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Introduction to Southeast Asia's Investment Environment (Philippines, Malaysia, Vietnam)


Introduction to Southeast Asia's Investment Environment (Philippines, Malaysia, Vietnam)


Southeast Asia includes regions geographically south of China, east of the Indian subcontinent, and northwest of Australia.

They are divided into mainland and islands, the mainland includes Cambodia, Laos, Myanmar, Thailand, and Vietnam; the islands include Brunei, East Timor, Indonesia, the Philippines, and Singapore, and Malaysia is included in both, bringing the total number of Southeast Asian countries to 11. The following provides a basic introduction to the Philippines, Vietnam, Malaysia, and other places.


I.Philippine investment climate

The Philippines is a Southeast Asian country located in the Western Pacific Ocean. It consists of 7,106 islands surrounded by the South China Sea, the Philippine Sea, the Sulu Sea, the Celebes Sea, and the Luzon Strait. Neighboring countries include Taiwan, Vietnam, and Indonesia.

The terrain is mountainous with narrow coastal lowlands. The system of government is a republic. The Philippines has a mixed economic system that includes various private liberties, as well as centralized economic planning and government regulation. The Philippines is also a member of the Asia-Pacific Economic Cooperation (APEC) and the Association of Southeast Asian Nations (ASEAN).

Opening up and restrictions on foreign investment

Foreign Direct Investment Policy

  • The Philippines seeks foreign investment to create jobs, promote economic development, and contribute to sustained growth. The Board of Investments (BOI) and PEZA are the main investment promotion agencies (IPAs). They offer investors incentives and special investment packages. Notable advantages of the Philippine investment climate include free trade zones, including PEZA, and a large, educated, English-speaking, relatively low-cost Filipino workforce. Philippine law treats foreign investors the same as domestic investors, except in areas reserved for Filipinos by the Philippine Constitution and foreign investment laws.
  • Restrictions on foreign ownership, insufficient public investment in infrastructure, and lack of transparency in procurement tenders hinder foreign investment. The regulatory regime in many economic sectors in the Philippines remains ambiguous, and corruption is a major problem. Large family-owned conglomerates, including San Miguel, Ayala, and SM, dominate the economic landscape, crowding out other smaller businesses.
  • The Investment Priorities Program (IPP), administered by the BOI, identifies the preferred economic activities approved by the President. Government agencies are encouraged to adopt policies and implementation plans consistent with IPP. The Foreign Investment Act (FIA) requires the publication of the Foreign Investment Negative List (FINL), which lists sectors where foreign investment is restricted.
    The FINL consists of two parts:
    Part A details industries in which the Philippine Constitution or laws restrict foreign participation;
    Part B lists foreign ownership restrictions for reasons of national security, defense, public health, ethics, and the protection of small and medium enterprises (SMEs).

Restrictions on foreign control and private ownership and establishment rights

  • Under the 1987 constitution, foreigners are prohibited from owning land outright, although the 1993 Investor Lease Act allows foreign investors to lease up to 1,000 hectares (2,471 acres) of contiguous land for a maximum period of 75 years. Dual citizens are allowed to own land.
  • The Foreign Investment Act (FIA) of 1991 requires the publication of the Foreign Investment Negative List (FINL) every two years, which outlines industries that restrict foreign investment. FINL prohibits foreign ownership/participation in the following investment activities: mass media (except recording and internet businesses); small-scale mining; private security agencies; exploitation of marine resources, including small-scale exploitation of natural resources in rivers, lakes and lagoons; cooperatives; driving cabins; manufacture of firecrackers and pyrotechnic devices; manufacture, repair, storage and/or distribution of nuclear, biological, chemical and radiological weapons and anti-personnel mines. In addition to the practice of law, radiology and X-ray technology, and ship deck and ship engine officers, other occupational laws and regulations allow foreigners to practice in the Philippines if their country allows reciprocity for Filipino citizens, these include medicine, pharmacy, nursing, dentistry, Accounting, Architecture, Engineering, Criminology, Teaching, Chemistry, Environmental Planning, Geology, Forestry, Interior Design, Landscape Design and Customs. In practice, however, language tests, cumbersome registration processes and other barriers prevent this from happening. Environmental planning, geology, forestry, interior design, landscape architecture and customs declaration. In practice, however, language tests, cumbersome registration processes and other barriers prevent this from happening. Environmental planning, geology, forestry, interior design, landscape architecture and customs declaration. In practice, however, language tests, cumbersome registration processes and other barriers prevent this from happening.
  • The Philippines limits foreign ownership to 40 percent in explosives, firearms, and military hardware manufacturing. Other areas with different foreign ownership caps include: private radio communication networks (40%); private employee recruitment firms (25%); advertising firms (30%); natural resource exploration, development, and utilization (40%, with exceptions); Educational institutions (40%, with some exceptions); operation and management of public utilities (40%); operation of commercial deep-sea fishing vessels (40%); Philippine government procurement contracts (40% for commodities and commodity supply); locally funded Contracts for construction and maintenance of public works (40%, with some exceptions); private land ownership (40%);
  • Retail trade businesses with the capital of less than $2.5 million or less than $250,000 for luxury retailers are reserved for Filipinos. The Philippines allows full foreign ownership of insurance adjustment, loan, financing, or investment companies; however, foreign investors are prohibited from holding shares in such businesses unless the investor’s home country grants the same reciprocal rights to Filipino investors.

Development of outsourced industries:

  • The Philippines is now taking advantage of its widespread use of English to vigorously promote the business process outsourcing industry, which is growing by an average of more than 20% annually. Two-thirds of the outsourcing industry’s revenue comes from customer service centers, and the remaining one-third comes from software development, animation, and engineering design. Non-customer service department. Among the business investment process outsourcing in the Philippines, it is worth mentioning Call Center. There are currently about 400 Call Centers in the Philippines, with employees ranging from 25,000 to 10. The size of the Call Center industry in the Philippines leads India and ranks first in the world. 75% of its operators are concentrated in Luzon Island (Metro Manila), followed by Vysaya in the center and Mindanao in the south. The niche of operating a Call Center in the Philippines is that the operating cost is lower than that of the United States, Canada, Australia, and other countries, the network dedicated line facilities are complete, the operating experience is rich, and the government is strongly supported, the Philippine employees are diligent and have language advantages and business needs. Skill. More than 90% of Call Centers in the Philippines use English, and 10% also provide services in 17 special languages ​​other than English, such as Chinese and Japanese.
  • A key factor that will increase the attractiveness of the Philippine economy over the next decade is the rapidly expanding size of the domestic consumer market. “The Philippines is projected to become one of Asia’s $1 trillion economies by 2033, which will make the Philippines more attractive for foreign direct investment by multinational corporations and will attract new investment into manufacturing and infrastructure, among others. Sector. Foreign investors will increasingly focus on the opportunities created by the Philippines’ fast-growing domestic consumer market and its attractiveness as a hub for manufacturing exports such as the production of electronics.

II.Vietnam investment environment

Vietnam is located in the eastern part of the Indo-China Peninsula, with a land area of 331,690 square kilometers and a coastline of 3,260 kilometers. The climate is tropical monsoon climate with humidity around 80%. Since Vietnam began economic reforms to transition to a market economy in 1986, the government has welcomed foreign direct investment as a key component of Vietnam's high economic growth over the past two decades.
Foreign investment continues to play a key role in the economy: According to Vietnam’s General Statistics Office (GSO), Vietnam exported $281 billion in goods in 2020, 72 percent of which came from projects utilizing foreign direct investment.

Attractive investment destination

  • Due to strong economic fundamentals and favorable investment climate, Vietnam has become a destination for multiple supply chain and manufacturing relocations. The country’s total new capital, adjusted capital and share purchases by foreign investors remained at $31.1 billion in 2021 as of Dec. 20, up 9.2 percent year-on-year, according to the Bureau of Foreign Investment. Since 2019, Vietnam has continued to emerge as an emerging manufacturing hub in the region, accounting for the majority of new manufacturing investments. Relocations from China or other parts of Southeast Asia have boosted FDI growth in recent years. This trend has been a key driver of the economy’s strong performance during the pandemic.

Having a good supply chain environment

  • The ability to establish a strong and efficient manufacturing ecosystem is one of the main reasons that has made Vietnam one of the major winners in the supply chain relocation battle. This includes building means for industrial suppliers and supplier networks to support large inbound manufacturers, as well as improving the country’s power, road, and transportation infrastructure. Vietnam is primarily known for its textile and garment manufacturing industry. However, in recent years, it has become a leading center for electronic product manufacturing in Southeast Asia.
  • It is expected that this trend will continue in the coming years as long as the overall fundamentals remain strong, the investment environment remains attractive, and the surge in investment relocation from other markets and foreign manufacturing investment continues.

Restricted and prohibited foreign investment sectors in Vietnam

  • Industries that affect national defense, national security, and social order; financial and banking industries; industries that affect public health; culture, news, media, and publishing; leisure and hospitality industry; real estate management; exploration, search, exploration, and exploitation of natural resources; ecology and environment; development of education and training; handling of imported toxic waste into Vietnam; and production of various toxic chemicals or projects using toxic substances prohibited by international conventions are subject to a list of prohibited investment projects and a list of investment projects with restrictions, which apply to foreign investors. (Source: Article 29 of the Vietnamese Investment Law and Article 23 of the implementing regulations of the Vietnamese Investment Law)

III.Malaysian investment environment

Malaysia, a Southeast Asian country, is located north of the equator and consists of two non-adjacent regions: Semenanjung Malaysia, also called Malaysia Barat, located on the Malay Peninsula, and East Malaysia, located on the island of Borneo. Kuala Lumpur, the capital of Malaysia, is located in the west of the peninsula, about 25 miles (40 kilometers) from the coast; established in 1963, Malaysia is strategically located between the Indian Ocean and the South China Sea and is well served by all major air and shipping routes. This, coupled with the country's sustainable and solid economic foundation, comprehensive business readiness environment, future-oriented focus, and dynamic skilled workforce, makes Malaysia an attractive cost-competitive investment location in the region and rapidly emerging as shared services and a leading preferred hub for the tech industry.

The terrain is mountainous with narrow coastal lowlands. The system of government is a republic. The Philippines has a mixed economic system that includes various private liberties, as well as centralized economic planning and government regulation. The Philippines is also a member of the Asia-Pacific Economic Cooperation (APEC) and the Association of Southeast Asian Nations (ASEAN).

Foreign Direct Investment Policy

  • The Malaysian government continues to encourage foreign direct investment (FDI). Government officials are calling for investment in high technology and research and development, with a focus on artificial intelligence, IoT device design and manufacturing, smart cities, electric vehicles, manufacturing automation, telecommunications infrastructure and other related industries such as aerospace. The government also seeks to further develop traditional industries such as oil and gas; palm oil and rubber, wholesale and retail businesses including e-commerce, financial services, tourism, electrical and electronics (E&E), business services, communications content and infrastructure, education, agriculture, and health care.
  • Historically, the Malaysian government has welcomed foreign direct investment as an integral part of its economic development. Over the past decade, the gradual liberalization of the economy and the influx of foreign direct investment have created new jobs and businesses and propelled Malaysia’s export-led growth strategy. The Malaysian economy is highly dependent on trade. According to the World Bank, the value of imports and exports of goods and services in Malaysia held steady at about 130% of GDP in 2018, more than double the global average.
  • Malaysia has several national, regional and municipal investment promotion agencies, including the Malaysian Investment Development Authority (MIDA) and InvestKL. These agencies can assist with business strategy consulting, domain familiarization, talent management programs, networking, and other post-investment services.

Restrictions on foreign control and private ownership  and establishment rights

  • Foreign and domestic private entities may establish and own commercial enterprises and engage in various forms of paid activity, with some exceptions. While Malaysia has taken steps to ease policies on foreign investment, there are still local equity participation requirements in certain sectors.
  • In 2009, Malaysia repealed the Foreign Investment Committee (FIC) guidelines that restricted foreign parties’ acquisitions of interests in local companies, mergers and acquisitions. However, certain business sectors, including logistics, industrial training and distribution trade, require restrictions on foreign equity participation when applying for business licenses, permits and approvals. Foreign investment in service industries, whether in industries without foreign equity caps or in controlled sub-sectors, is still subject to review and approval by ministries and agencies with jurisdiction over the relevant industries.
  • A key function of this review and approval process is to determine whether a proposed investment qualifies for various incentives implemented by the government to advance economic development goals. Investors in industries targeted by the Malaysian government can often negotiate favorable terms with the ministry or agency responsible for regulating the industry. This can include assisting in navigating a complex web of regulations and policies, some of which can be waived on a case-by-case basis.
  • Foreign investors in non-target industries tend to receive less government assistance in obtaining the necessary approvals from various regulators and thus may face greater hurdles.

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