Growth In South East Asia Brings Ever-Changing Compliance Needs
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It’s a region that’s changing, growing and speeding towards the next phase. And that environment forms the basis for discussions at this year’s Asian Legal Business (ALB) In-House Legal Summits.
It’s a region where half of the population is under the age of 30; one where inequality is a big trend, yet economic growth is booming. The nations of the ASEAN Economic Community are even looking to the European Union, trying to find ways to cooperate on political and economic projects.
The “ASEAN 5” – Indonesia, Malaysia, the Philippines, Thailand and Vietnam – will exceed economic growth rates of 5% for the next decade, largely driven by a young and mobile population that’s tapped in to a global world delivered direct to their smartphones.
Yes, it’s a region that’s changing, growing and speeding towards the next phase. And that environment forms the basis for discussions at this year’s Asian Legal Business (ALB) In-House Legal Summits, currently being held across Asia.
Discussing the scope of enterprise risk oversight, changing corporate governance needs and a revolution in legal and compliance across South East Asia (SEA) are in-house legal counsels, legal practitioners and compliance industry experts, including representatives from TMF Group’s local offices.
“SEA is growing fast and opportunities are everywhere,” says Albert Porta, Associate Director of Global Business Development. “There is a fair bit of uncertainty as well, but all countries are moving forward, albeit at different paces.
“There is a sense of general growth and optimism. I’m curious to see how developing economies will reshape themselves to grasp synergies rather than directly competing against each other.”
Those sought-after synergies drive talk of economic union across ASEAN, but that’s something Mr Porta doesn’t see happening soon: “Regulatory gaps make an economic union seem far at the moment. Infrastructure varies from one country to another; the gap is sizeable. There’s a long way to go but I believe that governments are realising that loosening protectionism will benefit them.”
Mergers and acquisitions driving global growth
For the most part, it’s M&A work that’s forcing rapid change in these once-lagging economies.
“When it comes to M&A, Philippines is a tiger economy in Asia now,” says TMF Philippines Managing Director Sharon Yam, who represented the company at the ALB Philippines summit.
“The current Philippines president, Rodrigo Duterte, is actively participating in roadshows in different countries, meeting Filipinos and fostering trade relationships. Philippines is also chairing ASEAN this year; with this heightened profile, there are many countries interested to invest in the country, while it also looks outward to expand internationally.
“ASEAN countries are opening up and becoming more international. There is lots of optimism in the Philippines economy and collaboration with ASEAN countries will further increase that growth. Philippine companies are getting ready to compete globally and are keen to bring global players into the Philippines.”
Ms Yam says this outlook brings a growing trend of M&A, both local and cross-border, as well as a growing awareness and the need for corporate compliance.
“Change is on the horizon,” she says. “Philippine companies are expanding out of the country and going regional and global. They are buying and investing in international brands and bringing them to the Philippines. Many international companies are also expanding into the Philippines to take advantage of its robust and growing economy. As such, there is more focus on compliance and governance, and we expect more transparency and more collaboration.”
Consistent global reporting needs behind move from local to global compliance partners
On the other side of the region, TMF Thailand’s Managing Director Tom Leenders moderated a discussion on cross-border M&A transactions at the ALB Thailand Summit. He heard about the caveats and on-the-ground experiences of the C-level when expanding operations in multiple countries, and found there’s an increasing demand for cross-border compliance reporting, multijurisdictional consolidated FATCA, transfer pricing reports, and more.
“Handling operations per country in silo sourcing local vendors has always been a way to reduce costs, although risking disparities in communication and quality of service delivery,” says Mr Leenders. “Now we are seeing multinationals jumping the price gap from local to international firms to ensure consistent reporting to an increasing regulator’s pressure on their HQ.
“At a local level with the move to Thailand 4.0 and a more value-based economy, we see the likes of India, China and Indonesia pushing to implement online filings, and so there is an increasing demand for ERP interfacing and on-demand web-based reporting.
“There are recurring concerns from professionals in the industry. We see the same roadblocks tend to come up as pressure points when expanding and operating in the international compliance space.”
So what can we learn from the state of compliance in ASEAN markets? Simply put, nothing is stationary. There is a move towards greater integration, and there is a move towards digitising compliance processes. This adds up to an ever-changing market where falling behind in compliance can cost you greatly. Ambitious companies should make the most of the vast opportunities presented by ASEAN, but ensure they work with a global compliance partner that has niche local knowledge to keep things moving.
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