By Chris Devonshire-Ellis, Andrew Salzman, Dezan Shira&Associates
Located along the Northeast corridor of the United States, Rhode Island is a mere 180 miles from New York City. The small coastal state is known for its knowledge economy based on its?elite universities and hospitals. In 2013, Rhode Island’s GDP was US$53.2 billion. The largest contributor to the state’s GDP growth was professional and business services sector. Today, Rhode Island’s industry base is dominated by healthcare, education, financial services, defense and advanced manufacturing.
ASEAN is a?major recipient of?exports from Rhode Island. The ASEAN bloc, which includes major Asian economies such as Indonesia, Malaysia, the wealthy island nation of Singapore, as well as the Philippines, Thailand and Vietnam, is developing as a major center for Rhode Island-based businesses.
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In 2012, Rhode Island exported?US$197 million in goods and services exports to ASEAN, of which US$151 million were goods. These included chemicals, computers & electronic products, primary metal manufacturing, machinery, and scrap products. The other?US$45.81 million in exports from Rhode Island were services. In addition, exports to ASEAN supports about?1,096 jobs in Rhode Island.?
Some of these links run deep. An estimated 17,000 Asian-American’s of ASEAN origins currently live in Rhode Island, with many of them using the so-called “Bamboo Network” to facilitate trade. In addition, Rhode Island is attracting increasing numbers of students from ASEAN in the education sector. Just over 300 students in 2012 realized direct state income of US$7 million, with a further US$10 million coming into Rhode Islands economy from ASEAN based tourists.?
In 2014, there were US$72 million in exports from Rhode Island to Singapore. This was down slightly from 2013 (0.1%). Singapore ranks 9th in exports from Rhode Island. As of 2009, Singapore received 6% of Rhode Island’s total exports. Singapore is one of Asia’s wealthiest cities, and it is worth noting that its average per capita income is over double that of Rhode Island at some US$79,000 against US$31,000.?Singapore has a Double Tax Treaty with the United States and provides US citizens with easy to obtain employment passes and work visas. Rhode Island businesses with the right connections may wish to evaluate Singapore as a regional hub to develop business potential into ASEAN as a whole.
RELATED: State by State: China and Rhode Island Trade
In 2014, Malaysia received US$21 million in exports from Rhode Island, which was down 22.4% from 2013. Malaysia?ranked 25th in exports from Rhode Island in 2014.?If the TPP is passed, there are two Malaysian?tariffs which would be lowered that are?of particular interest to Rhode Island. The tariff on rolled iron/non-alloy steel is currently 50% and would be reduced. In addition, the tariff on aluminum articles is up to 25% and would also be reduced if the TPP is passed.
In 2014, Rhode Island received US$80 million in imports from Thailand. That figure ranked 16th overall, and was down 24.1% from 2013, mainly due to unrest in the country. That has now subsided and trade can be expected to increase again.
Trade between Rhode Island and the ASEAN nations of Indonesia, Philippines and Vietnam remains relatively small at this stage.?However, given that these represent a collective?markets of some 420 million people, there may well be scope for Rhode Island entreprenuers to begin to reach out into these markets.
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Rhode Island?companies interested in ASEAN?can take advantage of ASEAN’s free trade agreements with both China and India. Signed off in 2010, these FTA have reduced tariffs on 97 percent of all traded products between ASEAN and China, and ASEAN and India, to zero. American companies, via establishing?a subsidiary in ASEAN can have that local entity, purely by its geographical location, qualify as an ASEAN company and accordingly access these FTA benefits.?Rules of Origin apply, and generally require 40 percent ASEAN components in the mix, allowing US parts to also be included prior to duty free export either across ASEAN or to China and India.?Using ASEAN as a base to further penetrate?Asian markets and reduce China manufacturing costs is now becoming a?trend.
The United States also has a Free Trade Agreement with Singapore, which contains tariff reduction provisions for trade in goods and services, and the?tax treatment of American nationals employed in Singapore. Additionally, the United States has signed Double Tax Treaties with Indonesia, Malaysia, Philippines, Singapore,?Thailand and conveys Most Favored Nation status upon Vietnam. These can reduce profits tax burdens under certain circumstances in both trade and any ASEAN?legal establishment. Please seek professional advice?for specific ASEAN?investment requirements.
RELATED: State by State: India and Rhode Island Trade
With existing and healthy trade ties between Rhode Island and Singapore especially, there is still greater scope for Rhode Island businesses to reach further out into the ASEAN region and continue to expand and develop their trade links. The American Embassy in Singapore estimates about 26,000 US citizens live in Singapore, mostly employed by the 3,500 American businesses, many of them in the services industry that are already operational there.? The message for Rhode Island exporters is clear – ASEAN, possibly via Singapore, should be part of your overall investment and business development strategy.
Further Support from Dezan Shira & Associates
Dezan Shira & Associates can service Rhode Island-based companies that are looking to further develop their operation in ASEAN. The firm can help companies establish a direct office in the country and can guide them through the affiliated tax, legal and HR issues that come with doing so. To arrange a free consultation, please contact our U.S. office at firstname.lastname@example.org.
For further Illinois-Asia trade data, please see our related articles on trade with China, India and Vietnam.?
This article was first published on ASEAN Briefing.
Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and emerging ASEAN, we are your reliable partner for business expansion in this region and beyond.
For inquiries, please email us at email@example.com. Further information about our firm can be found at: www.dezshira.com.