Southeast Asia is moving toward regional integration with the ASEAN Economic Community taking effect in December of 2015. With the free movement of labor and capital it will bring, China is among many nations wanting to invest in Southeast Asia. Chinese businessmen are investing in Asia’s emerging and frontier markets, from Myanmar to Malaysia. The goal? Finding natural resources and new markets for consumer goods.

However, American firms have been absent by comparison. ASEAN’s ten member states represent a smaller portion of U.S. trade than either China or Japan. This is despite strong sentiment from U.S. business leaders. It’s time for the United States and other western economies to take advantage of Southeast Asia’s huge growth.

Alex Feldman, president of the US-ASEAN Business Council which advocates for U.S. companies wanting to invest 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.”

For American businesses to capitalize on Southeast Asia’s large population and increase in purchasing power, policies by the U.S. government and more effort from companies will have to be made. The Obama administration’s policy of a “pivot eastward” got tons of attention. But there hasn’t yet been any substantive change.

 

Myanmar-AEC

Business and investors from Japan and China are active in Myanmar as it opens up to the world. Those from the United States? Not so much.

 

 

U.S. Government Makes it Hard to Invest in Southeast Asia

Which changes would U.S. businesses benefit the most from? For one, a removal of rules and regulations hampering companies’ ability to do business internationally. The recently enacted FATCA (Foreign Account Tax Compliance Act) law is one example. It 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) which taxes based on citizenship. All others tax based on residency or source of income. American citizens must pay taxes under any circumstances, regardless of where they live, as a result. This is passed onto American-owned firms.

U.S. businesses have less reason to invest globally because of the addition paperwork to file. They’re also taxed higher than their competitors.

But apart from structural changes which probably won’t come in the near future, it’s up to businesses themselves to venture abroad. The U.S. government’s restrictions make it harder for Americans to do business in Asia. However, the countless advantages are still worth it for companies to take the leap.

 

About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's experienced with trading stocks and buying property in Thailand, Cambodia, and elsewhere. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.

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