Cambodian Prime Minister Hun Sen, left, hands over the Asean gavel to Indonesian President Joko Widodo at the Asean Summit in Phnom Penh. EPA
Cambodian Prime Minister Hun Sen, left, hands over the Asean gavel to Indonesian President Joko Widodo at the Asean Summit in Phnom Penh. EPA
Cambodian Prime Minister Hun Sen, left, hands over the Asean gavel to Indonesian President Joko Widodo at the Asean Summit in Phnom Penh. EPA
Cambodian Prime Minister Hun Sen, left, hands over the Asean gavel to Indonesian President Joko Widodo at the Asean Summit in Phnom Penh. EPA


The 'Asian century' is upon us, and Asean may well be its unsung hero


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November 16, 2022

By the end of this week, world leaders will have gathered for the Association of South-East Asian Nations (Asean) and East Asia summits in Phnom Penh, Cambodia; the G20 in Bali, Indonesia; and the Asia Pacific Economic Co-operation (Apec) meeting in Bangkok, Thailand.

US President Joe Biden and Chinese Premier Li Keqiang were at the East Asia Summit, as were heads of government from South Korea, Japan, Australia and New Zealand, while other leaders, such as President Sheikh Mohamed, UK Prime Minister Rishi Sunak and Indian Prime Minister Narendra Modi, arrived for the G20 in Bali, where Mr Biden and Chinese President Xi Jinping held a hotly anticipated meeting on Monday.

If that isn’t evidence that the much-touted “Asian century” is upon us, I don’t know what is. Except the “restoration” of the continent’s predominance – according to the late historian Angus Maddison, Asia produced more than half the world’s economic output for 18 of the past 20 centuries – wasn’t quite supposed to turn out like this. The White House is concerned that the regime in North Korea is going to resume nuclear tests. Tensions over Taiwan have increased so much that a major part of the Chinese authorities’ account of Mr Biden and Mr Xi’s sit-down concerned the island. “The current state of China-US relations is not in the fundamental interests of the two countries and peoples,” it noted, with unusual understatement.

The Japanese government wants to increase defence spending drastically, not something a country does if it expects tranquillity in the years to come. Maritime disputes in several of the region’s seas have hardened, and the risk of incidents escalating into greater conflict has heightened. Meanwhile, countries in the Asia Pacific have declared time and again that they do not wish to side with China or the US against the other. US officials insist they are not pressuring any to fall in line, while doing precisely that. “You often hear this talking point from Washington, ‘the United States isn’t forcing anyone to choose',” said Evan Feigenbaum of the Carnegie Endowment for International Peace at a recent panel discussion. "Try putting Huawei kit in your 5G backbone and see how the US feels about you not making a choice."

  • People walk past a billboard welcoming US House Speaker Nancy Pelosi in Taipei, Taiwan. AP
    People walk past a billboard welcoming US House Speaker Nancy Pelosi in Taipei, Taiwan. AP
  • A US military aircraft carrying Ms Pelosi makes its descent at Songshan Airport in Taipei. AFP
    A US military aircraft carrying Ms Pelosi makes its descent at Songshan Airport in Taipei. AFP
  • Supporters outside Songshan Airport welcome Ms Pelosi. Bloomberg
    Supporters outside Songshan Airport welcome Ms Pelosi. Bloomberg
  • Ms Pelosi is visiting Taiwan as part of a tour of Asia aimed at reassuring allies in the region. Getty Images
    Ms Pelosi is visiting Taiwan as part of a tour of Asia aimed at reassuring allies in the region. Getty Images
  • A Taipei 101 skyscraper message welcomes Ms Pelosi to Taiwan. EPA
    A Taipei 101 skyscraper message welcomes Ms Pelosi to Taiwan. EPA
  • Ms Pelosi is greeted by Joseph Wu, Taiwan's foreign minister, at Songshan Airport. EPA / Taiwan Ministry of Foreign Affairs
    Ms Pelosi is greeted by Joseph Wu, Taiwan's foreign minister, at Songshan Airport. EPA / Taiwan Ministry of Foreign Affairs
  • Ms Pelosi poses for a group photo with Mr Wu and other officials on the tarmac. EPA / Taiwan Ministry of Foreign Affairs
    Ms Pelosi poses for a group photo with Mr Wu and other officials on the tarmac. EPA / Taiwan Ministry of Foreign Affairs
  • Ms Pelosi is the highest-ranking US official to visit the island in 25 years. Taiwan Ministry of Foreign Affairs / AP
    Ms Pelosi is the highest-ranking US official to visit the island in 25 years. Taiwan Ministry of Foreign Affairs / AP
  • Ms Pelosi poses with members of her delegation and Taiwanese officials. AP
    Ms Pelosi poses with members of her delegation and Taiwanese officials. AP
  • Police officers stand outside the Grand Hyatt Taipei. Bloomberg
    Police officers stand outside the Grand Hyatt Taipei. Bloomberg
  • Police officers await a convoy carrying Ms Pelosi outside the Grand Hyatt Taipei. Bloomberg
    Police officers await a convoy carrying Ms Pelosi outside the Grand Hyatt Taipei. Bloomberg
  • Police officers await a convoy carrying Ms Pelosi. Bloomberg
    Police officers await a convoy carrying Ms Pelosi. Bloomberg
  • Throngs of media wait outside the Grand Hyatt Taipei. Bloomberg
    Throngs of media wait outside the Grand Hyatt Taipei. Bloomberg
  • The convoy carrying Ms Pelosi arrives at the Grand Hyatt. Bloomberg
    The convoy carrying Ms Pelosi arrives at the Grand Hyatt. Bloomberg
  • People hope to take a photo of Ms Pelosi's arrival outside the hotel. Reuters
    People hope to take a photo of Ms Pelosi's arrival outside the hotel. Reuters
  • Supporters gathered outside the Grand Hyatt welcome Ms Pelosi. Bloomberg
    Supporters gathered outside the Grand Hyatt welcome Ms Pelosi. Bloomberg
  • Demonstrators show their support for Ms Pelosi's visit. Reuters
    Demonstrators show their support for Ms Pelosi's visit. Reuters
  • The Taipei 101 building lit up with a message reading 'TW hearts US'. Bloomberg
    The Taipei 101 building lit up with a message reading 'TW hearts US'. Bloomberg
  • Demonstrators in Taipei show their support of the US as Ms Pelosi arrives. Reuters
    Demonstrators in Taipei show their support of the US as Ms Pelosi arrives. Reuters
  • Not everyone in Taipei is thrilled by Ms Pelosi's visit. AP
    Not everyone in Taipei is thrilled by Ms Pelosi's visit. AP
Asean has considerable convening power, but it has trouble taking proactive concrete steps

“Crisis after crisis is occurring,” said Indonesian President Joko Widodo at the opening session of the G20 on Tuesday. “Rivalries continue to rise, wars occur, and the impact of various crises on food, energy and financial pressures is felt by the world, especially developing countries.”

The world’s stage may have moved to the East, but the Asia Pacific and the continent as a whole can hardly be said to be a zone of peace, freedom and neutrality, or "Zopfan" – and I use that term deliberately, as it was a concept agreed on by the foreign ministers of Asean in 1971. For while there may be no definitive answer on how to lower tensions and restabilise the region, one change that could be key would be if the 10-nation Asean took on a far more proactive role.

Both Cambodian Prime Minister Hun Sen, as current chair of Asean, and Mr Biden referred to the importance of the bloc’s “centrality” last weekend, and the idea that the group is at the centre of the diplomatic architecture of the Asia Pacific is certainly warranted. Both the East Asia Summit and Apec grew out of Asean meetings, for instance. But with divisions threatening to turn into chasms, it often feels as though Asean is trying to paper over cracks. The nearly 700 million-strong association has considerable convening power, but with its emphasis on consensus and non-interference in states’ internal affairs, it has trouble taking proactive concrete steps, as its lack of success in resolving the crisis in Myanmar has shown. On the other hand, Asean fails to promote itself sufficiently and take proper credit for its achievements – both internally, such as its moves towards turning the group into a single market and production base, and externally, like the signing in 2020 of the world’s biggest trade pact, the Regional Comprehensive Economic Partnership, which is actually an Asean-led agreement, although you'd be forgiven for not knowing that.

People watch the news at a station in Seoul, South Korea, last week, after North Korea reportedly launched ballistic missiles into the East Sea. EPA
People watch the news at a station in Seoul, South Korea, last week, after North Korea reportedly launched ballistic missiles into the East Sea. EPA

Newish institutions such as the Quadrilateral Security Dialogue, or Quad, of the US, Australia, Japan and India, and Aukus – the trilateral security pact between Australia, the UK and the US – are firming up. The problem is, they're all on one side – clearly aimed at containing China, whatever official protestations are made to the contrary. Asean has the potential to assert itself far more strongly as a major non-aligned bloc in the region. Two members, Thailand and the Philippines, may be US treaty allies, but if they could sign up to Zopfan in 1971, there is no reason why Asean as a whole could not take a similar stance today.

Gaining a new strength of purpose might be a hard task. While the EU may be admired as a regional organisation, in South-East Asian countries there is no appetite for a similar sharing of sovereignty. As a start, the Asean Secretariat could, at least, be strengthened, so that the Secretary General no longer has to complain, as the former Thai foreign minister Surin Pitsuwan did, that in office he was “more secretary than general”. More candidates with the high-level political experience of the charismatic Mr Surin should be put forward for the role, so that the stature of Asean itself is enhanced. And awareness of the group and appreciation of its benefits need to be spread far beyond businessmen and policy analysts to the wider populace.

For the G20 communique may be expected to state that “today’s era must not be of war”, but the leaders will soon depart from Bali. A major group representing nearly 700 million people insisting loudly, frequently and in every discussion on non-alignment is badly needed to ensure that the "Asian century" gets back on the right path. Otherwise, the G20 statement could come to be seen as the “peace in our time” of the 21st century.

BORDERLANDS

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Ten tax points to be aware of in 2026

1. Domestic VAT refund amendments: request your refund within five years

If a business does not apply for the refund on time, they lose their credit.

2. E-invoicing in the UAE

Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption. 

3. More tax audits

Tax authorities are increasingly using data already available across multiple filings to identify audit risks. 

4. More beneficial VAT and excise tax penalty regime

Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.

5. Greater emphasis on statutory audit

There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.

6. Further transfer pricing enforcement

Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes. 

7. Limited time periods for audits

Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion. 

8. Pillar 2 implementation 

Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.

9. Reduced compliance obligations for imported goods and services

Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations. 

10. Substance and CbC reporting focus

Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity. 

Contributed by Thomas Vanhee and Hend Rashwan, Aurifer

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Updated: November 16, 2022, 4:00 AM