Region

Times Higher Education’s Asia Rankings Demonstrate Increased Government Investment in Education Across Asia

Posted on by

By Dezan Shira & Associates
Editor: Alexander Chipman Koty

Times Higher Education (THE) released their annual Asia University Rankings today, awarding the National University of Singapore (NUS) the top spot in Asia for the first time since the ranking system was created in 2013. Japan’s foremost institution, the University of Tokyo, has plummeted from top spot in 2015 to seventh in this year’s rankings. Meanwhile, the University of Hong Kong – long considered one of Asia’s premier educational institutions – has fallen out of the top three to fourth place, a first for the prestigious university. Singapore’s Nanyang Technological University and China’s Peking University tied for second place to round out the top three.

Continue reading…


Mongolia Cancels 2016 Visa on Arrival Facilities for 42 Countries

Posted on by

The Mongolian government has cancelled the visa on arrival program that was extended to 42 countries in mid-2014. This means there will be no such facility during 2016 and all travelers from these nations now need to apply for a visa in advance from the Mongolian Ministry of Foreign Affairs.

The visa-free access for the 42 nations concerned was granted from June 2014 until 31st December 2015, but the decision not to extend it and revert back to a strict pre-visit visa-issuance program has taken many diplomats, businesspeople, tourists and travelers by surprise; especially as the decision impacts most significantly upon EU nationals, who are amongst the largest investors in and travelers to the country. The process to attain a pre-visit visa takes a minimum of three days and must be accompanied by various documentation concerning the visit.

Continue reading…


North Korea as a Product Finishing China Alternative

Posted on by

CDE Op-Ed Commentary

North Korea rarely enters the media unless it is bad news: rockets being shot over Japan, saber rattling with the United States, or nuclear testing. Yet there is another reality – that of North Korea as a product finishing destination. This recently came to light in the Rip Curl case, where I helped calm the waters over what had threatened to engulf the company in a wave of negative criticism. That piece, Rip Curl’s North Korea Scandal Is Actually A China Rules of Origin Issue“,  detailed how it is common for Chinese factories, and particularly those in the Dongbei (North-East) region of China, to subcontract finishing of products to North Korean factories across the border. Many of these factories are in fact Chinese invested. The basic reason is twofold – firstly, North Korean wages are about 25 percent of those payable to Chinese factory workers in the North-East, and secondly, because they can. 

What caught many people by surprise are the internationally agreed “Rules of Origin” guidelines, which determine how much locally sourced material and processing must go into a finished item and still permit it to have a “Made in China” label. That amount varies depending upon the product, but it is rarely 100 percent. In fact in terms of garment finishing – sewing on buttons, collars, cuffs, inserting zippers and so on, which is what would have been happening in Rip Curl’s case – it can be as high as 40 percent.  

It is entirely conceivable that Rip Curl didn’t know about this. But it does demonstrate that their China lawyers were somewhat sloppy in their contractual due diligence. If you don’t want products to include outsourced finishing in third countries, put it in the production contract. North Korea is just next door, and I have visited factories in the DPRK where very well-known brands are being finished there, for shipment back to China, where the fixing of a “Made in China” label is carried out, and the product then re-exported to its ultimate market in Japan, South Korea or the United States.  I take a somewhat perverse pleasure in knowing that it remains entirely possible that Donald Trump may in fact be wearing items finished in the DPRK.

Much of North Korea’s beef of course has to do with the United States, although the international community, including China, certainly do not approve of their nuclear testing. China recently joined with the Americans in approving additional sanctions on the country following the latest tests, although frankly it remains unclear what else can be done to further squeeze a regime already sanctioned to the hilt. 

Recent American blog comments elsewhere suggest that North Korea’s business environment is similar to that of China and provides (second hand) anecdotes to illustrate that. However, such comments are misguided, potentially dangerous, and in terms of encouraging American companies to look at the DPRK market while it remains under sanctions, illegal. It is naive in the extreme to suggest that the DPRK business environment is the same as China’s. Doing business in North Korea is not at all like doing business in China. I should know: my firm was asked back in 1999 to establish an investment office to be seated in the North Korean Ministry of Commerce building in Pyongyang. I was also hired, and carried out, a project to assist the DPRK write their foreign investment laws, which mainly consisted of answering questions about China’s relevant legal structure and sending the DPRK Minister of Commerce a series of books about Foreign Investment Law in several other countries. North Korea’s Foreign Investment Laws have, and I quote a local law firm’s comments, “a surprisingly sophisticated framework of foreign investment and related legislation in place, with dozens of laws and regulations covering numerous aspects of foreign business activity, including a revised dispute resolution law”. Needless to say, our mooted Pyongyang office never materialized, although it was fun to look at it from a potential perspective, and an honor to be asked at the time. The unwise placing of North Korea as part of an “Axis of Evil” by then incoming President George W Bush rather put a stop to any hopes that the country would open up and become a de facto sub-contracting Province of China while maintaining its sovereignty.  We’ll never know what could have been.  

North Korea does however have a number of well-established experts, for want of a better word, in situ, with a rare handful of expatriates having made the country their base for business for upwards of two decades now. If that doesn’t qualify someone as being an “expert”, when so few have ever been to the country, let alone regularly visited it, then I don’t know what does. But I can assure readers it is nothing like China. I wrote an article about China’s trade with the DPRK, China’s Trade With North Korea, fairly recently, which outlines the trade and investment support given by China to the North Koreans. Although my hope for a rapprochement at the time has not materialized, it does outline the hard trade support the Kim regime still enjoys. 

The Asia Briefing bookstore meanwhile regularly features North Korea business intelligence reports. These are sited under the “Partner Publications” section on our Bookstore and are free. The country remains a pariah, and its bellicose attitude doesn’t win it any friends. Yet overall, the United States diplomacy towards the country hasn’t been the best either. I don’t especially recommend investing in North Korea as an alternative Asian destination: it is too prone to sudden disruptions in trade, and there are the sanctions to consider, although these don’t affect everyone. Nonetheless, it is a fascinating country and I do recommend a visit. Understanding the issues that countries such as North Korea face is key to a more pragmatic and ultimately peaceful response.

International lawyers wishing to keep their clients out of the country should insert clauses forbidding sub-contracting of work to third countries. For the rare and brave souls out there that have ties with North Korea, opportunities are there, as there are in all countries under immense pressures in terms of permitted trade and investment.  But it is not like China.


Chris Devonshire-Ellis
 is the Chairman of Dezan Shira & Associates, a full service foreign direct investment practice with 28 offices across ASEAN, China and India. The practice advises foreign investors in these markets with research, legal advisory, tax advisory and related business services, including due diligence, compliance, accounting, payroll and related assistance. Please email to asia@dezshira.com  or visit our website at www.dezshira.com .

To obtain a complimentary subscription to Asia Briefing and Chris’s updates, please click here.

Related Reading-AB

 

 


DPRK Feb
DPRK Business Monthly: February 2016
The latest issue of DPRK Business Monthly is now available as a complimentary PDF download on the Asia Briefing Bookstore. This regular publication looks at current international, domestic, and peninsular affairs concerning North Korea while also offering commentary and tourism information on the country.

 


DPR KoreaD.P.R. Korea’s Rajin-Songbong Economic & Trade Zone
This UNDP report is a special guide on the climate for foreign investment and foreign transit trade in the Democratic People’s Republic of Korea’s Tumen River Area, specifically focusing on the Rajin-Sonbong Economic and Trade Zone.

 

 


TumenThe Great Tumen Initiative Investment Guide
The Greater Tumen Initiative is an intergovernmental cooperation mechanism in Northeast Asia, supported by the United Nations Development Program, with a membership of five countries: People’s Republic of China, Democratic People’s Republic of Korea, Republic of Korea, Mongolia and Russian Federation.


China’s Silk Road Development & Opportunities for Europe – EuroCham Hong Kong Event

Posted on by

On March 11, the European Chamber of Commerce Hong Kong will hold the China’s One Belt, One Road: Opportunities for Europe” breakfast seminar, in which a group of experts will gather to discuss China’s new Silk Road initiative. 

Chinese President Xi Jinping has stated that China’s proposed “Silk Road Economic Belt” and “21st Century Maritime Silk Road”, also known collectively as “One Belt One Road” (OBOR), will impact three billion people, uniting the largest market in the world with “unparalleled potential”. The breakfast seminar will examine the project’s major ambitions for institutional, financial, and infrastructure change and analyze how it will unfold across the entire region.

Continue reading…


Sending employees to China on a Project Basis? Avoid an Unexpected Tax Bill

Posted on by

By Steven Elsinga and Grace Tate

Apart from placing full time expatriate employees in China, as an investor you may often need to send staff from the parent company to China to complete temporary projects. Common examples include quality control, engineering projects, training or consultancy. However, what many foreign investors don’t know is that such visits may result in the parent company being subject to a wide array of Chinese taxes. This may even be the case if the company already has a subsidiary in China.

So how does this work? Obviously, a foreign-owned company incorporated in China is subject to Chinese tax. However, if a company registered abroad is deemed to have ‘permanent establishment’ in China, it will be subject to Chinese tax as well, such as Corporate Income Tax, VAT and other local surcharges. This would happen if the foreign enterprise has a business venue or construction site in China, is represented in China by an agent, or – most relevant to the topic at hand – dispatches personnel to China to provide services. This includes services rendered to the local subsidiary.

Continue reading…


Choosing an Investment Location in ASEAN’s Booming Automobile Industry

Posted on by

By Elizabeth Leclaire

ASEAN countries have continued to gain economic footholds in the global market, particularly in the automotive industry. Automobile manufacturing and production has skyrocketed in recent years, most notably in Thailand, Indonesia, Vietnam, and Malaysia. Although these ASEAN nations have all focused on automotive industry development, the particular economic niches and consumer bases differ greatly between them. This article will outline the primary differences between the markets and their implications on foreign investors looking to invest in Southeast Asia.

Continue reading…


Ind-AS: Preparing for India’s New Accounting Standards

Posted on by

By Dezan Shira & Associates
Publications Editor: Samuel Wrest

Foreign companies establishing a presence in India will encounter a host of considerations that do not exist in their home country. Of these, interpreting and understanding India’s idiosyncratic system of accounting standards can be an especially difficult challenge.

Until recently, India, like many countries in Asia, employed an antiquated set of generally accepted accounting principles (GAAP) that often proved difficult for foreign firms to adhere to. In order to have these standards converge more closely with international financial reporting standards (IFRS), the Institute of Chartered Accountants in India (ICAI) set out to introduce a new system, called simply Indian Accounting Standards (Ind-AS).

The first phase of Ind-AS was implemented in April 2011 and introduced a total of 35 new accounting standards, including ones on income taxes, impairment of assets and statements of cash flows. Subsequent phases were implemented in April 2013 and April 2014.

Continue reading…


Employing Foreign Nationals Across Asia

Posted on by

By Dezan Shira & Associates
Shanghai, Delhi and HCMC Offices

According to a survey conducted by HSBC, Asia is the world’s most popular destination for expats seeking a new challenge, particularly from Western countries such as the U.S. and U.K. Combined with its surging economies and plentiful opportunities, Asia is understandably an appealing destination for Western workers seeking employment.

Having the right mix of domestic employees with an understanding of local customs and expats with international experience is essential for foreign companies. However, obtaining employment visas for foreign talent can be a complicated procedure in many of the most popular destinations for foreign investment. Added to this, the relevant regulations undergo change at a rate faster than many companies are prepared to handle: China, India and Vietnam, for example, have all amended their work visa regulations in recent years. For China and Vietnam, these changes have served to increase the overall number of visa categories available to foreigners, while in India, new procedures have been introduced that add more eligibility requirements for the employment visa. In all instances, the process for obtaining a work visa has become more stringent.

Continue reading…


Retirement Plans For Asian Legal and Tax Partners

Posted on by

CDE Op-Ed Commentary

DSA SL (3)

Property investments such as this one by Dezan Shira & Associates are a good way to retain key partners, as well as provide retirement planning both as a capital investment and rental income. Several Asian firms are now reinvesting in property investment vehicles to attract and retain high quality personnel.

Although there are plenty of new, young practices now commencing life throughout Asia, the original old guard of law and tax partners, and especially those in China, are now nearing or are at retirement age. While many will be protected by their own firms’ schemes, personal investments and mandatory pension fund contributions, many smaller practices – some of which are now substantial businesses – may not have put those safety net measures in place, or may only now be thinking about doing so.

With an overall trend of partners now retiring at younger ages – the recommended retirement age for expatriate partners is now 55 – this means that, coupled with fast growth rates across Asia, partner level employees should have become personally financially independent by this age. 

Assuming a partner level position is achieved by age 40, this requires an estimated US$15 million of income for an average partner over the next fifteen years – a combined annual salary and dividend package of at least US$1 million. Comparisons with other firms across Asia suggest that practices achieving annual turnovers in excess of US$10 million per annum – a relatively low threshold – should be looking to implement these levels of partner income. If not, then one of two situations apply: either there is significant reinvestment by partners into the practice – a positive element – or one or more partners are simply not productive enough and are taking too much capital out of the business.

Continue reading…


Is Your Asian Law or Tax Career Earning You US$15 Million Plus?

Posted on by

CDE Op-Ed Commentary

At the recent Leading Edge Alliance Asia conference, a range of issues were discussed concerning the levels of remuneration partners at law and tax firms should reasonably be aiming for during their career. 

That number – US$15 million. The figure, which was arrived at with broad consensus from firms throughout Asia and including China, India, ASEAN and Australia, was based upon expected partner earnings over a 15 year period, meaning that at partner level income needs to be an annual remuneration of around USD1 million plus – after tax. This amount included salary and bonus/dividend levels, acknowledged the high cost of children’s education (estimated at US$1 million per child up until completion of University), and was aimed at partners achieving a reasonable level of sustainable upper middle class income, with enough money to further invest on a personal basis to underpin income from the employing firm. Such a benchmark has been loosely adopted by most practices in Asia. 

Continue reading…


Scroll to top