WEEKLY BUSINESS NEWS AND CURRENT AFFAIRS
(Feb. Protected content , Protected content
Ongoing Myanmar ethnic conflict not seen to impact on FDI Thailand extends deadline for oil and gas concession bids Indonesia to revise tax holidays regulation to lure investors Mining sector opposes 8 „mining-free zones‟ in the Philippines China sees FDI spike in January
￼￼￼￼￼￼The recent conflicts between the Myanmar government and armed ethnic rebels are not expected to have an impact on foreign investment inflows over the next year, The Irrawaddy on Feb. 18 reported economic observers as saying. But broader turmoil could signal a negative long-term outlook, it said. On a visit to promote investment in the Southeast Asian nation, London‟s global ambassador Alderman Alan Yarrow told The Irrawaddy that he did not think ongoing clashes in Myanmar‟s northeast would impact foreign direct investment in the country. “Nearly every country at the moment has a problem somewhere. And if you‟re an emerging economy, as rich (in natural resources) as Burma, you are going to have conflicts which are different,” he said. “I don‟t think that people will necessarily consider that as being serious unless it gets bigger. At the moment it‟s a border conflict, it‟s not something across the whole of the country.” Myat Thin Aung, chairman of the Hlaing Tharyar Industrial Zone in Yangon said the fighting in northeastern Myanmar and recent student protests would not be a serious drag on FDI.
Heavy fighting between the Myanmar army and the Kokang rebels has raged since last week, with dozens of casualties reported on both sides.
Assessment: Despite concerns about Myanmar‟s stalled reform process and continued government clashes with armed rebels, foreign direct investment has continued to pour in the country. The Myanmar Investment Commission reported last month that it had approved new foreign investment projects worth US$ 6.6 billion in the first nine months of the fiscal year Protected content April Protected content . The figure represents a tremendous rise in the country‟s FDI from the US$ 4.1 billion in Protected content US$ 1.4 billion in the previous year. The British global ambassador may have reason to expect that the Laukkai fighting will not impact on the country‟s FDI. But this may be only in the short term. If clashes with rebels continue to happen frequently, this will negatively affect the country‟s long-term stability and the investors‟ confidence.
Thailand‟s National Energy Policy Council extended the deadline for the 21st tender of oil and gas exploration and production concessions for one month, from Feb. 18 to March 16, local daily The Nation reported on Feb. 17. Energy Minister Narongchai Akrasanee said the resolution of a council meeting chaired by Prime Minister Prayuth Chan-ocha was in response to a request by many public groups. No firm had applied yet, Narongchai said, but companies understood the situation well and were still confident in the government‟s policy. The government will convene a public hearing on Feb. 20 to clarify the situation with the groups which have opposed the bidding. Kurujit Nakornthap, deputy permanent secretary of the Energy Ministry, said the ministry was ready to clear doubts over key issues, from the remaining fuel reserves to public concern about petroleum production under the concession system.
Assessment: The group opposing the bidding for Thailand‟s offer of oil and gas concessions now includes former Prime Minister Abhisit Vejjajiva. Concerned with transparency and government revenue, the group is calling Prayuth to review the process. Reuters reported that Thailand‟s pre-tax profit from the concessions is around 67 per cent compared with the Southeast Asian regional average of 74 per cent. The military government had said it will set a new deadline for the bids after a public forum set on Feb. 20. But the military government‟s extension of the deadline for the bidding even prior to the public forum signifies its firm intention to proceed with the process. The auction, according to the country‟s Energy Ministry, has attracted the interest of several international companies including the Thai units of China National Petroleum Corporation (CNPC) and Japan‟s Mitsui. But lack of bid application at the moment has allowed government to delay the process for a month.
Indonesian Finance Minister Bambang Brodjonegoro has promised to revise a regulation on tax holidays before it expires in August to provide fiscal incentives to companies to invest in the country, according to The Jakarta Globe on Feb. 18. Bambang said that the various incentives under the regulation are part of a wider fiscal incentive package the government plans to offer to companies. The Finance Ministry last year extended the regulation on tax holidays by a year after it expired in August last year. Under the regulation, the ministry grants companies operating in certain sectors a “tax holiday” by waiving their income tax requirements for five to 10 years. This break is available to manufacturing companies that invest at least Rp 1 trillion (US$ 78.2 million) in five “pioneering” sectors: oil refining and basic petrochemicals; renewable energy; base metals; machinery; and telecommunications equipment. The tax allowance break, meanwhile, is administered under a Protected content regulation. It allows eligible companies to enjoy a 5 per cent reduction in corporate income tax per year for up to six years. Bambang said that once all the revisions are completed, they would constitute “the biggest package” of fiscal incentives ever granted in Indonesian history.
Assessment: Indonesia‟s promise to revise the regulation on tax holidays emphasizes its drive to lure foreign direct investors to boost the country‟s economic growth. It also points to the weaknesses of the existing incentive to investors. Indonesian investment agency BKPM said it had found that less than 10 per cent of companies availed themselves of the country‟s offer of tax
￼holidays. Investors frequently complained during the previous administration that it was too difficult to secure tax holiday. The tax holiday was also not offered to some sectors, including maritime and infrastructure. Thus, BKPM sees the need to revise the regulation.
￼￼￼A report in the Rappler news site said representatives from the Philippines‟ mining sector expressed their reservations about the plan to declare eight provinces as mining-free zones during a Senate hearing on Feb. 17. The hearing looked into eight bills filed separately by eight congressmen to declare their provinces and one district as off-limits to mining. These areas are: Cagayan de Oro City, Catanduanes, Nueva Vizcaya, Eastern Samar, Nueva Ecija, Biliran, Davao City and the 2nd District of Sorsogon. Banning mining from these areas will "set a bad
￼precedent" for the Philippine government, said Chamber of Mines of the Philippines vice president for policy Ronald Recidoro during the hearing. "Mineral resources are limited, finite and do not occur everywhere. They are concentrated in only a few blessed provinces. This deprives the national government of the chance to develop a national industrialization plan," he added. But the congressmen who filed the bills defended their proposed laws saying mining has led to nothing but catastrophe for the provinces they represent. Senator Loren Legarda, chairperson of the Senate Environment Committee, decided to suspend the hearing until more data on the benefits of mining could be presented.
Assessment: The eight bills filed in the Philippine Congress to make eight areas “mining-free zones” point to existing opposition to mining in the Philippines. Currently, there is a moratorium on all new mining contracts until a new revenue-sharing agreement between mining companies, national government and local governments is finalized. But the mining bill recently filed by government, which increases government‟s take from mining, is criticized by the mining sector as killing the industry by making it uncompetitive.
China saw a surge of foreign direct investment (FDI) into the country last month as investments in the service industry gained steam, state media agency Xinhua reported on Feb. 16. FDI in the Chinese mainland jumped 29.4 per cent in January from a year earlier, settling at US$13.92 billion. The pace of growth quickened from a 1.7-percent uptick in Protected content , the Ministry of Commerce (MOC) said. A total of 9.18 billion dollars, around 66 per cent of the FDI, went into China's service sector last month, with the financial service industry seeing the biggest jump. Boosted by investments in the high-end manufacturing industry, combined FDI flowing into the manufacturing sector reached 3.95 billion dollars, accounting for 28.4 per cent of the total, MOC spokesman Shen Dayang said.
Assessment: Chinese media have been trumpeting the spike of FDI into the country in Jan. Protected content . The surprising data contradicts two other phenomena, namely: China‟s continuing economic slowdown and foreign companies‟ claim that that they are increasingly being targeted by Chinese regulators. China in Protected content the US as top FDI destination. Chinese authorities are confident the country will continue to be among the top global destinations this year as they promise to improve its investment environment.
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APAC Assistance is a risk management company providing highly specialized consulting services and solutions to national and multinational organizations. We aim to be the partner of choice in security, emergency management and business continuity services throughout the Asia Pacific region. We offer bespoke solutions to matters affecting companies that are not resourced to solve the problems internally. We are made up of industry experts drawn from Military, Government and Policing backgrounds where our key consultants have held senior management positions in Asia Pacific and/or Global level in private enterprise. Our senior Management team has extensive and specialist experience in providing risk and investigative services in the Asia Pacific Region.
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