BIMP-EAGA's Foreign Direct Investment Laws and Regulations

Date Published
December 09, 2019
While BIMP-EAGA countries have different policies governing foreign direct investments (FDIs), all four countries have set down investment laws and regulations to attract investors.

Here's an overview of each country's FDI laws and regulations.

Brunei Darussalam 

Brunei Darussalam’s long-term development plan,“Wawasan Brunei 2035” or “Brunei Vision 2035,” emphasizes attracting FDI as a key driver of economic growth. To diversify the economy, the Brunei Economic Development Board and the Ministry of Industry and Primary Resources offer favorable incentives to foreign investors. The country’s laws and regulations governing FDIs compare favorably with other BIMP-EAGA member states. 

Indonesia 

To provide clearer and more transparent investment regulations, Indonesia has an official list of businesses that are open and closed for investments. Indonesia bars investment activities for goods and services prohibited by Indonesian law because they are dangerous, polluting, or strategic for national security or heritage. Indonesia welcomes investments in several industries although in some cases, it imposes conditions on capital ownership, location, and licensing. 

Foreign investors are expected to provide training and development to Indonesian nationals to ensure the transfer of skills and technology needed for locals to effectively participate in management activities. A company can generally hire foreigners only for positions that the government has deemed open to non-Indonesians. Employers must provide manpower-training programs aimed at replacing foreign workers with nationals. Foreign worker must meet education, work experience, and Indonesian language requirements and commit to transfer knowledge to local counterparts. 

There are no controls over foreign exchange transactions. The Indonesian rupiah is freely convertible. Under the 2007 Investment Law, the government offers assurance to investors relating to the transfer and repatriation of funds. Also, there are no restrictions or time limitations on investment remittances. 

Malaysia 

In an effort to attract foreign investment, the government has liberalized, or in certain cases, removed investment restrictions. Transactions for acquisitions of interests, mergers, and takeovers of local companies by domestic or foreign parties are allowed without prior approval. 

The government has also liberalized the services sector to attract more foreign investment, especially in tourism and freight transportation. Complete foreign ownership is now allowed in healthcare, retail, education, along with professional, environmental, and courier services.  

Limits on foreign ownership remain in place in telecommunications, financial services, and transportation. Moreover, foreign investments in services, whether in fully liberalized or controlled sub-sectors, remain subject to review and approval by ministries and agencies with jurisdiction over the relevant sectors. The objective of the review and approval processes is to determine whether proposed investments meet the government’s requirements for the incentives in place. 

Investors in industries targeted by the Malaysian government can often negotiate favorable terms with ministries, or agencies, regulating the conditions applicable to specific industries. The terms can include assistance in dealing with regulations and policies, some of which can be waived on a case-by-case basis. The Malaysia Investment Development Authority serves as a focal point for legal and regulatory questions about foreign investment, especially in guiding foreign investors interested in the manufacturing and service sectors. In Sabah and Sarawak, the Sabah Economic Development and Investment Authority and the Sarawak Economic Development Corporation support investors. 

Philippines 

There are about 180 fiscal incentive laws in the Philippines, with the Board of Investments, under the Department of Trade and Industry, facilitating the grant of incentives. Fiscal incentives include income tax holidays, tax credits, and deductions from taxable income, while non-fiscal incentives include employment of foreign nationals, simplified customs procedures, importation of consigned equipment, and operation of bonded manufacturing warehouses. 

The Philippine Economic Zone Authority (PEZA) regulates and promotes investments in export-oriented manufacturing and service facilities inside special economic zones, including grant of fiscal and non-fiscal incentives. There is a more predictable business environment within the special economic zones, particularly those operated by PEZA.  

For Mindanao, there are 32 special economic zones that are currently operating in four types of zones—agro-processing, IT, manufacturing, and tourism. 

Source: BIMP-EAGA Business Opportunities in Corridor Value Chains