Some of the most powerful markets in the world are located in Asia. The economies in the region are gradually able to produce innovation and higher-end services, regardless of the short-term challenges. Compared to other regions, Asia has made more investments in digital. Asia and ASEAN continue to be at the top of the list for businesses wishing to expand their operations and services, as they make up about 60% of the global population.
LIST OF BEST ASIAN COUNTRIES FOR DOING BUSINESS IN 2024
With its strategic five-year initiatives and industrial regulations, China has the largest emerging economy in the world. The economy of China is made up of a sizable private sector, mixed-ownership companies, and government-owned enterprises. International investment is also encouraged.
In 1978, the government started implementing transformative economic reforms. Due to these factors, China’s major economy has grown at the fastest rate in the world over the past 30 years, with an average growth rate of over 10%. According to the International Monetary Fund (IMF), China’s GDP in 2023 was US$19.4 trillion, up 8.1% from the previous year and placing it second only to the US at US$26.9 trillion. This puts China ahead of the European Union.
China’s global leadership in purchasing power parity (PPP), which accounts for regional inflation rates and the cost of goods and services, is equally incredible. PPP, however, drops to 73rd place globally when measured by GDP per capita.
As the post-Covid recovery’s base effect wanes and the property market continues to be a drag, it is predicted that China’s economy will expand by 4.4% in 2024. Despite more clear fiscal support, a slight slowdown in infrastructure investments is anticipated, while exports increase as the global tech cycle strengthens.
E-invoicing in China
A pilot program for the fully digitalized VAT and proof-of-purchase form, known as e-fapiao, was introduced in a few Chinese regions in December 2021. The term “fapiao,” which is derived from the ideogram “发票,” refers to the official Chinese receipt that serves as evidence of the acquisition of goods or services. The e-fapiao is a virtual, electronic version of the fapiao that was required due to the pandemic lockdowns that occurred throughout China.
In 2023, the e-fapiao rollout will be extended to include more taxpayers. It is anticipated that e-fapiao will be entirely accessible throughout the nation by 2025.
The legal effects and usage of the fully digitalized e-fapiao are similar to those of the traditional paper fapiao. Businesses will gain numerous benefits from going paperless in addition to the financial and environmental benefits. These include better integration with other electronic systems for reporting and accounting.
Increasing the number of “encouraged industries” in the catalog to attract foreign investment
On January 1, 2023, the Ministry of Commerce (MOFCOM) and the National Development and Reform Commission (NDRC) introduced the Catalogue of Encouraged Industries for Foreign Investment. The document’s goal is to direct foreign expertise and investment toward underdeveloped sectors of the Chinese economy. Foreign investment in industries is divided into four categories: encouraged, permitted, restricted, and prohibited.
Compared to industries in the neural Permitted category, encouraged industries receive preferential treatment, such as tax breaks. Limited to minority stakes in joint ventures, foreign investment in restricted industries is strictly prohibited under the Prohibited category.
The manufacturing of final products, parts and components, and raw materials are covered by the additions and changes made to the updated catalogue. Foreign investment is encouraged in services that are production-oriented, like logistics and research and development. Regional catalogues are designed to address the unique benefits of China’s central, western, and northwest regions.
Foreign investment is encouraged in the following sectors:
- Healthcare: Healthcare includes creating medications for rare diseases and pediatric specialties, producing dental implant systems, creating, researching, and developing therapeutic medical and health textiles, producing cochlear implants and hearing aids, and rehabilitating autistic children.
- Elderly care: Research and development of smart healthcare devices and services related to elderly care.
- Vocational education: Non-academic training in language and art
- Sports: constructing, operating, and overseeing exercise centers; creating and researching heavy snow and ice machinery; developing intelligent sports products and services.
- Rural revitalization: This includes water-saving irrigation, improving rural environments, smart agriculture, and rural tourism.
Following major economic reforms in 1991 and the globalization of trade, India emerged as a growing market. Since then, the economy has been expanding consistently and at a relatively rapid pace. Throughout the past ten years, it has averaged 7.1%, with occasional fluctuations brought on by significant socioeconomic obstacles. Over the next few decades, it is anticipated that India’s growth rate will stabilize at 8%, making it the fastest-growing economy in the world.
India’s economy is currently the third largest in the world in terms of PPP and the fifth largest in terms of nominal GDP. Like China, India’s PPP drops to 127th place when adjusted for per capita GDP (India’s population is currently higher than China’s and ranks first globally).
It is predicted that India will grow by 6.2% in 2024, driven by strong growth in the manufacturing and services sectors as well as strong domestic demand.
New foreign trade policy
India’s new Foreign Trade Policy 2023 went into effect on April 1st, 2023, to increase the country’s exports of goods and services to USD 2 trillion by 2030.
The new strategy aims to further accelerate India’s rise to the center of global trade by boosting trade, promoting manufacturing, facilitating business transactions, creating export hubs, and making the Indian Rupee a global currency.
Debt mutual funds
India implemented new debt mutual fund regulations on April 1, 2023. Under the new regulations, investors in debt mutual funds are no longer eligible for the long-term capital gains (LTCG) tax break and instead pay taxes similar to those on bank deposits. This will also hold for funds of funds (FoFs) that invest in gold, foreign equity, and domestic equity.
New regime for foreign-sourced income
Many people consider Hong Kong to be one of the freest economies in the world, which is supported by its business-friendly climate, reasonable regulatory framework, strong property rights protection, and dedication to the rule of law. Hong Kong is the second-largest trading partner of the Chinese mainland after the United States, making it a strategically located business hub in the Asia-Pacific region. Additionally, it ranks among the Asia-Pacific region’s most significant hubs for financial services.
On January 1, 2023, Hong Kong enacted a new law governing income from foreign sources. The new system mandates that businesses pay tax on several foreign-sourced income streams, including interest, dividends, disposal gains, and income from intellectual property. It replaces the previous offshore profits tax exemption.
An MNE will not be required to pay taxes on certain foreign-sourced income received in Hong Kong if they meet the exemption criteria. These requirements are:
- The requirement for economic substance applies to dividends, interest, and gains from disposal.
- There is a nexus requirement for IP income.
- Gains from disposal and dividends are subject to the participation requirement.
Rich and varied natural resources, controlled inflation, political stability, and reasonably advanced financial systems are characteristics of Indonesia’s emerging market economy. Although the 1997 Asian financial crisis severely harmed Indonesia’s political and economic systems, the country has come a long way since then. It is currently the largest economy in Southeast Asia and a member of the G20, where it is growing at the third-fastest rate, behind only China and India. It has a GDP growing at a rate of about 5% annually and a developing middle-class consumer market.
Tax incentives for investing in Nusantara
The new Indonesian capital, Nusantara, is scheduled to open in 2024. Government Regulation 12 of 2023 (GR 9/2023), which the Indonesian government released, included several incentives to encourage investors to contribute to the growth of the new city. Incentives for priority project investment include corporate tax exemptions, tax holidays, import tax exemptions, personal income tax exemptions, and the possibility of hiring foreign workers for a maximum of ten years.
The government will offer a 100% corporate income tax exemption for a maximum of 30 years to domestic taxpayers who invest IDR 10 billion in the new capital city. The incentive’s duration is determined by the investment sectors.
For ten years, companies in the new capital city will be allowed to hire foreign workers. Also, based on the terms of their employment contracts, foreign workers may be able to extend their 10-year residency permits. The Ministry of Manpower usually receives a monthly payment of USD 100 from the employer, but this payment is not required by the Foreign Worker Compensation Fund.
Additionally, investors are receiving 95-year land use permits from the government. A total of 190 years of land usage could be possible if these were extended for an additional 95 years.
By 2024, Malaysia is expected to be a high-income country. With a wide range of goals that prioritize equity, inclusivity, environmental sustainability, infrastructure, human capital development, and more, the most recent five-year development plan (2021–2025) offers a path toward advanced economy status.
Despite having a population of only 32 million, Malaysia is one of the richest emerging economies in Asia. With a GDP that is ranked fourth in ASEAN and 35th overall, Malaysia is classified as an upper-middle-income country with a per capita income of USD 12,295. After accounting for population size, PPP is ranked 54th in the world, only behind Greece and Turkey.
Malaysia’s economy is among the most open in the world; since 2010, its trade-to-GDP ratio has exceeded 130%. With about 40% of jobs connected to export operations, the nation’s openness to trade and investment has been crucial to the generation of jobs and income growth.
New requirements for hiring foreign employees
On January 1, 2023, Malaysia implemented new regulations regarding the hiring of foreign workers.
The new requirements are:
- Before employing foreign workers, the employer must obtain approval from Malaysia’s Director General of Labour (DGL). This applies to all non-Malaysians and those in the country temporarily who need a work permit.
- Upon termination, work permit expiration, repatriation, or any other reason, employers are required to notify the DGL within 30 days of the foreign employee’s employment coming to an end. Additionally, employers have 14 days to notify the DGL if a foreign employee quits or leaves without cause.
Failure to abide by the new regulations could result in a fine of up to RM 100,000, a maximum five-year prison sentence, or both.
The Philippines is among the emerging markets with the fastest rate of growth in the world. The Philippines’ economy ranked 36th in the world by nominal GDP in 2023, 12th in Asia, and third in ASEAN after Thailand and Indonesia, according to the IMF. With a population of about 115 million, the Philippines ranks 29th in the world in terms of PPP but 117th when taking per capita GDP into account.
Economic activity is robust, with the finance, insurance, real estate, and business process outsourcing sectors all performing well in the service sector. With a large and youthful population, a growing middle class, and increasing urbanization, the nation’s financial health is based on robust consumer demand, a thriving labor market, and large remittances from overseas.
100% ownership of public services
Senate Bill (SB) 2094, which amended Commonwealth Act No.146, popularly known as the Public Service Act, was approved on March 21, 2022, by then-President Rodrigo Duterte. This allowed for 100% foreign ownership of public services in the Philippines. But in March 2023, the act underwent yet another revision.
The most recent revision allows for 100% foreign ownership of services like telecommunications, airports, trains, and expressways from April 1, 2023. Only forty percent of the following public utilities can be owned by foreign entities:
- Distribution of electricity
- Transmission of electricity
- Utility vehicles for the public
- Water pipeline distribution and sewerage systems
Foreigners are now able to fully own domestic companies, including microenterprises, and renewable energy projects, according to the government.
Singapore stopped allowing business entities to hold electronic meetings, or “e-meetings,” from July 1, 2023. In 2020, this clause was temporarily implemented to help with business continuity in the event of the COVID-19 pandemic.
The removal of the e-meeting clause may affect businesses in several ways. For instance, they might have to pay extra for transportation to and from actual meeting places. The Monetary Authority of Singapore (MAS) and the Accounting and Corporate Regulatory Authority (ACRA) declared that they are developing changes that will enable companies to continue holding general meetings virtually even after the clause is revoked.
Due diligence requirements for financial advisors
The MAS has implemented additional due diligence requirements for corporate finance (CF) advisors doing business in the city-state under Notice SFA o4-N21. All corporate advisory engagements are subject to the due diligence requirements from October 1, 2023.
A CF advisor is required to perform due diligence with reasonable care, skill, and diligence in accordance with Notice SFA o4-N21. Additionally, the CF advisor has to make sure the listing applicant is aware of their responsibilities under the Act.
From verifying the accuracy of the data provided on the listing application to making sure the directors of the listing application are qualified to run the company, the CF advisor plays a crucial role in upholding these due diligence requirements.
Refer to Singapore company registration for more information if you wish to start a business there.
Thailand is a developing free-market economy with a nominal GDP of about US$575 billion. It is ranked second in Southeast Asia and 27th in the world.
With the private sector acting as the primary growth engine, Thailand boasts a thriving domestic market and a developing middle class. Thailand’s economy is highly integrated into the world economy, with over 70% of GDP coming from exports. Its massive industrial sector accounts for 40% of GDP, while its robust and expanding services sector, which is mostly focused on financial and tourism services, accounts for 50% of GDP.
Thailand has been a regional leader in trade facilitation and liberalization, especially with its Asian neighbors, given the significance of exports. Thailand is an important ASEAN member, with a prime location that provides quick access to the market of more than 660 million people within the association. Furthermore, Thailand’s easily accessible transportation infrastructure to China, India, Japan, and Korea expands the consumer market to even greater scales.
The minimum number of shareholders was lowered from three to two by the Civil and Commercial Code amendment (No. 23), which came into force on February 7, 2023.
Vietnam’s economy is among the fastest-growing in the world. The rapid economic growth of the nation has been facilitated by the shift in labor allocation from agriculture to manufacturing and services. Vietnam has developed as a result of private investment, strong tourism, growing incomes, and increased urbanization.
Tax deadlines extended
Under Decree 12/2023/ND-CP, businesses in Vietnam will get tax extensions for land rent, corporate income tax, personal income tax, and VAT.
Tax deadline extensions are available to the majority of businesses and individuals conducting business in Vietnam. Among the industries are:
- Fisheries, forestry, and agriculture
- Manufacturing of beverages;
- drainage and treatment of wastewater
- Education and training
- Accommodation and catering services
- Food processing and production
- Activities related to health and social assistance
- Real estate company
- Transportation and storage
The new deadlines are as follows:
VAT – Monthly VAT declarations: six months has been added to the deadline from January to May 2023.
- June: a five-month extension of the deadline
- July: a four-month extension of the deadline
Quarterly VAT reports:
- Initial quarter of 2023: six-month extension of the deadline
- 2023’s second quarter: a five-month extension of the deadline
Corporate income tax – The first and second quarters of 2023’s corporate income tax deadlines had their dates extended by three months.
Personal income tax – The deadline for business households and individuals to file their personal income taxes was set for December 30, 2023.
Land rent – The first half of the 2023 land rent payment was due on May 31, 2023, six months later than previously scheduled.
What customs need to be taken into consideration by companies doing business in Asia?
The importance placed on relationships is one significant cultural nuance. Beyond the bare minimum required by contracts, Asians place a high value on developing business relationships based on mutual respect and trust. The impact of societal and economic factors on business practices is another example of a cultural nuance.
Which Asian nation is the easiest to establish a business in?
Hong Kong is among the easiest markets to launch a business in terms of company formation. As a result, a lot of business executives consider the Asia-Pacific region to be a good place to expand. In addition to being the best place to start a business, Hong Kong serves as a gateway to the Chinese mainland market.
What drives businesses to enter the Chinese market?
China has emerged as a top destination for companies looking for new opportunities due to its enormous market potential and rapid economic growth. The country is a desirable market for businesses worldwide due to its large consumer base, quickly growing GDP, and supportive business environment.
What is the fastest-growing industry in Asia?
In China, Indonesia, and many other Asian countries, the number of delivery and logistics companies has been growing at a faster rate than any other industry. This is because these nations have better transportation systems and a thriving e-commerce sector.
Why do businesses prefer China over India?
Wages are important, but locations with high demand, cheap infrastructure, and favorable corporate tax rates also attract investors. These factors currently make China and Southeast Asian countries more competitive in the manufacturing sector than India.