ASEAN'S INVESTMENT INCENTIVES & REAL ESTATE INVESTMENT

Abstract

One major factor influencing Singaporean's investment in the ASEAN countries is the provision of their governmental incentives. Real estate-related incentives are of paramount importance to Singaporean investors because property investment may constitute a huge portion of their overall cost of foreign investment. The primary aims of this study are to evaluate the most significant real estate-related incentives and to quantify the impact of these incentives on a hypothetical investment project assumed to be established in the ASEAN countries. The paper concludes that real property gains tax exemption and the types of land tenure/ownership available to foreign investors are the two most significant incentives affecting the value of real estate ownership. Through the analysis of a hypothetical project, it has shown that the real rates of return in Thailand, Malaysia and Indonesia are reduced by as much as 23% by the impact of tax on capital gains. Conversely, with the provision of capital gains tax exemption's incentive in The Philippines, the expected rate of return of the project is not affected. After the adjustment for inflation among the ASEAN countries, the results indicate that the project in Indonesia seems to provide the best real expected re taxation system of capital gains. The rationale is that capital gains have implicitly encapsulated inflation component, in which the real gains may be much lower than the nominal gains. In view of the potential investors, careful evaluation of the "prospective" country's operating business environment should be carried out before venturing in.