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Open Regionalism and Deeper Integration: The Implementation of ASEAN Investment Area (AIA) and ASEAN Free Trade Area (AFTA)
The Sixth ASEAN Summit agreed to launch "Bold Measures" for speedy recovery from the crisis
(59). These include the "Short Term Measures to enhance ASEAN Investment Climate" that accelerates the implementation of AIA
(60). The short term practical measures cover the following areas
(61): minimum three years corporate income tax exemption or a minimum 30% corporate investment tax allowance; 100% foreign equity ownership; duty-free imports of capital goods; domestic market access; minimum industrial and leasehold period of 30 years; employment of foreign personnel; and speedy customs clearance. All these measures are applicable to all investors
The specific measures and privileges extended by ASEAN member countries provided in section 3 of the Short Term Measures are as follows:
Brunei will allow 100% foreign equity ownership in high-technology manufacturing and export-oriented industries.
Indonesia offers wholesale and retail trade up to 100% foreign equity ownership to qualified investors, in addition to 100% foreign equity in all areas of the manufacturing sector. Indonesia has also reduced the processing time for approval in principle, for investment less than US$ 100 million, to 10 working days. In the banking sector, listed banks are open for 100% foreign equity ownership;
Laos allows duty exemption on imported capital goods required by the promoted investment projects;
Malaysia offers 100% foreign equity ownership in the manufacturing sector with no export conditions imposed on all new investments, expansions and diversifications, except for seven specific activities and products. Foreigners can also own land in Malaysia subject to certain limitations;
Myanmar will extend a minimum of three years corporate tax exemption to all investment projects in all sectors. In addition, they will also extend the duty free import of raw materials to all industrial investments for the first three years of operation;
The Philippines will open retail trade and distribution business to foreign equity. In addition, the Philippines has opened private construction in the domestic market to foreign companies;
Singapore has substantially reduced business costs as part of a cost reduction package that amounts to S$ 10 billion in saving in addition to extending 30% corporate investment tax allowance on a liberal basis to industrial projects and to selected service industries in respect of productive equipment. These activities include manufacturing, engineering or technical services and computer-related services;
Thailand allows 100% foreign equity ownership for manufacturing projects regardless of location. Furthermore, agricultural projects, which export 80% of sales, will receive import duty exemption on machinery, regardless of location;
Vietnam extends duty exemption on imported capital goods for all projects in respect of the import of raw materials for production for especially encouraged investments and for projects located in mountainous or remote regions for the first 5 years of operation. The issuance of investment licenses for several types of projects has been reduced to 15 days from the receipt of proper simplified documents. In addition, investment licensing for projects under US$ 5 million has been decentralised to all provinces and cities.
However, all privileges granted by ASEAN countries are subject to specific conditions: investors must meet the minimum investment level specified by the host country, if any; the industry must be in the published priority list for tax incentives to enjoy this particular privilege; the industry must not be in any negative list, if any; and the investor must show proof that foreign funds have been brought in for the entire amount of the investment, if required by the host country
(59)Statement on Bold Measures paragraph 1. provided that "1. The financial and economic crisis has severely affected the ASEAN economies and business dynamism in the region. In order to regain business confidence, enhance economic recovery and promote growth, the ASEAN Leaders are committed to the realization of the ASEAN Free Trade Area (AFTA). In addition, the Leaders agreed on special incentives and privileges to attract foreign direct investment into the region. To enhance further economic integration of the region, the Leaders also agreed to further liberalize trade in services". The special incentives and privileges are provided in the "Short Term Measures to enhance ASEAN Investment Climate".
(60)These "short-term measures" are applicable to all applications received from 1st January 1999 to 31st December 2000, and those approved thereafter. Each ASEAN country has agreed to extend additional special privileges to qualified ASEAN and non-ASEAN investors in the manufacturing sector. The "Short Term Measures" were agreed as part of "the ASEAN Investment Bold Measures" agreed upon by the ASEAN Leaders at the Sixth ASEAN Summit in Hanoi on 16th December 1998.
(61)Section 1: Privilege Granted to new Investments/Projects or Expansion of Existing Investment Operations of the "Short-term Measures to Enhance ASEAN Investment Climate", Annex to the Statement on Bold Measures, agreed upon by the ASEAN Leaders at the Sixth ASEAN Summit in Hanoi, in December 1998.
(62)Joint Press Statement, First Meeting of the ASEAN Investment Area (AIA) Council, 5th March 1999, Phuket, Thailand. The statement declared that "all ASEAN countries are implementing the "bold measures" agreed upon by the ASEAN Leaders at the Sixth ASEAN Summit in Hanoi in December 1998. The privileges cover manufacturing investment applications received and approved by the respective ASEAN investment agencies in 1999 and 2000. The privileges under the "bold measures" are to be extended to all investors, ASEAN and non-ASEAN. The Council encouraged investors to take full advantage of the investment privileges offered under the bold measures during the promotion period.
(63)Section 4: "Conditions" of the Short Term Measures to Enhance ASEAN Investment Climate.