ASEAN offers opportunities with Singapore as gateway

By Gautam Khurana, India Law Offices and Aloysius Wee, Aquinas Law Alliance
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The Association of Southeast Asian Nations (ASEAN) comprises 10 countries, namely, Singapore, Malaysia, the Philippines, Indonesia, Myanmar, Laos, Brunei, Thailand, Cambodia and Vietnam. With total GDP estimated at US$2.55 trillion in 2016, it would rank sixth in the world if it were a single country, according to the IMF. ASEAN and each of its members present diverse opportunities for investment and trade cooperation.

Gautam KhuranaManaging partnerIndia Law Offices
Gautam Khurana
Managing partner
India Law Offices

India and ASEAN countries have commercial links that go back centuries. Today ASEAN is India’s fourth-largest trading partner, with annual trade in 2015-16 at US$65.04 billion. Meanwhile, statistics from India’s Ministry of External Affairs show that ASEAN has accounted for approximately 12.5% of investment flows into India since 2000. The ASEAN-India Free Trade Area has been in operation since 1 July 2015. This year, ASEAN and India celebrate the 25th anniversary of their dialogue partnership and 15 years of summit-level interaction with a wide range of activities.

Indeed, trade between India and ASEAN can be expected to increase. The ASEAN countries formed the ASEAN Economic Community (AEC) on 31 December 2015. It is still early days for the AEC, which was set up to promote trade and commerce both within the AEC and between the AEC as a bloc with other countries.

The beauty of the ASEAN countries lies in their diversity however this also presents some challenges. The countries’ legal systems vary greatly and while those of Singapore, Malaysia and Brunei, like that of India, are based on English common law, each of these countries has developed its own precedents and its own legal “tradition”.

The diversity of legal systems in ASEAN might raise questions as to the choice of law. For instance, a Malaysian investor funding a project in Indonesia may insist upon Malaysian governing law for the agreement or a neutral, third party law, perhaps Singapore law. On the other hand, a Singapore company entering into an agreement with the Indonesian government to obtain a mining licence can expect their agreement to be governed strictly by Indonesian law.

Aloysius WeeManaging partnerAquinas Law Alliance
Aloysius Wee
Managing partner
Aquinas Law Alliance

Given the complexities of the varied legal systems and languages, contemporary international commercial arbitration enables parties to choose a neutral place for the resolution of their disputes. This provides both a “face saving” measure and a good compromise for the parties.

The relationship between India and Singapore is strong politically, culturally and economically. Indian companies’ familiarity with doing business in Singapore is a pull factor to continue to conduct their ASEAN business through Singapore.

Given the AEC now, Singapore is an effective financial and commercial hub for ASEAN trade and commerce. The ease of doing business in Singapore is evident from the World Bank’s recent ranking of Singapore as No. 2 for ease of doing business among 190 economies in the world. Many of the services involving the Singapore government have gone electronic to ensure efficiency and speed, yet the government does not rest on its laurels. For instance, all Singapore government ministries and agencies provide a phone number and email address for a “quality service manager” that welcomes public feedback or complaints.

Singapore remains a popular venue for the establishment of regional headquarters, financing and in recent times, dispute resolution. According to an International Chamber of Commerce (ICC) report, Singapore is the No. 1 choice of venue in Asia for ICC arbitrations, and is ranked fourth in the world.

Because of the diverse demography of ASEAN, investors can expect a comprehensive “menu” of industries to invest in, with varied risk profiles and investment scale. The healthcare, logistics, automotive and electronics sectors are among those of particular interest to investors from India. Thailand and Malaysia both have motor industries that Indian companies can contribute to or invest in. The emerging economies of Myanmar and Cambodia offer India opportunities in infrastructure development, particularly in the area of information technology infrastructure. Indian businesses may also take advantage of lower costs of manufacturing and relocate manufacturing of fast-moving consumer goods to the AEC, where there is a large and growing consumer market.

Along the way, there may be teething issues but these can be overcome with good business and legal advice. With the Make in India initiative, we can also optimistically expect to “Make It Together with ASEAN”.

Gautam Khurana is the managing partner at India Law Offices in New Delhi. Aloysius Wee is the managing partner at Aquinas Law Alliance in Singapore.

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