As Southeast Asia moves toward regional integration with the ASEAN Economic Community set to take effect in December of 2015, along with the free movement of labor and capital it will bring, China is among many nations that have noticed the region’s opportunity. Chinese businessmen are present throughout Asia’s emerging and frontier markets, from Myanmar to Malaysia, seeking natural resources and new markets for consumer goods.
However, American companies and investors have been absent by comparison, and the ten member states of ASEAN as a whole represent a smaller portion of U.S. trade than either China or Japan. It is time for the United States and other western economies to take advantage of the huge growth in Southeast Asia.
Alex Feldman, president of the US-ASEAN Business Council which advocates for U.S. companies doing businesses in Southeast Asia, sees the benefits. “ASEAN now represents more than 620 million people and a combined gross domestic product of US$2.2 trillion”, said Feldman. “Clearly, ASEAN matters to the United States more than ever, just as the United States most clearly matters to ASEAN.”
In order for American businesses to capitalize on Southeast Asia’s large population and rapid increase in purchasing power, policy implementations by the U.S. government along with more effort from companies of all sizes will have to be made. Much attention has been given to the Obama administration’s policy of a “pivot eastward”, but any substantive change in action remains to be seen, whether diplomatic, commercial, or cultural.
What changes would U.S. businesses benefit the most from? For one, a removal of rules and regulations that hamper the ability of companies to succeed in doing business internationally. One example is the recently enacted FATCA (Foreign Account Tax Compliance Act) law, which subjects both American citizens and U.S. majority held companies to stringent reporting requirements in an attempt to cut down on tax evasion. The law requires financial institutions, even those with no operations in the United States, to give private information about their clients to the IRS.
In addition, the United States is the only country in the world (besides Eritrea) that taxes based on citizenship, rather than source of income or residency. This makes U.S. citizens liable to pay taxes under any circumstances, and is passed on to companies which are owned by Americans. This removes some of the incentives of seeking out opportunities worldwide by giving companies more paperwork to file, as well as taxing them higher than their competitors may be.
But apart from structural changes that may not come in the near future, it is up to businesses themselves to venture abroad and find ways to overcome harmful policies. While doing business in Asia is made even more complicated by the U.S. government’s restrictions, the countless advantages are still worth it for companies to take the leap.