Staring down the barrel of enhanced Asean Economic Community (AEC) integration and reduced barriers to competition, the battle for Foreign Direct Investment (FDI) is heating up in Southeast Asia.

Bordering the region’s industrial powerhouse of Thailand, Cambodia and Myanmar have been working to boost the attractiveness of their respective Special Economic Zones to would-be foreign investors.

Myanmar passed its Special Economic Zone law in 2011, creating special tax and non-tax incentives for industrial investors. Of three Special Economic Zones identified for development, the most advanced is Thilawa. Located just 34.2 km from the country’s main international shipping port, the government hopes to attract more than 100 factories into the zone and create more than 50,000 new jobs in the next three years.

In Cambodia, the country’s Minister of Commerce Sun Chantol, a former General Electric executive, has provided a boost to the country’s industrialization effort. The minister’s advisory board sub-committee on FDI, chaired by Tractus’ Managing Director John Evans, has displayed a practical approach to industrial investment attraction strategy focused on advantages in cost-competitive labor, creating a vertically integrated garment sector, light manufacturing and agro-business investment. Cambodia’s own Special Economic Zone legislation also provides for competitive investment attraction incentives in addition to being the most open FDI regime in Asean, according to the World Bank.

A true apples-to-apples comparison of Special Economic Zone incentives is difficult given varying operating conditions and incentive structures. A basic bench-marking exercise of Corporate Income Tax (CIT) exemptions puts Cambodia at the head of the pack with the biggest CIT exemption incentives of up to nine years for qualifying investments. Myanmar meanwhile, despite have some of the least attractive operating conditions, trails the pack offering just seven and a half years (five years CIT exemption plus five years at 50% exemption) compared to Thailand’s eight year CIT exemption for qualifying investments.

Thailand, Cambodia, Myanmar CIT Exemptions
Thailand, Cambodia, Myanmar CIT Exemptions

Additional tax and non-tax incentives are much more difficult to compare on an apples-to-apples basis and varying incentive structures can have dramatically varying impacts on differently oriented businesses. While exemptions on customs duties, tax deductions and other fiscal incentives are an important and quantitatively measurable aspect of a Special Economic Zone location decision, investors must additionally give considerable thought to qualitative aspects such as rights to the repatriation of profits, guarantees against nationalization, dispute resolution mechanisms and equitable treatment of foreign and local investments under law.

Tractus has a long and rich history of industrial investment advisory. Advising on more than US$5 billion of FDI into Asia across more than 700 projects since 1995, Tractus is an expert resource to companies analyzing industrial site selection decisions in Asia. Tractus’ on-the-ground approach to data-backed research and analysis has helped form recommendations that have conferred long term cost and operating condition advantages to hundreds of clients across Asia.

About the author

Joshua is Tractus’ lead manager for the company’s Myanmar office and was Tractus’ first full time employee dedicated to the country. Since 2012, Joshua has led Tractus’ engagements in Myanmar including advising on more than US$31.5 million in direct investment decisions in the mining, porcelain, animal feed, garment and pharmaceutical sectors. Recent projects have included investment cash flow modeling, risk probability analysis, industrial site selection, supply chain analysis and government advocacy on licensing and approvals among others. Joshua sits on the Executive Committee of the American Chamber of Commerce Myanmar Chapter and is an active member of both the American Chamber of Commerce in Thailand and Thai-Canadian Chamber of Commerce as well as the Canada Asean Business Council. Joshua has spoken extensively on the topic of Myanmar including at forums in Toronto and New York as well as in Hong Kong, Vietnam and Singapore. As one of the earliest business advisors on the ground following the suspensions of US sanctions, Joshua’s opinions are regularly sought after and have been printed in regional media as well as the Washington Post and Christian Science Monitor.

Recent Posts

Recent News

  • Tractus Chairs ASEAN/Thailand M&A 2016: Legal, Tax & Business Strategies for Successful Cross-Border Acquisition ConferenceSeptember 29, 2016
  • Tractus Bringing the Public and Private Sector Together to Enhance Global Value Chain Connectivity between Asia, Latin America and the CaribbeanSeptember 7, 2016

Case Studies