Asia-Pacific has been ranked the second most complex region for multinationals to comply with corporate regulation and legislation in 2015, according to TMF Group’s Global Benchmark Complexity Index.
The far-reaching annual study by TMF Group ranked 95 jurisdictions across Europe, the Middle East, Africa, Asia-Pacific and the Americas according to how complex they are to do business in from a regulatory and compliance perspective. View full report.
Asia’s representation amongst the most complex jurisdictions for business compliance has risen since 2014 with three Asian countries in the top 10. Indonesia has risen seven places to rank as the second most complex country to do business with regard to regulation and compliance. Two other Asian countries feature in the top 10, namely China and Thailand in fifth and ninth places respectively. Other countries from the region in the top 20 are Japan (12th), South Korea (14th) and Malaysia (15th).
Commenting on the findings, Paolo Tavolato, Head of Asia Pacific at TMF Group, said: “Due to the wide range of legal systems, regulation and languages spoken throughout the region, it is no surprise that APAC countries feature prominently in the top 20 most complex in the world. The heavy administrative burden and complexity in the regulatory and compliance frameworks can discourage investors and entrepreneurs looking to set up in the region.
“However, we still expect businesses to capitalise on opportunities, as Asia Pacific is experiencing growth and contributing significantly to the world economy. For many companies, the region is too large to ignore. Adequate planning and a firm understanding of local requirements can overcome what at first glance is often seen as a risky venture in an uncertain territory.”
According to experts at TMF Group, Indonesia has retained its place in the top 10 most challenging countries for three years running. Whilst in recent years the Indonesian government has made significant progress in improving the country’s business environment, the legal system still lags behind its regional peers and suffers from a high level of disjointed government bureaucracy. The government’s decision in 2015 to reduce the permit to stay for foreigners to six months has had a particularly negative impact on encouraging doing business in the country. It has caused significant disruption for foreign-owned companies and their senior management, forcing them to leave and then re-enter the country to renew their permits.
China ranked fifth, compared to its 12th place ranking as one of the most complex countries from a regulatory and compliance perspective, in the previous year. The numerous different Chinese provinces with separate regulatory regimes, combined with the variety of different dialects across the country are some of the elements which have continued to contribute to the jurisdiction’s red tape. Chinese authorities have sought to simplify the regulatory framework by combining three of the business licenses into a single one and ensuring that two annual submissions are no longer required.
Thailand continues to be included in the top 10, moving up one place to ninth in the ranking. The unstable political environment, together with its highly bureaucratic government infrastructure, has fueled a complicated and challenging business environment in the country. As the situation shows little sign of abating, TMF’s experts predict that the country’s complexity ranking will not change over the coming year.
The index also reveals some of the region’s most welcoming countries for businesses. Hong Kong’s free-market economy, combined with a transparent and efficient government infrastructure, places it among some of the least complex jurisdictions, in 89th place. Furthermore, Vietnam has significantly improved its complexity ranking since last year, decreasing its ranking by 30 places to 44th place in the 2015 survey. A number of new trade agreements made during the year have opened up opportunities for the jurisdiction and are supported by internal reforms, such as the new laws on investment and enterprise. The new laws have provided a favourable investment environment for foreign investors in certain targeted sectors, significantly reducing administrative processes and speeding up the applications by foreign enterprises to establish new companies.
At the other end of the spectrum, Ireland (95th) has been ranked as the least complex place to do business from a regulatory and compliance perspective, largely due to its common law framework, stable political environment, strong legal framework and pro-business attitude. Ireland was followed at the bottom of the complexity rankings by the British Virgin Islands (94th), new entrants Latvia (93rd) and Trinidad & Tobago (92nd) and regular high performer New Zealand (91st).
