian economies – Australia, Brunei, Japan, Malaysia, Singapore and Vietnam, while Indonesia has expressed a keen willingness to join. However, the agreement’s potential impact will affect many others, not least of all China. In this issue of Asia Briefing magazine, we examine where the TPP agreement stands right now, look at the potential impact of the participating nations, as well as examine how it will affect Asian economies that have not been included.

An Introduction to Tax Treaties Throughout Asia
In this issue of Asia Briefing Magazine, we take a look at the various types of trade and tax treaties that exist between Asian nations. These include bilateral investment treaties, double tax treaties and free trade agreements – all of which directly affect businesses operating in Asia.

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