By: Alexander Chipman Koty

As Philippine president-elect Rodrigo Duterte prepares to take office on June 30, investors and business people both at home and abroad are wary of how the audacious politician will impact the country’s booming economy. Under President Aquino, the Philippines enacted several liberal macroeconomic reforms and experienced an average GDP growth rate of 6.2 percent, leading the Oxford Business Group to name the country the best economy in South East Asia. However, widespread anger over elitism, corruption, inequality, and crime catapulted the controversial politician to the country’s highest office despite little explanation of his economic policies.

Duterte has made international headlines for his crude and seemingly off-the-cuff anti-establishment remarks, while drawing anxiety from some corners due to his uncompromising tough on crime approach and implicit support for extrajudicial vigilante killings, giving him the monickers “Duterte Harry” and “The Punisher”. His populist campaigning, self-description as a socialist, lack of commitment to the rule of law, and remarks that he does not know much about economics or care about the stock market have unnerved investors who fear a reversal of the previous administration’s liberal economic reforms.

To allay these anxieties, Duterte recently announced an eight-point economic plan setting out his agenda to maintain the Philippines’ vigorous growth. The plan addresses rural development, tax reform, corruption, education, tourism, ease of doing business, foreign investment, and public-private partnerships.

Despite Duterte’s fiery and unpredictable rhetoric, he appears set to continue former president Benigno Aquino’s reforms and further open up the Philippines to foreign investment. While Duterte’s presidency promises to be eventful and campaign pledges may not ultimately be wholly fulfilled, investors can take solace in his reassurances to the business community and commitment to attracting foreign investment.

Law and Order

Duterte’s principal campaign promise to strengthen law and order features prominently in his economic plans. Duterte contends that eliminating gangs and organized crime will reassure investors wary of entering the Philippines due to concerns over their own personal safety. He touts his experience as mayor of Davao, where rampant lawlessness once earned the city the designation the “Nicaragua of Asia”, but now boasts the lowest crime rates in the country and strong foreign investment.

In addition to expunging urban crime, Duterte has pledged to quell ongoing conflicts and insurgencies with Islamist and Communist rebels in the South, principally on the island of Mindanao. While Duterte is notoriously ruthless on crime, even admitting to killing criminals himself, he has signaled his openness to enter peace talks with rebels. If successful, he plans to promote the area – the Philippines’ second largest island and home to over 20 million people – for tourism, agriculture, and infrastructure investment.

By: Ellena Brunetti

Aware that well-developed and organized transport infrastructure plays a vital role in economic growth, ASEAN’s leadership has recently published its 2016-2025 ASEAN Strategic Transport Action Plan. Dubbed the Kuala Lumpur Transport Strategic Plan, the document sets out specific goals with the intention of boosting connectivity within the region. In the following article, we take a closer look at the initiatives of the plan, what has been done so far, and how the various projects will impact businesses operating within the region.

General Goals of the 2016-2025 Master Plan

The main objective of the master plan is to implement the second pillar of the ASEAN Economic Community (AEC) blueprint – creating a competitive economic region. In the context of the strategic transport plan, the second pillar of the AEC aims to develop ASEAN as a single market and production base by enhancing land, air, and maritime transport between ASEAN member states.

This plan also aims at ensuring a sustainable transport network, by formulating a regional policy framework to support sustainable transport, including low carbon modes of transport, integration of transport, and land use planning.

The region’s connectivity with China, South Korea, and Japan is also at the core of the plan, and the development of the ASEAN transport network is expected to combine with China’s “One road, One belt” project.

South Korea is located at a cultural crossroads, where Western and Eastern customs and values intersect. And that can have a profound impact on how business is conducted there.

South Korea (officially known as the Republic of Korea) was established in 1948. Five years later, the armistice ending the Korean War instituted the demilitarized zone that marks the country’s border with North Korea. Over the next 62 years, the two countries took divergent economic paths. Communist North Korea has seen comparatively little economic growth and remains one of the world’s most isolated and secretive countries. The Democratic South, by contrast, has seen sprawling economic growth. South Korea is now the world’s 13th largest country by nominal GDP, and the capital, Seoul, is one of the world’s most important centers for business and finance.

Although South Korea’s business climate is decidedly Western, Eastern customs and traditions – particularly the principles of Confucianism – still factor heavily into Korean life, and Westerners conducting business in South Korea should be mindful of the Eastern influences that pervades its culture.

With that in mind, here are some things to remember about doing business in South Korea.

Respecting superiors

Respecting individuals who have seniority and authority is a major tenet of Confucian philosophy. Because of that, South Korean businesses tend to be very hierarchical, and younger or lower-ranking individuals defer to their elders and superiors in nearly all decisions. Do not expect to work with associates who are used to highly collaborative decision-making processes.

Breaking the ice

As in many Asian cultures, reserved behavior is expected among strangers and new acquaintances. Immediately developing warm, open relationships with new business associates is uncommon. Rather, close business relationships are the product of months – and sometimes years – of building trust.

Maintaining relationships

Once you’ve taken the time to build a trusting relationship with your Korean counterparts, your ongoing behavior will dictate whether you maintain that level of trust. Continue to invest the time and effort to solidify your business relationships. A misstep that comes across as self-serving or rude can set the relationship back.

Negotiating a deal

Because seniority and rank are so important, sending a lower-ranking representative to negotiate a deal with higher-ranking South Korean executives can be perceived as disrespectful. The delegation you send to negotiate should be of equal rank with the delegation sitting across the table.

Managing people

When managing a Korean workforce, you are expected to take an active role in the well-being of your staff – including their personal lives. The relationship between employer and employee is not viewed as merely transactional – labor for money – but as one based on years of building and maintaining trust.

Dressing the part

Conservative business attire is still very much the norm in South Korea – dark suits with shirt and tie for men, business suits or dresses for women. And dress appropriately for the season. The Korean Peninsula is located in the middle latitudes, with the accompanying shift in weather from summer to winter. In Seoul, located in the northwestern part of the country, the average high in January is in the mid-30s Fahrenheit, while the average high in July is in the mid-80s.

The role of women

As a conservative culture, women rarely occupy high-ranking roles in Korean businesses, and their opinions and input are rarely given more weight than that of a male counterpart – even a younger, less-experienced male counterpart. Because this can be a frustrating experience for women from Western cultures, it helps to make a contingency plan for this scenario before you arrive in South Korea.

General information

The culture of Belarus, located in the heart of Europe at the crossroads of trade routes from the West to the East, has absorbed traditions of different people inhabiting Europe. It borders on Baltic States to the north, Ukraine to the south, Russia to the east and Poland to the west.

Belarus covers 207,600 square kilometers, stretching 560 kilometers (350 miles) from north to south and 650 kilometers (460 miles) from west to east. Minsk, the capital, is located on the same latitude as Hamburg and Dublin and is two time zones ahead of London. From Minsk, it takes about two hours to get to Berlin, Paris or Vienna, and less than three hours to London by airplane.

Belarusians generally share the same values of Western culture and think, perform and do business in a way quite similar to that of European business practices.

Belarus as an IT country

With a population of approximately 9.6 million, Belarus has high scientific potential. In early 2000s, the government declared its IT sector to be the one of the top-priority market sectors to be developed, creating great opportunities for foreign investment. In 2005, the virtual Hi-Tech Park (HTP) in Minsk, also known as the Belarus Silicon Valley” was established. There are about 144 companies registered as HTP residents in Belarus, including EPAM, Apalon, IAC, IBA, Itransition, SoftClub, Coherent Solution, Artezio, Intetics and many more. And 10 HTP residents were recently named in the “Software 500” ranking of Software Magazine. Half of Belarus’ HTP resident-companies are 100 percent or partially owned by foreign companies, and software and IT services produced in Belarus are sold to clients from more than 50 countries.

Any Belarusian company engaged in IT and related industries (such as micro-, opto- and nanoelectronics, telecommunications, radio navigation and wireless communication), information protection and setting up data processing centers can apply for residency within the HTP and benefit from tax incentives and other advantages.

The HTP concept is based on an ex-territorial principle, meaning that no physical premise is required to be within the HTP borders. Rather, any company, regardless of its location within Belarus, can be registered as an HTP resident. To benefit from HTP incentives, a foreign investor should first set up a local company within Belarus, then apply for HTP residency status.

Tax incentives in the HTP

HTP residents are exempt from all corporate taxes, including VAT and profit tax, as well as customs duties for certain types of goods. Individual income received by developers from these companies is taxed at 9 percent as personal income tax. Other benefits include 5 percent withholding tax on dividends, interest and royalties sourced from Belarus, and there is no offshore tax on dividends distributed to the parent company. The only tax chargeable on revenue of HTP residents is a 1 percent duty paid quarterly to the HTP administration.

SCHNEIDER GROUP can help

SCHNEIDER GROUP, within its IT-nearshoring strategy, is a reliable partner for foreign companies considering expansion into the Belarusian IT outsourcing market. We can provide assistance based on the needs of the client: (i) IT contracting-searching for the right partners and conducting project controlling functions, or (ii) IT outstaffing – searching for and employing the right IT experts; the entire operational function is managed by the client, whereas controlling functions remain with us, and (iii) entering the market and back office services.
SCHNEIDER GROUP will register a local legal entity for the client, search for a team of experienced IT experts, prepare all paperwork and apply to Hi-Tech Park for residency status, provide legal/business address services, and perform outsourced accounting services, and legal and tax advisory services as needed.

SCHNEIDER GROUP is capable of providing a full scope of services for market entry to a foreign investor considering Belarus as its next destination for further business expansion.

Natalia Shulzhenko is a member of the management Team. Reach her atShulzhenkoNA@schneider-group.com.

Thomas Titsch is director ERP. Reach him at TitschT@schneider-group.com.

By Fernando Vidaurri

Earlier this year, Tholons Inc., a leading U.S.-based services globalization and investment advisory firm, published a report that placed Manila ahead of Mumbai as the second-largest outsourcing destination in the world. Cebu also figured among the top 10 preferred destinations. In fact, over the past couple of years, the Philippines has seen a fast growth in the BPO industry.

The business process outsourcing (BPO) industry has not always been a fast-growing market. Accenture set up the first call center in 1992. However, only after restrictions were eased in 1995 with the Special Economic Zone Act did the industry start growing. The past 10 years, in particular, saw rapid growth, with industry revenue growing 10-fold from $1.55 billion in 2004 to $15.5 billion in 2013. The number of employees working in this industry rose by a similar percentage, from 101,000 to 900,000 over the same time period.

An English-speaking and highly educated workforce

The large college-educated, English-speaking labor force has been one of the main factors behind this growth. Owing in part to their past colonial history, as well as their modern education system, a high number of Filipinos speak English with an American accent. Their culture is Western oriented, and many of them have studied or worked in the U.S. or have been taught to speak with an American accent at school.

Each year, the country produces more than 450,000 graduates every year, who contribute to the qualified labor pool. The country makes higher education a priority. This fact, coupled with the 95 percent literacy rate, provides a big advantage over other Asian countries. Additionally, all schools in the Philippines teach in English, making the country the third-largest English-speaking country in the world. All of these factors, plus being one of the most Western-oriented countries in Asia, have benefited the BPO industry.

Business incentives

The rapid growth in the BPO industry can also be attributed to government regulations and incentives for doing business in the country. The legal regulatory framework and financial reporting guidelines of the Philippines are based on American systems, reflecting the links between the U.S. and the Philippines. Additionally, the 1995 introduction of Special Economic Zones eased restrictions by lowering area requirements for developers and offering tax incentives.

Companies that set up a business in the country enjoy capital-related, operation-related and taxation-related benefits including exemptions on local tax and permits, duty-free import of capital equipment, permanent residence for foreign investors and four-year exemption of corporate income tax, extendable to eight years. Companies also benefit from one of the lowest-cost office rental markets in the region.

Internet connectivity

The young population is also very technologically savvy; in fact, Filipinos are some of the most active social media users in the world. However, the country’s connectivity still lags behind other countries in the region, exemplified by its relatively low rankings in indices of Internet connectivity. The Net Index report published in May by Internet broadband testing company Ookla shows the Philippines has an average download speed of 3.64Mbps, well below the world average of 23.3Mbps.

Slow connectivity speeds, especially when compared to other countries in the region, can influence investors seeking to do business in the region, despite the multitude of other advantages the country offers. According to real estate services firm KMC MAG Group, connectivity issues and infrastructure still put a cap on further investment.

Recognizing the impact of poor infrastructure on attracting foreign direct investment (FDI), the country’s politicians have taken action to remedy the problem. Last year, a bill was filed in the Senate that would require communication companies to provide faster Internet connections. Senate Bill 2238 would impose minimum Internet connections of 10Mbps on local telecommunication companies and ISPs operating in the country. The bill is still pending in the committee, but if passed, it would be a good step toward improving Internet connectivity in the country.

Future outlook

The good news is also that growth is not just confined to Manila but has spread to other cities around the country. Cebu already ranks eighth in Tholon’s Top 100 Outsourcing Destinations and is joined by six other Filipino cities in the Top 100. The industry accounts for 6 percent of the GDP of the country and is expected to grow as more companies look to the Philippines to take advantage of the talented work pool and lower rents in the interior the country.

The high number of English-speaking graduates, the emphasis on higher education and the relatively young age – average 23 years — promise great potential not only for the BPO industry but for the country. Despite the connectivity challenges, the IT and Business Processing Association of the Philippines projects that the industry will create 372,000 new jobs between 2014 and 2016. The BPO sector is projected to employ some 1.3 million Filipinos and generate up to $27 million in annual revenue by 2016.

While the country is largely open to investment, the Philippines can prove a tricky market to crack for first-time entrants. To best take advantage of the country’s strengths, as well as anticipate possible challenges to doing business, it is highly recommended that you enlist the assistance of a professional services firm experienced in operating regionwide. Contact us to find out how we can help your business grow.

This article was first published on www.dezshira.com.

Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and emerging ASEAN, we are your reliable partner for business expansion in this region and beyond.

Contact us at info@dezshira.com or asean@dezshira.com or visit www.dezshira.com.