ASEAN offers 'bold' investment incentives

ASEAN offers 'bold' investment incentives

By Meidyatama Suryadiningrat

HANOI (JP): The Association of Southeast Asian Nations (ASEAN)
agreed on Wednesday to introduce special incentives as a quick
fix to the fall in investment to the region.

Incentives and privileges to attract foreign direct investment
were outlined in a Statement of Bold Measures at the end of the
sixth ASEAN Summit here.

"The adoption of the bold measures shows our strong
determination to regain business confidence, enhance economic
recovery and promote growth," said Brunei's Sultan Hassanal
Bolkiah, who will chair the next ASEAN Summit in 2001.

"All of these will bring new momentum to the region's growth
and development."

Regional statistics here show inflow of foreign direct
investment into ASEAN fell by nearly 40 percent from US$31.4
billion in 1996 to $19 billion in 1997.

Officials believe foreign investment will help boost the
crisis-hit economies.

Apart from accelerating the ASEAN Free Trade Area deadline
from 2003 to 2002, the measures set out a crash program to entice
investors if they submit investment applications for the
manufacturing sector between Jan. 1, 1999, and Dec. 31, 2000.

Incentives open to qualified ASEAN and non-ASEAN investors may
include a 100 percent foreign equity ownership, a three-year
corporate income tax exemption or a minimum 30 percent corporate
investment tax allowance. Exemptions will not be granted on an
incremental basis over and above existing incentive provisions.

Investors could also receive duty-free imports of capital
goods and a land leasehold of a minimum of 30 years. Foreign
investors will also be given free market access to the domestic
market.

Fellow ASEAN investors under the ASEAN Investment Area
agreement may also qualify for national treatment in the
manufacturing sector.

However, each country's incentives differ.

Indonesia, for example, has promised qualified investors in
wholesale and retail trade up to 100 percent foreign equity, in
addition to the 100 percent foreign equity in all areas of the
manufacturing sector.

Listed banks are also open to 100 percent foreign equity
ownership.

Indonesia will also speed up investment approvals to less than
10 working days for investments below $100 million.

Malaysia is offering 100 percent foreign equity ownership in
the manufacturing sector, with no export conditions imposed on
all new investment, expansion and diversification.

With limited exceptions, foreigners can also own land in
Malaysia.

Thailand is allowing 100 percent foreign equity ownership for
manufacturing projects regardless of their location, while
agricultural projects which export 80 percent of sales will
receive import duty exemption on machinery.

The Philippines has pledged to further open its retail trade
and distribution business to foreign equity, and allow foreign
companies into private construction.

Officials separately noted that despite the positive trend,
particular national restrictions or conditions would continue to
override.

Brunei, for example, will only allow full foreign equity
ownership in high-tech manufacturing and export-oriented
products.

Indonesia would require some local equity ownership after 15
years.

Agreements

Separately, ASEAN economic ministers also signed three
documents -- Framework Agreement on Mutual Recognition, Framework
Agreement on the Facilitation of Goods and Services and the
Protocol to Implement the Second Package of Commitments under the
ASEAN Framework Agreement on Services -- to hasten the grouping's
economic integration.

The first agreement calls on member states to develop ways of
establishing product standards, thus making the flow of goods
from one member to another more acceptable.

The second agreement aims to facilitate speedy movement of
goods from one ASEAN country to another, or to a third country,
by way of a neighboring ASEAN country.

The arrangement is particularly important for food and
agricultural products, which would spoil in lengthy transit.

Meanwhile the signed Protocol would make it easier for
nationals of ASEAN members to sell their services to one another.

Economic ministers attending the proceedings in the Vietnamese
capital were Brunei's Abdul Rahman Taib, Indonesia's Ginandjar
Kartasasmita, Laos' Soulivong Daravong, Malaysia's Rafidah Aziz,
Myanmar's David O. Abel, the Philippines' Jose Trinidad Pardo,
Singapore's Lee Yock Suan, Thailand's Supachai Panitchpakdi and
Vietnam's Truong Dinh Tuyen.