BIMP-EAGA Investment Incentives
BIMP-EAGA member countries have greatly expanded efforts to promote and facilitate domestic and foreign investments and to create a stable, predictable, and transparent regulatory environment.
- Brunei Darussalam’s efforts to attract foreign direct investment into high-tech industries include investment incentives; a low tax regime with no capital gains or personal income taxes; exemptions from corporate taxes; exemption from import duties and taxes; and adjustment of capital allowances and losses.
- Indonesia’s investment incentives provide a choice between tax holidays and a tax incentive program in high-priority sectors; special economic zone incentives; import duty exemptions; pioneer industry status; and investment guarantees.
- Malaysia’s investment promotion program in technologically sophisticated manufacturing and service industries includes a variety of tax incentives to attract investment in different sectors and regions of the country.
- The Philippines’ investment reforms of the past 4 years have bolstered the country’s economic fundamentals, and its incentive programs have targeted six broad priority sectors that are part of the country’s industrialization plan.
Brunei Darussalam has an open economy that favors both domestic and foreign direct investment (FDI). As part of efforts to reduce the economy’s dependence on oil and gas, it has targeted high-technology industries in its development plan.
Brunei Darussalam offers low-tariffs, with no capital gains or personal income tax; exemptions from corporate taxes; exemption from import duties and taxes on raw materials, machineries, equipment component parts, accessories or building structures; and adjustment of capital allowances and losses. The incentives are administered by the Brunei Economic Development Board and Ministry of Industry and Primary Resources and promoted by the Ministry of Foreign Affairs and Trade.
According to the World Trade Organization, Brunei Darussalam has made progress in attracting investment in both the traditional oil and gas industry and in manufacturing.
Brunei Darussalam further streamlined its investment process by allowing business licenses to be issued immediately by a single authority under the Ministry of Home Affairs, once the business incorporation or registration certificates have been issued by the Ministry of Finance.
Indonesia offers two types of tax incentives. The first is a tax holiday that exempts businesses from paying corporate income taxes for up to 10 years. To receive the tax holiday, the company must have first set up as a legal entity in Indonesia for at least a year. The alternative is a tax incentive program for projects in national high-priority sectors. The projects may enjoy reduced income taxes of 5% from 30% for six years. The high-priority sectors include agriculture, forestry, maritime and fishery, energy and mineral resources, industry, public works, culture and tourism, transportation, communication and information, and health.
Businesses may also enjoy tax exemption for their import of machines, goods, and materials for production for two years. An import duty facility is granted for four years to a company using locally produced machines at least 30% of the total value of machines for its production. Under the facility, a company operating in industrial sectors and service areas like tourism, health, and telecommunications will have their import duties paid by the government.
Indonesia also offers tax incentives to businesses in special economic zones, including the one in Bitung, North Sulawesi, which is part of BIMP-EAGA. Investors receive income tax discounts ranging from 20% to 100% over 25 years. Foreign investors are allowed to own property in the special economic ones. They are also able to import raw materials free of any value-added tax. Goods manufactured in these special economic zones are exempt from value-added tax when sold domestically, but remain subject to customs and excise fees. Tourism, restaurant and entertainment businesses operating in these zones receive a 50% to 100% discount on entertainment taxes.
Malaysia promotes investments in technologically sophisticated manufacturing and service industries given its goal to become knowledge-driven and for the economy to move further up the value chain. It wants to be a high-tech hub for manufacturing and services activities and to attract quality investments in high value-added industries as well as new growth areas. It envisions becoming a high-income nation by 2020.
The WTO has noted Malaysia’s efforts to institute incentives to encourage investment as well as the strengthening of a number of agencies to guide prospective investors.
Malaysia offers a variety of tax incentives to attract investment. Tax holidays are available in ICT, biotechnology, and halal products in the food, cosmetics and pharmaceutical industries.
Tax exemptions are available for exported goods with a significant portion of value added within Malaysia. Fifteen-year tax holidays are available for firms with "Pioneer Status," that is, companies with products or activities in industries or parts of Malaysia to which the government places a high priority. Meanwhile, 10-year tax exemptions are available for companies with "Investment Tax Allowance" status, which is given to businesses with products or activities in industries or parts of Malaysia in which the government places a priority, but not as high as those with Pioneer Status.
The Philippines treats foreign investors the same as their domestic counterparts, except in sectors reserved for nationals by the Philippine Constitution and Foreign Investment Act. The country’s investment climate has significantly improved over the last 10 years and the reform momentum is likely to continue to boost the country’s prospects for attracting investment in the coming years.
The Philippines issues an Investment Priorities Plan annually, listing areas of investments eligible for incentives. Preferred activities include the four broad sectors of manufacturing, agribusiness and fishery, services, and infrastructure and logistics, while preferred export activities cover the production and manufacture of export products, services exports and activities in support of high value exporters.
In 2015, the Philippines issued the 10th Foreign Investment Negative List, which revises List A on sectors where foreign ownership is limited by mandate of the Constitution and specific laws. The revised listing provides clarity on the specific professional areas that are open to foreigners, subject to reciprocity.