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Investment brief
Asia’s emerging gems
pwC
Asia’s emerging gems: Investment brief
Malaysia
Thailand
Disclaimer
“Asia’s emerging gems” is published by PricewaterhouseCoopers (PwC) for distribution
to its business associates. This publication includes information obtained or derived
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ISBN 978-983-41238-1-9
2 Asia’s emerging gems: Investment brief
Vietnam
Cambodia
Laos
Foreword
4
Country facts & figures
5
Country economic performance 6
Vietnam
47
At a glance
Economic overview
Leading corporates
Investment overview
Fiscal stimulus packages
Tax brief
Market insights 48
49
52
54
59
60
63
Cambodia
65
At a glance
Economic overview
Investment overview
Tax brief
Market insights 66
67
70
71
73
Malaysia
9
At a glance
Economic overview
Leading corporates
Investment overview
Fiscal stimulus packages
Tax brief
Market insights
10
11
14
16
22
24
27
Thailand
29
At a glance
Economic overview
Leading corporates
Investment overview
Fiscal stimulus packages Tax brief
Market insights 30
31
34
36
40
42
45
Appendices
Laos
At a glance
Economic overview
Investment overview
Tax brief
Market insights
76
77
80
81
83
Appendices
85
Sources
Abbreviations
Glossary of ratings
List of charts
PwC contacts
Industry contacts
Acknowledgements
86
87
89
91
94
96
98
PricewaterhouseCoopers 3
Foreword
Multi-faceted economies, culturally diverse
and highly populated with vast potential.
That is Southeast Asia, at a glance.
The region’s potential is hard to ignore strategically located at the centre of Asia
Pacific, these economies are also driven by
the phenomenal growth of China and India,
as well as the dynamic demands of the
region’s large populace.
And with green shoots bringing a
sense of optimism, more so to Asia
which is poised for a strong recovery
and sustainable growth, investors are
looking towards the region for continued
growth and opportunities. The Southeast
Asian countries are at varying stages of
development, each with a unique set
of characteristics, ranging from sociodemographics to economic base, to
investment drivers.
4 Asia’s emerging gems: Investment brief
Given these robust developments, we
believe you will find this publication useful in
bringing you market insights across Malaysia,
Thailand, Vietnam, Cambodia and Laos.
We hope “Asia’s emerging gems” provides
useful and refreshing insights on the
investment opportunities in each of these
countries. Even more so, we hope it makes
you want to invest in this region.
Sincerely,
Johan Raslan Prasan Chuaphanich
Executive Chairman
PwC Malaysia
Executive Chairman
PwC Thailand
September 2009
Country
facts & figures
Malaysia
Thailand
Vietnam
Cambodia
Laos
Population (mln)1
27.3
66.4
86.8
14.6
6.3
GDP (US$ bln)1
222.2
273.2
89.8
11.2
5.2
8,140.6
4,115.3
1,040.3
818.0
840.7
GDP growth (%)1
4.6
2.6
6.2
6.0
7.2
Inflation (%)1
5.4
5.5
23.1
19.7
7.6
Exchange rate (Home currency to US$1)2
3.52
34.06
17,798.0
4,164.0
8,517.5
Stock market closing index2
1,075.2
597.5
448.3
N.A
N.A
Market capitalisation (US$ mln)2
224,858
133,728
17,417
N.A
N.A
Equity market return2
7.8
10.1
10.8
N.A
N.A
Equity market price earnings ratio2
18.6
20.8
24.3
N.A
N.A
- Standard & Poor’s
A-
BBB+
BB
n.a
n.a
- Moody’s
A3
Baa1
Ba3
n.a
n.a
- Sovereign risk
BBB
BB
CCC
CCC
n.a
- Currency risk
BBB
BB
B
B
n.a
BB
B
CCC
CCC
n.a
- Political risk
BBB
CCC
B
C
n.a
- Economic structure risk
BBB
BB
CCC
CC
n.a
GDP per capita (US$)1
Long-term borrowings credit rating2
EIU risk analysis3
- Banking sector risk
n.a Not available
N.A Not applicable
Source:
IMF, World Economic Database, April 2009
S&P; Moody’s ratings, Bloomberg (as at 30 June 2009)*
3
EIU, Bloomberg (as at July 2009)*
* Please refer to glossary of ratings for definitions
1
2
Note: All foreign currency conversion in this publication are using the 30 June 2009 closing rate
PricewaterhouseCoopers 5
Country economic
performance
Chart 1
Country’s GDP growth
Chart 3
Country’s stock market indices
GDP growth across the region is expected to regain
growth momentum from the second half of 2009
onwards, averaging 5.3%
Steady positive upward stockmarket trend from Q2
2009 onwards
200
10
6
4
Malaysia
Thailand
Vietnam
Cambodia
Laos
2
Index (July 2008 = 100)
8
GDP growth (%)
Malaysia
Thailand
Vietnam
Shanghai
Dow Jones
180
60
40
Jun 09
May 09
Apr 09
Mar 09
Feb 09
Jan 09
Dec 08
-2
Nov 08
0
2013
Oct 08
2012
80
Sep 08
2011
100
Aug 08
2010
120
Jul 08
2009
140
20
0
2008
160
-4
Source:
Source:
IMF, World Economic Outlook Database, April 2009
Bloomberg (June 2009)
Chart 2
Country’s inflation rate
Chart 4
Exchange rate of country’s currency against the US Dollar
Inflation rates are expected to stabilise at a flat trend
in the next 5 years, at below 6%
Impact of the global financial crisis – volatile currency
movements
Malaysia
Thailand
Vietnam
Cambodia
Laos
20
18
Inflation rate (%)
16
14
12
10
8
6
4
2
RM
THB
VND
EURO
115
110
Value of currencies against US$
USD = 100
22
KHR
CNY
LAK
JPY
105
100
95
90
85
80
75
0
Jun 09
May 09
6 Asia’s emerging gems: Investment brief
Apr 09
Bloomberg (June 2009)
Mar 09
IMF, World Economic Outlook Database, April 2009
Feb 09
Source:
Jan 09
Source:
Dec 08
2013
Nov 08
2012
Oct 08
2011
Sep 08
2010
Aug 08
2009
Jul 08
2008
Chart 5
The PwC EM20 Index
Explores the attractiveness of various emerging markets as long-term investment destinations using econometric
analysis and World Bank data. This country risk estimation model is based on factors such as political stability, regulatory
effectiveness and the rule of law.
Manufacturing index
Country
Services index
2009 Rank
2008 Rank
Chile
1
9
Bulgaria
2
Country
2009 Rank
2008 Rank
2
Slovakia
1
6
2
2
Malaysia
3
13
Chile
China
4
14
Malaysia
5
9
7
16
India
6
4
China
Thailand
9
11
Thailand
11
15
5
India
13
20
Vietnam
18
Note: Vietnam, Cambodia and Laos are not in top 20 list
EM - Emerging Market
Source:
PwC, EM20 Index 2009 Interim Update: Balancing Risk & Reward, April 2009
Chart 6
World Bank: Ease of doing business
Chart 7
UNCTAD: Most attractive location
for foreign direct investment (FDI)
Chart 8
WEF: Global
Competitiveness Index
2008/09
Rank
2007/08
Countries
Rank
2008
Rank
2007
Rank
Countries
2009
Rank
2008
Rank
Countries
1
1
Singapore
1
1
China
1
2
Switzerland
2
2
New Zealand
2
2
India
2
1
United States
3
3
Hong Kong, China
3
3
United States
3
3
Singapore
4
4
United States
4
4
Russia
4
4
Sweden
5
6
United Kingdom
5
5
Brazil
5
3
Denmark
12
12
Thailand
6
6
Vietnam
24
21
Malaysia
23
21
Malaysia
8
14
Indonesia
29
30
China
93
91
Vietnam
11
Thailand
36
34
Thailand
122
129
Indonesia
Top
30*
13
Malaysia
49
50
India
133
132
India
15
Singapore
75
70
Vietnam
145
139
Cambodia
110
109
Cambodia
167
165
Laos
* Detailed UNCTAD ranking not
available
Source:
Source:
World Bank, Doing Business 2010
Report, September 2009
UNCTAD World Investment Prospects
Survey, 2007-2009 & 2008-2010
Source:
World Economic Forum,
The Global Competitiveness Report
2009-2010, September 2009
PricewaterhouseCoopers 7
8 Asia’s emerging gems: Investment brief
Malaysia has over the last 50
years developed to be a strong
industrial base for foreign
electrical and electronics (E&E)
multinational corporations. In
the last decade, as it moved
up the industry value chain,
Malaysia has emerged as an
attractive regional hub for
services. More recently, the
collective impact of bold and
significant market liberalisation
measures is positioning
Malaysia to receive an inflow
of foreign investment capital
in the various 27 services subsectors, including financial
services, information and
communications technology
(ICT) and logistics sectors.
Malaysia is also increasingly
being recognised as an
innovative international
Islamic financial centre
and fast developing to be
a global halal hub for the
manufacturing industry in areas
such as processed food and
pharmaceuticals (including
herbal and alternative medicine).
Malaysia is also emerging
as a springboard or centre
for regional expansion into
Association of Southeast Asian
Nation (ASEAN) in view of its
strategic, central location and
multi-lingual “Truly Asia” mix
of Malay, Chinese and Indian
populace.
MALAYSIA
At a glance
Economic overview
Leading corporates
Investment overview
Fiscal stimulus packages
Tax brief
Market insights
PricewaterhouseCoopers 9
At a glance
27.3
million population
Total area
329,750 sq km
Capital
Kuala Lumpur
Language
Malay, English, Chinese
dialects, Indian dialects
and other various ethnic
dialects
Currency
Exchange rate
(as at 30 June 2009):
US$1 = RM3.52
(Malaysian Ringgit)
Government
Constitutional monarchy
Administrative divisions
13 states and three
federal territories
10 Asia’s emerging gems: Investment brief
Strengths
•
•
•
•
•
Efficient domestic market
Strong and sophisticated financial markets
English speaking and highly skilled labour force
World-class infrastructure facilities
High foreign exchange reserves and current account
surplus
• Stable political environment
Weaknesses
•
•
•
•
Relatively small population
Mature and competitive domestic market
Moderate medium-term growth rates
Slowdown in export and industrial activities with global
recession
• Relative to developing Asian countries, higher labour
costs, with higher living standards
Opportunities
• Government is promoting investments in technology and
knowledge-intensive sectors
• Liberalisation of 27 services sub-sectors to foreign
investments (include financial services sector with
issuance of new banking and insurance licences)
• Government is promoting Malaysia as an international
Islamic finance hub with various investment incentives
• Has the second highest purchasing power among ASEAN
countries with strong middle class
• Government has established five economic growth
corridors for promotion of free trade and investments
Threats
• Prolonged global recession will adversely affect export
sectors
• Risk of deflation, lower price as demands fall with ample
supplies could derail recovery prospects
• Lower demand as companies or customers defer/delay
their purchases or investments
• More stringent access to funding - banks and investors
have lower tolerance towards risk
Economic
overview
%
Malaysia
2007
2008
2009(f)
2010(f)
2013(f)
Commentaries
GDP
6.3
4.6
- 3.5
1.3
6.0
• Public sector expenditure and private
consumption expected to be the pillars of
support to the economy
• Key stimulus will emanate from the
Government’s RM67 bln (US$19 bln) fiscal
spending
Inflation
2.0
5.4
0.9
2.5
2.5
• 2008 inflation averaged at 5.4% with the
decline in prices of domestic food and fuel
prices in the fourth quarter
• The lower inflation rate projected at 0.9%
in 2009 reflects the 2.5% reduction in
electricity tariffs for households which
came into effect in March 2009 and lower
transport costs with declining oil prices
Unemployment
3.2
3.3
4.8
4.9
4.3
• Retrenchment on the rise but reasonably
contained
• Affected areas are mainly the E&E sector,
trade, hotels & restaurants and the financial
service sectors
(f) Forecast
Source:
IMF for GDP and inflation data; EIU for unemployment data
PricewaterhouseCoopers 11
Chart 9
Top sectors by GDP contribution, 2008
Financial
services
Wholesale
& retail trade
12%
Oil & gas (O&G)
11%
8%
28%
8%
GDP
RM748.0 bln
(US$212.5 bln)
7%
Manufacturing
Real estate
& construction
Agriculture
26%
Others
Chart 10
Trade information, 2008
Oil & gas
Electronics,
electrical machinery
& appliances
13%
42%
Palm oil
7%
Exports
RM676.5 bln
(US$192.2 bln)
6%
Chemicals &
chemical products
Imports
RM531.8 bln (US$151.1 bln);
intermediate goods (76%)
32%
Others
Source:
Bank Negara Malaysia (Central Bank of Malaysia)
12 Asia’s emerging gems: Investment brief
Major trading partners
Singapore, other ASEAN countries,
US, EU, Japan and China
Malaysia
Sectoral performance review
Growth%
Sector
Commentaries
2007
2008
2009(f)
Manufacturing
3.1
1.3
- 0.8
• Slowdown in line with sharp correction in commodity prices
• The global economic downturn adversely affected demand for
Malaysia’s main exports in this sector, i.e. E&E which accounts
for over half (56%) of total manufactured exports and nearly
half (42%) of Malaysia’s total exports in 2008
Oil & gas
3.3
- 0.8
- 0.4
• Subject to global price volatility, regulatory changes and
competitive market forces
• Malaysia’s national oil company, Petroliam Nasional Berhad
(PETRONAS) dominates the market. It holds exclusive
ownership rights to all exploration and production projects in
Malaysia, and all foreign and private companies must operate
through production sharing contracts
Agriculture
2.2
3.8
- 2.0
• Crude palm oil (CPO) made up about 30% of value-add in this
sector
• Currently, Malaysia is the world’s second largest producer of
palm oil
• Stronger growth in 2008 driven by stronger CPO production
and CPO prices - averaged at RM2,875 (US$817) per tonne.
The CPO price forecast to average at around RM2,500 and
RM2,700 (US$710 and US$767) per tonne respectively for 2009
and 2010
Wholesale & retail trade
12.5
9.8
< 9.8
• Continued expansion in hypermarkets and retail outlets
coupled with the extension of Visit Malaysia Year and Malaysian
mega sales events helped boost retail spending in the first half
of 2008
• Retail growth moderated in the second half of the year due to
high inflation and weak consumer sentiments
• Business Monitor International (BMI) forecast the value of sales
through modern retail outlets to increase by 36.9% into 2013
Financial services
11.1
7.7
< 7.7
• Growth moderated in 2008 due to the slowdown in capital
market activities in the second half of the year
• Islamic finance continued to expand in 2008 with six new
Islamic banks commencing operations
• Liberalisation of the financial services sector, announced in
April 2009, will spur entry of more foreign players, both in the
conventional and Islamic finance markets
Real estate &
construction
4.6
2.1
3.0
• The construction sector recorded a 0.6% growth in the first
quarter of 2009 due to higher construction of office space
as well as increased activity in the high-end segment of the
residential sub-sector, particularly luxury condominiums in
Klang Valley and Penang state
• The deregulation of Foreign Investment Committee (FIC)
rules in June 2009 is expected to enhance the attractiveness
of Malaysia’s global real estate as FIC approval is now only
required for property transactions for properties valued at RM20
mln (US$5.7 mln) and above
(f) Forecast
PricewaterhouseCoopers 13
Leading
corporates
Equity market analysis
Malaysia’s stock exchange, Bursa
Malaysia, has 960 listed stocks (as
at 30 June 2009) with total market
capitalisation of RM817.9 bln (US$232.4
bln).
The Kuala Lumpur Composite Index
(KLCI) rose to its historic high of 1,516.22
on 11 January 2008 but the euphoria
was unsustainable in the later part of
last year, as investors’ sentiment was
battered mainly by the global financial
crisis which saw the exit of foreign funds.
The KLCI fell by 38.9% in 2008.
However, Malaysian stocks rose again
after the first quarter of 2009 in line with
the regional market rally and the ‘feel
good’ sentiment after the announcement
of the Government’s second stimulus
package to boost the economy. Other
positive market factors include the recent
announcement on the removal of the 30%
Bumiputera (indigenous) equity requirement
for 27 services sub-sectors plus the
liberalisation of the financial sector. KLCI hit
its 6-month high at 990.74 basis points as
at 30 April 2009, led by selected blue chips.
In recent years, Malaysia has also emerged
as a key player in the international Islamic
financial market. Malaysia currently has a
significant and fast growing Islamic banking
and financial market with sukuk (Islamic
bond) making up over 56% of all bonds.
As at March 2009, there are a total value of
RM146 bln (US$41.5 bln) sukuk bonds and
Islamic banking assets recorded at RM194
bln (US$55.1 bln).
About 87% of the stocks listed on Bursa
Malaysia are classified as Shariahcompliant securities.
Chart 11
Top 10 companies on Bursa Malaysia
Company
Industry sector
Market capitalisation
Revenue
RM mln
US$ mln
RM mln
US$ mln
Sime Darby
Diversified
41,824
11,882
36,143
10,268
Malayan Banking
Banking
41,817
11,880
16,579
4,710
Tenaga Nasional
Electric
33,211
9,435
27,589
7,838
Bumiputra-Commerce Holdings
Banking
32,468
9,224
13,661
3,881
Public Bank
Banking
32,010
9,094
11,130
3,162
MISC
Transportation
31,848
9,048
16,202
4,603
IOI Corporation
Agriculture
29,525
8,388
15,544
4,416
Genting
Hospitality & leisure
20,958
5,954
9,595
2,726
Axiata Group
Telecommunications
20,042
5,694
11,989
3,406
Petronas Gas
Gas
19,419
5,517
3,505
996
Source:
Bloomberg as at 30 June 2009
Note: Top companies based on market capitalisation
14 Asia’s emerging gems: Investment brief
Malaysia
Chart 12
Electrical & electronics
Company
Chart 13
Retail - Departmental store
Market
capitalisation
Revenue
Market
capitalisation
Revenue
US$ mln
US$ mln
US$ mln
US$ mln
Malaysian Pacific Industries
299
464
Parkson Holdings
1,504
676
Hong Leong Industries
272
933
Aeon Co.
427
1,030
Panasonic Manufacturing Malaysia
206
Unisem
173
175
DFZ Capital
233
163
370
The Store Corporation
50
624
ETI Tech Corporation
156
25
Suiwah Corporation
22
112
Chart 14
Banking
Company
Company
Chart 15
Property
Market
capitalisation
Revenue
Company
Market
capitalisation
Revenue
US$ mln
US$ mln
US$ mln
US$ mln
Malayan Banking
11,880
4,710
SP Setia
1,151
403
Bumiputra-Commerce Holdings
9,224
3,881
UEM Land Holdings
1,078
154
Public Bank
9,094
3,162
KLCC Property Holdings
866
251
AMMB Holdings
2,618
1,490
IGB Corporation
725
207
Hong Leong Bank
2,562
1,136
IJM Land
443
196
Market
capitalisation
Revenue
Chart 16
Construction
Company
Chart 17
Plantation
Market
capitalisation
Revenue
US$ mln
US$ mln
Gamuda
1,582
729
IJM Corporation
1,554
WCT
Company
US$ mln
US$ mln
Sime Darby
11,882
10,268
1,342
IOI Corporation
8,388
4,416
460
1,139
Kuala Lumpur Kepong
3,614
2,373
Malaysian Resources Corporation
325
237
Genting Plantations
1,185
311
Sunway Holdings
182
551
United Plantations
746
309
Source:
Bloomberg as at 30 June 2009
Note: Top companies based on market capitalisation
PricewaterhouseCoopers 15
Investment
overview
Foreign direct investment
Strong inflows of FDI were
recorded in the first half of 2008
but moderated in the second
half with the deterioration
in the global economy and
financial sectors. Over 2009,
manufacturing FDI is expected
to reach RM27.5 bln (US$7.8
bln).
In continuing to draw more FDI
into the country, the Government
has since April 2009, announced
a series of bold and significant
liberalisation measures for the
services sector.
More recently, in late September
2009, a new wave of foreign
investment emanated from
the Middle East with the
RM8.7 bln (US$2.5 bln) joint
venture between 1Malaysia
Development Berhad, the
sovereign wealth fund whollyowned by the Government,
and Saudi Arabia’s PetroSaudi
International Ltd (PSI). The joint
venture is aimed at high-impact
projects in Malaysia and the
region, mostly in petroleumrelated industry, renewable
energy sector and real estate.
Chart 18
Gross approved FDI inflows
2007
2008
2009(f)
RM 48.9 bln
(US$13.9 bln)
RM 52.1 bln
(US$14.8 bln)
RM25.6 bln
(US$7.3 bln)
(f) Forecast
Chart 19
Gross approved FDI inflows by sectors, 2008
Manufacturing
Mainly E&E
industry
27%
45%
Gross approved FDI
inflows by sectors, 2008
26%
2%
Others
O&G
Exploration, extraction &
production activities
Source:
Bank Negara Malaysia (Central Bank of Malaysia)
16 Asia’s emerging gems: Investment brief
Services
Mainly financial services,
communications and real
estate
Malaysia
Market liberalisation
To be a developed nation by 2020, the Malaysian Government is adopting a holistic approach to implement a new
economic model that will foster competition in all sectors of the economy. The market liberalisation measures include:
Deregulation of FIC
investment guidelines
Liberalisation of
27 services sub-sectors
Liberalisation of financial services
sector
Malaysia’s new economic model
is a significant departure from the
previous approach on Bumiputera
equity participation. These
unprecedented announcements
mark a major milestone for the
opening of the Malaysian capital
market.
The liberalisation of the 27 services
sub-sectors, announced on 22
April 2009, was aimed at creating
a conducive business environment
to attract more investments,
bringing in more professionals
and technology, encouraging
competitiveness and creating higher
value employment opportunities.
The liberalisation of the financial services
sector was announced on 27 April
2009 which encompasses measures
on issuances of new licences, increase
in foreign equity limits and operational
flexibilities for both the conventional and
Islamic finance sector.
• Removal of equity conditions in
most equity-based transactions
• Encouraging fund raising climate
in the Malaysian capital market
• Post-listing fund raising
exercises will no longer be
subject to any equity conditions
except in the case of reverse
takeovers and backdoor listings
• Easing of regulatory restrictions
on property transactions
Of significance is the removal of
the 30% Bumiputera equity quota
which is expected to spur foreign
investment interest.
The liberalisation will be
implemented in two stages:
• Immediate liberalisation for
sectors such as ICT, healthcare,
tourism, construction (by 2009)
and logistics (by 2010)
• Progressive liberalisation of other
sub-sectors such as business
services, distributive trade,
education, environment and
transport (by 2012)
Over 2009 to 2012, nine new licences
will be issued to foreign participation,
including:
•
•
•
•
•
Five commercial banks
Three world-class banks
Two specialist banks
Two mega Islamic banks
Two family takaful (Islamic insurers)
• Foreign parties will also be allowed
to take up to 70% equity in domestic
Islamic banks, investment banks,
insurance companies, Takaful
firms, stockbrokers and unit trust
management companies
• Fund management companies are
allowed 100% foreign ownership
PricewaterhouseCoopers 17
High growth potential sectors
The Malaysian Government has also set a National Mission which is based on five key thrusts, namely:
1.
2.
3.
4.
5.
To move the economy up the value-chain
To raise the capacity for knowledge and innovation and nurture ‘first class mentality’
To address persistent socio-economic inequalities constructively and productively
To improve the standard and sustainability of quality of life
To strengthen the institutional and implementation capacity
The Government is focusing on the growth of several areas which include those that can generate new sources of wealth
in technology and knowledge-intensive sectors. Among the new growth sources, the incentives announced include:
1. Promoting biotechnology
2. Promoting halal* industry
3. Tapping tourism potential
The Government has proposed
several new incentives to
encourage new investments in
biotechnology activities which
include:
To establish itself as a “Global Halal
Hub”, Malaysia has taken steps to
develop its position to become a
reference point as the centre for
training, research and development
(R&D) and standards. Among the
initiatives implemented are:
For Malaysia to remain an attractive
tourist destination, the Government
continues to provide incentives to
upgrade its tourist facilities and
develop new tourism products,
which include:
• Bionexus companies be given
income tax exemption for 10
years, beginning from the first
year the company is profitable
• After the expiry of the 10-year
exemption period, a bionexus
company will be taxed at a
concessionary rate of 20%, for
another 10 years
• Tax deduction equivalent to the
amount of investment made in
seed capital and early stage
financing be given to companies
or individuals investing in
bionexus companies
• Stamp duty and real property
gains tax exemptions be given to
bionexus company undertaking
merger with acquisition of a
biotechnology company within a
period of five years
• Buildings for research activities
related to biotechnology be
given Accelerated Industrial
Building Allowance, whereby the
cost of constructing or acquiring
the building is written off over a
period of 10 years
18 Asia’s emerging gems: Investment brief
• The establishment of Halal Industry
Development Corporation (HDC)
with a launching grant of RM25 mln
(US$7.1 mln). The HDC has been
tasked to:
-- Coordinate and ensure the
integrated and comprehensive
development of the industry
-- Coordinate efforts to review
standards, develop the local
industry, promote Malaysian
halal products and services in
the international markets, as well
as support investments in the
domestic halal sector
• A sum of RM50 mln (US$14.2 mln)
has been allocated to set up halal
parks in the states of Kelantan,
Pahang, Terengganu and Perlis
Note:
Halal* - Permissable and lawful under
Islamic law
• Income tax exemption until 2011
for tour operators, providing
tour packages with at least 500
inbound tourists or 1,200 local
tourists annually
• Tour operators be given excise
duty exemption of 50% on
locally assembled four-wheel
drive vehicles
• Income tax exemption to
employees for local leave
passage provided by employers
which include fares and
expenses on accommodation
and meals
Malaysia
4. Accelerating ICT development
5. Accelerating the development
of Islamic finance
6. Commercialising the
agriculture sector
• There are currently over 78 foreign
services and outsourcing companies
with a workforce of 19,500 in
operation
In line with the objective of making
Malaysia a leading international
Islamic financial centre, significant
incentives announced include:
• The SSO industry will continue to be
developed with emphasis on high
value services, especially in logistics
and financial services
• Income tax exemption for 10
years for all Islamic banking and
takaful entities that conduct their
businesses in foreign currencies,
and licensed under the Islamic
Banking Act 1983 and Takaful Act
1984
• The Government is placing
efforts to transform the
agriculture sector into a modern
commercial and competitive
sector
• The expansion of the Multimedia
Super Corridor (MSC) include the
states of Malacca and Johor Bahru,
with Cyberjaya continuing to be
developed to become a major
national ICT hub
• A sum of RM154 mln (US$43.7 mln)
has been allocated to Multimedia
Development Corporation (MDeC),
a Government-owned company, to
provide more comprehensive ICT
services which include:
-- Services ranging from registration
to operations
-- Small-medium enterprise
(SME) industry development
programmes
• The Content Industry Development
Fund was established with an initial
funding of RM25 mln (US$7.1 mln) to
finance ICT applications
• Additional 20% stamp duty
exemption for instruments related
to Islamic financing for three
years - to be given after providing
for tax neutrality between
conventional and Islamic
financing
• Income tax exemption for 10
years to local and foreign Islamic
fund managers
• Focus has been placed on R&D
findings, utilisation of modern
technology and improvement of
the supply chain
• Khazanah Nasional
(Government’s investment arm)
has established an agriculture
fund of RM200 mln (US$56.8
mln) to provide venture capital to
finance new technology-initiative
agrticulture projects
• In addition, the Government
is also promoting its green
industries, which include herbal
pharmaceuticals and biofuels
• Tax deduction be given on
expenses incurred in establishing
an Islamic stockbroking firm
• Tax deduction on expenses
incurred in the issuance of Islamic
products be extended for year of
assessment 2008 to 2010
• MIMOS Berhad, an agency under
purview of the Malaysian Ministry of
Science, Technology and Innovation
(MOSTI), is allocated a sum of
RM162 mln (US$46 mln) for various
programmes, including:
-- Mobile Broadband Engines
-- E-learning applications
-- R&D pertaining to language
technology
PricewaterhouseCoopers 19
Special investment zones and economic growth corridors
The Government has also introduced various measures to facilitate economic growth, spur investments and bridge the
rural-urban divide in the country. These measures include the implementation of:
Growth corridors
Industrial parks
Free Industrial Zones (FIZ)
Several growth corridors have been
conceptualised and implemented
to promote investments and
development in certain promoted
areas and activities/industries. Major
corridors include:
Industries in Malaysia are mainly
located in over 200 industrial estates
or parks. State governments and
private developers are continuously
developing new sites which are fully
equipped with infrastructure facilities
such as roads, electricity and water
supplies, and telecommunications.
There are 18 FIZs throughout the
country. FIZs are export processing
zones which have been developed
to cater to the needs of exportoriented industries. Companies in
FIZs are allowed duty free imports of
raw materials, components, parts,
machinery and equipment directly
required in the manufacturing process.
FIZ manufacturers are also exempted
from the payment of sales tax, excise
duty and service tax.
• Multimedia Super Corridor (MSC)
-- Designated cybercities and
cybercentres
• Iskandar Malaysia (IM)
-- Southern Johor
• Northern Corridor Economic Region
(NCER)
-- Perlis, Kedah, Penang and
Northern Perak
• East Coast Economic Region
(ECER)
-- Kelantan, Terengganu, Pahang
and Mersing district of Johor
• Sabah Development Corridor (SDC)
-- Sabah
• Sarawak Corridor of Renewable
Energy (SCORE)
-- Sarawak
Apart from the incentives in Malaysia
which are offered to various industries
and approved activities under the
Promotion of Investments Act 1986
and the Income Tax Act 1967,
customised or special incentives have
been modified for the purpose of each
corridor. These incentives are over and
above the existing set of incentives
offered by the Malaysian Government.
20 Asia’s emerging gems: Investment brief
Specialised parks have also been
developed in Malaysia to cater to
the needs of specific industries.
Examples of these parks are:
• Technology Park Malaysia (TPM) in
Bukit Jalil, Kuala Lumpur
-- TPM is among the world’s most
advanced and comprehensive
centres for R&D by knowledgebased industries
• Kulim Hi-Tech Park in the northern
state of Kedah
-- Caters to technology-intensive
industries and R&D activities
Licensed Manufacturing
Warehouses ( LMW)
In areas where FIZs are not available,
companies can set up LMWs which
are accorded facilities similar to those
enjoyed by establishments in FIZs.
Malaysia
Chart 20
Promoted industries in the growth corridors
• Agriculture
• Manufacturing
- E&E, O&G,
biotechnology
• Tourism
• Logistics
•
•
•
•
•
NCER
•
•
•
•
Hospitality & leisure
Oil, gas and petrochemical
Manufacturing
Agriculture
Education
Tourism
Logistics
Agriculture
Manufacturing
SDC
ECER
ICT, multimedia and
services for innovation
and operations which
include:
• Smart Card
Technology
• Smart Schools
• Telehealth
e-Government
• e-Business
• Technopreneurship
• Creative Multimedia
• Shared SSO
MSC
SCORE
IM
• E&E
• Petrochemicals &
oleochemicals
• Food & agro
processing
• Logistics & related
services
• Tourism
• Healthcare
• Education
• Financial services
• Creative industries
• Manufacturing
- oil-based, glass,
timber
• Mining
- aluminium, steel
• Agriculture
- palm oil,
livestock,
aquaculture
• Services
- tourism, marine
engineering
Source:
MSC - www.mscmalaysia.my
IM - www.iskandarmalaysia.com.my
NCER - www.ncer.com.my
ECER - www.ecerdc.com
SDC - www.sdc.gov.my
SCORE - www.sarawakscore.com.my
PricewaterhouseCoopers 21
Fiscal stimulus
packages
In response to the
global economic
crisis, the Malaysian
Government has
announced two
stimulus packages
to spur economic
growth. The first
stimulus package of
RM7 bln (US$2 bln)
was announced on 4
November 2008 while
the second stimulus
package amounting to
RM60 bln (US$17 bln)
was announced on 10
March 2009.
22 Asia’s emerging gems: Investment brief
Summary of Malaysia’s stimulus packages
Type of
measures
Fiscal injection
Guaranteed funds
Equity investments
Private finance initiatives & off-budget projects
Tax incentives
RM22 bln
RM25 bln
RM10 bln
RM7 bln
RM3 bln
US$6.2 bln
US$7.1 bln
US$2.8 bln
US$2.0 bln
US$0.9 bln
Measures
under the
four thrusts
Thrust 1
Reducing unemployment and increasing
employment opportunities
Training, education, creating employment,
retrenched workers’ welfare & reduce foreign
workers
RM2 bln
US$0.6 bln
Thrust 2
Easing the burden of the citizen, in particular, the
vulnerable groups
Home ownership, public infrastructure, savings
bonds, school facilities, rural areas amenities, Sabah
& Sarawak infrastructure, microcredit schemes,
retrenched workers’ welfare
RM17 bln
US$4.8 bln
Thrust 3
Assisting the private sector in facing the crisis
Guarantee scheme (working capital & loan
restructuring), promote automotive, aviation &
tourism sectors, higher windfall profit levy threshold
on palm oil, tax incentives (accelerated capital
allowance, carry back losses) and reducing time-tomarket to access capital market
RM29 bln
US$8.2 bln
Thrust 4
Building capacity for the future
Increase Khazanah’s investment funds, aviation &
telecommunication infrastructure, PFI (Tanjung Agas
industrial park in ECER, biotechnology cluster in IM,
traffic infrastructure system around transportation
hub, KL Sentral), enhance government-linked
companies’ (GLC) corporate responsibility activities
in human capital, new FIC role and enhance
Government procurement
RM19 bln
US$5.4 bln
PricewaterhouseCoopers 23
Tax brief
Malaysia operates a unitary tax system on
a territorial basis. Tax residents of Malaysia,
whether corporates or individuals, are
taxed on income accruing in or derived
from Malaysia or received in Malaysia
from outside Malaysia. However, resident
companies (except for those carrying on
banking, insurance, sea or air transport
operations) and resident individuals are
exempted from income tax on foreignsourced income remitted to Malaysia. Nonresidents are only taxed on income accruing
in or derived from Malaysia.
There is no withholding tax on dividends
paid by Malaysian companies. Dividends
payable to shareholders under the singletier tax system are exempt from Malaysian
income tax in the hands of shareholders.
There is no capital gains tax regime in
Malaysia. Other taxes include service tax,
sales tax, import duties, export/excise
duties and personal income tax.
Tax treaty networks
Malaysia has an extensive network of tax
treaties including:
Albania, Australia, Austria, Bahrain,
Bangladesh, Belgium, Canada, Chile, China,
Croatia, Czech Republic, Denmark, Egypt,
Fiji, Finland, France, Germany, Hungary,
India, Indonesia, Iran, Ireland, Italy, Japan,
Jordan, Korea, Kuwait, Kyrgyz Republic,
Lebanon, Luxembourg, Malta, Mauritius,
Morocco, Myanmar, Mongolia, Namibia,
New Zealand, the Netherlands, Norway,
Pakistan, Papua New Guinea, Philippines,
Poland, Qatar, Romania, Russia, Saudi
Arabia, Seychelles, Singapore, South
Africa, Spain, Sri Lanka, Sudan, Sweden,
Switzerland, Syria, Thailand, Turkey, United
Arab Emirates, United Kingdom, Uzbekistan
and Vietnam.
Malaysia also has limited tax treaties with
Argentina (shipping and air transport),
United States of America (shipping and air
transport) and Taiwan (exemption orders).
24 Asia’s emerging gems: Investment brief
Persons chargeable to tax
Persons
Type of tax
Corporations
Corporate tax
Individuals
Personal tax
Tax rate applicable
Type of tax
Corporate income tax
• Resident companies (general)
• Resident companies (SMEs)
• 1st RM500,000
• > RM500,000
• Non-resident companies
Rates
25%
20%
25%
25%
Capital gains tax
None
Personal income tax (on a scale basis)
• Residents
• Below RM2,500
• RM2,500 – RM100,000
• Above RM100,000
• Non-residents (flat rate)
0%
1% - 24%
27%
27%
Value added tax
None
Indirect taxes (single stage)
• Service tax on prescribed services
• Sales tax on certain locally manufactured
and imported goods
• Import duties on taxable imported goods
• Export and excise duties
– selected range of goods
5%
5% or 10%
2% - 60%
10% - 105%
Withholding taxes
Withholding tax rates for payments
made to non-residents
Rates
Dividends
0%
Interests
15%
Royalties
10%
Technical/management fees
(services performed in Malaysia)
10%
Rental of moveable properties
10%
Contract services performed in Malaysia
(where there is a permanent establishment)
• Non-resident contractors
• Employees of non-resident contractors
10%
3%
Malaysia
Tax incentives
The main tax incentives include:
• Pioneer status (tax holiday) or
investment tax allowances
– (both mutually exclusive)
Companies producing a promoted
product or participating in a
promoted activity may apply for
either one of the above incentives.
Promoted products or activities
are generally available for
manufacturing, agricultural, hotel,
tourism and other industrial sectors.
• Reinvestment allowance
Granted to manufacturing and
agricultural sectors for expansion,
modernisation, diversification or
automation of its operations.
• Increased export allowance
Granted to manufacturing,
agricultural and designated
qualifying services which have
exported products/services.
• Accelerated capital allowance
For companies engaged in
promoted products and waste
recycling activities. Other
specific qualifying assets are
new transportation buses, ICT
equipment, security and monitor
control equipment, plant and
machinery and renovation or
refurbishment of business
premises.
• Double deductions
Qualified expenses allowed
to be deducted twice from
calculation of taxable income.
Such expenses include training
of employees, research and
development expenses, import
and export insurance premiums
with Malaysian companies,
promotions for export, remuneration
to handicapped employees, freight
charges for wood-based products,
advertising of Malaysian brands,
expenses for obtaining recognised
quality systems standards and halal
certification, expenditure incurred
on training of employees in selected
fields (i.e. post-graduate courses in
ICT, electronics and life sciences,
post-basic courses in nursing
and allied healthcare and aircraft
maintenance engineering courses)
and employment of local retrenched
workers.
The following are special tax incentives
granted to specific industries:
• Approved services projects
Generally in transportation,
communications and utilities.
Granted investment allowance on
capital expenditure.
• Unit trusts, closed-end fund
companies, real estate investment
trusts (REITs), venture capital
companies, foreign fund
management companies,
conference promoters, organisers
of international trade exhibitions,
residents carrying out group
inclusive tours, R&D companies,
private higher education institutions,
last mile network facilities providers
for broadband, traders of certified
emission reduction certificates
and corporate advisors for listing
of foreign companies/investment
products on Bursa Malaysia
• Regional distribution centres,
international procurement centres
and operational headquarters
Granted tax exemption on income.
• Companies involved in
environmental conservation and
new energy sources
Granted pioneer status or
investment tax allowance.
• Companies investing in/upgrading
laboratories for testing of medical
devices
Granted pioneer status or
investment tax allowance.
• MSC status
For companies involved in
information technology. Granted
pioneer status or investment tax
allowance.
• Bionexus status
For companies involved in
biotechnology (agriculture,
healthcare and industrial). Granted
pioneer status or investment tax
allowance.
• IM, NCER, ECER
For companies undertaking
qualifying activities within the IM,
NCER and ECER. Granted income
tax exemption or investment tax
allowance.
Granted tax exemptions on income.
PricewaterhouseCoopers 25
Malaysia
26 Asia’s emerging gems: Investment brief
Market insights
Malaysia
2020
Fully developed country
World
reputation
Government
targeted
growth
sectors
Growth
corridors/
promoted
zones
Government,
FDI and capital
market
• World’s 3rd largest
Islamic banking
market (US$65.6 bln)
• Services economy:
Liberalisation of 27
services sub-sectors
(including financial
services and capital
market)
• New growth hubs:
1. Multimedia Super
Corridor
2. Iskandar Malaysia
3. Northern Corridor
Economic Region
4. East Coast Economic
Region
5. Sabah Development
Corridor
6. Sarawak Corridor of
Renewable Energy
• Government
-- The six National Key Results
Areas (NKRA) of 1Malaysia
concept*
1. Reduce crime
2. Combat corruption
3. Widen access to
affordable & quality
education
4. Raise living standard of
the poor
5. Improve infrastructure in
rural areas
6. Improve public
transportation
• FDI
-- Market liberalisation policies
• Revamp of capital market
-- One prime market for
established companies
with the merger of the main
board and second board
-- Access, Certainty and
Efficiency (ACE) market
for high-tech growth
companies
• World’s largest Sukuk
issuer (US$62 bln)
• World’s largest
producer of rubber,
palm oil, pepper and
tropical hardwoods
• 10th largest trading
partner in the US
• Key promoted sectors
1. Biotechnology
2. Global Halal Hub
3. Tourism
4. ICT
5. Islamic finance
6. Agriculture (eg. herbal
pharmaceuticals)
* 1Malaysia concept was introduced in mid-2009 as an extension of the Government’s
efforts to grow national unity towards achieving Malaysia’s Vision 2020. In line with
the Government’s administration vision of 1Malaysia – “People First and Performance
Now” – six National Key Results Areas (NKRA) were introduced.
PricewaterhouseCoopers 27
28 Asia’s emerging gems: Investment brief
Thailand has a long track
record of being foreign
investors’ destination
of choice, thanks to
its integrated business
infrastructure, attractive
FDI investment policies
and large workforce.
Today, Thailand is known
as a world-class producer
of high-tech industrial
manufacturing, livestock
and agricultural and
tourism services.
Despite political unrest,
investor confidence has
remained resilient.
Going forward, Thailand’s
huge labour pool (including
hospitable culture) and
attractiveness as a great
place to work, will be the
drivers for continued FDI
investor interest.
Industries that continue
to draw investor interest
include its agro-industry,
high-tech and machinery
manufacturing, and tourism
industries.
THAILAND
At a glance
Economic overview
Leading corporates
Investment overview
Fiscal stimulus packages
Tax brief
Market insights
PricewaterhouseCoopers 29
At a glance
66.4
million population
Total area
514,000 sq km
Capital
Bangkok
Language
Thai, English, ethnic and
regional dialects
Currency
Exchange rate
(as at 30 June 2009):
US$1 = THB 34.06
(Thai Baht)
Government
Constitutional monarchy
Administrative divisions
76 provinces
Strengths
• Investor-friendly and easy to do business
• Relatively large marketplace, attributed to its sizeable
population
• Good infrastructure particularly roads and air transport
• Relatively low labour cost
• US companies operating in Thailand have an equal
playing field with local companies
Weaknesses
• Uncertain political climate
• Ineffective implementation of Government policies e.g.
foreign investment and privatisation
• Shortage of skilled labour and lag in technology readiness
hinder ability to provide value-added services
• Cumbersome regulatory procedures
Opportunities
• Newly elected government expected to promulgate
business-friendly policies to maintain foreign investor
confidence
• Further financial services market liberalisation e.g. ease
restrictions on foreign ownership of banks and new
licences
• Wide privatisation of SOEs
• Significant public sector investment in infrastructure
development
Threats
• Impact of prolonged global recession on export sectors
and unemployment
• Impact of political and global economic climate on the
financial services sector
• Impact of further anti-government protests
• Impact of violence in the southernmost Muslim-majority
provinces
30 Asia’s emerging gems: Investment brief
Economic
overview
%
Thailand
2007
2008
2009(f)
2010(f)
2013(f)
Commentaries
GDP
4.9
2.6
- 3.0
1.0
6.0
• Growth significantly reduced due to severe
contraction of major trading partners’
economies, slower domestic spending and
private investment, aside from political
unrest factor
• Gradual recovery is expected with the
THB1.5 trn (US$45.4 bln) fiscal stimulus
packages, medium and long-term public
investment scheme together with looser
monetary policy
Inflation
2.2
5.5
0.5
3.4
1.9
• Easing with the slowdown in economic
activity and decline in oil and food prices
Unemployment
1.4
1.4
4.1
4.4
2.9
• On the rise with current economic
conditions
• Highly affected are the manufacturing and
tourism sectors
(f) Forecast
Source:
IMF for GDP and inflation data; EIU for unemployment data
PricewaterhouseCoopers 31
Chart 21
Top sectors by GDP contribution, 2008
Transport, storage
& communications
Wholesale
& retail trade
14%
10%
Agriculture
9%
GDP
THB 4.3 trn
(US$125.9 bln)
4%
Financial
services
3%
Utilities
Manufacturing
18%
42%
Others
Chart 22
Trade information, 2008
Vehicles, parts
& accessories
Electronics,
electrical machinery
& appliances
9%
31%
9%
Exports
THB 6.0 trn
(US$177.8 bln)
9%
Textile products,
footwear & jewellery
Agricultural
products
5%
5%
Others
Source:
Bank of Thailand
32 Asia’s emerging gems: Investment brief
32%
Petroleum
products
Base metal
products
Imports
THB6.08 trn (US$178.7 bln);
intermediate goods (41%), capital
goods (24%)
Major trading partners
Japan, US, EU, China, Hong Kong,
ASEAN, United Arab Emirates (UAE),
Saudi Arabia, South Korea and
Taiwan
Thailand
Sectoral performance review
Growth%
Sector
2007
2008
2009(f)
Commentaries
Manufacturing
6.2
3.9
- 10.0
to
- 12.0
• Declining growth due to the slowdown in the E&E and
automotive sector worldwide
• Thailand is currently the world’s top manufacturer of hard disk
drives (HDD) and components. It is also envisioned to be the
world’s top 10 auto manufacturers with forecast demand for
original equipment manufacturer (OEM) automotive electronics
in Thailand to increase nearly 14% p.a., reaching THB88.6 bln
(US$2.6 bln) in 2011
Wholesale & retail
trade (including hotel &
restaurants)
8.8
3.4
n.a
• Consumers are likely to cut down spending on non-food items
and entertainment with rising debt and shrinking income,
coupled with uncertain economic outlook
• The Government allocated some THB6.6 bln (US$194 mln) for
tourism projects over the next three years, starting October
2010, to revive the industry which is severely hit by the global
economic recession and current political unrest
• Introduction of Retail Business Act to ensure survival of small
retailers against retail giants is expected in the next few years
Transport, storage &
communications
5.9
- 0.4
n.a
• Key areas of the planned mega projects worth THB1.7 trn
(US$50 bln) over 2009-2012 are mass transit (28%), energy
(27%), logistics and transportation (20%), water resources
management (11%), education and healthcare (9%), and lowincome housing projects (5%)
Agriculture
1.8
5.1
3.0
- 4.0
• Thailand is currently the world’s largest rice exporter and
producer of rubber
• Up to THB238 bln (US$6.9 bln) allocated over the next
three years to strengthen the potential and raise the
competitiveness of the agricultural sector. The investment plan
will cover construction and improvement of irrigation systems
nationwide, construction of small reservoirs and upgrading of
food safety and security
• Import tariffs on rice and fruits will be cut to zero in early 2010
Financial services
6.5
8.1
n.a
• Large banks posted poor profits for the first quarter of 2009
due to tighter net interest margins, decelerating loan growth
and deeper economic malaise
• The Ministry of Finance and 11 financial institutions have
launched the Joint Export Credit Insurance Facility in March
2009 to help Thai exporters manage risks associated with
international trade amid the global financial crisis
Utilities (Electricity, gas &
water supply)
5.1
4.3
n.a
• Power consumption projected to grow by 1.9% in 2009
• Consumption has been shrinking sharply in line with the
slowing momentum of business activity as a result of the
global economic recession. Consequently, power producers
postponed power deliveries by one or two years due to the
slowing demand
(f) Forecast
n.a Data not available at time of publication
PricewaterhouseCoopers 33
Leading
corporates
Equity market analysis
The Stock Exchange of Thailand (SET)
has 536 listed stocks as at June 2009
with total market capitalisation of THB4.5
trn (US$132 bln).
The Capital Market Development
Committee was established at end-2008 to
facilitate the financial system reformation in
Thailand.
In early June 2009, SET surged to a
new high of 600 points (from a low of
384.15 points in 2008) in line with other
regional markets, encouraged by signs
of a possible global economic recovery
and also news of the recently introduced
stimulus measures to boost the
economy. However, the rally is expected
to continue only for the short term.
For the rest of 2009, the index is
projected to fluctuate and trade in a
broader range between 400-550 points.
The seven key measures in the Capital
Market Development Fund include:
•
•
•
•
Demutualisation of SET
Further market liberalisation
Further financial deregulation
Legal reform, focusing mainly on
updating old acts
• Tax reform
• Privatisation of SOEs
• Reform the bond market (currently only
accounts less than 15% of the equity
market)
Chart 23
Top 10 companies on the Stock Exchange of Thailand
Company
Industry sector
Market capitalisation
Revenue
THB bln
US$ mln
THB bln
US$ mln
PTT
Oil & gas
660
19,389
2,043
59,983
PTT Exploration & Production
Oil & gas
441
12,953
142
4,166
Advanced Info Service
Telecommunication
268
7,865
113
3,321
Bangkok Bank
Banking
206
6,047
103
3,021
Siam Commercial Bank
Banking
190
5,589
90
2,632
Siam Cement
Building materials
186
5,456
299
8,791
Kasikornbank
Banking
158
4,651
85
2,481
Krung Thai Bank
Banking
98
2,870
77
2,275
Banpu
Coal
91
2,670
52
1,515
Bank of Ayudhya
Banking
88
2,584
48
1,419
Source:
Bloomberg as at 30 June 2009
Note: Top companies based on market capitalisation
34 Asia’s emerging gems: Investment brief
Thailand
Chart 24
Electrical & electronics
Company
Chart 25
Automotive & parts
Market
capitalisation
Revenue
US$ mln
US$ mln
Delta Electronics Thai
468
985
Hana Microelectronics
395
454
CalComp Electronics Thailand
252
3,696
Muramoto Electron Thailand
92
SVI
80
Market
capitalisation
Revenue
US$ mln
US$ mln
Thai Stanley Electric
209
247
Somboon Advance
Technology
54
174
528
Yarnapund
47
282
214
AAPICO Hitech
35
272
Thai Steel Cable
31
70
Chart 26
Retail - Convenience/Departmental stores
Company
Company
Chart 27
Construction
Market
capitalisation
Revenue
US$ mln
US$ mln
CP ALL
2,254
3,720
Big C Supercenter
1,017
Siam Makro
Company
Market
capitalisation
Revenue
US$ mln
US$ mln
2,112
Italian-Thai
Development
344
1,285
510
2,207
CH. Karnchang
159
398
Robinson Department Store
293
393
137
437
TWZ Corp
81
97
Sino Thai Engineering &
Construction
Unique Engineering &
Construction
42
68
Ascon Construction
39
59
Market
capitalisation
Revenue
Chart 28
Banking
Company
Chart 29
Agriculture
Market
capitalisation
Revenue
US$ mln
US$ mln
Bangkok Bank
6,047
3,021
Siam Commercial Bank
5,589
Kasikornbank
Krung Thai Bank
Bank of Ayudhya
Company
US$ mln
US$ mln
2,632
Charoen Pokphand
Foods
1,054
4,684
4,651
2,481
Univanich Palm Oil
212
205
2,870
2,275
Lee Feed Mill
60
117
1,419
United Palm Oil Industry
58
39
Chumporn Palm Oil
Industries
34
162
2,584
Source:
Bloomberg as at 30 June 2009
Note: Top companies based on market capitalisation
PricewaterhouseCoopers 35
Investment
overview
Foreign direct investment
Since the 1997-1998 Asian
financial crisis, Thailand’s
economic reform programme
has been specifically tailored to
create a compelling climate for
foreign investors. However, FDI is
likely to suffer in 2009, due to the
global risk aversion and the shaky
domestic political situation. The
main sources of Thailand’s FDI
are from Japan, the EU (led by
the UK), the US, Singapore and
Taiwan – all very much affected
by the current economic crisis.
The Thai Board of Investment
(BoI) has announced a number of
initiatives to soften the slump in
business activity and investment.
BoI has offered ‘universal
zoning’ to six industries deemed
important to the growth of the
economy, and these will enjoy
maximum incentives regardless
of where in the country they run
projects under the ‘Thailand
Investment Year 2008-2009’
initiative. In addition to these
sectors, the Thai Board of Trade
is encouraging investment in
key infrastructure and strategic
sectors, such as petrochemicals,
steel and renewable energy.
Chart 30
Gross approved FDI inflows
2007
2008
2009(f)
THB505.6 bln
(US$14.8 bln)
THB351.1 bln
(US$10.3 bln)
THB298.9 bln – THB448.3 bln
(US$8.8 bln - US$13.2 bln)
(f) Forecast
Chart 31
Gross approved FDI inflows by sectors, 2008
Electrical &
electronics
Chemicals/
paper
17%
12%
Metal
products/
machinery
7%
25%
Gross approved FDI
inflows by sectors, 2008
3%
33%
Services
Source:
Thailand Board of Investment
36 Asia’s emerging gems: Investment brief
3%
Minerals/
ceramics
Light
industries/
textiles
Agriculture
products
Thailand
Thailand Investment Year 20082009: Special Measures
Envisioned to restore investors’
confidence, promote investment in
targeted industries and stimulate
entrepreneurs’ development
to enhance Thailand’s overall
competitiveness and promote
Thailand as a top international
distribution centre.
Under the special measures,
investors who submit investment
applications in the six target sectors
located in any provinces except
Bangkok by 31 December 2009 will
obtain the following incentives, if
approved:
• Eight year exemption of
corporate income tax
• 50% reduction of corporate
income tax for five years
• Double deduction of
transportation, electricity and
water supply costs
• 25% deduction from net profit
for facility installation and
construction costs in addition to
normal depreciation capital
Zone 3-equivalent incentives package
(refer to page 39) will also be granted
to new investment projects in BoIpromoted industrial estates in Zone 2,
in Laem Chabang industrial estate and
those in Rayong province for five more
years up till 31 December 2014.
These six target sectors are:
• Energy saving and alternative
energy-related businesses
• High-tech businesses
• Environmental-friendly materials
and products manufacturing
• Mega projects-related businesses
• Tourism and real estate-related
businesses
• High-tech agricultural materialbased business
Source:
Thailand Board of Investment
PricewaterhouseCoopers 37
Special investment zones and economic growth corridors
Overview
The BoI provides promotion privileges through three
investment promotion zones, namely Zone 1, Zone 2
and Zone 3, based on economic factors, i.e., the level
of income and the availability of infrastructure in each
province.
Chart 32
Thailand investment zones
Zone 1
(6 central provinces)
Zone 2
(12 provinces)
1.
2.
3.
4.
5.
6.
Ayuthaya
Bangpa-In Industrial Estate
Hi-Tech Industrial Estate
Saha Rattana Industrial Estate
Bangkok
Samut Prakan
Samut Sakhon
Nakhon Pathom
Nonthaburi
Pathum Thani
Bangkok
Bangchan Industrial Estate
Lad Krabang Industrial Estate
Chachoengsao
Gateway City industrial Estate
Wellgrow Industrial Estate
Samut Prakarn
Bangplee Industrial Estate
Bangpoo Industrial Estate
Chonburi
Amata Nakhon Industrial Estate
Chonburi Industrial Estate
Laem Chabang Industrial Estate*
Pinthong Industrial Estate
Samut Sakhon
Samut Sakhon Industrial Estate
Rachaburi
Ratchaburi Industrial Estate
Saraburi
Nong Khae Industrial Estate
Saraburi Industrial Estate
Zone 3
(remaining provinces)
*Special Privileges
Rayong Provinces and Laem
Chabang Industrial Estate are
entitled to Zone 3 incentives and
privileges by IEAT even though
being in Investment Zone 2
Rayong*
Amata City Industrial Estate
Eastern Industrial Estate
Eastern Seabord Industrial Estate
Map Ta Phut Industrial Estate
Padaeng Industrial Estate
Thai Singapore 21 Industrial Estate
Other Provinces
Khon Kaen Industrial Estate
Northern Region Indusrial Estate
Pichit Industrial Estate
Southern Industrial Estate
Source:
Thailand Board of Investment and Industrial Estate Authority of Thailand (IEAT)
38 Asia’s emerging gems: Investment brief
Thailand
Promotion privileges for investment zones
Targeted sectors and investment incentives
The level of tax incentives being offered for each zone
are varied as follows:
In November 2008, the BoI announced special
promotion incentives for five activity groups within
the six targeted sectors outlined in the Thailand
Investment Year 2008-2009.
Zone 1
• 50% reduction of import duty on machinery
• Corporate income tax exemption for three years for
industrial estate/promoted industrial zones (IE/PIZ)
• Exemption for one year of import duty on raw or
essential material used in manufacturing of export
products
Five activity groups
1. Energy conservation and alternative energy
2. High-tech group
3. Manufacturing group related to environmentalfriendly materials and products
4. Mega projects related to businesses, especially in
water resources - management, transportation and
logistics activity
5. High-tech agricultural material-based businesses
Zone 2 *
• Exemption of import duty on machinery for IE/PIZ
and 50% reduction for other areas
• Corporate income tax exemption for seven years1
for IE/PIZ and three years for other areas
• Exemption for one year of import duty on raw or
essential material used in manufacturing of export
products
Promotion incentives
• Exemption of corporate income tax for eight years
- no limits
• 50% reduction of corporate income tax for five
years after the exemption period
• Double deduction from transportation, electricity
and water costs for 10 years
• 25% deduction for facility installation and
construction costs in addition to normal
depreciation capital for 10 years
*excluding Laem Chabang IE and IE/PIZ in Rayong
Zone 3
• Exemption of import duty on machinery
• Exemption for eight years of corporate income tax
• Exemption for five years of import duty on raw or
essential material used in manufacturing of export
products
• Deduction of 25% of the project’s infrastructure
installation or construction cost
Other incentives
• Exemption of import duty on machinery for the
investment for three activity groups
• Activities entitled to the special promotion
incentives must be located in all provinces in
Thailand, except Bangkok. The application of
investment must be submitted by 31 December
2009
For 36 provinces and Laem Chabang IE/PIZ in
Rayong
• Double deduction from transportation, electricity
and water costs for IE/PIZ for 10 years
• 50% reduction of corporate income tax for five
years for IE/PIZ
• 75% reduction of duty on raw or essential materials
used in the manufacturing of domestic sales for
five years1 with year-by-year approval for IE in 36
provinces (excluding Laem Chabang IE and IE/PIZ
in Rayong)
For 22 provinces
• Double deduction from transportation, electricity
and water costs
• 50% reduction of corporate income tax for five
years after the exemption period
• 75% reduction of duty on raw or essential materials
used in the manufacturing of domestic sales for
five years1 with year-by-year approval for IE/PIZ
Source:
The Thailand Board of Investment Thailand
Note:
For all applications submitted by 31 December 2014
1
PricewaterhouseCoopers 39
Fiscal stimulus
packages
First stimulus package
The Government approved
THB116.7 bln (US$3.4 bln)
economic stimulus package
in January 2009 with the aim
of a 1% increase in GDP and
unemployment rate between
2.0-2.5%.
Key projects under Thai’s first stimulus package
Project
THB bln
US$ mln
Free education for 15 years
19.0
557.8
One-off THB2,000 (US$58.7) cash
handout for low income earner
18.9
554.9
Improve quality of life in rural community
15.2
446.3
Stabilise agriculture prices
13.6
399.3
Free water and electricity for the poor
and transport subsidy
11.4
334.7
Tax measures
9.8
287.7
Create senior citizen insurance
9.0
264.2
Wage subsidy
6.9
202.6
Community health volunteer recruitment
3.0
88.1
Build and improve water resources
2.0
58.7
Housing estate for police
1.8
52.8
Rural roads construction
1.5
44.0
Reduce living cost
1.0
29.4
Improve health service stations
1.0
29.4
Tourism stimulus
1.0
29.4
Small reservoirs construction
0.8
23.5
Support food industry and SMEs
0.5
14.7
Rebuild Thailand’s image
Total
0.3
8.8
116.7
3,426.3
Source:
The National Economic and Social Development Board
Second stimulus package
The Thailand investment plan
for the second economic
stimulus package was
approved by the Cabinet in
May 2009 with a budget of
THB1.4 trn (US$42.0 bln)
for the period of 2009-2012.
The plan is aimed at creating
1.6 to 2 mln jobs and
increase competitiveness of
the private sector in longterm.
Key projects under Thai’s second stimulus package
Project
Logistic infrastructure improvement
US$ bln
837.6
24.6
Irrigation system for agriculture
238.5
7.0
Education
137.9
4.1
Healthcare
99.4
2.9
Community
91.7
2.7
Creative economy
17.6
0.5
Tourism
8.5
0.2
1,431.2
42.0
Total
Source:
Ministry of Finance, Thailand
40 Asia’s emerging gems: Investment brief
THB bln
PricewaterhouseCoopers 41
Tax brief
Corporate income tax is levied
on both Thai and foreign
companies. Only Thailandincorporated companies are
taxed on worldwide income. A
foreign-incorporated company
carrying on business in Thailand
is taxed on profits arising from
or in consequence of business
carried on in Thailand. A foreign
company not carrying on business
in Thailand, but which derives
certain categories of income
in Thailand, is subject to a
withholding tax such as interest,
dividends, royalties, rentals
and service fees paid from or in
Thailand.
Other taxes include personal
income tax, withholding tax, value
added tax, specific business tax
and municipality tax, stamp duty,
profit remittance tax (branch profit)
and customs and excise taxes.
Tax treaty networks
Thailand has an extensive
network of tax treaties with over
52 countries, namely, Armenia,
Australia, Austria, Bahrain,
Bangladesh, Belgium, Bulgaria,
Canada, China, Cyprus, Czech
Republic, Denmark, Finland,
France, Germany, Hong Kong,
Hungary, India, Indonesia, Israel,
Italy, Japan, Korea, Kuwait, Laos,
Luxembourg, Malaysia, Mauritius,
Nepal, Netherlands, New Zealand,
Norway, Oman, Pakistan,
Philippines, Poland, Romania,
Seychelles, Singapore, Slovenia,
South Africa, Spain, Sri Lanka,
Sweden, Switzerland, Turkey,
Ukraine, United Arab Emirates,
United Kingdom, United States,
Uzbekistan and Vietnam.
Persons chargeable to tax
Persons
Type of tax
Corporations
Corporate tax
Individuals
Personal tax
Withholding taxes
Withholding tax rates for payments made to foreign
companies not carrying on business in Thailand
Rates
Dividends
10%
Interests
15%1
Royalties
15%1
Capital gains, service fees, professional fees and rents of
property
15%1
Profit remittance
10%
Note: Rate may be reduced under a tax treaty
1
Withholding tax rates for payments made to Thailandincorporated companies or foreign incorporated
companies carrying on business in Thailand
Dividends
10%
Royalties
3%
Rents of property
5%
Fees for hire of work, professional income, service fees
(excluding certain service fees)
3%
Remuneration for hire of work paid to foreign companies
carrying on business in Thailand without permanent branch in
Thailand
5%
Advertising fees
2%
Prizes won in contests, competitions, lucky draws or other
like activities
5%
Tax incentives
• Tax incentives are available for
companies in certain industries
provided under the Investment
Promotion Act and the
announcements of BoI such as
exemption or reductions of import
duties on imported machinery
• Tax incentives to encourage exports
such as exemption from import
duties on imported raw materials
and components imported for
manufacturing for export
• Corporate income tax incentive and
personal income tax incentive for
expatriate employees are available
to regional operating headquarters
42 Asia’s emerging gems: Investment brief
Rates
• Tax incentives for enterprises
located in IE/PIZ include the
following:
-- Reduction of 50% of corporate
income tax for five years after
the termination of a normal
income tax holiday or from the
date of earning income if no tax
holiday is granted
-- Double deduction from
taxable income for the cost of
transportation, electricity and
water supply
Thailand
Tax rate applicable
Type of tax
Corporate income tax
• Resident companies (general)
• Non-resident companies (taxed on
Thailand income)
• SMEs (paid-up capital not exceeding
THB5 mln at the end of any accounting
period)
• Net profit THB0 – 150,000
• Net profit THB150,001 – 1,000,000
• Net profit THB1,000,001 – 3,000,000
• Net profit over THB3,000,000
Corporate tax rate reduction given to
companies listed on the SET and the Market
for Alternative Investment (MAI), the trading
board established by the SET, as follows1:
1) Companies listed between 6 September
2001 and 31 December 2005
• Companies listed on the SET
• Companies listed on the MAI
Rates
30%
30%
Nil
15%
25%
30%
25%
20%
Note: The reduced rate applies for five accounting
periods commencing from the first accounting
period which begins on or after the day the
company has listed its securities on the SET or
the MAI.
2) Companies applying for listing between
1 January 2007 and 31 December 2008
and which are duly listed within 31
December 2009
• Companies listed on the SET
• Companies listed on the MAI
25%
20%
Note: These rates will apply for three accounting
periods commencing from the first accounting
period beginning on or after the day the company
has listed its securities on the SET or the MAI.
3) Listed companies other than those in 1)
and 2)
• Net profit of companies listed on the
SET
• THB0 - 300,000,000
• Over THB300,000,000
• Net profit of companies listed on the
MAI
• THB0 - 20,000,000
• Over THB20,000,000
Note: These rates apply for three accounting
periods commencing from the accounting period
beginning on or after 1 January 2008.
Type of tax
Rates
Net profit from bank deriving profits
from lending to non-Thai residents
from foreign currency funds obtained
from non-Thai sources (so called “outout business”)
10%
Foreign companies engaging in
international transportation
3%
Profitable associations and
foundations
2%, 10%
Capital gains (there is no specific
legislation governing capital gains. All
capital gains earned by a company
are treated as ordinary revenue for tax
purposes)
30%
Personal income tax (on a scale basis)
Net income
• THB0 - 150,000
• THB150,001 – 500,000
• THB500,001 – 1,000,000
• THB1,000,001 – 4,000,000
• Above THB4,000,001
0%
10%
20%
30%
37%
Value added tax
7%
Specific business tax (SBT)
• Commercial banking, financial and
credit foncier business
• Life insurance
• Pawnshop brokerage
• Sale of immovable property, real
estate
• Sale of securities in the stock
exchange
• Business with regular transactions
similar to commercial banking
3%
2.5%
2.5%
3%*
0.1%**
3%
* Reduced to 0.1% until 28 March 2010
** Currently exempted from SBT
Municipality tax
10% of SBT
25%
30%
20%
30%
Note:
1
Companies listed on the SET or MAI between 6
September 2001 and 31 December 2005, and whose
concession rate as noted under item 1) has expired, will
be able to enjoy the concession rate under item 3) but
not beyond the accounting period ending on or after 31
December 2010.
PricewaterhouseCoopers 43
Thailand
44 Asia’s emerging gems: Investment brief
Market insights
Thailand
2020
Creative and sustainable economy
World
reputation
Government
targeted
growth
sectors
Growth
corridors/
promoted
zones
Government,
FDI and
capital market
• World’s biggest
manufacturer of hard
disk drives (42% of
global supply)
• World’s leading
manufacturer of
rubber (natural
and synthetic) and
selected automotive
parts
• World leader in
poultry and seafood
production, rice and
tapioca
• Energy savings and
alternative energy
• High-tech businesses
• Environmental-friendly
materials and products
businesses
• Mega projects
• Tourism (including
medical tourism) and real
estate businesses
• High-tech agricultural
businesses
• International hub for
medical and healthcare
tourism (2009:
Expected combined
revenue from foreign
patients is US$1.32 bln)
• Eastern seaboard with
excellent transport
network (Chonburi,
Zone 2 and Rayong,
Zone 3)
• Three investment
processing zones (Zone
1, Zone 2 and Zone
3 with different tax
incentives)
• Government
-- More focus towards
Public-Private
Partnerships (PPPs)
in view of pending
privatisation of 58 SOEs
• FDI
-- BoI FDI focus policies
• Capital market
-- Launch of FTSE SET
Shariah Index (FSTSH)
for investment in Islamic
products on 25 May
2009
PricewaterhouseCoopers 45
46 Asia’s emerging gems: Investment brief
Regarded by many as the
new Asian Tiger, Vietnam
has attracted many
multinational corporations
(MNCs) including those
which see the need to
diversify operations away
from China in their “China
plus One” manufacturing
strategy. Vietnam’s 86.8
mln strong population
boasts of a large and
young workforce that has
also seen an increase of
disposable incomes in
recent years.
Starting from a low
economic base since
the early ’90s, Vietnam’s
economy grew strongly
and rapidly before it
slowed down during the
current global financial
crisis. Vietnam’s economy
is expected to bounce
back to pre-crisis growth
trends post-2011. Sectors
that are calling for foreign
investment include
infrastructure, tourism
development and related
real estate and retail sector
development in urban
areas.
VIETNAM
At a glance
Economic overview
Leading corporates
Investment overview
Fiscal stimulus packages
Tax brief
Market insights
PricewaterhouseCoopers 47
At a glance
86.8
million population
Total area
329,560 sq km
Capital
Hanoi
Language
Vietnamese, English,
French, Chinese, Khmer
and mountain area
languages
Currency
Exchange rate
(as at 30 June 2009):
US$1 = VND17,798
(Vietnamese Dong)
Government
Communist state
Administrative divisions
59 provinces and five
municipalities
Strengths
• Political stability with the ruling Communist Party of Vietnam expected to
maintain its control on the country
• Sound long-term economic and investment growth prospects. The
Government is committed to market-oriented reforms
• Low labour wages. Relatively large and young labour market
• Preferential trading partner status with developed economies.
Underdeveloped country status
• Ongoing efforts to attract FDI. Investment incentives and improving legal
and regulation transparency and consistency
Weaknesses
• Shortage of skilled labour. The lag in technology readiness hinders ability
to provide value-added services
• Poor public and legal institutions
• Administrative bureaucracy and ongoing graft problems remain a
hindrance
• Government’s weak fiscal position leaves less scope for increased
economic stimulus measures and ability to service its debt
• Weak infrastructure such as transportation and power increases risk of
value chain disruption
Opportunities
• SOE reforms and equitisation (part-privatisation) expected to resume in
the short to medium-term (2009-2013)
• Reductions in restrictions/limitations expected on foreign investments and
operation activities including market liberalisation (with WTO ascension)
• Growth in demand for consumer goods with higher disposable income
over the medium to long-term
• Significant infrastructure investments required to facilitate commerce,
trade and investment activities
• Investments in export-based industries which tap on competitive labour
costs
• Resilient domestic consumption
Threats
• Prolonged global recession adversely affects some export sectors and
slows down the economy: unemployment and labour unrest contribute to
concerns in some industries and particular locations
• Volatile inflation trends
• General threat of international trade protectionism
• Low level of foreign exchange reserves increases the risk of currency crisis
48 Asia’s emerging gems: Investment brief
Economic
overview
%
Vietnam
2007
2008
2009(f)
2010(f)
2013(f)
Commentaries
GDP
8.5
6.2
3.3
3.9
6.9
• Slower growth as export, which makes up
about 70% of GDP, is decreasing due to the
economic downturn
• Domestic consumption and the
construction sector will be contributing to
growth
Inflation
8.3
23.1
6.0
5.0
5.0
• Increased to a 17-year high and peaked at
28.3% in August 2008 due to hike in the
prices of food, housing and construction
• Although inflation has eased recently
due to easing commodity prices, some
analysts expect it to start rising again from
September 2009 on the back of rising food
and oil prices. Inflation to hit 9% by end2009 and 13% by end of first quarter 2010
Unemployment
4.5#
4.7
8.2
4.5*
4.0*
• Unemployment rate may reach 8.2% this
year with the negative impact of the global
economic slowdown
• An estimated 30,000 workers lost their jobs
in 2008 and about 300,000 to 400,000 are
expected to lose their jobs in 2009
(f) Forecast
Source:
IMF for GDP and inflation data; EIU, GSO# and BMI* for unemployment data
PricewaterhouseCoopers 49
Chart 33
Top sectors by GDP contribution, 2008
Trade, hotel
& restaurant
Agriculture
17%
18%
Construction
6%
GDP
VND1,625 trn
(US$91.3 bln)
Manufacturing
9%
Mining
21%
5%
Transport, warehouse
& communications
24%
Others
Chart 34
Trade information, 2008
Agricultural
products
Crude oil
13%
17%
Seafood
7%
Textile,
footwear &
apparels
22%
Exports
VND1,119 trn
(US$62.9 bln)
30%
Source:
General Statistics Office of Vietnam
50 Asia’s emerging gems: Investment brief
6%
5%
Others
Electrical &
electronics products
Wooden
products
Imports
VND1,431 trn (US$80.4 bln);
Machinery, petroleum and steel
accounted for 39% of total imports
Major trading partners
US, Japan, Australia, China,
Singapore and Taiwan
Vietnam
Sectoral performance review
Growth%
Sector
2007
2008
2009(f)
Commentaries
Manufacturing
12.8
10.1
- 5.0
• Manufacturing accounts for over 35% of total exports in 2008
• Declining growth due to declining demand for major exports
items - textile, footwear & apparels, E&E and wooden
products
• FDI trends moving towards manufacturing of higher valueadded products
Trade, hotel & restaurant
9.4
6.8
4.7
• The retail market increased by 31% in 2008 to VND1,032 trn
(US$58 bln) over 2007 - forecast to increase by 13.6% on
average between 2008 and 2012
• Modern retail is in its infancy, representing 18% of total retail
sales but has the fastest growth among other retail channels
at around 20%
• Retail sales are resilient but facing downward pressure with
increasing cost of doing business in current economic climate
Agriculture
2.3
3.6
3.0
• Main crops are rice, coffee and rubber - Vietnam is the world’s
second-largest rice and coffee exporter and the world’s top
cashew exporter
• Generally, Vietnam’s agriculture is based mostly on smallscale farms with poor yields. Transportation and production
infrastructure is often poor, making getting crops to market
difficult and negatively impacting quality
Construction
12.0
0.02
- 0.2
• The overheating of domestic economy in late 2007 due to
massive capital inflows led to inflation acceleration, asset
price bubbles and a larger trade deficit which spilled into 2008
performance
• High raw material prices hindered timely development of
projects causing construction costs’ overruns and delays
• Risk aversion and credit scarcity have also deterred major
ventures in the infrastructure sectors that rely heavily on FDI
Mining
- 2.0
- 3.8
n.a
• State-controlled oil and gas industry, featuring international
oil companies’ participation through production sharing
agreements
• Main government vehicle is PetroVietnam, which, with its
Vietsovpetro JV, provides around 90% of the country’s oil
production
• The first oil refinery, Dung Quat Refinery, commenced
operations in February 2009
Transport, warehouse &
communications
10.4
13.8
8.5
• The current state of the country’s physical infrastructure limited road, rail, port capacity and power plant capacity
- insufficient to accommodate the anticipated rapid
growth ahead and also the supply chain management
that increasingly demands seamless connection between
producers and consumers
• Vietnam’s Ministry of Transport estimates close to
VND1,067 trn (US$60 bln) is required into 2020 to fund road
infrastructure projects
(f) Forecast
n.a Data not available at time of publication
PricewaterhouseCoopers 51
Leading
corporates
Equity market analysis
There are two stock exchanges in
Vietnam - Ho Chi Minh Stock Exchange
(HOSE) with its Ho Chi Minh Stock
Index (HCMS index) and Hanoi Stock
Exchange (HNX)* with its HNX Index
(formerly known as Hanoi Securities
Trading Center (HASTC) with its HASTC
Index).
The HCMS Index fell sharply by 66% in
2008 to 316 points in December 2008
due to the impact of the global financial
crisis. The market subsequently
recovered in 2009, gaining 31% in
the first five months to 412 points in
May 2009. Similarly, Vietnam’s stock
market capitalisation (both HOSE and
HNX) surged by 41% to VND219 trn
(US$12.3 bln) in May 2009.
Since 1 June 2009, there are new
regulations to allow foreign investors
to buy and sell shares, bonds and
assorted securities in both listed or
unlisted markets; buy shares in initial
public offerings (IPOs) of SOEs; and
invest in funds and joint stock firms
at a fixed rate. The new rulings allow
foreign firms to hold up to 49% of
non-listed shareholding firms, up from
30%. Each foreign investor can also
open a bank account in Vietnamese
Dong to indirectly invest in Vietnam.
In addition, effective 24 June 2009,
a new trading floor, Unlisted Public
Companies Market (UPCoM) was
launched at the HNX to help regulate
trade in unlisted companies’ shares.
There is initial participation of 17
companies for unlisted shareholding
companies. Although Vietnam has
over one thousand shareholding
companies, less than half of these
have been listed on either the Hanoi or
Ho Chi Minh City exchanges.
Measures to revitalise Vietnam’s
stock exchanges
• Securities market
-- Encourage long-term
investment
-- Professional to individual
investors mix at 60:40
-- Extend market trading time
until afternoon
• Government’s role
-- Clear country’s policies,
economic indicators
and macro-economic
management
-- Delay the capital gains on
individuals tax until 2010
• Improve privatisation and IPO
methods
• Further expansion of bond
market
* Launched on 24 June 2009
Chart 35
Top 10 companies on Ho Chi Minh Stock Exchange and Hanoi Stock Exchange
Company
Industry sector
Market capitalisation
Revenue
VND bln
US$ mln
VND bln
US$ mln
Bank for Foreign Trade of Vietnam
Financial services
72,616
4,080
14,719
827
Asia Commercial Bank
Financial services
31,146
1,750
12,992
730
Bao Viet Insurance & Finance Group
Financial services
30,363
1,706
6,888
387
PetroVietnam Finance
Financial services
20,734
1,165
2,740
154
Saigon Thuong Tin Commercial
Financial services
17,210
967
9,272
521
Viet Nam Dairy Products
Food & beverages
16,124
906
8,881
499
PetroVietnam Fertilizer & Chemical
Industrial products & services
16,072
903
7,012
394
Hoang Anh Gia Lai (HAGL)
Real estate
12,031
676
2,028
114
PetroVietnam Drilling and Well Services Industrial products & services
11,106
624
4,040
227
Hoa Phat Group
10,608
596
9,041
508
Industrial products & services
Source:
Bloomberg as at 30 June 2009
Note: Top companies based on market capitalisation
52 Asia’s emerging gems: Investment brief
Vietnam
Chart 36
Financial services
Chart 37
Industrial products & services
Company
Market
capitalisation
Revenue
US$ mln
US$ mln
Bank for Foreign Trade of Vietnam
4,080
827
Asia Commercial Bank
1,750
730
Bao Viet Insurance & Finance Group
1,706
PetroVietnam Finance
Saigon Thuong Tin Commercial
Company
Market
capitalisation
Revenue
US$ mln
US$ mln
PetroVietnam Fertilizer &
Chemical
903
394
387
PetroVietnam Drilling and
Well Services
624
227
1,165
154
Hoa Phat Group
596
508
967
521
Petroleum Technical
Services
331
527
Ha Tien 1 Cement
97
154
Chart 38
Utilities & infrastructure
Company
Market
capitalisation
Revenue
US$ mln
US$ mln
Pha Lai Thermal Power
491
236
Vinh Son – Song Hinh Hydropwer
255
29
Thac Ba HydroPower
85
15
HCM City Infrastructure Investment
77
14
Can Don Hydro Power
25
15
Chart 40
Electrical & electronics
Company
Chart 39
Real estate
Company
Market
capitalisation
Revenue
US$ mln
US$ mln
HAGL
676
114
Vincom
457
15
Tan Tao Investment
Industry Corp
392
64
Kinh Bac City
Development Share
Holding Corp
339
52
Viet Nam Construction
and Import-Export
291
173
Revenue
Market
capitalisation
Revenue
US$ mln
US$ mln
Refrigeration Electrical
Engineering Corp
187
70
Cables and
Telecommunications Material
100
79
Dry Cell & Storage Battery
48
75
Market
capitalisation
Dien Quang
18
23
US$ mln
US$ mln
RangDong Light Source and
Vacuum Flask
17
51
Viet Nam Dairy Products
906
499
KinhDo Corp
138
88
Societe de Bourbon Tay
Ninh
97
34
Minh Phu Seafood
88
175
Nam Viet Corp
62
202
Source:
Bloomberg as at 30 June 2009
Note: Top companies based on market capitalisation
Chart 41
Food & beverages
Company
PricewaterhouseCoopers 53
Investment
overview
Foreign direct investment
Vietnam has attracted VND1,139 trn (US$64
bln) of registered capital in 2008, which is 3.2
times higher than in 2007.
FDI disbursements reached VND204 trn
(US$11.5 bln), rising by 43.2% compared with
2007. Major investors were from Malaysia
25%, followed by Taiwan, Japan and
Singapore at 14%, 12% and 7% respectively.
The global economic downturn is expected
to affect foreign remittances and foreign FDI
inflows in 2009.
Chart 42
Gross approved FDI inflows*
2007
2008
2009(f)
VND379 trn
(US$21.3 bln)
VND1,139 trn
(US$64.0 bln)
VND355 trn
(US$20.0 bln)
(f) Forecast
* Granted licence
Chart 43
Gross approved FDI inflows by sectors, 2008
The first quarter of 2009 saw VND112 trn
(US$6.3 bln) FDI committed into the country,
down 17% year-on-year FDI commitments
were largely from the US, South Korea, Hong
Kong, UK and Singapore.
Remittances sent home by approximately
3 mln Vietnamese working overseas have
been estimated at VND142 trn (US$8.0 bln) in
2008, but is expected to decrease by roughly
a third to VND97 trn (US$5.5 bln) in 2009
as overseas workers face a considerably
tougher job market. Remittances are also
affected by weaker investment prospects
in the Vietnamese real estate market, which
previously drew large funds from overseas.
Foreign investment in Vietnam is governed
under the Law on Foreign Investment and its
related regulations, decrees and circulars.
The main types of direct foreign investments in
Vietnam include:
• Joint ventures
• Wholly-owned companies
• Representative offices
Different legal forms available include:
• One member limited liability
• Two or more members limited liability
• Joint stock company (shareholding
company)
In addition to direct investment, foreign
investors can make indirect investment in
Vietnamese companies i.e. acquire shares in
stock market or unlisted company.
54 Asia’s emerging gems: Investment brief
Construction
25%
Heavy
industry
32%
Gross approved FDI
inflows by sectors, 2008
10%
Others
18%
Oil & gas
15%
Hotel & tourism
Source:
General Statistics Office of Vietnam (GSO)
Vietnam’s attractiveness
to foreign investors
• Large, young and “eager
to work” population
• Low labour cost
• Growing consumer
market
• Gradual move from
centralised to marketoriented economy
• Introduction and
amendments of
legislations by the
Government to make FDI
more attractive
Despite the attractions, a number
of barriers to investment remain. An
opaque legal system, an
inflexible financial system,
corruption, a lack of regulatory
transparency and consistency,
a ponderous bureaucracy and
complex land purchase rules are
among areas criticised by
foreign investors. The country’s
weak infrastructure is also an
impediment to many foreign
investors. However, this is a
diminishing problem as the
Government is actively investing in
improving its transportation system.
Vietnam
Promoted zones
Overview
The country’s first export
processing zone started in 1991.
Since then, a series of industrial,
export processing, high-tech
and economic zones have been
developed along with the increase
in foreign investment, mainly in
northern and southern Vietnam.
Industrial zones (IZs)
Zones specialising in the production of industrial goods and
provision of services for industrial production.
Vietnam aspires to become an
industrialised country by 2020.
By late 2008, Vietnam had
over 200 industrial zones (IZs),
export processing zones (EPZs),
high-tech zones (HTZs) and 13
economic zones (EZs) across the
country. With attractive incentives
and favourable conditions for
investors, IPs and EPZs have
attracted a great inflow of foreign
and local investment. IPs and
EPZs attracted 3,564 FDI projects
with a total registered capital of
VND760 trn (US$42.7 bln) while
EZs brought in 72 FDI projects
capitalised at VND356 trn (US$20
bln). Domestic businesses also
invested nearly VND267 trn
(US$15 bln) into 3,588 such
projects.
High-tech zones (HTZs)
Zones specialising in R&D, application of high-tech, developing
high-tech enterprises, training high-tech human resource and
production and trade in high-tech products.
The Ministry of Planning and
Investment (MPI) said the national
zoning plan envisaged setting
up 91 new IPs with a total area
of 20,800 hectares by 2015 and
expanding 22 existing IPs by
3,500 hectares. It will also develop
another EZ in 2010 and another
planned after 2010. By 2020, the
Government targets that EZs will
contribute 15-20% of GDP and
generate some 1.3 mln to 1.5 mln
new jobs.
Note: Economic zones and bordergate economic zones are all
referred to as EZs, unless otherwise specified.
Export processing zones (EPZs)
Industrial zones specialising in the production of export goods
and provision of services for production of export goods and
activities.
Note: IZs, EPZs and HTZs have specific geographical
boundaries and enjoy specific incentives.
Economic zones (EZs)
Zones having a separate economic space with an investment
and business environment particularly favourable for
investors. EZs are organised into functional areas including
non-tariff areas, bonded warehouse areas, EPZs, IZs, HTZs,
entertainment areas, resorts, urban areas, residential areas,
administrative areas and other functional areas consistent with
characteristics of each EZ.
Bordergate economic zones (BEZs)
BEZs are formed in onshore bordergate areas with an
international bordergate or main bordergate. There are six BEZs:
Mong Cai, Dong Dang, Lao Cai, Cha Lo, Lao Bao, Nam Giang.
Targeted sectors
• Oil refining
• Steel
• Telecommunication
• Infrastructure and public works
• Pharmaceutical
• Chemicals
• Real estate
• Tourism
PricewaterhouseCoopers 55
Chart 44
Vietnam economic zones
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56 Asia’s emerging gems: Investment brief
..AM#AN
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Ho Chi Minh City
Vietnam
Tax incentives for promoted areas
Corporate income tax (CIT*)
Type of project
Remittance tax
Tax incentive
• Newly-established enterprises operating in localities with
especially difficult socio-economic conditions, in EZs and
HTZs
• 10% tax rate for 15 years
• 4 years of tax exemption
• 9 years of 50% reduction
None
• Newly-established enterprises operating in localities with
difficult socio-economic conditions
• 20% tax rate for 10 years
• 2 years of tax exemption
• 4 years of 50% reduction
None
*CIT incentives are no longer based on sector/industry except for some limited sector/industry
Other tax incentives
Import tax
Raw materials and materials
Not yet
domestically
produced for
manufacturing
in IPs and EPZ
For manufacturing in
EZs
Tax holiday within 5 years
Personal
income tax
Value added tax (VAT) and excise tax
Machinery &
equipment
To form fixed
assets for
all projects
in IPs, EPZs
and EZs
Goods
imported
into EPZs
and/or
imported
by export
processing
enterprises
Means
of public
transportation
including bus
and electric
tramcars in
IPs and EPZs
Goods
manufactured in or
imported to
non-tariff
area in EZs
Goods
imported to
non-tariff
area in EZs,
which are
domestically
produced or
produced in
tariff area
Experts and
Employees
in EZs
Import duty
exemption
for the whole
duration of
the project
0% VAT
Exemption
from VAT
Exemption
from Excise
Tax and VAT
0% VAT
50%
reduction
Note:
Companies operating in EZs (remote areas) are still subject to tax incentives. The removal of corporate tax
incentives applies to new companies located in industrial zones and export processing zones. However, all
companies operating in IZs and EPZs which were licensed before 2009 are grandfathered from the changes.
New companies established in IZs and EPZs are no longer entitled to corporate tax incentives.
With World Trade Organisation (WTO) commitment, Vietnam has a phased out period of five years to remove
the incentives granted to companies on the basis of export ratios. Most export processing enterprises (EPEs)
were granted highest tax incentives due to its 100% export ratio. This will be removed by 2012. EPEs are
considered as operating in bonded areas and thus not subject to import duty from import raw materials.
PricewaterhouseCoopers 57
Vietnam
58 Asia’s emerging gems: Investment brief
Fiscal stimulus
packages
The MPI has officially
announced details
of the Government’s
demand stimulus
package with a total
value of VND143
trn (US$8 bln) in
May 2009. It aims
to support growth,
ensure social security,
and accelerate poverty
reduction.
Vietnam
Summary of Vietnam’s stimulus package
Type of
measures
• Infrastructure and other developmental projects
-- State budget for urgent projects
-- Investment funds
-- Government bonds
-- Advance funding for capital construction
• Tax incentives for business and individuals
• Interest subsidy for loans and credit guarantee
• Social welfare programmes
Measures
under the
five thrusts
Thrust 1
Support key sectors
• Support further development of the manufacturing, services and export sectors
besides expanding domestic market to develop a self-reliant economy
• Support enterprises, especially SMEs through temporary interest rate subsidies,
credit guarantees, delays in corporate income tax payments, and a 30%
temporary reduction in the tax liabilities for SMEs
VND37.2 trn
VND30.2 trn
VND20.0 trn
VND 3.4 trn
VND28.0 trn
VND17.0 trn
VND 7.2 trn
US$2.1 bln
US$1.7 bln
US$1.1 bln
US$0.2 bln
US$1.6 bln
US$0.9 bln
US$0.4 bln
Thrust 2
Stimulate investments
• Focus on development investment and key infrastructure projects vital to future
growth including healthcare, education and social housing policy
• Facilitate access to credit and provide credit guarantees for equipment and
machinery imported by enterprises for upgrading or expanding production
• Improve efficiency in the investment process by simplifying investment
procedures
Thrust 3
Effective monetary and fiscal policies
• Facilitate loan financing for enterprises
• Tax relief schemes
• Aggressive easing of monetary policy by State Bank of Vietnam
Thrust 4
Timely, flexible and practical policies
• Improve forecasting capabilities to fine-tune government measures in response
to a changing economic environment
• Focus on implementing the policies and accelerating administrative reform
• Raise awareness and transparency of implementation of government policies to
the public
Thrust 5
Social stability and poverty reduction
• Ensure social stability – raise basic salary for public employees, housing for the
poor, unemployment relief loans
• Special programme intended to reduce the poverty rate in the 61 poorest
districts in Vietnam
• One-time cash handout of VND200,000 (US$11.20) per person, up to VND1 mln
(US$56.20) to households classified as poor by the Ministry of Labour, Invalids
and Society Affairs
PricewaterhouseCoopers 59
Tax brief
Vietnamese income tax is covered under
the Law on Tax Administration (2006), Law
on Personal Income Tax (2007), Law on
Corporate Income Tax (2009) and Law on
Value Added Tax (2009).
Resident companies are subject to
corporate income tax on their worldwide
income and non-resident companies are
taxed only on Vietnamese source income.
Foreign companies performing businesses
in Vietnam with Vietnamese customers
and earning income from Vietnam without
establishing any legal entities in Vietnam are
subject to foreign contractor withholding
tax (FCWT). Withholding tax also applies to
payments of interest, royalties, service fees,
transportation and lease charges. There is
no withholding tax on dividends.
Other taxes include capital assignment
profit tax, value added tax, personal income
tax, special sales tax, import/export duties
and natural resource tax.
Tax treaty networks
Vietnam has an extensive network of tax
treaties with 58 countries, namely, Algeria,
Australia, Austria, Bangladesh, Belarus,
Belgium, Brunei, Bulgaria, Canada, China,
Cuba, Czech Republic, Denmark, Egypt,
France, Finland, Germany, Hong Kong,
Hungary, Iceland, India, Indonesia, Ireland,
Israel, Italy, Japan, Korea (North), Korea
(South), Kuwait, Laos, Luxembourg,
Malaysia, Mongolia, Morocco, Myanmar,
Netherlands, Norway, Oman, Pakistan,
Qatar, Philippines, Poland, Romania, Russia,
Seychelles, Singapore, Slovakia, Spain,
Sri Lanka, Sweden, Switzerland, Taiwan,
Thailand, UAE, Ukraine, United Kingdom,
Uzbekistan and Venezuela.
60 Asia’s emerging gems: Investment brief
Persons chargeable to tax
Persons
Type of tax
Resident companies
Corporate tax
Non-resident companies
- carrying on business in Vietnam
Corporate tax
Foreign-owned enterprises or branches
Corporate tax
Vietnamese citizens
- residing in Vietnam or working overseas
Personal tax
Foreign individuals
- working in Vietnam or earn Vietnam sourced income
Personal tax
Tax rate applicable
Persons
Rates
Corporate tax
• General
• Companies engaged in O&G and exploitation of
special natural resources
25%
32% - 50%
Personal tax
• Resident
• Employment
• Non-employment
• Non-resident
• Employment
• Non-employment
0% - 35%
5% - 25%
20%
5% - 25%
Capital assignment profit tax (on capital gains)
25%
Special sales tax
10% - 70%
Import duty
0% - 87%
Export duty
0% - 37%
Natural resource tax
0% - 40%
Vietnam
Foreign contractor withholding taxes (FCWT)
Nature of supply
Trading (distribution, supply of goods, materials, machinery and equipment)
FCWT CIT
rates
FCWT VAT
rates
1%
Exempt or 1%
Pure services performed within Vietnam
5%
5%
Royalties
10%
Exempt
Leasing of machinery and equipment
5%
5%
Leasing of aircraft, vessels (including components)
2%
Not specified
Interest
10%
Exempt
Construction, installation without supply of material or machinery and equipment
2%
5%
Construction, installation with supply of material or machinery and equipment
2%
3%
Transportation
2%
3%
Overseas reinsurance
2%
Exempt
Transfer of securities
0.1%*
Exempt
Insurance
5%
5%
Manufacturing and other business activities
2%
3%
Note:
CIT – Corporate income tax portion of FCWT
VAT – Value added tax portion of FCWT
* On total gross proceeds
Tax incentives (new investments)
Nature of project
Preferential tax rates from
commencement of
operation*
Tax exemption
Full or 50% exemption from the
first year of profit*
Investments in locations designated under especially
difficult socio-economic conditions zones, EZs and
HTZs
10% for 15 years
• Full exemption - 4 years
• 50% exemption - 9 years
Investments in locations designated under difficult
socio-economic conditions zones
20% for 10 years
• Full exemption - 2 years
• 50% exemption - 4 years
Investments in high technology, science research
and technology development, certain infrastructure
development, computer software manufacture
Investments in education, healthcare, sport/culture,
environment (conditions apply)
10% for 15 years
• Full exemption - 4 years
• 50% exemption - 9 years
10% for the life of the
project
• Full exemption - 4 years
• 50% exemption - 5 to 9 years
* The incentives are granted as a package and will run concurrently
PricewaterhouseCoopers 61
Vietnam
62 Asia’s emerging gems: Investment brief
Market insights
Vietnam
2020
Industrialised nation
World
reputation
Government
targeted
growth
sectors
Growth
corridors/
promoted
zones
• World’s top cashew
exporter
• World’s 2nd largest
rice and coffee
exporter
• World’s 6th most
attractive location for
FDI
• Key promoted sectors
-- Oil refining
-- Steel
-- Telecommunication
-- Infrastructure
-- Pharmaceutical
-- Chemicals
-- Real estate
-- Tourism
• Growth sectors
-- Retail (up by 31% in
2008 to US$58 bln)
-- Infrastructure projects
(e.g. US$60 bln
required for road
infrastructure)
• Over 200 IZs, EPZs,
HTZs and 15 EZs
• 91 new IPs with a
total area of 20,800
hectares by 2015;
expansion of 22
existing IPs by 3,500
hectares
Government,
FDI and
capital market
• Government
-- Privatisation of SOEs
(2008: 73 out of 262
SOEs)
• FDI
-- Commitment to WTO
policies
• Capital market
-- Equity market: new
trading floor, UPCoM
(Unlisted Public
Companies Market)
PricewaterhouseCoopers 63
64 Asia’s emerging gems: Investment brief
Cambodia is a developing
market economy that has
grown at an average rate
of over 10% since 2004.
The coalition government
is focused on accelerating
development through
economic and political
reform programmes.
Since Cambodia joined the
World Trade Organisation
in 2004, trade has steadily
increased and the US
has become Cambodia’s
largest trading partner,
particularly in the garment
and footwear industries.
Notwithstanding its light
manufacturing export
forays, agriculture continues
to be a key export sector of
the Cambodian economy,
driven by rice, fisheries,
timber and rubber.
With its large and
inexpensive labour
force and pro-business
government, which is
directing investments to
grow in various sectors
including manufacturing,
infrastructure, agribusiness
and tourism, Cambodia
is poised for gradual
industrialisation.
CAMBODIA
At a glance
Economic overview
Investment overview
Tax brief
Market insights
PricewaterhouseCoopers 65
At a glance
14.6
million population
Total area
181,035 sq km
Capital
Phnom Penh
Language
Khmer, French and
English
Currency
Exchange rate
(as at 30 June 2009):
US$1 = KHR4,164
(Cambodian Riel)
Government
Multi-party democracy
under a constitutional
monarchy
Administrative divisions
23 provinces and one city
Strengths
• Young and inexpensive work force
• Pro-business government focused on attracting FDI
• Stable political environment, with the ruling Cambodian People’s Party
continuing to be in control (with the royalist FUNCINPEC* party as a
minority coalition partner)
Weaknesses
•
•
•
•
•
Lack of infrastructure such as power and transportation
Shortage of skilled workers
Opacity of rules, regulations, commercial and business information
Bureaucratic licensing process
High poverty rate - some 30% of the country’s 14.6 mln people live on
less than KHR2,082 (US$0.50) a day
• Highly dependent on external sector for growth and investments, making
it vulnerable to external shocks.
Opportunities
• Opportunity to achieve high growth due to the country’s low economic
base
• Government has earmarked KHR11.6 trn (US$2.8 bln) on public
investment over three years
• Multi-donors have pledged to disburse KHR3.96 trn (US$951.5 mln) in
grants and loans in 2009 for development
• Needs to diversify and broaden its economic base, aside from light
manufacturing
• Needs several billions of dollars in investment to develop its infrastructure,
industry and economy
Threats
•
•
•
•
•
•
Corruption a key concern among businesses
Prolonged global recession will adversely impact export sectors
Anti-competitive practices (unfair competition)
Border tension with Thailand
Limited availability of credit to finance investments
Higher banking system non-performing loan (NPL) from sectors like real
estate, construction and garment
* National United Front for an Independent, Neutral, Peaceful and
Cooperative Cambodia
66 Asia’s emerging gems: Investment brief
Economic
overview
Cambodia
%
2007
2008
2009(f)
2010(f)
2013(f)
Commentaries
GDP
10.2
6.0
- 0.5
3.0
7.3
• In 2008, the economy is affected by
declines in export orders for garments (70%
of exports and mostly to the US), a drop in
construction activities, a collapse in private
capital inflows and a sharp slowdown in
tourist arrivals
Inflation
5.9
19.7
5.2
1.4
3.5
• Inflation peaked at 26% in May 2008,
pushed by higher prices for food and oil,
before slowing to 13.5% in December 2008
• With domestic demand pressures projected
to ease, inflation should continue its
downward trend from 2009 onwards
Unemployment
2.5
2.5
n.a
n.a
n.a
• Registered unemployment has risen from
10,000 in 2007 to 100,000 in early 2009
• About 50,000 garment workers, or 17% of
the total industry workforce, have lost their
jobs since September 2008
(f) Forecast
n.a Data not available at time of publication
Source:
IMF for GDP and inflation data; CIA World Factbook for unemployment data
PricewaterhouseCoopers 67
Chart 45
Top sectors by GDP contribution, 2007
Manufacturing
Construction
& real estate
17%
13%
Agriculture
30%
GDP
KHR36.2 trn
(US$8.69 bln)
13%
7%
Trade, hotels &
restaurants
Transport
& communications
20%
Others
Chart 46
Trade information, 2007
72%
Garment
Exports
KHR17.0 trn
(US$4.09 bln)
10%
Rice
4%
Rubber
3%
11%
Fish
Others
Source:
IMF
Note:
In Q1 2009, total exports decreased by 26%, mainly due to the export contraction
in the garment sector, particularly to the US market
68 Asia’s emerging gems: Investment brief
Imports
KHR22.6 trn (US$5.42 bln); garment
sectors (25%), petroleum (25%)
Major trading partners
US, China (including Hong Kong),
EU, Taiwan, Thailand and Vietnam
Cambodia
Sectoral performance review
Growth%
Sector
Commentaries
2006
2007
2008(f)
Agriculture
(mainly rice)
5.5
5.0
4.5
• Roughly 80% of the country’s population is engaged in agriculture. The country
has two mln hectares of unforested and uncultivated land
• Agricultural production is expected to be marginally higher in 2009 compared to
2008’s estimated growth of 4.5%, reflecting improvements in irrigation, a drop
in fertiliser prices from 2007’s high, and a continuation of policies to increase
production
• The Government is taking measures to promote the plantation sector through
the approval of 10 agricultural projects worth KHR1.3 trn (US$319.4 mln) in the
first four months of 2009 which include three sugar cane plantation projects and
seven rubber plantation projects
Manufacturing
(mainly garment
& footwear)
17.4
8.9
n.a
• The Government has allocated almost KHR2.1 trn (US$500 mln) for the garment
sector in 2008
• Garment exports are expected to contract further in 2009 due to lower demand
in the US and Europe, higher wage costs, the ending of safeguards imposed on
China at end-2008, and increasing competition from Vietnam
• Garment exports fell sharply in January 2009 by 31% year-on-year while orders
dropped by 20-40% with a poor outlook for retail sales in the US
• The sector shows signs of recovery in opening 19 new garment factories in Q1
2009, creating job opportunities for workers who lost employment in 2008
Construction &
real estate
15.5
8.7
n.a
• New construction activities faltered from the second half of 2008 as FDI and
credit growth decelerated
• Property prices in and around Phnom Penh are reportedly down as much as 25%
from historic highs in mid-2008
• Since the global financial crisis hit, a few major urban projects have been
scaled back, as foreign investors (mainly from South Korea) reassessed of their
commitments in the face of tighter funding conditions abroad and weaker nearterm prospects in Cambodia
• Real estate and construction activity is expected to decelerate further in 2009 as
investment becomes constrained by FDI inflows and credit
Trade, hotels &
restaurants
10.4
9.9
n.a
• Aside from trade, this sector is linked to tourism activities
• In 2008, the tourism sector recorded an estimated 2.1 mln tourists, bringing in
approximately KHR4.1 trn (US$1 bln) in revenue for the year
• There is an estimated 350 hotels offering 20,000 rooms
• Tourist arrival growth moderated in 2009 due to the economic downturn as key
tourist-source countries cut discretionary holiday spending
• The Government expects to boost the tourism sector with several new resort
development projects, namely in Kep town (resort has 32 four-star bungalows
resort due to be completed by end-2009)
Transport &
communications
2.1
7.2
n.a
• Only a quarter or 24% of the population has access to mobile networks
• The number of subscribers has increased approximately by 1.2 mln or 45%
compared to 2007. This is expected to increase to 13 mln subscribers by 2013
• In July 2009, Telecom Cambodia has inaugurated a new 650km link national fibre
backbone that connects the south western coast to the north, near Laos’ border
• The Government has offered Build-Operate-Transfer concessions to several
companies to rehabilitate portions of national highway systems and to upgrade
provincial airports
• In June 2009, the Government signed a 30-year agreement with Australia’s Toll
Holdings to upgrade the national railway system
(f) Forecast
n.a Data not available at time of publication
PricewaterhouseCoopers 69
Investment
overview
Foreign direct investment (FDI)
FDI continues to be focused mainly on the
garment, tourism, and real estate sectors.
Asian investors from ASEAN, China, Hong
Kong, Taiwan, South Korea continue
to dominate inflows. Recent interest in
agribusiness are coming from Middle
Eastern investors. According to December
2008 World Bank estimates, FDI inflows into
Cambodia fell from KHR3.6 trn (US$866
mln) in 2007 to about KHR3.3 trn (US$800
mln) in 2008, and may fall to under KHR2.5
trn (US$600 mln) in 2009.
Fiscal stimulus package
Th Government has extended a tax holiday
for corporate income tax payments for
foreign direct investors from 2010 until
2012. Although the direct budgetary impact
will not be felt over 2009 to 2010, the
measure may help retain any companies
that could have closed down due to the
slump in garment exports. Efforts are
underway to support agricultural producers
and provide trade financing to exporters.
Stock exchange
The Government signed an agreement
to set up the country’s first stock market
with Korea Exchange (KRX) on 24 March
2009. The agreement gives the Ministry
of Finance 55% of shares and KRX the
remaining 45%. Proposed regulations of
corporate governance for listed companies
from Securities and Exchange Commission
of Cambodia (SECC) is currently being
discussed. The stock exchange is expected
to be launched in December 2009.
70 Asia’s emerging gems: Investment brief
Special economic zones (SEZ)
SEZ in Cambodia brings together all industrial and other
related activities including general IZs and/or EPZs in
one designated area. Each SEZ is designed to have a
production area which may include a free trade area,
service area, residential area and tourist area. These zones
are expected to help diversify the Cambodian export
structure, which is presently heavily oriented towards
garment products. There are 21 SEZs located at Koh Kong,
Poipet, Savet, Phnom Den, Sihanoukville and Phnom Penh,
of which six are being actively developed as of March 2009.
Priority sectors
• Agriculture
• Physical infrastructure especially transportation and
telecommunication
• Water supply and electrical power
• Human resource development
• Export-oriented and labour-intensive industry
• Tourism
• Oil and gas and other mineral resources such as bauxite
and iron ore
Incentives for SEZ developers include:
• Nine year tax exemption on profit
• No value added tax and export tax
• Import duty exemptions:
-- Import of equipment
-- Construction of equipment
-- Means of transportation used in infrastructure
construction in SEZs
-- Machinery and equipment for construction of
connecting roads and other infrastructure for public
services
• Investment guarantees relating to nationalisation, price
fixing and all foreign exchange transactions
• Land concession up to 99 years
• Free repatriation of profit
• Additional tax incentives as provided for under the Law
on Investment for zone investors
Tax brief
A sub-decree implementing the amended
Law on Investment, which came into
effect on 27 September 2005, applies to
all projects registered with the Council for
the Development of Cambodia (CDC) and
municipal/provincial sub-committee as
Qualified Investment Projects (QIP). The
sub-decree provides that investments falling
within a Negative List are not entitled to
investment incentives.
The Negative List includes:
• Commercial activities
• Imports and exports trading
• Transportation services (except the
railway sector)
• Currency and financial services
• Tobacco products
• Telecommunication services
• Real estate development
Resident companies are subject to
corporate income tax on worldwide income
while non-resident companies are taxed on
income derived in Cambodia only. Resident
companies earning foreign sourced income
can receive credits for foreign taxes paid.
Other taxes include minimum tax, value
added tax, capital gains tax, import
duties, personal income tax, specific tax,
withholding tax and other taxes.
Cambodia
Persons chargeable to tax
Persons
Type of tax
Resident companies
Foreign-owned enterprises or branches
Corporate tax
or minimum
tax, whichever
is higher
Cambodian citizens
Personal tax
Foreign individuals having a residence or a
principal place of abode in Cambodia
Personal tax
Non-resident companies
- carrying on activities in Cambodia
Tax rate applicable
Persons
Rates
Corporate income tax
20%
• General
• Companies engaged in oil and gas, and certain 30%
mineral exploitation activities
5%1
• Companies engaged in insurance activities
Minimum tax
1% of turnover
Capital gains tax
20%2
Personal income tax
0% to 20%
Value added tax (VAT)
0% and 10%
Import duties
0% to 35%
Specific tax on certain merchandise and services
0% to 33.33%
Note:
1
On gross premium income
2
Capital gains form part of taxable profit
Investment incentives
Tax holidays are available to a QIP.
A QIP is allowed the following tax
incentives:
• Exemption from minimum tax
• Tax holiday of up to six years
• Import duty exemptions
A QIP is required to obtain a Certificate of
Compliance (CoC) from the CDC annually to
qualify for the investment incentives.
Withholding taxes
Payments made to residents
Rates
Interest paid by a resident taxpayer
15%
Interest paid by a resident taxpayer bank
4% and 6%
Royalties
15%
Rent
10%
Services (except payment to VAT registered
taxpayers supported by VAT invoices)
15%
Payments made to non-residents
Rates
Tax treaty networks
Dividends
14%
No tax treaties have been negotiated.
Interest paid by a resident tax payer
14%
Rent
14%
Management or technical services
14%
PricewaterhouseCoopers 71
Cambodia
72 Asia’s emerging gems: Investment brief
Market insights
Cambodia
2020
Graduate from “Least-Developed Country” status
World
reputation
Government
targeted
growth
sectors
Growth
corridors/
promoted
zones
• World’s 6th largest
garment exporter
• World’s 8th largest
rice exporter
• Manufacturing (garment
industry)
• Tourism
• High-tech agricultural
businesses (mainly rice,
sugar cane, rubber, palm
oil and fishery industries)
• Infrastructure
(transportation and
telecommunication)
• Upstream hydropower
• Mining
• Six out of 21 SEZs are
actively developed
as of March 2009
(Koh Kong, Poipet,
Savet, Phnom Den,
Sihanoukville and
Phnom Penh)
• Phnom PenhSihanoukville Growth
Corridor’s SEZ port (to
be completed by end2009)
Government,
FDI and
capital market
• Government
-- Launched trade
development project
worth US$12 mln
promoting export
products (March 2009)
• FDI
-- Commitment to WTO
policy
• Capital market
-- Set up country’s first
stock exchange by end2009
PricewaterhouseCoopers 73
74 Asia’s emerging gems: Investment brief
Laos is a country blessed
with an abundance of
natural resources. Gold and
copper make up half of the
country’s exports.
The long-term vision of
Laos is to graduate from
the United Nation’s Least
Developed Country status
by 2020. In achieving this
vision, it is working towards
achieving its Millennium
Development Goals by
slowly opening up to global
partnerships in economic
development.
Guided by the New
Economic Mechanism
implemented in 1986,
Laos is gradually moving
away from being a
predominantly agriculturalbased nation to a growing
industrial economy. The
Government is sponsoring
major improvements in
the transportation system
and developing the
construction industry. Laos
is also emerging as the
“Battery of Asia” as the
Government is now tapping
into its massive hydropower
potential as its next
environmentally sustainable
source of economic growth.
LAOS
At a glance
Economic overview
Investment overview
Tax brief
Market insights
PricewaterhouseCoopers 75
At a glance
6.3
million population
Total area
236,800 sq km
Capital
Vientiane
Language
Lao, French, English and
various ethnic languages
Currency
Exchange rate
(as at 30 June 2009):
US$1 = LAK8,517.50
(Laotian Kips)
Government
Communist state
Administrative divisions
16 provinces and one
capital city
Strengths
• Pro-business government, with aims to attract FDI
• Low labour costs
• Abundant natural resources e.g. mining and hydropower which account
for more than half of total investment and exports
• Situated in an economic growth zone, sharing borders and common
interests with Thailand, Vietnam, Cambodia and China
• Stable political environment, with the ruling Lao People’s Revolutionary
Party continuing to be in control
Weaknesses
• High poverty rate and among the world’s least developed countries
• Inadequate legal frameworks leading to opaque regulations and a poorly
resourced bureaucracy
• Weak physical infrastructure
• Lack of capital, knowledge and technology know-how required for
sustainable economic development
• Shortage of skilled workers
• Landlocked mostly rural nation, with small domestic market of 6 mln
population
• Foreigners are not allowed to own land in Laos
Opportunities
• New foreign investment law to end discrimination against foreign investors
• Investment in hydropower could reach LAK44.3 trn (US$5.2 bln) over the
next five years; the country plans to become Southeast Asia’s powerhouse
• Government is also attracting investments in light manufacturing, mining,
forestry and agriculture sectors
• Infrastructure investments e.g. Thailand and Vietnam governments have
been investing in Laos infrastructure e.g. railway, bridges and power
Threats
• Prolonged global recession on export sectors
• Many state-owned banks have difficulty managing their debt and will need
to be radically reformed
• Difficult place to do business, ranked 167 out of 183 countries in World
Bank’s Doing Business 2010 Report
• In practice, trade and investment are more heavily regulated, including
import and export licensing
76 Asia’s emerging gems: Investment brief
Economic
overview
%
Laos
2007
2008
2009(f)
2010(f)
2013(f)
GDP
7.5
7.2
4.4
4.7
6.6
• Growth is driven mainly by mining,
hydropower and services
• Slower growth in 2009 and 2010 as the
global economic downturn hits exports of
clothing and copper, as well as tourism
Inflation
4.5
7.6
0.2
2.6
4.0
• Average annual inflation of 7.6% in 2008
and continues to be low in 2009
• After peaking at 10.3% in May 2008, the
year-on-year inflation rate dropped to 2.4%
in January 2009 mainly due to sharp decline
in oil and food prices
• Lower fuel prices brought down the cost of
transportation, construction materials and
other products, leading to further decline in
core inflation
Unemployment
2.4
2.4
n.a
n.a
n.a
• 70% of the labour force is in agriculture
and a large portion of the population lives in
poverty
• More than 48,000 labour workers have been
laid off their jobs since early 2009 due to the
global economic crisis
• However, the Government remains positive
that Thai, South Korean, Malaysian and
Japanese employers in local companies
have all expressed interest in hiring an
additional 25,000 workers in 2009
(f)
Commentaries
Forecast
n.a Data not available at time of publication
Source:
IMF for GDP and inflation data; CIA World Factbook for unemployment data
PricewaterhouseCoopers 77
Chart 47
Top sectors by GDP contribution, 2007
Manufacturing
23%
40%
GDP
LAK33.2 trn
(US$3.9 bln)
13%
Agriculture
Wholesale &
retail trade
6%
5%
13%
Real estate &
construction
Others
Source:
Mining &
quarrying
IMF
Chart 48
Trade information, 2007
Garments
15%
Mining
50%
Exports
LAK8.9 trn
(US$ 1.05 bln)
Wood &
wood product
13%
5%
8%
9%
Source:
World Bank
Others
Agricultural
Electricity
Note:
Latest estimates in 2008 indicate that Laos’ exports maintained at US$1 bln.
Exports are dominated by gold and copper which grew by 21.2% over the year.
78 Asia’s emerging gems: Investment brief
Imports
LAK17 trn (US$2 bln);
capital goods (60%),
intermediate goods (10%)
Major trading partners
Thailand, China and Vietnam
Laos
Sectoral performance review
Growth%
Sector
2006
2007(f) Commentaries
Mining & quarrying
52.8
33.0
• Mining of precious metals is an important component of the country’s
economy. Copper and gold comprise more than half of Laos’ exports
• Export from mining contributed LAK4.7 trn (US$553 mln) in 2007
• With more than 570 types of mineral deposits identified, Laos is among
the world’s most resource-rich countries
Agriculture
2.9
2.7
• Laos is mainly an agricultural country, with the agriculture sector
contributing about 40% of GDP
• The sector’s main output are crops, livestock and fisheries
• Agriculture, which employs over 70% of the labour force, was hit by
severe floods in late August 2008 which damaged 10% of the arable
area and curtailed production of rice and vegetables
• The Government is taking steps to improve the irrigation system to
bolster farm output
Manufacturing
14.8
13.9
• Manufacturing in Laos is an emerging sector - main products are
garments and wood products
• Laos is a location for cost-effective manufacturing of garments and
high-end woven fabrics, exporting largely to Thailand and Europe
• Orders for clothing exports in early 2009 were down by 15-20%,
reflective of the global financial crisis
Electricity
1.1
- 2.9
• The Government plans to tap the Mekong river’s massive potential to
turn Laos into the major energy provider to the region
• Laos currently has 10 operational hydropower plants with a combined
capacity of 700 MW (Megawatt) and eight more plants with a combined
capacity of 2,500 MW under construction
• The Government has invited independent power producers to develop
the hydropower industry
Wholesale & retail trade
8.2
8.9
• The wholesale and retail trade industry contributes some 12.6% of GDP
in 2007
• Preparations to join the WTO in 2010 were stepped up last year, with
the formation of a new body to coordinate the effort and oversee
associated trade-related reforms. Laws and regulations are being
amended to meet WTO requirements
Transportation, storage &
communication
7.5
8.1
• The Government put in place a new telecoms regulator, the National
Post and Telecommunications Authority (NPTA) in October 2007
• The number of subscribers increased approximately 1.1 mln or 100%
compared to 2007. It is expected to increase to 5.1 mln in 2013
• The Lao Telecommunication Company which holds 80% of the market
share in the telecommunications sector, recently launched its 3G phone
services in July 2009
(f) Forecast
Note: 2008 and 2009 data not available at time of publication
PricewaterhouseCoopers 79
Investment
overview
Special economic zone (SEZ)
Incentives for SEZ developers
Laos has one SEZ known as SavanSeno Special Economic Zone
(SSEZ) which is at its initial stage of
development. SSEZ is geographically
located close to the new highway
that links Southwest China and
Southeast Asia. This SEZ is expected
to become a hub for trade, services
and manufacturing activities for the
Greater Mekong Sub-region (GMS)
nations. The categories of business
activities planned to be develop in the
SSEZ include the following:
Under Article 17 and 18 of the Law on the Promotion of Investment, the
Government has specified 3 promoted zones, which are based on geographical
locations and socio-economic conditions. The zones and incentives are as
follows:
• Export Processing Zone
• Free Trade Zone
• Free Service and Logistic Centre
(which should include tourism,
banking and other activities)
Description
Incentives
Zone 1
Mountainous, plain and
plateau zones with no
economic infrastructure to
facilitate investments
• Profit tax exemption for seven
years
• Thereafter, subject to profit tax at
the rate of 10%
Zone 2
• Profit tax exemption for five years,
Mountainous, plain and
• Thereafter, subject to a reduced
plateau zones with a
certain level of economic
profit tax rate of half of 15% for
three years
infrastructure suitable to
accommodate investments • Thereafter, profit tax rate of 15%
to some extent
Zone 3
Mountainous, plain and
plateau zones with good
infrastructure to support
investments
• Profit tax exemption for two years
• Thereafter, subject to a reduced
profit tax rate of half of 20% for
two years
• Thereafter, profit tax rate of 20%
Note:
Profit tax exemption starts from the date of the foreign enterprise’s
commencement of operations. For tree plantation activities, profit tax exemption
commences from the date the enterprise starts making a profit.
Foreign direct investment
Stock exchange
Fiscal stimulus package
According to the Ministry of Planning and
Investment (MPI), the Government has
licensed more than 40 FDI projects with total
capital exceeding LAK8.5 trn (US$1 bln) in the
first half of the 2008-2009 fiscal year. Over
2007-2008, the country attracted 161 FDI
projects valued at LAK5.5 trn (US$650 mln).
Vietnam is the leading foreign investor in Laos,
followed by Thailand and China.
The Laotian Government
is currently working
in association with
South Korean securities
officials to establish a
stock market exchange
in the country. The
Government had signed
an agreement with the
Korea Exchange in
2007 to set up a jointventure bourse in Laos.
The stock exchange is
expected to commence
operations in October
2010 and is likely to list
five companies on its
opening.
In February 2009, the Government announced a
list of measures to help cope with the economic
crisis. The key measures are aimed at:
According to the United Nations Conference
on Trade and Development (UNCTAD), Laos
attracted LAK2.8 trn (US$324 mln) in FDI in
2007, up sharply by 73% from LAK1.6 trn
(US$187 mln) in 2006. The MPI singled out
hydropower, construction materials, tourism,
energy and mining as sectors that welcome
foreign investments.
80 Asia’s emerging gems: Investment brief
• Strengthening revenue management and
prioritising public spending to focus on
projects/programmes impacting growth and
domestic demand
• Supporting growth, especially to promote
agricultural production, tourism and local
investment, increasing the domestic lending,
reviewing and streamlining approved FDI
projects and improve the quality of the public
sector services and coordination
• Mitigating the social impacts of the crisis,
especially for the poor and unemployed
The Government has also cut the corporate
income tax rate for domestically-owned
enterprises in the garment sector to the level paid
by foreign-owned firms.
Tax brief
Income tax is assessed on income/profits
earned from any source related to Laos,
regardless of whether the enterprise is a
Lao resident or a foreign-owned enterprise/
branch carrying on a business in Laos.
Currently, there are no rules in relation to
the determination of corporate residence.
In practice, an entity which has been
incorporated in Laos and received corporate
licences/certificates from the MPI, the
Ministry of Industry and Commerce and
the Ministry of Finance is subject to tax
payment obligations under the tax laws.
All entities incorporated in Laos are subject
to withholding tax on payments to be
made to foreign entities (non-incorporated/
registered entities in Laos).
Generally, the Government offers various
incentives to attract investments in the
country. Both local and foreign investors are
granted tax exemptions, reduced corporate
taxes, reduced duties and business turnover
taxes on imported equipment and raw
materials and investment permissions
and guarantees. Further, foreign investors
can negotiate for various other incentives
from the MPI based on their individual
investments.
Tax incentives
Tax holidays are available for companies
undertaking promoted activities or operating
in promoted zones in Laos. Depending
on the promoted zones, the general
concessionary tax rates will apply:
Laos
Persons chargeable to tax
Persons
Type of tax
Resident companies
Foreign owned enterprises or branches
1. Corporate tax and minimum tax
2. Business turnover tax
Non-resident companies
- carrying on activities in Laos
1. Withholding corporate tax
2. Business turnover tax
Lao citizens
Personal tax
Foreign individuals
Personal tax
Tax rate applicable
Persons
Rates
Standard corporate income tax
35%
Withholding corporate tax:
• Commercial activities
• Production activities
• Transportation and construction
activities
• Services activities
1.75%
2.8%
3.5%
7%
Minimum tax (on annual revenue)
• for production
• for services
0.25%
1%
Capital gains tax
10%
Personal income tax
• Lao individuals
• Foreign employees
5% to 25%
10%
Business turnover tax*
5% and 10%
Excise tax
5% to 90%
Import duties
A variety of rates
* To be replaced with value added tax (VAT) at 10% by 1 January 2010
Withholding taxes
Zone 1
10% (after tax holiday of seven years)
Other payments made to non-residents
Rates
Dividends; interest; security fees
10%
Zone 2
15% (after tax holiday of five years and
reduced rate of 7.5% for three years)
Royalties
5%
Zone 3
20% (after tax holiday of two years and
reduced rate of 10% for two years)
Tax treaty networks
Laos entered into double tax agreements (DTA) with China, South Korea,
Thailand and Vietnam. It is in negotiations with Brunei, Kuwait, North
Korea and Russia. There are also talks with Malaysia on the DTA.
PricewaterhouseCoopers 81
Laos
82 Asia’s emerging gems: Investment brief
Market insights
Laos
2020
Graduate from “Least-Developed Country” status
World
reputation
Government
targeted
growth
sectors
Growth
corridors/
promoted
zones
• A leading resourcerich country in the
world
• Cheap location
for manufacture of
garments and highend woven fabrics
• Transforming into
major energy provider
for the Greater
Mekong Sub-region
• Hydropower & energy
• Mining (mainly copper
and gold)
• Manufacturing (garment
& wood products)
• Infrastructure
• Agriculture
• International hub
for trade, services
and manufacturing
activities for the
Greater Mekong Subregion
• Savan-Seno Special
Economic Zone
-- Location for Export
Processing Zone,
Free Trade Zone
and Free Service
and Logistic Centre
Government,
FDI and
capital market
• Government
-- Liberalisation of foreign
investment law (released
by end of 2009)
• FDI
-- To adopt WTO policies
in 2010
• Capital market
-- Commencement of
stock market exchange
(October 2010)
PricewaterhouseCoopers 83
84 Asia’s emerging gems: Investment brief
APPENDICES
Sources
Abbreviations
Glossary of ratings
List of charts
PwC contacts
Industry contacts
Acknowledgements
PricewaterhouseCoopers 85
Appendices
Sources
PricewaterhouseCoopers conducted the research using publicly available information gathered between December 2008
and September 2009 from international financial and economic institutions, national statistical offices as well as economic
and industry intelligence services. Key sources include:
General sources
Country specific sources
• ADB, “Asian Development
Outlook 2009”, March 2009
• Bloomberg, 2009
• CIA, “The World Factbook”, April
2009
• EIU, “Country View”, May 2009
• IMF, “World Economic Outlook
Database”, April 2009
• PwC, “EM20 Index 2009 Interim
Update: Balancing Risk &
Reward”, April 2009
• UNCTAD, “World Investment
Prospects Survey”, 2007-2009 &
2008-2010
• WEF, “The Global
Competitiveness Report 20092010”, September 2009
• World Bank, “Battling the forces
of global recession: World Bank
economic update for the East Asia
and Pacific Region”, April 2009
• World Bank, “Doing Business
2010 Report”, September 2009
• v3.moodys.com
• www.adb.org
• www.cia.gov
• www.economist.com
• www.eiu.com
• www.factiva.com
• www.imf.org
• www.pwc.com
• www.standardandpoors.com
• www.unctad.org
• www.wikipedia.org
• www.worldbank.org
Malaysia
• BMI, “The Malaysia Business
Forecast Report Q2 2009”,
January 2009
• Central Bank of Malaysia, “Annual
Report 2008/2009”, March 2009
• Central Bank of Malaysia,
“Financial Stability Report
2008/2009”, March 2009
• Ministry of Finance, “Economic
Report 2008/2009”, August 2008
• www.bnm.gov.my
• www.ecerdc.com
• www.iskandarmalaysia.com.my
• www.mscmalaysia.my
• www.ncer.com.my
• www.sarawakscore.com.my
• www.sdc.gov.my
Thailand
• BMI, “The Thailand Business
Forecast Report Q1 2009”,
November 2008
• National Economic and Social
Development Board (NESDB),
“Economic Outlook: Thai
Economic Performance in Q4 and
Outlook for 2009”, February 2009
• www.bot.or.th
• www.boi.go.th
• www.ieat.go.th
• www.nesdb.go.th
• www2.mof.go.th
Vietnam
• BMI, “The Vietnam Business
Forecast Report Q2 2009”,
February 2009
• IMF, “Country Report No. 09/110”,
April 2009
86 Asia’s emerging gems: Investment brief
• MPI, “Vietnam’s IPs, EPZs and
EZs: Ideal Places for Manufacturing
Base”, 2007
• Vietnam Law & Legal Forum,
“Decision No. 1353/QD-TTg of
September 23, 2008, approving
the Scheme on planning of
development of Vietnam’s coastal
economic zones up to 2020”
• www.gso.gov.vn
• www.mof.gov.vn
Cambodia
• IMF, “Country Report No. 09/47”,
February 2009
• IMF, “Country Report No. 09/48”,
February 2009
• Phnom Penh Chamber of
Commerce, “Invest in Cambodia”,
July 2007
• www.cambodiasez.gov.kh
• www.cambodiainvestment.gov.kh
• www.cia.gov • www.investincambodia.com
• www.maff.gov.kh
• www.mot.gov.kh
• www.nbc.org.khw
• www.ppcc.org.kh
Laos
• IMF, “Country Report No. 08/350”,
October 2008
• IMF, “Country Report No. 08/340”,
October 2008
• www.bol.gov.la
• www.iisd.org
• www.invest.laopdr.org
• www.edl-laos.com
Abbreviations
Abbreviation
Full term
Abbreviation
Full term
ASEAN
Association of Southeast Asian Nations
GMS
ADB
Asian Development Bank
Greater Mekong Sub-region (China,
Vietnam, Cambodia, Thailand, Myanmar
and Laos)
BEZ
Bordergate economic zone
GSO
General Statistics Office of Vietnam
bln
Billion
HASTC
Hanoi Securities Trading Center
BMI
Business Monitor International
HDD
Hard disk drives
Bol
Board of Investment
HK
Hong Kong
CDC
Council for the Development of
Cambodia
HNX
Hanoi Stock Exchange
CIT
Corporate income tax
HOSE
Ho Chi Minh Stock Exchange
CNY
Chinese Renminbi
HTZ
High-tech zone
CPO
Crude palm oil
ICT
Information and communications
technology
DTA
Double taxation agreement
IE
Industrial estate
ECER
East Coast Economic Region
IEAT
Industrial Estate Authority of Thailand
E&E
Electrical and electronics
IM
Iskandar Malaysia
EIU
Economist Intelligence Unit
IMF
International Monetary Fund
EM
Emerging market
IP
Industrial park
EPZ
Export processing zone
IPO
Initial public offering
EU
European Union
IZ
Industrial zone
EZ
Economic zone
JPY
Japanese Yen
FCWT
Foreign contractor withholding tax
JV
Joint venture
FDI
Foreign direct investment
KHR
Cambodian Riel
FIC
Foreign Investment Committee
KLCI
Kuala Lumpur Composite Index
FIZ
Free industrial zone
LAK
Laotian Kips
GDP
Gross domestic product
LMW
Licensed Manufacturing Warehouses
GLC
Government-linked companies
PricewaterhouseCoopers 87
Abbreviations
Abbreviation
Full term
Abbreviation
Full term
MAI
Market for Alternative Investment
SCORE
Sarawak Corridor of Renewable Energy
MIFC
Malaysia International Financial Centre
SDC
Sabah Development Corridor
mln
Million
SET
Stock Exchange of Thailand
MNC
Multinational corporation
SEZ
Special Economic Zone
MDeC
Multimedia Development Corporation
SME
Small-medium enterprise
MOSTI
Malaysian Ministry of Science,
Technology & Innovation
SOE
State-owned enterprise
MPI
Ministry of Planning and Investment
SSO
Services and outsourcing
MSC
Multimedia Super Corridor
S&P
Standard & Poor’s
MW
Megawatt
THB
Thai Baht
NCER
Northern Corridor Economic Region
TPM
Technology Park Malaysia
NPL
Non-performing loan
trn
Trillion
O&G
Oil and gas
UK
United Kingdom
PIZ
Promoted industrial zone
UNCTAD
United Nations Conference on Trade and
Development
PwC
PricewaterhouseCoopers
UPCoM
Unlisted Public Companies Market
QIP
Qualified investment project
US
United States of America
R&D
Research & development
VAT
Value added tax
RM
Ringgit Malaysia
VND
Vietnamese Dong
SBT
Specific business tax
WEF
World Economic Forum
WTO
World Trade Organisation
88 Asia’s emerging gems: Investment brief
Glossary of ratings
Standard & Poor’s long-term borrowings credit rating
Standard & Poor’s credit ratings varies from AAA (highest – capacity to meet its financial commitment on the obligation is
extremely strong) to D (lowest – being payment in default). The ratings from ‘AA’ to ‘CCC’ is modified by the addition of a
plus (+) or minus (-) sign indicating relative standing within the major rating categories (i.e. A+, BBB and BBB-).
Malaysia
A-
More susceptible to the adverse effects of changes in circumstances and
economic conditions than obligations in higher-rated categories. However, the
obligor’s capacity to meet its financial commitment on the obligation is still strong.
Thailand
BBB+
Exhibits adequate protection parameters. However, adverse economic conditions
or changing circumstances are more likely to lead to a weakened capacity of the
obligor to meet its financial commitment on the obligation.
Vietnam
BB
Less vulnerable to non-payment than other speculative issues. However, it
faces major ongoing uncertainties or exposure to adverse business, financial, or
economic conditions, which could lead to the obligor's inadequate capacity to
meet its financial commitment on the obligation.
Source: www.standardandpoors.com
Moody’s long-term borrowings credit rating
Moody’s credit ratings varies from Aaa (highest – judged to be of high quality, with minimal credit risk) to C (lowest –
judged to be typically in default, with little prospect for recovery of principal or interest).
Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa (i.e. A2, Ba3
and Caa1):
• Modifier 1 - obligation ranks in the higher end of its generic rating category
• Modifier 2 - mid-range ranking
• Modifier 3 - a ranking in the lower end of that generic rating category
Malaysia
A3
Upper-medium grade and are subject to low credit risk.
Thailand
Baa1
Subject to moderate credit risk. They are considered medium-grade and as such
may possess certain speculative characteristics.
Vietnam
Ba3
Judged to have speculative elements and are subject to substantial credit risk.
Source: v3.moodys.com
PricewaterhouseCoopers 89
Glossary of ratings
EIU country risk analysis
EIU’s country risk model evaluates the ability (and willingness) of a country to pay its debt. The primary focus of the
model assessment are on sovereign risk, currency risk and banking sector risk and two types of generic risk: political risk
and economic structure risk. Ratings of countries’ risk varies from AAA (highest – capacity and commitment to honouring
obligations not in question under any foreseeable circumstances) to D (lowest – very weak capacity and commitment to
honouring obligations)
BBB
Capacity and commitment to honour obligations currently but somewhat susceptible to changes in
economic climate.
BB
Capacity and commitment to honour obligations currently but susceptible to changes in economic
climate.
B
Capacity and commitment to honour obligations currently but very susceptible to changes in economic
climate.
CCC
Questionable capacity and commitment to honour obligations. Patchy payment record.
CC
Somewhat weak capacity and commitment to honour obligations. Patchy payment record. Likely to be
in default on some obligations.
Source: www.eiu.com
90 Asia’s emerging gems: Investment brief
List of charts
Country economic performance
Chart 1
Country’s GDP growth
Chart 2
Country’s inflation rate
Chart 3
Country’s stock market indices
Chart 4
Exchange rate of country’s currency against the US Dollar
Chart 5
The PwC EM20 Index
Chart 6
World Bank: Ease of doing business
Chart 7
UNCTAD: Most attractive location for foreign direct investment (FDI)
Chart 8
WEF: Global Competitiveness Index
Malaysia
Economic overview
Chart 9
Top sectors by GDP contribution, 2008
Chart 10
Trade information, 2008
Leading corporates
Chart 11
Top 10 Companies on Bursa Malaysia
Chart 12
Electrical & electronics
Chart 13
Retail - Departmental store
Chart 14
Banking
Chart 15
Property
Chart 16
Construction
Chart 17
Plantation
Investment overview
Chart 18
Gross approved FDI inflows
Chart 19
Gross approved FDI inflows by sectors, 2008
Chart 20
Promoted industries in the growth corridors
PricewaterhouseCoopers 91
List of charts
Thailand
Economic overview
Chart 21
Top sectors by GDP contribution, 2008
Chart 22
Trade information, 2008
Leading corporates
Chart 23
Top 10 Companies on Stock Exchange of Thailand
Chart 24
Electrical & electronics
Chart 25
Automotive & parts
Chart 26
Retail - Convenience/Departmental store
Chart 27
Construction
Chart 28
Banking
Chart 29
Agriculture
Investment overview
Chart 30
Gross approved FDI inflows
Chart 31
Gross approved FDI inflows by sectors, 2008
Chart 32
Thailand investment zones
92 Asia’s emerging gems: Investment brief
Vietnam
Economic overview
Chart 33
Top sectors by GDP contribution, 2008
Chart 34
Trade information, 2008
Leading corporates
Chart 35
Top 10 companies on Ho Chi Minh Stock Exchange and Hanoi Stock Exchange
Chart 36
Financial services
Chart 37
Industrial products & services
Chart 38
Utilities & infrastructure
Chart 39
Real estate
Chart 40
Electrical & electronics
Chart 41
Food & beverages
Investment overview
Chart 42
Gross approved FDI inflows
Chart 43
Gross approved FDI inflows by sectors, 2008
Chart 44
Vietnam economic zones
Cambodia
Economic overview
Chart 45
Top sectors by GDP contribution, 2007
Chart 46
Trade information, 2007
Laos
Economic overview
Chart 47
Top sectors by GDP contribution, 2007
Chart 48
Trade information, 2007
PricewaterhouseCoopers 93
PwC contacts
Malaysia
Thailand
Vietnam
PricewaterhouseCoopers
Level 10, 1 Sentral
Jalan Travers
Kuala Lumpur Sentral
P O Box 10192,
50706 Kuala Lumpur, Malaysia
PricewaterhouseCoopers
15th Floor Bangkok City Tower
179/74-80 South Sathorn Road
Bangkok 10120, Thailand
Hanoi
Tel: 60 (3) 2173 1188
Fax: 60 (3) 2173 1288
Email: [email protected]
Website: www.pwc.com/my
Advisory Services
Transactions (Deals)
Datuk Mohd Anwar bin Yahya
Tel: 60 (3) 2173 1811
[email protected]
Assurance Services
Mohammad Faiz Azmi
Tel: 60 (3) 2173 0867
[email protected]
Tax Services
Khoo Chuan Keat
Tel: 60 (3) 2173 1368
[email protected]
94 Asia’s emerging gems: Investment brief
Tel: 66 (0) 2 344 1000
Fax: 66 (0) 2 286 3456
Email: [email protected]
Website: www.pwc.com/th
PricewaterhouseCoopers
7th Floor Pacific Place
83B Ly Thuong Kiet, Hoan Kiem
Hanoi, Vietnam
Tel: 84 (4) 3946 2246
Fax: 84 (4) 3946 0705
Website: www.pwc.com/vietnam
Advisory Services
Transactions (Deals)
Charles Ostick
Tel: 66 (0) 2 344 1167
[email protected]
Advisory Services
Transactions (Deals)
Paul Coleman
Tel: 84 (4) 3946 2246 (ext 1600)
[email protected]
Assurance Services
Nangnoi Charoenthaveesub
Tel: 66 (0) 2 344 1381
[email protected].
com
Assurance Services
Tax Services
Tax Services
Thavorn Rujivanarom
Tel: 66 (0) 2 344 1444
[email protected]
Dinh Thi Quynh Van
Tel: 84 (4) 3946 2246 (ext 1500)
[email protected]
Nguyen Phi Lan
Tel: 84 (4) 3946 2246 (ext 1000)
[email protected]
Vietnam
Cambodia
Laos
Ho Chi Minh
PricewaterhouseCoopers
123 Norodom Boulevard
Sangkat Tonle Bassac
Khan Chamcar Mon
Phnom Penh, Cambodia
PricewaterhouseCoopers
Units 1-3, 4th Floor
ANZ Vientiane Commercial Building
33 Lane Xang Ave.
Ban Hatsady, Chanthaboury
P O BOX 7003
Vientiane, Lao PDR
PricewaterhouseCoopers
4th Floor Saigon Tower
29 Le Duan, District 1
Ho Chi Minh City, Vietnam
Tel: 84 (8) 3823 0796
Fax: 84 (8) 3825 1947
Website: www.pwc.com/vietnam
Advisory Services
Transactions (Deals)
Stephen Gaskill
Tel: 84 (8) 3823 0796 (ext 1600)
[email protected]
Tel: 855 (23) 218 086
Fax: 855 (23) 211 594
Email: [email protected]
Website: www.pwc.com/kh
Partner
Paiboon Tunkoon
Tel: 855 (23) 218 086
[email protected]
Director
Assurance Services
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Tel: 84 (8) 3823 0796 (ext 1000)
[email protected]
Senaka Fernando
Tel: 855 (23) 218 086
[email protected]
Tel: 856 (21) 222 718
Fax: 856 (21) 222 723
Email: [email protected]
Website: www.pwc.com/lao
Partner
Paiboon Tunkoon
Tel: 856 (21) 222 718
[email protected]
Director
Apisit Thiengtrongpinyo
Tel: 856 (21) 222 718
[email protected]
Tax Services
Richard Irwin
Tel: 84 (8) 3823 0796 (ext 4880)
[email protected]
PricewaterhouseCoopers 95
Industry contacts
Malaysia
Thailand
Vietnam
Malaysian Industrial Development
Authority (MIDA)
Board of Investment of Thailand (BOI)
Ministry Of Planning And Investment
(MPI)
5th Floor, Block 4, Plaza Sentral
Jalan Stesen Sentral 5
50470 Kuala Lumpur, Malaysia
Tel: 60 (3) 2267 3633
Fax: 60 (3) 2274 7970
E-mail: [email protected]
Website: www.mida.gov.my
555 Vibhavadi-Rangsit Road,
Chatuchak, Bangkok 10900
Thailand
Tel: 66 (0) 2 537 8111/15
Fax: 66 (0) 2 537 8177
Tel: 84 (4) 3843 3360/0804 3485
Fax: 84 (4) 0804 8473
E-Mail: [email protected]
Website: www.boi.go.th
E-mail: [email protected]
Website: www.mpi.gov.vn
Vietnam Trade Promotion Agency
(VIETRADE)
Ministry of Commerce
Malaysia External Trade
Development Corporation
(MATRADE)
Menara MATRADE
Jalan Khidmat Usaha
Off Jalan Duta
50480 Kuala Lumpur, Malaysia
Tel: 60 (3) 6207 7077
Fax: 60 (3) 6203 7037/7033
E-mail: [email protected]
Website: www.matrade.gov.my
Central Bank of Malaysia
Corporate Communications Dept
Bank Negara Malaysia
P O Box 10922
50929 Kuala Lumpur, Malaysia
Tel: 60 (3) 2174 1717
Fax: 60 (3) 2174 1515
E-mail: [email protected]
Website: www.bnm.gov.my
44/100 Nonthaburi 1 Road,
Amphur Muang, Nonthaburi 11000
Thailand
20 Ly Thuong Kiet Street,
Hanoi, Vietnam
Tel: 66 (0) 2 507 8000 Fax: 66 (0) 2 507 7717
Tel: 84 (4) 3934 8143
Fax: 84 (4) 3934 8142
E-mail: [email protected]
Website: www.moc.go.th
E-mail: [email protected]
Website: www.vietrade.gov.vn
Federal of Thai Industries
The State Bank of Vietnam
Zone C, 4th flr, Queen Sirikit National
Convention Center
60 New Rachadapisek Road, Klongtoey
Bangkok 10110, Thailand
49 Ly Thai To Street,
Hanoi, Vietnam
Tel: 66 (0) 2 345 1000
Fax: 66 (0) 2 345 1296/99
E-mail: [email protected]
Website: www.fti.or.th
Bank of Thailand
273 Samsen Road
Bangkhunprom, Bangkok 10200
Thailand
Tel: 66 (0) 2 283 5353
Fax: 66 (0) 2 280 0449
E-mail: [email protected]
Website: www.bot.or.th
96 Asia’s emerging gems: Investment brief
6B Hoang Dieu,
Badinh, Hanoi, Vietnam
Tel: 84 (4) 3934 3327
Fax: 84 (4) 3934 9569
E-mail: [email protected]
Website: www.sbv.gov.vn
Cambodia
Laos
The Council for the Development
of Cambodia (CDC) - Cambodian
Investment Board (CIB)
Department of Domestic and Foreign
Investment (DDFI)
Government Palace
Sisowath Quay, Wat Phnom
Phnom Penh, Cambodia
Tel: (855 23) 981 154
Fax: (855 23) 428 426
E-mail: [email protected]
Website: www.cambodiainvestment.
gov.kh
Cambodian Government-Private
Sector Forum
G-PSF Coordinating Bureau
70 Norodom Boulevard
Sangkat Chaktomuk, PO Box 115
Phnom Penh, Cambodia
Tel: (855 23) 210 922
Fax: (855 23) 215 157
Luang Prabang Road,
Vientiane 01001, Lao PDR
Tel: (856 21) 222 690/222 691
Fax: (856 21) 215 491
E-mail: [email protected]
Website: www.invest.laopdr.org
Ministry of Industry and Commerce
Phon Xay Road, Phon Xay Village
Commercial and Information Technology
Division P O Box 4107
Vientiane, Lao PDR
Tel: (856 21) 412 009 Fax: (856 21) 412 434
E-mail: [email protected]
Website: www.moc.gov.la
Ministry of Foreign Affairs
E-mail: [email protected]
Website: www.cambodia-gpsf.org
01004, 23 Singha Road
Vientiane Capital, Lao PDR
The Ministry of Commerce
Tel: (856 21) 413 148
Fax: (856 21) 414 009
20A-B Preah Norodom Boulevard,
Phnom Penh, 12205, Cambodia
Tel: (855 23) 427 358
Fax: (855 23) 213 288
E-mail: [email protected]
Website: www.mofa.gov.la
National Assembly of Lao PDR
E-mail: [email protected]
Website: www.moc.gov.kh
Saysetha
Vientiane Capital, Lao PDR
The National Bank of Cambodia
Tel: (856 21) 451 889
Fax: (856 21) 413 528
22-24 Norodom Boulevard,
Phnom Penh, Cambodia
Website: www.na.gov.la
Tel: (855 23) 722 563/722 221
Fax: (855 23) 426 117
E-mail: [email protected]
Website: www.nbc.org.kh
PricewaterhouseCoopers 97
Acknowledgements
We would like to acknowledge IMF, World Bank, Asian
Development Bank, Business Monitor International, EIU
ViewsWire and other organisations for the use of information
extracted from their publications and websites.
PricewaterhouseCoopers drew on the support of its partners
and staff members with varied experience and knowledge.
Advisors
Charles Ostick
Chin Suit Fang
Datuk Mohd Anwar bin Yahya
Dinh Thi Quynh Van
Ian Lydall
Khoo Chuan Keat
Paiboon Tunkoon
Sridharan Nair
Stephen Gaskill
Project leader
Pearlene Cheong
Project team
Project manager
Vivian Ko Shiau Ping
Editorial
Haniza Taufik
Business Research Services
Debjani Ghosh
Miranda Kua
Nguyen Tuong Van
Ong Khar Keong
Peter Amaczi
Raweewan Wisuthachinda
Sun Kim-Hor
Vatcharaporn Thongjuta
Creative Services
Jimmy Lim
Karen Chong
Norzalila Ghazali
98 Asia’s emerging gems: Investment brief
International Tax
Dorothy Ooi
Lim Yiek Lee
pwc.com
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requires, the network member firms of PricewaterhouseCoopers International Limited, each of
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