CARI Captures Issue 659: Myanmar’s economy to expand by 1% for the year through March 2025

Given recent developments in the region, Captures has widened its scope to include news related to all the members of the Regional Comprehensive Economic Partnership (RCEP) agreement which was signed towards the end of 2020. Besides the ASEAN Member States, this includes Australia, New Zealand, China, Japan, and South Korea. The other weekly newsletters under CARI, China-ASEAN Monitor and Mekong Monitor will also be consolidated into the Captures newsletter. We hope this new version of Captures will serve you better and look forward to providing a curation of stories relevant to ASEAN and its trading partners.

MYANMAR
Myanmar’s economy to expand by 1% for the year through March 2025
(12 June 2024) Myanmar’s economy faces a deepening crisis due to ongoing conflict and compulsory conscription, as reported by the World Bank. The GDP growth forecast has been reduced to 1% for the year through March 2025, down from 2% projected in December 2023. The slower growth is attributed to high inflation, labour shortages, foreign exchange constraints, and electricity issues. The country’s GDP also grew 1% in the past year. Conscription announced for February 2024 has led to increased migration and labour shortages. Trade disruptions have significantly affected imports and exports, with a 13% drop in exports and a 20% drop in imports over six months. Power outages are a growing problem, with 33% of companies citing them as their main issue. Inflation remains high, with consumer prices rising 30.4% last September. The poverty rate is expected to reach 32.1% for 2023-24, reflecting deteriorated economic conditions.

THAILAND
Thailand’s central bank maintains key interest rate at 2.5%
(12 June 2024) Thailand’s central bank maintained its key interest rate at 2.5%, as decided by a 6 to 1 vote in the latest monetary policy committee meeting. The decision aligns with the bank’s inflation target range of 1% to 3%, as the headline consumer price index rose by 1.54% in May. This marks the fourth consecutive meeting without a rate change. The bank’s forecast predicts 2.6% economic growth in 2024, driven by domestic demand, tourism recovery, and increased government spending, despite slow export growth. Economists anticipate potential rate cuts in the final quarter of the year, following the U.S. Federal Reserve’s expected rate adjustments. The central bank projects 3.0% economic growth and 1.3% inflation for 2025.

MALAYSIA
ASEAN must enhance rail connectivity to facilitate free flow of goods
(11 June 2024) Malaysia’s Transport Minister emphasised the need for ASEAN member states to enhance rail connectivity to facilitate the free flow of goods in the region. Loke highlighted the long-term vision of linking peninsular Malaysia’s railway network to Thailand, Laos, and China. He noted that despite existing connections, gaps remain in the Kunming-Singapore railway network. Addressing these gaps requires harmonised regulations and cross-border customs clearance. Malaysia is conducting a preliminary feasibility study on the Trans-Borneo Railway project, expected to be completed in nine months, to assess its commercial, technical, and logistical viability.

CHINA, ASEAN
Chinese solar panel producers cease some production in Southeast Asia due to after US tariff holiday expires
(07 June 2024) LONGi Green Energy Technology Co Ltd and Trina Solar Co, Ltd, two major solar panel producers, are suspending some production in Southeast Asia following the expiration of a US tariff reprieve on solar panels from specific Southeast Asian countries. LONGi suspended production at a battery plant in Viet Nam, which accounts for less than 10% of its total battery production capacity. Trina Solar announced maintenance shutdowns for its facilities in Thailand and Viet Nam, primarily serving the US market. LONGi’s other plants in Malaysia and Viet Nam remain operational. The tariffs aimed to prevent companies from bypassing US duties on Chinese goods by completing panels in Southeast Asia. Trina Solar is constructing new cell and module capacity in Indonesia, with operations expected to begin in the third quarter, in partnership with Indonesian state-owned utility PT PLN (Persero).

INDONESIA
Government designates Tanjung Sauh island as special economic zone
(13 June 2024) Indonesia has designated Tanjung Sauh island as a special economic zone to foster job creation and economic development. The zone spans 840.67 hectares and will house electronic component industries, electronic product assemblies, and a centre for alternative energy research and production. It will be supported by a port with a capacity of 5 million TEUs, enhancing logistical connections between Batam and Bintan trade centres and international markets. The zone has secured investment commitments of 199.6 trillion rupiah (approximately US$12 billion) and is projected to generate 366,087 jobs by 2053.

INDONESIA
President-elect Prabowo Subianto to increase debt-to-GDP ratio towards 50% over next five years
(14 June 2024) Indonesia’s President-elect Prabowo Subianto plans to increase the debt-to-GDP ratio by 2 percentage points annually over the next five years, reaching approximately 50% by the end of his term, up from about 39% currently. This gradual increase aims to allow the economic team to adapt to any headwinds. This marks a significant shift for Indonesia, which has maintained a conservative fiscal policy post-1997 Asian Financial Crisis, except during the COVID-19 pandemic. The proposed increase is intended to reassure investors while maintaining fiscal prudence, keeping the ratio below 60%. Prabowo’s spending plans, including free lunches for children, are projected to cost up to 460 trillion rupiah (US$28 billion) annually. The high interest-rate environment and currency volatility pose challenges to borrowing. Indonesia’s current government spends 500 trillion rupiah annually on interest payments, consuming 15% of the budget.

SINGAPORE
Prime Minister Lawrence Wong visits Brunei Darussalam and Malaysia from 11-12 June
(10 June 2024) Prime Minister Lawrence Wong will visit Brunei Darussalam and Malaysia from 11-12 June, as announced by the Prime Minister’s Office on Monday. This marks Wong’s first overseas trip since taking office last month. In Brunei, he will have a royal audience with Sultan Hassanal Bolkiah and Queen Saleha and attend an official lunch hosted by the Sultan. Accompanying Wong will be his wife Loo Tze Lui, Foreign Affairs Minister Vivian Balakrishnan, Minister for Sustainability and the Environment Grace Fu, National Development Minister Desmond Lee, and Minister of State Rahayu Mahzam. On Tuesday evening, Wong will travel to Malaysia to meet Prime Minister Anwar Ibrahim and other Malaysian leaders. During his absence, Deputy Prime Minister Gan Kim Yong will serve as Acting Prime Minister.


RCEP Monitor


NEW ZEALAND, ASEAN
New Zealand enhancing cooperation with ASEAN on regional stability and climate change
(11 June 2024) New Zealand is enhancing cooperation with ASEAN to promote regional stability and address challenges such as climate change, as stated by Deputy Prime Minister Winston Peters. Peters emphasised the importance of robust relations with ASEAN for New Zealand’s active regional participation. He suggested closer collaboration in developing green energy and hydrogen, and sharing agricultural expertise. Peters highlighted the significance of multilateral frameworks for smaller countries, advocating for collective action to defend rights and uphold values of freedom, democracy, and the rule of law. Trade between ASEAN and New Zealand reached US$14.92 billion in 2022, with next year marking their 50th anniversary of dialogue relations.

JAPAN
Japan’s economy expands by 0.6% in April 2024, driven by recovery in auto manufacturing
(12 June 2024) Japan’s economy grew by an annualised 0.6% in April 2024, driven by a recovery in automobile shipments, according to the Japan Center for Economic Research (JCER). This followed a 0.3% GDP growth in March. Private final consumption increased by 0.5% and private residential investment by 1.3%, reversing declines of 0.9% and 2.3% in March, respectively. Exports rose by 0.4% in April, while imports fell by 0.8%, further boosting GDP growth. JCER noted that the increase in automobile-related exports contributed significantly to this improvement. However, JCER expressed caution regarding private consumption, citing weak underlying trends based on credit card usage and consumer confidence data. Private-sector capital investment declined by 0.2% from March.

SOUTH KOREA
South Korea to extend ban on short-selling of stocks until 30 March, 2025
(13 June 2024) South Korea will extend its ban on short-selling stocks until 30 arch, 2025, to develop an electronic system to prevent illicit trading practices, particularly naked short-selling. The Financial Services Commission (FSC) announced this extension after the stock market closed on Thursday. The FSC plans to establish an electronic monitoring platform by March 2025, initially introduced in April to detect naked short sales. The FSC will also revise short-selling rules to balance opportunities between retail and institutional investors and increase fines for illegal trading practices. The ban, originally set to expire on 30 June, was requested to be extended by the ruling People Power party until the new system is operational. Short-selling has been banned since November 2023 due to concerns from retail investors about price declines and illegal trading. The extension has raised concerns among market analysts about its impact on market dynamics and South Korea’s potential inclusion in MSCI’s developed market index. Last week, MSCI downgraded South Korea’s short-selling accessibility in its annual review.

 

15 participating countries

20 chapters

2.2 billion

US$26.2 trillion

28%

ASEAN member states, Australia, China, Japan, South Korea, New Zealand

trade in goods and services, investment, intellectual property, e-commerce, competition, SMEs, economic and technical cooperation, and government procurement

combined population, 30% world’s population

combined GDP, 30% global GDP

global trade (based on 2019 figures)

CARI Captures Issue 658: Chinese tech suppliers expand presence in ASEAN amid geopolitical tensions

Given recent developments in the region, Captures has widened its scope to include news related to all the members of the Regional Comprehensive Economic Partnership (RCEP) agreement which was signed towards the end of 2020. Besides the ASEAN Member States, this includes Australia, New Zealand, China, Japan, and South Korea. The other weekly newsletters under CARI, China-ASEAN Monitor and Mekong Monitor will also be consolidated into the Captures newsletter. We hope this new version of Captures will serve you better and look forward to providing a curation of stories relevant to ASEAN and its trading partners.

ASEAN
Chinese tech suppliers expand presence in ASEAN amid geopolitical tensions
(31 May 2024) Chinese tech suppliers are increasing their presence in Southeast Asia, where Taiwanese and other rivals have long been helping the likes of Google and Apple expand production. For instance, Google has selected Chinese supplier Goertek to produce Pixel watches in Vietnam starting in 2025, a role previously held exclusively by Taiwanese companies. Additionally, BYD is bidding to manufacture Pixel phones in Southeast Asia, though no decision has been made yet. The strategic shift is driven by business considerations such as quality, service, and competitive pricing. The presence of Chinese suppliers in Vietnam has grown significantly, with 37% of Apple’s suppliers in the country being Chinese. Political tensions and economic slowdowns in China are also pushing Chinese companies to seek growth opportunities abroad. Investments by Chinese and Hong Kong firms in Southeast Asia surpassed those from Singapore in 2023, reflecting a systematic diversification effort by Chinese suppliers. The expanding supply chain in Southeast Asia may draw increased scrutiny from the U.S., particularly concerning trade practices and the growing trade surplus with the region.

MALAYSIA, URUGUAY
Uruguayan government plans to expand collaboration with Malaysia in halal meat and dairy market
(05 June 2024) The Uruguayan government, through the Institute of National Meat of Uruguay (INAC), aims to expand its collaboration with Malaysia in the halal meat and dairy market. Malaysia’s Deputy Prime Minister discussed this during a meeting with Uruguay’s Minister for Livestock, Agriculture, and Fisheries. Uruguay produces 600,000 tonnes of beef annually, with 450,000 tonnes exported, predominantly to China. Malaysia sees potential in sourcing halal meat from Uruguay to bolster its own food security. The Malaysian government plans to position Malaysia as a hub for processing, storage, and transportation of halal meat, especially for the ASEAN market. Key Malaysian bodies, including Jakim and the Halal Development Corporation, have been auditing Uruguayan abattoirs for halal compliance.

SINGAPORE
Singapore’s casino resorts begins second phase of development
(01 June 2024) When Lawrence Wong took over leadership of Singapore last month, the focus shifted to the legacy of former Prime Minister Lee Hsien Loong, particularly the casino resorts which began operations in 2010 and have since contributed 1% to 2% of annual GDP and doubled tourist arrivals to 19.1 million by 2019. The second phase of development for these resorts is underway, with Genting Singapore’s Resorts World Sentosa planning to start construction on two new hotels with 700 rooms by the end of 2024, and Marina Bay Sands set to add a fourth hotel tower, a 15,000-seat arena, and other facilities, with completion expected by July 2029. Both resorts will also expand their casino floors, with Marina Bay Sands gaining an additional 2,000 sq. meters and Genting gaining 500 sq. meters. The expansion, originally approved in 2019 and delayed by the pandemic, now faces higher costs due to inflation, with Genting’s investment rising to SG$6.8 billion, while Sands anticipates exceeding initial projections.

THE PHILIPPINES
Government to reduce tariffs on rice from 25% to 15% through 2028 to combat inflation
(04 June 2024) The Philippines will reduce tariffs on rice from 35% to 15% through 2028 to combat inflation. The head of the National Economic and Development Authority stated the move aims to lower rice prices, making it more affordable, as rice comprises 9% of the consumer price index and has significantly driven recent inflation. While this reduction is expected to lower consumer prices, analysts express concerns that it could harm Filipino farmers by making imported rice cheaper than domestic products. The president is set to issue an executive order to implement the tariff cut, while tariffs on corn, pork, and mechanically deboned meat will remain unchanged through 2028. Analysts warn of the negative impact on farmers’ incomes and stress the need for government support programs to mitigate these effects.

INDONESIA
Indonesian rupiah declines to four-year low of 16,293 per dollar
(05 June 2024) The Indonesian rupiah declined to a four-year low of 16,293 per dollar on 05 June, 2024, marking its weakest point since April 2020. Bank Indonesia intervened in both spot and domestic non-deliverable forward markets to stabilise the currency, as confirmed by Edi Susianto. Governor Perry Warjiyo stated ongoing efforts to maintain rupiah stability amid market volatility. Contributing factors to the rupiah’s weakness include seasonal dividend and Hajj pilgrimage outflows, and a narrowing trade surplus. The rupiah is the worst-performing emerging-Asian currency this quarter. It has been noted that dividend payouts by Indonesian companies are adding to the currency’s challenges.

SINGAPORE
Singapore seeks bids for two hydrogen-ready gas-fired power plants
(04 June 2024) Singapore’s Energy Market Authority (EMA) has issued a request for proposals to build, own, and operate two hydrogen-ready gas-fired power plants, each with a capacity of at least 600 megawatts. These plants are expected to be operational by 2029 and 2030. This initiative follows a separate request in 2023 for a power plant to be completed by 2028. The demand for electricity in Singapore is rising, driven by electricity-intensive sectors such as advanced manufacturing and transport. Peak power demand is projected to increase by at least 3.7% over the next six years, potentially reaching 11.8 gigawatts by 2030. EMA’s chief executive emphasised the importance of ensuring sufficient generation capacity to meet the needs of homes, workplaces, and communities.

THAILAND
Thailand approves tax measures to stimulate domestic tourism during low season
(04 June 2024) Thailand’s cabinet approved tax measures on 04 June, 2024 to stimulate domestic tourism during the low season, from May to November. Deputy Finance Minister Paopoom Rojanasakul announced that the measures include tax deductions for companies organising conventions and seminars. Additional incentives allow income tax deductions for expenses on homestays and non-hotel accommodations in secondary cities. Prime Minister Srettha Thavisin noted that the measures will cost the government THB 1.5 billion baht (USD 41 million) in revenue, but he expects the benefits to outweigh the costs.


RCEP Monitor


CHINA
China’s manufacturing activity contracts in May after two months of growth
(31 May 2024) China’s manufacturing activity contracted in May, with the manufacturing purchasing managers’ index (PMI) falling to 49.5 from April’s 50.4. This marks a return to contraction after two months of growth. The new order index dropped by 1.5 percentage points to below 50, indicating slowed demand in the manufacturing sector. Nonmanufacturing business activity also declined, with the index slipping 0.1 points to 51.1, influenced by downturns in the real estate and financial sectors. It is believed that the recovery has lost momentum and anticipated that increased fiscal support and property stimulus might boost short-term growth. Morgan Stanley economists highlighted structural imbalances, citing excess capacity and weak corporate margins due to the shift of credit from property to industrial investment. Official data showed ongoing challenges from soft domestic demand and a struggling property sector, which impacts consumer confidence and overall economic growth.

SOUTH KOREA
South Korea’s economy grows 4.9% more than previously thought every year on average since 2000
(06 June 2024) According to the Bank of Korea, South Korea’s economy has been revised to have grown 4.9% more on average annually since 2000, increasing the 2022 nominal GDP to 2,401 trillion won from a previous estimate of 2,236 trillion won. This revision lowers debt-to-GDP ratios, with household debt falling to 93.7% from 100.6% and government debt to 51.4% from 55.3%. The Bank of Korea’s updates incorporate new concepts, methodologies, and a base year change to 2020 from 2015. The manufacturing sector’s economic share grew, while services and construction shrank. In the first quarter, real GDP expanded 1.3% from the previous quarter, matching preliminary data, but year-on-year growth was slightly revised to 3.3% from 3.4%. Inflation slowed to 2.7% in May, maintaining speculation of a potential interest rate cut later in 2024 despite the current restrictive 3.5% benchmark rate. The BoK revised its 2024 economic outlook upwards following a stronger-than-expected first-quarter performance.

JAPAN, THAILAND
Japanese seafood distributors targeting Thailand as key market
(07 June 2024) Japanese seafood distributors are targeting Thailand as a key market following China’s ban on Japanese seafood imports. Yokohama-based Sprout Investment organised a tasting event in Bangkok in April 2024, showcasing sashimi from bonito and mackerel, which impressed local restaurant owners. Sprout, operating over 20 izakaya pubs in Japan and one in Bangkok, plans to enter the Thai seafood wholesale market by August, sourcing mainly from Chiba prefecture’s Boso Peninsula. Tokyo-based Uoriki aims to open up to 100 outlets in Thailand within five years, having formed a joint venture with Charoen Pokphand Group and opening its first outlets in October 2023. Uoriki plans to expand beyond Bangkok to cities like Chiang Mai and collaborate with Central Group. As incomes rise in Thailand, Japanese food, once a luxury, has become more common, supported by an improved cold chain.

15 participating countries

20 chapters

2.2 billion

US$26.2 trillion

28%

ASEAN member states, Australia, China, Japan, South Korea, New Zealand

trade in goods and services, investment, intellectual property, e-commerce, competition, SMEs, economic and technical cooperation, and government procurement

combined population, 30% world’s population

combined GDP, 30% global GDP

global trade (based on 2019 figures)

CARI Captures Issue 657: Equity investors scouring Southeast Asia for winners from AI boom

Given recent developments in the region, Captures has widened its scope to include news related to all the members of the Regional Comprehensive Economic Partnership (RCEP) agreement which was signed towards the end of 2020. Besides the ASEAN Member States, this includes Australia, New Zealand, China, Japan, and South Korea. The other weekly newsletters under CARI, China-ASEAN Monitor and Mekong Monitor will also be consolidated into the Captures newsletter. We hope this new version of Captures will serve you better and look forward to providing a curation of stories relevant to ASEAN and its trading partners.

ASEAN
Equity investors scouring Southeast Asia for winners from AI boom
(28 May 2024) Equity investors are scouring Southeast Asia for likely winners from the AI boom. Power producers are particularly favoured, benefiting from the establishment of more data centres in the region due to lower energy and land costs. Companies in IT services, telecommunications, and semiconductors are also well-positioned to profit. Analysts highlight utility companies and grid suppliers as particularly interesting investment prospects. Southeast Asia’s low production costs and strong position in the global semiconductor value chain contribute to its attractiveness as a data centre hub. Despite AI’s nascent stage, analysts project substantial upside potential, with the region set to become the world’s second-largest non-US data centre provider by 2027. Among the stocks identified as prime candidates to capitalize on the AI boom include YTL Power (Malaysian utility firm), Tenaga Nasional (Malaysian utility firm), Delta Electronics (Thai power module supplier for data centers and electric vehicles), Gulf Energy Development (Thai power producer), and FPT (Vietnamese software and telecommunications firm).

SINGAPORE
Singapore to expand data center capacity by more than one-third
(30 May 2024) Singapore plans to expand its data center capacity by more than one-third, with a focus on sustainable growth for the energy-intensive industry, as stated by Janil Puthucheary, senior minister of state at the Ministry of Communications and Information. The city-state, already a major global hub for data centers, had previously restricted new construction due to environmental concerns, but the new roadmap seeks to strike a balance between industry growth and decarbonization efforts. Singapore aims to allocate at least 300 megawatts of additional capacity in the near term, potentially powered by green energy, representing a 35% increase from the current national capacity of over 1.4 gigawatts. Plans for energy-efficient facilities with advanced cooling solutions and partnerships with low-carbon energy providers will be sought to ensure environmentally friendly construction.

MALAYSIA
Google invests US$2.2 billion in data center and cloud region in Malaysia
(30 May 2024) The Ministry of Investment, Trade and Industry (Miti) announced Google’s commitment to invest US$2 billion (RM9.4 billion) in establishing its first data centre and Google Cloud region in Malaysia. This initiative aims to power Google’s digital services and facilitate the delivery of artificial intelligence (AI) benefits to users nationwide. The project is expected to create 26,500 jobs across various sectors, with an economic impact valued at RM15.04 billion. The Malaysian cloud region will join Google’s global network, offering cloud infrastructure, analytics, and AI services while adhering to high security and regulatory standards.This investment aligns with Malaysia’s digital ambitions outlined in the New Industrial Master Plan 2030 and marks Google’s largest planned investment in the country.

THAILAND
Thailand to apply to BRICS bloc of emerging nations as soon as May
(29 May 2024) Thailand announced its intention to apply for membership in the BRICS bloc of emerging nations, which includes Brazil, Russia, India, China, and South Africa. The government plans to submit the application as early as this month, with hopes of becoming the first Southeast Asian member if approved. Joining BRICS is seen as a strategic move to bolster Thailand’s presence on the global stage and strengthen its leadership role among developing countries. The decision was finalised at a cabinet meeting, with a government spokesperson emphasising the potential benefits of membership. BRICS, often perceived as a counterbalance to the dominance of developed economies, has been expanding its membership under the leadership of China and Russia, with recent additions including the United Arab Emirates, Iran, Ethiopia, and Egypt.

THAILAND
Major Thai gas station operator to focus on cafes amidst EV shift
(29 May 2024) PTG Energy, a major Thai gas station operator, is adapting its business strategy in anticipation of the increasing prevalence of electric vehicles (EVs). The company plans to expand its PunThai Coffee chain fivefold over the next three years, aiming to reach 5,000 stores by 2027. Currently, PunThai Coffee boasts around 1,000 locations, doubling in number annually since its inception in 2012. The chain sources its beans locally from northern Thailand and offers affordable prices, such as a 60 baht (US$1.64) Americano. PTG’s move towards diversification reflects concerns about the sustainability of its oil-based business model amidst the government’s plan to boost EV production to 30% of all automobiles by 2030. Non-oil businesses currently contribute just over 20% of PTG’s gross profit, but the company aims to increase this to 50% by 2027, focusing on food and beverage retail. This strategy aligns with Thailand’s expanding coffee market, which has seen significant growth in recent years.

THE PHILIPPINES
Philippines lags behind flock of ‘Asian geese’ in attracting FDI | The Star
(30 May 2024) Nomura reports that the Philippines lags in attracting foreign direct investments away from China due to barriers in the manufacturing sector and geopolitical tensions with Beijing. While the country and Indonesia show strong economic growth and reform prospects, they are not the preferred destinations for global companies seeking new production bases. Viet Nam and Thailand emerge as winners in this shift, though Thailand faces competitiveness challenges. Despite the Philippines’ significant electronics exports, it hasn’t benefited much from supply chain relocations. Geopolitical tensions with China further deter Chinese investments. Issues in the manufacturing sector include high power rates, poor connectivity, and infrastructure underspending.

VIET NAM
FDI into Viet Nam in first five months of 2024 hits five-year record
(30 May 2024) According to the General Statistics Office, Viet Nam’s foreign direct investment (FDI) disbursement in the first five months of 2024 is estimated at US$8.25 billion, marking a 7.8% increase compared to the previous year, which is a five-year record for this period. The processing-manufacturing sector received the largest share of FDI at US$6.5 billion, constituting 78.9% of the total disbursed FDI. Following was real estate business with US$781 million and production and distribution of utilities with US$336.2 million. The total foreign investment into Viet Nam reached US$11.07 billion by 20 May, showing a 2% year-on-year increase. Among the 53 countries and regions investing in Viet Nam, Singapore led with US$2.92 billion, contributing 36.8% of the total newly licensed projects in the country during the first five months of the year.


RCEP Monitor


NEW ZEALAND
New budget focuses on new spending and tax relief measures amidst weak enviroment
(30 May 2024) New Zealand’s Treasury outlined a challenging economic landscape in its recent budget, with rising unemployment and a weaker fiscal position prompting reduced new spending and tax relief measures. Finance Minister Nicola Willis stated that while the budget wouldn’t solve all economic challenges, it demonstrated prudent management. The centre-right coalition government, facing a technical recession, announced changes to personal income tax thresholds aimed at benefiting lower and middle-income earners. Tax relief measures are expected to inject NZ$3.7 billion into the economy, offset by savings and new revenue, maintaining inflation neutrality. Significant allocations include NZ$2.68 billion for transportation infrastructure and NZ$2.1 billion for law enforcement, featuring funding for additional police officers and prison expansion. Budget cuts targeted housing, education, conservation, and environment spending, with resources reallocated to frontline services. A budget deficit of NZ$11.07 billion, wider than previously forecast, is expected for 2023/24, with a return to surplus projected for 2027/28. Net debt is forecast to peak at 43.5% of GDP in 2025/26, delayed from previous estimates. Treasury anticipates economic contraction in the first half of the year followed by growth in the latter half.

SOUTH KOREA, THAILAND
Thai energy producer aims to secure US$600 million in private debt to construct wind farm in South Korea
(30 May 2024) B.Grimm Power PCL, a Thai energy producer, aims to secure up to US$600 million in private debt to construct an offshore wind farm in South Korea. The company plans to offer its shares in the wind-farm project company as collateral for the three-year loan, potentially comprising offshore yuan and US dollar tranches. Discussions regarding the financing structure are ongoing. One of the wind farms earmarked for private funding will be developed over three years by a Chinese state-owned construction firm, with an estimated cost of US$1.44 billion. The company has been actively investing in wind-farm projects in South Korea and Viet Nam, with recent acquisitions in both countries.

JAPAN
Government to extend discussions into June and beyond regarding ride-hailing services ban
(31 May 2024) The Japanese government has decided to extend discussions into June and beyond regarding the potential full lifting of the ban on ride-hailing services in the country. Prime Minister Fumio Kishida had aimed to present the direction of his administration’s policy in June 2024, but divisions within his ruling Liberal Democratic Party (LDP) have caused delays. Some LDP members are divided on whether information technology firms should be permitted to enter the ride-hailing business. Opposition from officials within the transport ministry and Komeito, the coalition partner of the LDP, has also contributed to the postponement. In April, limited-time ride-hailing services were introduced in select areas, managed by taxi companies. Kishida discussed the matter with regulatory reform minister Taro Kono, who supports lifting the ban, and transport minister Tetsuo Saito of Komeito, who is more cautious. They agreed to assess the situation following the April trial period, without setting a specific deadline for the examination and discussions on allowing non-taxi companies to enter the sector.

15 participating countries

20 chapters

2.2 billion

US$26.2 trillion

28%

ASEAN member states, Australia, China, Japan, South Korea, New Zealand

trade in goods and services, investment, intellectual property, e-commerce, competition, SMEs, economic and technical cooperation, and government procurement

combined population, 30% world’s population

combined GDP, 30% global GDP

global trade (based on 2019 figures)

CARI Captures Issue 656: Malaysia surpasses Thailand as Southeast Asia’s second-largest auto market

Given recent developments in the region, Captures has widened its scope to include news related to all the members of the Regional Comprehensive Economic Partnership (RCEP) agreement which was signed towards the end of 2020. Besides the ASEAN Member States, this includes Australia, New Zealand, China, Japan, and South Korea. The other weekly newsletters under CARI, China-ASEAN Monitor and Mekong Monitor will also be consolidated into the Captures newsletter. We hope this new version of Captures will serve you better and look forward to providing a curation of stories relevant to ASEAN and its trading partners.

MALAYSIA, THAILAND
Malaysia surpasses Thailand as Southeast Asia’s second-largest auto market
(15 May 2024) Malaysia has surpassed Thailand as Southeast Asia’s second-largest auto market after Indonesia. Data from industry groups show Malaysia’s auto sales exceeded Thailand’s for three consecutive quarters through January-March 2024. The Malaysian Automotive Association reported a 5% increase in first-quarter sales to 202,245 vehicles and an 11% rise in 2023 to a record 799,731 vehicles. Sales tax exemptions for locally produced vehicles significantly boosted sales in Malaysia, particularly for national brands Perodua and Proton, which both hold a 60% market share. Although these exemptions ended in mid-2022, the fulfilment of prior tax-free bookings continued to elevate 2023 figures. In contrast, Thailand’s auto sales fell 25% in the first quarter of 2024 due to rising nonperforming auto loans and stagnant consumption. Indonesia’s sales dropped 24% in the same period, hindered by higher interest rates.

MALAYSIA
Malaysia to open autogate facility to 36 additional countries and regions from June onwards
(16 May 2024) Beginning 1 June, travellers from 36 additional countries and regions will be able to use Malaysia’s autogate facility for immigration clearance, according to Home Minister Saifuddin Nasution Ismail. This expands the existing list of 10 countries, including Singapore. New countries added include those in the European Union, Bahrain, the United Arab Emirates, Jordan, mainland China, Canada, Hong Kong, and Taiwan. This decision aims to streamline the immigration process for travellers from these low-risk regions. Between 1 January, 2023, and April 2024, Malaysia recorded 40 million entries, with 30.5 million entering through Kuala Lumpur International Airport’s Terminals 1 and 2, and Johor Bahru. The autogate facility is expected to enhance the efficiency of entry point clearances and boost tourism. The minister confirmed that security would not be compromised, as all traveller information would continue to be recorded and captured.

INDONESIA
Bank Indonesia now holds 23% of Indonesia’s rupiah bonds, surpassing local bank’s holdings
(16 May 2024) Indonesia’s central bank, Bank Indonesia (BI), now holds 23% of the nation’s rupiah bonds, surpassing local banks’ holdings. This marks a significant increase from less than 5% in early 2020, driven by efforts to stabilise the currency. BI has adopted bond buying as a key tool to counter the dollar’s dominance and manage bond market volatility. In April 2024, BI raised interest rates unexpectedly and committed to strengthening the rupiah beyond 16,000 per dollar. BI’s status as the largest holder of government bonds enables it to reduce market volatility. Foreign purchases of rupiah bonds totalled approximately US$230 million in May 2024, contributing to a near 2% appreciation of the rupiah. BI has also increased the issuance of high-yield rupiah securities to attract foreign investment, using rupiah bonds as collateral for these securities.

THE PHILIPPINES
The Philippines’ central bank may lower its key interest rate by 50 basis points in 2024
(16 May 2024) The Philippine central bank may lower its key interest rate by a total of 50 basis points in 2024, according to Governor Eli Remolona, as price risks moderate. The Bangko Sentral ng Pilipinas (BSP) might start with a 25-basis point reduction as early as August 2024, followed by another similar cut. Currently, the target rate remains at 6.50%, a 17-year high. The governor’s remarks follow softer US inflation data and weaker Australian job market indicators, suggesting a potential global easing cycle. Remolona indicated a less hawkish stance, suggesting possible rate easing in the third or fourth quarter of 2024. The BSP revised its inflation forecast for 2023 down to 3.8% from 4%, while slightly raising expectations for 2025.

SINGAPORE
Singapore Airlines to get eight months salary bonus after record profits in 2024
(16 May 2024) Singapore Airlines Ltd. will award staff a bonus payout equivalent to almost eight months of salary, following a second consecutive record annual profit. This payout exceeds the previous year’s bonus, which included 6.65 months’ pay and a maximum of 1.5 months’ ex-gratia bonus. The airline achieved a record US$1.98 billion profit for the fiscal year 2023-2024, a 24% increase from the previous year. The airline attributed its success to strong demand for travel and a robust cargo sector, despite facing higher costs, geopolitical tensions, and economic uncertainty. Monthly passenger volumes reached 97% of pre-pandemic levels by March. This bonus mirrors Emirates’ staff payout, who received five months’ bonus following their record US$5.1 billion profit. Singapore Airlines’ shares rose 0.4% on Thursday, marking a 4.3% increase for the year.

VIET NAM
As US increases tariffs on China, imports soar from Viet Nam
(16 May 2024) As the United States increases tariffs on China, it has significantly boosted imports from Viet Nam, which relies heavily on Chinese inputs for its exports. Viet Nam’s trade surplus with the U.S. reached nearly US$105 billion in 2023, 2.5 times larger than in 2018. Viet Nam now ranks fourth in trade surplus with the U.S., behind China, Mexico, and the European Union. The World Bank estimates a 96% correlation between Viet Nam’s imports from China and its exports to the U.S., up from 84% before 2018. This trade dynamic could prompt the U.S. to impose tariffs on Viet Nam, especially after the November 2024 elections. Last year, U.S. imports from Viet Nam more than doubled to over US$114 billion compared to 2018. Much of Viet Nam’s exports to the U.S. consist of Chinese components, with imported components comprising about 80% of the value of Viet Nam’s electronic exports. In the first quarter of this year, U.S. imports from Viet Nam were US$29 billion, while Vietnam’s imports from China were US$30.5 billion.

BRUNEI DARUSSALAM
Brunei Darussalam’s economy to grow by 2.7% in 2024, driven by recovery in non-oil and gas sector
(15 May 2024) Brunei Darussalam’s economy is set to strengthen in 2024 following a 1.4% expansion in 2023, with growth projected to reach 2.7% this year. This growth is driven by recovery in the non-oil and gas sector, with significant contributions from offshore oil and gas exploration and development activities. The downstream oil and gas industry is expected to support growth through diversification into new products. The government is focusing on accelerating diversification towards less carbon-intensive industries to enhance economic resilience. The non-oil and gas sector’s recovery is supported by expansions in downstream activities, agri-food, transportation, and tourism. Inflation is expected to rise to 1.4% due to food inflation, despite easing pressures from lower commodity prices and supply chain normalization.

CHINA
Chinese banks launch first sales of special loss-absorbing debt
(16 May 2024) China’s largest banks have initiated their first sales of total-loss absorbing capacity (TLAC) bonds to meet international regulatory requirements aimed at preventing financial crises. Industrial and Commercial Bank of China (ICBC) is issuing RMB 40 billion (US$5.5 billion) in TLAC bonds, and Bank of China is pricing its own RMB 30 billion sale. These bonds help ensure that banks have sufficient capital to absorb losses before affecting more sensitive liabilities such as deposits. China has five banks designated as globally systemically important by the Financial Stability Board (FSB), requiring TLAC equivalent to 16% of risk-weighted assets by early 2025. Fitch Ratings estimates that these requirements could total RMB 1.6 billion, potentially reduced if Chinese regulators allow deposit insurance funds to count towards the total. No international financial institutions are underwriting Bank of China’s or ICBC’s bond issues. China’s top five banks recently reported profits and stable non-performing loan ratios, though margins are under pressure.

SOUTH KOREA, MALAYSIA
Malaysia’s central bank extends US$3.20 billion bilateral swap arrangement with South Korea
(13 May 2024) Malaysia’s central bank announced the extension of a bilateral swap arrangement with South Korea for an additional three years. The arrangement’s size remains at RM15 billion or five trillion Korean won (US$3.20 billion). The agreement can be further extended by mutual consent between the two central banks. The swap arrangement is designed to facilitate the exchange of local currencies to enhance trade and investment between Malaysia and South Korea, as well as to strengthen financial cooperation. Malaysia also has similar swap agreements with other major trading partners and neighbours, including China, Japan, Indonesia, and Thailand.

JAPAN
Japan’s economy contracts by 0.5% in first quarter of 2024, exceeding market expectations
(16 May 2024) Japan’s economy contracted by 0.5% in the first quarter, exceeding market expectations of a 0.3% decline. Exports fell by 5.0% after a 2.8% increase in the previous quarter, while imports decreased by 3.4%. GDP dropped by an annualised 2.0% compared to the same period in 2023, against a forecasted 1.2% decline. The economy was impacted by a major earthquake on 1 January, 2024 and production halts at Toyota’s Daihatsu subsidiary. Revised data showed zero growth between October and December, down from a previously reported 0.1% expansion, and a 0.9% contraction from July to September, revised from minus 0.8%. These figures increase pressure on Prime Minister Fumio Kishida, whose government has low poll ratings. Germany overtook Japan as the third-largest economy in 2023, partly due to a weak yen, and India is projected to overtake Japan as well. Inflation has risen, leading the Bank of Japan to raise interest rates in March for the first time in 17 years, but the wide rate differential has pressured the yen, which hit three-decade lows against the dollar.

15 participating countries

20 chapters

2.2 billion

US$26.2 trillion

28%

ASEAN member states, Australia, China, Japan, South Korea, New Zealand

trade in goods and services, investment, intellectual property, e-commerce, competition, SMEs, economic and technical cooperation, and government procurement

combined population, 30% world’s population

combined GDP, 30% global GDP

global trade (based on 2019 figures)

CARI Captures Issue 655: The Philippines’ economy expands by 5.7% in first quarter of 2024

Given recent developments in the region, Captures has widened its scope to include news related to all the members of the Regional Comprehensive Economic Partnership (RCEP) agreement which was signed towards the end of 2020. Besides the ASEAN Member States, this includes Australia, New Zealand, China, Japan, and South Korea. The other weekly newsletters under CARI, China-ASEAN Monitor and Mekong Monitor will also be consolidated into the Captures newsletter. We hope this new version of Captures will serve you better and look forward to providing a curation of stories relevant to ASEAN and its trading partners.

THE PHILIPPINES
The Philippines’ economy expands by 5.7% in first quarter of 2024
(09 May 2024) The Philippine economy expanded by 5.7% in the first quarter of 2024, surpassing the previous quarter’s growth of 5.5%. Key drivers were household spending, which increased by 4.6%, and a recovery in exports, rising by 7.5%. Notably, net exports sector growth rebounded to 9.5%, primarily led by the recovery in exports of electronic products. However, concerns over economic prospects persist due to El Nino-induced droughts affecting the agricultural sector, leading to a 3.8% inflation rate in April 2024, the third consecutive month of acceleration. Imports have slowed significantly, particularly in capital and raw material imports, affecting economic growth. Economists predict a growth rate of 5.8% for 2024 and 6.1% for 2025, albeit below trend due to high interest rates hindering private investment.

THE PHILIPPINES
Unemployment rate rises to 3.9% in March 2024, up from 3.5% in February
(08 May 2024) The Philippines’ unemployment rate rose to 3.9% in March 2024, up from 3.5% in February, according to the Philippine Statistics Authority (PSA). This increase resulted in approximately two million Filipinos being without jobs or businesses, up from 1.8 million in the previous month, based on a survey of 11,114 households. Concurrently, the country’s labour force expanded to 51.5 million from 50.75 million, leading to a labour force participation rate of 65.3% in March, compared to 64.8% in February. However, there was an improvement in job quality as the underemployment rate decreased to 11% in March from 12.4% previously.

INDONESIA
Starlink satellite company obtains business license to operate in Indonesia
(09 May 2024) Starlink, Elon Musk’s satellite company, has obtained business licenses to operate in Indonesia, allowing it to provide internet services across the vast archipelago. The network of low Earth orbit satellites can extend connectivity to remote areas or locations with limited communications infrastructure. The communication and information ministry confirmed the approval, stating that Starlink now has the right to provide telecommunication services in Indonesia. The company’s services will be trialled in the newly planned capital Nusantara on Borneo before a full launch at a later date. With the Indonesian government relocating the capital due to environmental concerns, expanding internet access is a priority, considering that only two-thirds of the population had internet access by 2022.

THAILAND, CHINA
Chinese EV makers fueling price war in Thai EV market
(07 May 2024) Chinese automakers are intensifying competition in Thailand’s electric vehicle (EV) market, leading to price reductions and a crowded market. At the Bangkok International Motor Show, BYD offered its flagship Atto 3 SUV at 18% lower prices than before, while Changan Automobile introduced the Lumin micro-EV priced at THB 480,000. Hozon New Energy Automobile’s compact EV is priced at around THB 550,000, further driving down prices. However, despite the influx of Chinese EVs, the market saw a decline in sales in February 2024, attributed partly to reduced government subsidies. While sales slightly recovered in March, future market growth remains uncertain. Additionally, Chinese automakers face competition from hybrid models, with some like Great Wall Motor turning to hybrid vehicles to avoid price competition.

VIET NAM
Global robusta coffee prices surge partly due to Vietnamese farmers switching to durian
(07 May 2024) International prices for robusta coffee have surged due to adverse weather conditions, increased consumption in Asia, and the rising popularity of durian fruit in China. Robusta futures in London reached a new high in late April, exceeding US$4,500 per tonne, contributing to the financial pressures faced by businesses. The surge in robusta coffee prices has been fueled in part by many coffee farmers in Viet Nam switching to durian cultivation due to its increasing demand in China, leading to a reduction in coffee supply. Vietnam ranks as the world’s second-largest producer of coffee beans and the largest robusta producer. This shift is compounded by factors such as the El Nino weather phenomenon, which has caused drought in Southeast Asia. Additionally, major European and U.S. companies are favouring the relatively inexpensive robusta variety over Arabica due to rising transportation and fuel costs. Rising consumption in Southeast Asia and China further strains the coffee market, with the Asia-Pacific region accounting for over a quarter of global consumption.

SINGAPORE
Deputy Prime Minister addresses Singapore’s equities market challenges
(09 May 2024) Singapore’s Deputy Prime Minister Lawrence Wong addressed Singapore’s equities market challenges, highlighting difficulties in attracting listings. Similar challenges have been observed in the UK and Hong Kong. He attributed this partly to the trend of high-growth companies opting to remain private longer amidst prevailing interest rates. Wong acknowledged the attractiveness of the US market due to its depth and liquidity. Despite this, Singapore is committed to encouraging locally incubated companies to list domestically. Recent reports suggest Singapore is exploring strategies to revitalise its stock market, prompted by a growing performance gap compared to regional counterparts.

MALAYSIA
Malaysia’s central bank maintains overnight policy rate (OPR) at 3%
(09 May 2024) Malaysia’s central bank, Bank Negara Malaysia (BNM), maintained the overnight policy rate (OPR) at 3% following its monetary policy committee (MPC) meeting, in line with economist expectations. It is anticipated that the key interest rate will remain unchanged until at least 2026. BNM stated that the current OPR level supports economic growth and aligns with inflation and growth prospects. The central bank remains vigilant about ongoing developments and seeks to ensure monetary policy sustains economic growth and price stability. Globally, economic growth continues, supported by strong labour markets and recovering global trade. Despite decreasing inflation, some advanced economies may maintain elevated interest rates, particularly the US. Downside risks to global growth include geopolitical tensions and financial market volatility. Inflation is projected to remain moderate in 2024, contingent upon domestic policy implementation and global commodity prices.


RCEP Monitor


CHINA
China’s exports experience modest growth of 1.5% in April 2024
(09 May 2024) China’s exports experienced a modest growth of 1.5% in April 2024, rebounding from a 7.5% decline in March. The increase was attributed to higher shipments of mechanical and high-tech products, although demand for steel and garments decreased. Exports to Brazil and Southeast Asia showed growth, while those to the U.S. and EU declined. Concurrently, China’s manufacturing activity expanded for the second consecutive month in April, but sluggish domestic demand prompted more businesses to sell excess supply overseas at discounted rates, contributing to trade tensions. China’s dollar-denominated imports surged by 8.4% in April, surpassing estimates, driven by significant growth in high-tech products and crude oil imports, notably from Russia and the U.S. Over the first four months of 2024, Chinese exports rose by 1.5%, while imports increased by 3.2%.

JAPAN
Weakness of Japanese yen spurs fears of currency war in Asia
(09 May 2024) Investors are contemplating the possibility of competitive devaluations in Asia, spurred by the Japanese yen’s decline to a 34-year low against the US Dollar, potentially intensifying currency tensions with exporting countries like South Korea and Taiwan. Despite efforts by Asian central banks to support their currencies, the yen’s slide poses challenges to the region’s export competitiveness. The yen’s weakness has prompted concerns about its impact on neighbouring currencies and potential disruptions to financial markets. While Japanese authorities have intervened to stabilise the yen, there are fears of a further slump, with implications for Asian and emerging-market currencies. China’s management of the yuan is crucial, as any significant devaluation could destabilise the region further. Overall, while the likelihood of such a scenario is low, it remains a concern for investors monitoring currency dynamics in Asia.

AUSTRALIA
Australia to maintain position of natural gas amidst energy transition
(08 May 2024) Australia’s center-left Labor government has released the Future Gas Strategy, aiming to ensure the affordability of natural gas and maintain its position as a major exporter amidst the transition to cleaner energy. Minister for Resources Madeleine King emphasized the continued importance of gas in supporting the economy through to 2050 and beyond. While the strategy has been welcomed by the industry, environmental groups and left-wing lawmakers have criticized the government for pandering to fossil fuel interests. Prime Minister Anthony Albanese’s government is phasing out coal-fired power generation and transitioning to renewables, but acknowledges the need for natural gas in the energy transition. The government also aims to address concerns about future gas supply, particularly for major buyers like Japan and South Korea, to whom all contracts will be honored.

15 participating countries

20 chapters

2.2 billion

US$26.2 trillion

28%

ASEAN member states, Australia, China, Japan, South Korea, New Zealand

trade in goods and services, investment, intellectual property, e-commerce, competition, SMEs, economic and technical cooperation, and government procurement

combined population, 30% world’s population

combined GDP, 30% global GDP

global trade (based on 2019 figures)

CARI Captures Issue 654: Microsoft to invest US$2.2 billion into Malaysia over next four years

Given recent developments in the region, Captures has widened its scope to include news related to all the members of the Regional Comprehensive Economic Partnership (RCEP) agreement which was signed towards the end of 2020. Besides the ASEAN Member States, this includes Australia, New Zealand, China, Japan, and South Korea. The other weekly newsletters under CARI, China-ASEAN Monitor and Mekong Monitor will also be consolidated into the Captures newsletter. We hope this new version of Captures will serve you better and look forward to providing a curation of stories relevant to ASEAN and its trading partners.

MALAYSIA
Microsoft to invest US$2.2 billion into Malaysia over next four years
(02 May 2024) Microsoft has announced its largest investment in Malaysia to date, committing US$2.2 billion over the next four years to support the nation’s digital transformation. Microsoft’s chairman and CEO outlined plans to develop a world-class AI infrastructure accessible to Malaysia and to provide AI skilling opportunities for an additional 200,000 people. The investment also aims to strengthen collaboration with the Malaysian government to establish a national AI Centre of Excellence and to enhance cybersecurity capabilities. Microsoft underlined its commitment to Malaysia’s AI transformation, aiming for inclusive economic growth and innovation. This initiative aligns with the ongoing Bersama Malaysia commitment since 2021, which is aimed at elevating Malaysia as a digital hub. The Malaysian Investment Development Authority (MIDA) emphasized the transformative impact of AI and Microsoft’s contribution to bridging the digital divide and fostering business growth in Malaysia.

SINGAPORE, INDONESIA
Singapore plans to import low-carbon electricity from Indonesia
(29 April 2024) Singapore’s plan to import low-carbon electricity from Indonesia progresses well, as confirmed by Prime Minister Lee Hsien Loong after meeting with Indonesian President Joko “Jokowi” Widodo. The Energy Market Authority of Singapore has granted conditional approvals for five projects to import a total of 2 gigawatts of low-carbon electricity from Indonesia. However, challenges exist due to Indonesia’s regulations, including requirements for state utility facilitation and local sourcing of solar PV components. Lee and Jokowi discussed potential partnerships in carbon capture and storage, as well as utilising carbon credits. The meeting was also attended by incoming leaders Deputy Prime Minister Lawrence Wong and Indonesian Defense Minister Prabowo Subianto, signifying continuity in agreements and relationships.

SINGAPORE
DBS’ digital services face disruptions days after MAS-imposed ban ends
(02 May 2024) Singaporean bank DBS Group Holdings Ltd encountered fresh disruptions to its Internet banking and payment services in Singapore, days after the lifting of a six-month ban imposed by the country’s central bank in 2023 due to similar issues. The bank acknowledged the problem on its Facebook page and confirmed that it had identified the issue causing the disruption. Complaints surged around 5:40 pm local time, as reported by the Downdetector website, but services returned to normal by 8 pm local time. The Monetary Authority of Singapore lifted the ban this week, citing improvements by the bank. Despite the service disruptions, DBS reported better-than-expected results on 02 May, 2024, driven by strong lending and wealth fees, resulting in a 1.9% increase in its shares at close. This pushed DBS’ market capitalisation to S$101 billion, making it the first Singapore-listed company to surpass that milestone.

INDONESIA
Global funds to continue divesting from Indonesian equities amidst weak rupiah
(03 May 2024) Despite the Indonesian central bank’s unexpected interest rate increase, global funds are anticipated to continue divesting from Indonesian stocks. This is due to the surprise hike’s minimal impact in boosting the rupiah. Overseas investors pulled out over US$1 billion from Indonesian equities in April 2024, marking the end of a four-month influx. This trend persisted into May, with investors directing their preferences towards other markets. Janus Henderson Group Plc suggested a potential shift of funds from Indonesia to China due to China’s current momentum and reduced concerns regarding property bond defaults. It has been noted that every percentage point of rupiah depreciation against the dollar will squeeze Jakarta Composite Index companies’ earnings per share growth by a similar amount. The rate hike’s effectiveness in stabilizing the rupiah remains uncertain amidst global economic uncertainties.

VIET NAM
Unexpectedly weak export performance exacerbate currency pressures for Thailand and Viet Nam
(29 April 2024) Unexpectedly weak export performances in Asia’s emerging economies, particularly Thailand and Vietnam, may exacerbate currency pressure caused by a strong US dollar and the Federal Reserve’s hawkish stance. Thailand’s outbound shipments declined by 11% in March 2024, falling below all forecasts, while Vietnam’s exports grew by 10.6% in April, missing the median estimate of 14%. This weaker export performance could lead to continued currency depreciation for both countries, especially as stubborn inflation and sluggish economic growth in key markets such as the US, China, and Southeast Asia dampens demand for goods. Both the Vietnamese dong and the Thai baht have faced downward pressure, with the dong hitting a historic low and the baht trading at a six-month low. Thailand’s trade deficit for the third consecutive month and Viet Nam’s narrowing surplus may strain their foreign-exchange reserves required for currency intervention. Both countries’ export weaknesses were attributed to price-sensitive demand in overseas markets and shipping disruptions in the Red Sea affecting Viet Nam’s exports.

THAILAND
Bank of Thailand Governor affirms bank’s independence despite political pressure
(29 April 2024) The Bank of Thailand’s Governor affirmed the central bank’s commitment to making interest rate decisions independently despite political pressure. He stated that recent decisions demonstrate the bank’s adherence to economic considerations rather than succumbing to political influence. The central bank maintained the key interest rate at 2.50% during its April 2024 policy meeting, despite pressure from the government to lower rates. The monetary policy committee expressed concerns over elevated household debt, recognizing its potential impact on long-term economic growth. The governor acknowledged the challenge of balancing weak economic recovery with monetary policy management. He noted that the current interest rate supports recovery while ensuring responsible debt management. The Thai economy is projected to grow by 2.6% in 2024 and 3.0% in 2025, supported by private consumption and tourism. Inflation is expected to gradually increase and return to the target range of 1% to 3% by the end of the year.

THAILAND
Thailand’s CPI increases by 0.19% year-on-year in April 2024
(03 May 2024) In April 2024, Thailand’s headline Consumer Price Index (CPI) increased by 0.19% compared to the previous year, contrasting with a 0.47% year-on-year decline in March. This figure surpassed the Reuters poll forecast of a 0.25% decrease and marked the first positive inflation in seven months. The core CPI, excluding volatile food and energy prices, rose by 0.37% in April. The Director of Trade Policy and Strategy Office attributed this increase to last year’s low base for electricity prices, the rise in agricultural prices, and a weak baht. Despite the rise, inflation has remained outside the central bank’s target range of 1% to 3% for the 12th consecutive month. Factors contributing to this trend include escalating global energy prices and increased agricultural product prices due to a hot climate. The ministry maintained its inflation forecast for the year at 0.0% to 1.0%. Over the first four months ending in April, the average CPI decreased by 0.55% compared to the same period the previous year.


RCEP Monitor


CHINA
Chinese stocks gain momentum due to supportive policies
(29 April 2024) China stocks have seen a surge in momentum recently, attributed to supportive policies. Most notably, there was a daily record US$3.1 billion northbound inflow on 26 April, 2024. Foreign investors utilising the Connect system recorded the largest single-day net investment since its inception in 2014, with buying of A-shares continuing on 29 April, reaching the sixth-largest single-day net investment this year. The Hang Seng Index, driven by tech stocks, surpassed the 18,000 mark on Monday morning, with even beleaguered Hong Kong-listed Chinese property companies experiencing significant gains. Notably, the CSI 300 rose by 1.11% on Monday to 3,623.91, while the Hang Seng closed 0.54% higher at 17,746.91. China’s securities watchdog aims to enhance listing company quality and shareholder returns. They’ve also announced separate measures to bolster the Hong Kong market, including broadening product availability through the Connect scheme. Concerns persist regarding the sustainability of the rallies without fundamental economic change. While investors flock to Hong Kong on expectations of a weaker yuan and attractive stock valuations, sustained interest from long-term foreign investors remains uncertain due to challenging macroeconomic conditions and stagnant earnings growth.

CHINA
Chinese rare-earth industry face declining revenues due to greater global competition
(29 April 2024) China’s rare-earth industry is facing declining revenues and profits despite government efforts to protect the sector, as global competitors establish their own supply chains and domestic economic conditions remain challenging. China Rare Earth Resources and Technology, a key listed arm of state conglomerate China Rare Earth Group, reported a 5.4% decrease in annual revenue for 2023, amounting to US$550 million. The company attributed this decline to accelerated consolidation and structural adjustments in the global rare-earth industry, leading to falling prices. The latest data from the U.S. Geological Survey (USGS) shows China leading in rare earth reserves and production, but other countries are also increasing their output. Supply-demand pressures, combined with a slowing domestic economy, pose further risks of falling prices.

SOUTH KOREA
President Yoon reaffirms pledge to raise monthly basic pension for seniors
(03 May 2024) President Yoon Suk Yeol reaffirmed his pledge to raise the monthly basic pension benefit for seniors during his tenure. Yoon stated this while speaking at a Parents’ Day ceremony, marking the first time a sitting president attended the annual event. The Yoon government aims to increase the pension from around US$234.76  to US$293.45 per month for individuals aged 65 and above within the lower 70 percent income bracket. He emphasized the ongoing contributions of the older generation and proposed measures to enhance their quality of life, such as creating more job opportunities and boosting wages. Yoon also committed to expanding senior care services, including easing the financial strain of nursing fees.

15 participating countries

20 chapters

2.2 billion

US$26.2 trillion

28%

ASEAN member states, Australia, China, Japan, South Korea, New Zealand

trade in goods and services, investment, intellectual property, e-commerce, competition, SMEs, economic and technical cooperation, and government procurement

combined population, 30% world’s population

combined GDP, 30% global GDP

global trade (based on 2019 figures)

CARI Captures Issue 653: Food service industry in Southeast Asia sees shift towards food delivery services

Given recent developments in the region, Captures has widened its scope to include news related to all the members of the Regional Comprehensive Economic Partnership (RCEP) agreement which was signed towards the end of 2020. Besides the ASEAN Member States. this includes Australia, New Zealand, China, Japan, and South Korea.. The other weekly newsletters under CARI, China-ASEAN Monitor and Mekong Monitor will also be consolidated into the Captures newsletter. We hope this new version of Captures will serve you better and look forward to providing a curation of stories relevant to ASEAN and its trading partners.

ASEAN
Food service industry in Southeast Asia sees shift towards food delivery services
(19 April 2024) Across Southeast Asia, the food service industry has seen a significant shift towards food delivery services, with in-house restaurant dining declining to 60% of the food service industry in Asia from 76% in 2019. Delivery apps like Grab and Shopee have played a major role in filling the gap. Euromonitor data shows that the delivery market has grown from 8% of the food service industry in 2018 to 21% in 2023, with a forecasted increase to 23% by 2028. While dining at eateries may increase to 67% by 2028, it might not return to pre-COVID-19 levels for at least five years. The convenience and speed of delivery services are driving this trend. However, the surge in deliveries has led to concerns about plastic waste, prompting calls for companies to reduce packaging. Despite the popularity of delivery, fierce competition has made it challenging for delivery apps to turn a profit. Overall, the food industry in Asia is expected to return to pre-COVID-19 levels in revenue, reaching US$1.3 trillion in revenue in 2024.

INDONESIA
Indonesia’s central bank hikes interest rates to 6.25% amidst slumping rupiah
(24 April 2024) Indonesia’s central bank has raised its benchmark interest rate by 25 basis points to 6.25% in an effort to bolster the weakening rupiah amidst escalating global risks. Bank Indonesia Governor Perry Warjiyo emphasized the pre-emptive nature of the rate hike to maintain inflation within the target range of 1.5% to 3.5% for 2024 and 2025. The rupiah, near a four-year low at around 16,000 per dollar, faces pressure from the dollar’s strength and speculation surrounding when the US Federal Reserve will cut interest rates. Warjiyo anticipates the rate increase will stabilise the rupiah at 16,200 in the second quarter, strengthening to 16,000 in the third quarter and further to 15,800 in the fourth quarter. Following the announcement, the rupiah gained ground, reaching 16,140 against the dollar.

MALAYSIA
Malaysia introduces new incentive schemes to attract startups and venture capital firms
(22 April 2024) Malaysia has introduced new incentive schemes, namely the Unicorn Golden Pass and the VC Golden Pass, aimed at attracting leading startups and venture capital firms to the country. Economy Minister Rafizi Ramli outlined these initiatives during the KL20 Summit startup event in Kuala Lumpur. The Unicorn Golden Pass offers benefits such as waived fees for employment passes, subsidized rental, and preferential tax rates to entice global and regional startups. The VC Golden Pass, on the other hand, targets venture capital firms with assets over US$100 million and offers perks like waived work visa fees and expedited license approval. Prime Minister Anwar Ibrahim highlighted the significance of startups in driving technological progress and announced plans to position Malaysia as a hub for semiconductor, clean energy, agritech, and Islamic fintech industries.

MALAYSIA, THE PHILIPPINES
Malaysia’s ZUS Coffee targeting 150 stores in the Philippines by end-2024
(22 April 2024) ZUS Coffee from Malaysia is expanding its presence in the Philippines, aiming to achieve 150 stores in the country by the end of 2024. Since its debut in Quezon City in September 2023, ZUS Coffee has grown to operate 12 outlets in the Philippines, its sole international market. The coffee chain prioritizes app-based pre-ordering and is part of a rising trend of value-focused operators in the Filipino branded coffee shop market. ZUS Coffee’s pricing strategy positions espressos and americanos at US$0.78 and US$1.13 respectively, with premium beverages like Spanish latte and gula melaka priced around US$1.65. Compared to competitors like Pickup Coffee, But First, Coffee, and Paik’s Coffee, ZUS Coffee offers competitive pricing within the market. Established in 2019, ZUS Coffee now operates 402 stores across Malaysia. In March 2023, Filipino restaurant group Choi Garden Restaurant Company acquired a 35% stake in the chain.

MALAYSIA
Malaysia’s consumer inflation stands at 1.8% year-on-year in March 2024
(25 April 2024) In March 2024, Malaysia’s consumer inflation stood at 1.8% year-on-year, unchanged from February’s figure. Prices for housing, water, electricity, gas, and other fuels saw a 3% increase, as did restaurant and accommodation services, while personal care, social protection, and miscellaneous goods and services rose by 2.6%. However, this was offset by slower increases in health (2.1%), food and beverage (1.7%), and recreation, sport, and culture (1.5%). Core inflation, excluding volatile items, stood at 1.7%. The official forecast for 2024 projects headline inflation between 2% and 3.5%, and core inflation between 2% and 3%. On a state-by-state basis, most states recorded inflation lower than the national level, except for Penang, Sarawak, Pahang, Selangor, and Perlis.

SINGAPORE
Joint venture between Temasek and BlackRock raises US$1.4 billion for climate-focused venture capital fund
(25 April 2024) The joint venture between Singapore’s sovereign wealth fund Temasek Holdings and global asset manager BlackRock has successfully raised US$1.4 billion for its inaugural climate-focused venture capital fund, dedicated to investing in firms with technologies aimed at reducing carbon emissions. Over 30 institutional investors, along with commitments from BlackRock and Temasek, contributed to the fund’s final closing, surpassing its initial US$1 billion target. Temasek has pledged to halve the net carbon emissions of its portfolio by 2030 and reach net zero by 2050, demonstrating its commitment to decarbonization efforts. The partnership, called Decarbonization Partners, has already invested in seven companies specializing in decarbonization technologies such as clean hydrogen and electric vehicle fleet management.

VIET NAM
Viet Nam’s central bank sells dollars in market to prop up falling dong
(22 April 2024) Viet Nam’s central bank has confirmed its intervention in the foreign exchange market by selling dollars to certain banks, as the country’s currency, the dong, reached a record low of 25,463 per dollar. The State Bank of Vietnam disclosed that the intervention price was set at 25,450 dong per dollar. Factors contributing to the dong’s decline include the escalating conflict in the Middle East and speculations about the Federal Reserve potentially postponing interest-rate cuts, bolstering the dollar and adversely affecting emerging-market currencies worldwide. This move aligns Viet Nam with other Asian countries such as South Korea and Indonesia, which are also taking measures to counter the strength of the US dollar. This intervention comes amidst a week where the daily dollar-dong reference rate has increased by 0.7%, marking the most significant rise since 2015.


RCEP Monitor


AUSTRALIA, ASEAN
Australia’s diplomacy with ASEAN seen shift towards engaging with individual countries
(21 April 2024) Australia is seeking to enhance economic ties with ASEAN, as highlighted in a recently-published 200-page report by the Australian government titled “Invested: Australia’s Southeast Asia Economic Strategy to 2040”. Southeast Asia presents significant economic opportunities for Australia, with high projected GDP growth and a significant consumer market. However, Australia’s investment in the region remains relatively low compared to total global inflows. However, Australia’s economic diplomacy is shifting towards engaging with Southeast Asian countries individually rather than as a bloc, as evident in recent diplomatic initiatives.This shift signifies a major change in approach, moving away from prioritizing relations with ASEAN as a collective entity.

JAPAN
Next 30 years could see outflow of funds from rural areas to major banks based in cities
(20 April 2024) Major Japanese banks are vying for an estimated US$377 billion in inherited bank deposits that are expected to move out of regional lenders based mainly in rural areas over the next 30 years. As interest rates rise, large money center banks are eager to expand their deposit bases. Many small regional lenders are worried about the future outflow of funds, as many of their depositors living in rural areas are elderly and their savings could go elsewhere after their money is passed on to their children living mainly in cities. According to estimates by Sumitomo Mitsui Trust Bank, US$377 billion of inherited financial assets will shift to Tokyo and the neighboring prefectures of Kanagawa, Chiba and Saitama from elsewhere in the country over the next 30 years. As well, more than 30% of household assets in 17 prefectures, including Nara, Akita and Ehime, could leave those prefectures.

CHINA
China’s premier auto show, Auto China, returns after four-year hiatus
(25 April 2024) Beijing’s Auto China exhibition has returned after a four-year hiatus, showcasing the strides made by Chinese automakers in the electrification of the world’s largest car market and their expanding global presence. The event, featuring about 1,500 companies including BYD, Chery, and SAIC Motors, will unveil 117 new models and 41 concept cars. Amid domestic challenges such as sluggish consumption and intense competition, Chinese automakers are increasingly exporting vehicles and establishing overseas production facilities. Notably, Chinese automaker Chery signed an agreement with Ebro-EV Motors to establish a joint venture in Barcelona, marking the first Chinese auto plant in Europe. This move is in response to Spain’s interest in becoming a hub for electric mobility. Additionally, Chery has entered a joint venture in Viet Nam, while SAIC Motors is exploring European production and expansion in India. Chinese automakers are also capitalizing on opportunities in markets like Russia, with Great Wall Motor among the top sellers there.

15 participating countries

20 chapters

2.2 billion

US$26.2 trillion

28%

ASEAN member states, Australia, China, Japan, South Korea, New Zealand

trade in goods and services, investment, intellectual property, e-commerce, competition, SMEs, economic and technical cooperation, and government procurement

combined population, 30% world’s population

combined GDP, 30% global GDP

global trade (based on 2019 figures)

CARI Captures Issue 652: Bank of Thailand resists government pressure to slash rates

Given recent developments in the region, Captures has widened its scope to include news related to members of the Regional Comprehensive Economic Partnership (RCEP) agreement which was signed towards the end of 2020. The other weekly newsletters under CARI, China-ASEAN Monitor and Mekong Monitor will also be consolidated into the Captures newsletter. We hope this new version of Captures will serve you better and look forward to providing a curation of stories relevant to ASEAN and its trading partners.

THAILAND
Bank of Thailand resists government pressure to slash rates
(15 April 2024) Thai Prime Minister Srettha Thavisin’s push for a rate cut from the Bank of Thailand (BOT) to support his stimulus program has faced resistance from BOT Governor Sethaput Suthiwartnarueput. Despite pressure from Srettha, on 10 April, 2024 the BOT maintained its benchmark rate at 2.5%, aligning with market expectations. The baht remained stable at 36.30 to the dollar following the decision. It is feared that premature rate cuts may weaken the baht further, with the currency having already dropped by close to 6% this year relative to the dollar. However, the BOT may consider cuts later in 2024 depending on economic data and the Fed’s actions. Thailand has experienced six months of negative inflation, which likely ended in March 2024 due to the expiration of government subsidies and rising global energy prices.

ASEAN
Visitors to Southeast Asia tops 100 million in 2023, 70% of pre-COVID-19 numbers
(15 April 2024) In 2023, Southeast Asian countries received over 100 million visitors in 2023, reaching 70% of pre-COVID levels but still 29.8% lower than in 2019. Thailand led with 28 million tourists, benefitting from economic recovery and the legalization of cannabis. Chinese travellers played a significant role in Thailand’s recovery, drawn by its proximity and cultural appeal. Lao PDR and Cambodia saw increased tourism due to Chinese-led infrastructure projects, including the Laos-China Railway and a new international airport in Siem Reap, Cambodia. Tourism is expected to continue recovering in 2024, with Thailand and China implementing mutual visa waivers to boost travel. However, concerns over China’s economic slowdown may impact consumer spending and tourism in the region.

SINGAPORE
Singapore Prime Minister Lee Hsien Loong to step down in May 2024
(15 April 2024) Singapore Prime Minister Lee Hsien Loong announced on 15 April, 2024 that Deputy Prime Minister Lawrence Wong will succeed him on May 15, marking the city-state’s first leadership change in 20 years. Wong, 51, received unanimous support from the ruling People’s Action Party (PAP) lawmakers. Lee, 72, will continue in the cabinet as a senior minister. Wong began his career as a civil servant in 1997 and has held various ministerial positions, including minister for education and minister for national development. He gained prominence during the COVID-19 pandemic as co-chair of the multi-ministry task force. Wong will lead the PAP into the next general election, expected by November 2025. The succession’s timing suggests the ruling party may be accelerating its election plans amid geopolitical uncertainties. Lee’s original plan to step down by 2022 was disrupted by the pandemic. Wong was endorsed as the leader of the PAP’s “fourth generation” team in April 2022 and has since been involved in key policies and foreign diplomacy.

MALAYSIA
Sarawak state hopes to expand role in Malaysia’s semiconductor industry
(15 April 2024) Sarawak aims to expand its role in Malaysia’s semiconductor industry, leveraging past experience and new partnerships with U.K.-based firms. SMD Semiconductor, wholly owned by the Sarawakian government, focuses on chip design, and has signed agreements with UK-based companies Riverbeck and Big Innovation Centre. SMD’s collaboration with Riverbeck will focus on developing radio frequency integrated circuits for satellite applications, while its collaboration with Big Innovation Centre will focus on sustainable semiconductor manufacturing. Melexis, a Belgian company, is also expanding its presence in Sarawak with a significant investment into expanding its facility in Kuching. Malaysia plays a crucial role in the global semiconductor supply chain, with the country’s electrical and electronic product exports reaching US$120.5 billion in 2023. Sarawak’s semiconductor industry began with 1st Silicon, and has since attracted investments from companies like X-Fab and Taiyo Yuden. The Sama Jaya High Tech Park located in Kuching hosts major multinational corporations, helping make Sarawak an attractive investment destination in the semiconductor sector.

MALAYSIA
Malaysian exports rise by 2.2% in first quarter of 2024 to reach US$75.77 billion
(19 April 2024) Malaysia’s export values experienced a slight decline of 0.8% in March 2024 to RM128.64 billion (US$26.90 billion) but maintained growth momentum for the first quarter of 2024. Exports expanded by 2.2% to MYR 362.41 billion (US$75.77 billion) during the first three months of 2024, driven by increased shipments of manufactured and mining goods. Notable increases were observed in exports of iron and steel products, machinery, equipment and parts, manufactures of metal, crude petroleum, and liquefied natural gas (LNG). Total trade in March rose by 5.1% year-on-year to MYR 244.47 billion (US$51.11 billion), while the trade surplus decreased by half to MYR 12.81 billion (US$2.68 billion) compared to the same period last year. Imports increased by 12.5% year-on-year to MYR 115.83 billion (US$24.22 billion) in March, driven by a surge in capital goods, intermediate goods, and consumption goods. Overall, Malaysia’s total inbound shipments for January-March 2024 rose by 13.1% to MYR 328.19 billion (US$68.62 billion) compared to the same quarter in 2023.

THE PHILIPPINES, SINGAPORE
Singapore inspires the Philippines’ planned special economic zone north of Manila
(18 April 2024) On 18 April, 2024, Singapore Foreign Minister Vivian Balakrishnan concluded his four-day visit to the Philippines. During his visit, the Foreign Minister expressed Singapore’s readiness to exchange ideas with the Philippines with regards to a special economic zone (SEZ) located north of Manila, whose development plans take inspiration from Singaporean infrastructure and urban planning. The focus is on New Clark City, a 9,450-hectare community located within the Clark Freeport and Special Economic Zone, formerly a US military base. Philippines’ President Ferdinand Marcos Jr aims to transform it into the country’s first smart city. Sixteen Singapore firms already operate in Clark, contributing US$139.92 million in investments and employing over 1,600 people as of 2023. Plans for the SEZ include developing affordable housing inspired by Singapore’s HDB flats and transforming the civil aviation complex around Clark International Airport into a global hub akin to Changi Airport. Clark International Airport Corporation (CIAC) president Arrey Perez outlined plans for sports, entertainment, and agricultural trade facilities.

VIET NAM
Viet Nam’s central bank provides troubled bank with US$24 billion in emergency loans
(18 April 2024) Vietnam’s central bank has reportedly provided Saigon Joint Stock Commercial Bank (SCB) with approximately US$24 billion in “special loans” between October 2022 and the start of April 2024. This significant intervention, amounting to around 5.6% of GDP, underscores concerns about stability in Viet Nam’s financial sector. SCB, previously one of the country’s largest commercial lenders, has faced turmoil following the arrest of real estate tycoon Truong My Lan in October 2022, who was subsequently sentenced to death for her alleged role in siphoning US$12.5 billion from the bank. Despite efforts to restore confidence, including placing SCB under central bank supervision, the situation has highlighted potential risks in Viet Nam’s financial system. This development may prompt reassessment among global companies considering Viet Nam as an alternative to China for their supply chains.


RCEP Monitor


SOUTH KOREA, UNITED STATES
Samsung to invest US$45 billion in chipmaking facilities in US
(15 April 2024) The U.S. government will provide up to US$6.4 billion to Samsung Electronics to construct chipmaking facilities in Texas, part of efforts by the Biden administration to enhance domestic semiconductor production. Samsung’s total investments in the U.S. is set to more than double, reaching approximately US$45 billion. The grant will aid in building two chip factories for producing 2-nanometer chips, an advanced packaging facility, and a research and development fab in Taylor, Texas. Samsung also plans to expand an existing facility in Austin to produce power-efficient chips for the aerospace, defense, and automotive sectors. The first fab is expected to start production in 2026, followed by the second in 2027, the same year the R&D facility is set to open. The grant, although smaller than those given to Intel and TSMC, is substantial relative to Samsung’s investment.

CHINA, INDONESIA
Indonesia requests Chinese assistance in developing local infrastructure
(18 April 2024) During a meeting between Indonesian President Joko Widodo and Chinese Foreign Minister Wang Yi in Jakarta, Widodo requested China’s assistance in various sectors, including developing Indonesia’s new capital city Nusantara (namely its transportation system), as well as for investment in the petrochemical industry in North Kalimantan. The Indonesian president also urged the acceleration of feasibility studies for extending the China-backed Jakarta-Bandung high-speed railway to Surabaya. Wang’s visit aims to deepen bilateral economic cooperation, with discussions held on a wide range of topics including the Belt and Road Initiative. Meetings were also held with incoming President Prabowo Subianto. Indonesia hopes to solidify its relationship with China, especially amidst the upcoming change in leadership. China has been a significant trade and investment partner for Indonesia over the years, contributing to various projects.

SOUTH KOREA, JAPAN
South Korea and Japan signal readiness to respond excessive volatility in currency markets
(17 April 2024) South Korea and Japan have expressed concerns over the recent depreciation of their currencies and are prepared to take action against excessive exchange-rate volatility. South Korean Finance Minister Choi Sang-mok and his Japanese counterpart Shunichi Suzuki stated their readiness to deploy measures to stabilize currency markets during a meeting held in Washington D.C.. These concerns come amidst a weakening of the won and yen against the US Dollar. The won strengthened to 1,382.6 per dollar on 17 April, 2024, while the yen hit a 34-year low against the dollar, standing at 154.64 yen in Asia. The finance leaders of South Korea, Japan, and the United States are scheduled to hold their first trilateral meeting in Washington D.C. on 17 April on the sidelines of the ongoing IMF and G20 gatherings. Analysts speculate on potential currency intervention by Japanese authorities if the dollar surpasses 155 yen, though the impact may be limited. Additionally, Bank of Korea Governor Rhee Chang-yong stated readiness to implement measures to stabilize the market due to recent currency movements, which have been deemed excessive.

CARI Captures Issue 651: Top ASEAN finance officials agree to expand cross-border QR payments

Given recent developments in the region, Captures will widen its scope to include news related to members of the Regional Comprehensive Economic Partnership (RCEP) agreement which was signed towards the end of 2020. The other weekly newsletters under CARI, China-ASEAN Monitor and Mekong Monitor will also be consolidated into the Captures newsletter. We hope this new version of Captures will serve you better and look forward to providing a curation of stories relevant to ASEAN and its trading partners.

ASEAN
Top ASEAN financial officials agree to expand cross-border QR payments
(06 April 2024) Top financial officials from the Association of Southeast Asian Nations (ASEAN) have agreed to promote the expansion of cross-border QR payments through compatible platforms. The agreement, outlined in a 25-point statement issued during the 11th ASEAN Finance Ministers’ and Central Bank Governors’ Meeting (AFMGM) held in Luang Prabang, Lao PDR, covers areas such as financing, payment, and service connectivity. Lao PDR, as this year’s ASEAN chair, has agreed with Thailand to launch a cross-border QR payment system between the two countries, with full-scale operations expected to begin in June 2024. Similar arrangements are being pursued with Cambodia and Viet Nam. ASEAN countries aim to form joint QR payment networks to facilitate easier consumption, promote tourism, and facilitate investments. The goal is to unify standards and enlist payment operators to make these compatible QR payment standards widespread. Integrating QR payment standards is seen as aiding in preventing crimes such as money laundering.

MALAYSIA
Malaysia’s Port Klang to double capacity over coming decades
(10 April 2024) Port Klang, Malaysia’s largest port situated on the Malacca Strait, plans to double its capacity over the next few decades to compete with Singapore. The expansion plan aims to increase annual capacity from 14 million twenty-foot equivalent units (TEUs) to 27 million TEUs, with operator Westports Holdings investing US$8.34 billion. Port Klang’s strategic location and handling of various products contribute to its significance in Southeast Asia’s logistics sector. The expansion aligns with supply chain realignment trends, particularly the “China plus one” strategy, with Southeast Asia as a focus. Despite competition from neighbouring countries like Singapore and Thailand, Port Klang remains competitive due to its affordability.

THAILAND
Bank of Thailand holds rates steady for third straight meeting, defying Prime Minister
(10 April 2024) On 10 April, 2024, the Bank of Thailand (BOT) maintained its benchmark rate at 2.5% for the third consecutive meeting, defying Prime Minister Srettha Thavisin’s calls for monetary easing. The BOT cited structural economic challenges as limiting the effectiveness of monetary policy. The bank forecasts the Thai economy to grow by 2.6% in 2024, with headline inflation expected at 0.6%. Inflation has fallen below the target range of 1% to 3% due to government subsidies on diesel and electricity, both of whom are set to expire soon. Market analysts anticipate rate cuts later in 2024, with geopolitical tensions and energy subsidies to be monitored closely by the BOT.

SINGAPORE
Multinationals increasingly shift regional headquarters functions to save costs
(10 April 2024) Multinational corporations are increasingly shifting some of their Southeast Asian regional headquarters’ functions outside Singapore to leverage cost savings and growth opportunities. Sakata Inx, a Japanese printing ink manufacturer, established a regional head office in Malaysia in February 2024, aiming to serve customers more efficiently across South Asia and Southeast Asia. Malaysia’s proposed fiscal 2024 budget introduced tax incentives, including preferential income tax rates of 5% to 10%, attracting companies like Sakata Inx. Thailand is also becoming a preferred destination, with Nissin Foods Holdings relocating its Southeast Asian headquarters there in 2020. Japanese companies are increasingly considering partial relocations to countries like Thailand and Malaysia due to rising costs in Singapore. Despite this trend, Singapore retains advantages in location, language proficiency, and financial services, maintaining its status as a prime spot for regional headquarters.

VIET NAM
Gold smuggling due to high domestic prices negatively impacting dong
(7 April 2024) Vietnam faces challenges in stabilizing its gold market as smuggling activity increases due to high local prices for gold. Since smugglers need to buy dollars in the black market to pay for the commodity, the smuggling of gold leads to distortions in exchange rates and weakening of the dong. Gold imports surged to 55.5 tons in 2021, up from 39.8 tons in 2020, mainly through illegal channels. The rise in smuggling is driven by a shortage of official supplies and flight-to-safety demands amid economic struggles and geopolitical tensions. It is argued that the pressure on the dong negatively impacts the economy. The National Financial and Monetary Policy Advisory Council proposed ending the state monopoly on gold imports and bullion production, aiming to reduce smuggling and narrow the local premium. Abolishing the monopoly is expected to boost tax revenue from official imports and alleviate the reliance on illegal sources.

CAMBODIA
Cambodia’s economy expected to grow by 5.8% in 2024, according to Asian Development Bank
(11 April 2024) According to the Asian Development Bank’s flagship economic report, Cambodia’s economy is projected to grow by 5.8% in 2024, increasing from 5% in the previous year, with further growth expected at 6% in 2025. The ADB highlighted the positive momentum in the garments, footwear, and travel goods (GFT) sector, contributing to this growth. Inflation is anticipated to remain low at around 2% over the next two years due to expected lower energy prices. However, challenges such as potential global economic slowdowns, rising private debt, fluctuating energy prices, and climate vulnerabilities could affect the long-term outlook. Recent bilateral free trade agreements (FTAs) and participation in the Regional Comprehensive Economic Partnership (RCEP) are also expected to contribute positively to Cambodia’s economic performance, namely through a significant increase in export volume.

CAMBODIA
Cambodia confirms commitment to construct US$1.7 billion Funan Techo canal
(11 April 2024) Cambodian Prime Minister Hun Manet confirmed Cambodia’s commitment to constructing the US$1.7 billion Funan Techo canal connecting Phnom Penh to the sea. The project, backed by China, has raised concerns in Vietnam regarding potential access for Chinese warships near its coastline. However, Hun Manet dismissed these concerns, affirming the canal’s historic significance and economic benefits for Cambodia. Construction, funded by China, is set to commence later this year, although specific details are limited. The canal, measuring 100m wide and 5.4m deep, aims to bypass Vietnam’s traditional route and enhance economic prospects for millions. Hun Manet assured that the canal would not affect the mainstream Mekong’s water flow, crucial for regional fisheries. Despite concerns, Cambodian officials maintain that infrastructure developments, including the canal and naval base renovations, are not intended to serve foreign military interests.


RCEP Monitor


CHINA
China’s vehicle sales increase by 9.9% year-on-year in March 2024
(10 April 2024) China’s vehicle sales rebounded in March 2024 to reach 2.69 million units, a 9.9% increase from the previous year. First-quarter shipments surged by 10.6% to 6.72 million, the highest since the same period in 2019. Electric vehicles (EVs) played a significant role, with sales rising by 31.8% to 2.09 million units, driven by new models and price reductions. Exports of vehicles overall increased by 33.2% in the quarter. Concerns over China’s overcapacity in the EV sector have been raised by analysts and international figures such as the U.S. Treasury Secretary Janet Yellen, who stressed the importance of boosting domestic demand. Despite challenges such as declining profit margins, China’s EV industry is expected to become a significant contributor to economic growth by 2030, according to Moody’s Ratings.

JAPAN
Tokyo’s office vacancies fall to three-year low in March 2024
(11 April 2024) In March, Tokyo’s office vacancies hit a three-year low at 5.47%, marking a resilient commercial real estate market compared to global trends. Real estate broker Miki Shoji Co. reported this decline, with rents also increasing steadily throughout 2024 after a previous drop in 2023. The shift is attributed to companies relocating to central business districts or expanding their office spaces. Notably, the data includes occupied spaces, indicating sustained demand. Tokyo stands apart from other global cities facing record office vacancies and decreased property values due to remote work trends, which have not significantly impacted Japan.

AUSTRALIA
Australia to introduce ‘Future Made in Australia Act’ to boost manufacturing and clean energy sectors
(11 April 2024) Australia will introduce the ‘Future Made in Australia Act’ to boost its manufacturing and clean energy sectors in response to global competition. Prime Minister Anthony Albanese will unveil the scheme, departing from Australia’s traditional free-market policies. While specific figures are not provided, the taxpayer-funded initiative aims to compete with other nations’ substantial investments, such as those made by the US under President Joe Biden’s Inflation Reduction Act, as well as other initiatives by countries like China, the European Union, Canada, and Japan. Albanese stresses the need for Australia to actively participate in this global race, describing the current economic and climatic changes as significant. The act aims to foster renewable energy resources, including battery production and green hydrogen, to create jobs and ensure economic competitiveness.

CARI Captures Issue 650: South Korean firms based in Viet Nam face competition from China

Given recent developments in the region, Captures will widen its scope to include news related to members of the Regional Comprehensive Economic Partnership (RCEP) agreement which was signed towards the end of 2020. The other weekly newsletters under CARI, China-ASEAN Monitor and Mekong Monitor will also be consolidated into the Captures newsletter. We hope this new version of Captures will serve you better and look forward to providing a curation of stories relevant to ASEAN and its trading partners.

VIET NAM, SOUTH KOREA
South Korean firms based in Viet Nam face competition from China
(04 April 2024) South Korean companies have historically dominated foreign direct investment in Viet Nam, but they are facing increasing competition from Chinese counterparts. Despite South Korea ranking first in cumulative investment in Viet Nam since 1988, recent years have seen stiff competition from China. In 2023, South Korea ranked fourth in foreign direct investment in Viet Nam, behind Hong Kong, China, and Singapore. Factors such as rising labour costs and increased presence of Chinese companies have made Korean firms cautious about new investments in Viet Nam. Additionally, Viet Nam’s implementation of a global minimum corporate tax of 15% may impact its attractiveness as an investment destination, with South Korean companies expected to bear a significant portion of the tax burden. Despite challenges, Viet Nam’s open trade and investment environment, along with diplomatic relations with the United States and the influx of investment from multinational companies leaving China, are expected to contribute to the country’s economic growth.

INDONESIA, MALAYSIA, BRUNEI DARUSSALAM
Bruneian company pitches first high-speed railway on the island of Borneo
(01 April 2024) Brunergy Utama, a Brunei-based infrastructure company, has proposed the Trans-Borneo Railway, a high-speed railway spanning 1,620 kilometers across the island of Borneo. The railway would connect Brunei Darussalam, Indonesia, and Malaysia. The project aims to connect major cities and districts in Borneo, including Pontianak, Kuching, Kota Kinabalu, and Tutong, with plans to extend to Indonesia’s new capital of Nusantara on the western side of the island. The railway is designed to have four terminals, 24 stations, and trains reaching speeds of up to 350 kilometers per hour, with an estimated cost of US$70 billion. The project’s outlook is currently unclear, as neither Malaysia, Indonesia, or Brunei Darussalam have committed to the project.

THE PHILIPPINES, UNITED STATES, JAPAN
The Philippines, United States, and Japan to collaborate on semiconductors and clean energy
(04 April 2024) Japanese Prime Minister Fumio Kishida stated in an interview that Japan, the U.S., and the Philippines plan to collaborate in various sectors such as semiconductors, digitalization, and clean energy. This is with the larger aim of providing an alternative to China’s influence in Southeast Asia. The leaders will hold a trilateral summit in Washington to discuss regional challenges. They will explore economic and security cooperation, including the development of semiconductor facilities by U.S. companies in the Philippines (with Japan providing training for Filipino engineers), the setting up of 5G networks in the Philippines, cybersecurity, and development of supply chains for critical minerals such as nickel.

THAILAND
Thailand’s post-pandemic recovery sluggish compared to neighbors
(01 April 2024) Thailand is facing economic challenges, with household debt reaching nearly 87% of GDP and informal loans amounting to US$1.5 billion. The economy is exhibiting signs of the middle-income trap, characterized by low productivity and limited opportunities for the workforce. Despite other Southeast Asian countries’ strong recovery from the COVID-19 pandemic, Thailand’s economy grew by only 1.9% in 2023. Thai Prime Minister Srettha Thavisin has proposed measures such as cash handouts and legalizing casinos to stimulate economic growth, but these policies have faced criticism. The Bank of Thailand has refused to lower interest rates, pointing instead to the country’s loss of competitive edge due to factors like China’s slowdown and inadequate investments in digital literacy and training.

SINGAPORE
Singapore government bonds worst performing in Southeast Asia in 2024
(04 April 2024) Overseas investors in Singapore government bonds are facing challenges as the debt has performed poorly in 2024, with a loss of over 4% in dollar terms. The upcoming policy review by the Monetary Authority of Singapore (MAS) is unlikely to provide relief due to persistent inflation and robust economic data. The strong link between Singapore bonds and the US market means that any moves in Treasury yields often influence local yields. Despite expectations of easing by central banks, including the Federal Reserve, the timing of rate cuts has been delayed as the US economy remains resilient. Singapore bonds are expected to be less affected by rate cuts compared to regional peers due to the relatively lower increase in Singapore dollar (SGD) rates compared to US dollar (USD) rates. MAS policy is not anticipated to change until October 2024 unless there are significant declines in Singapore inflation. The impact of US events on Singapore bonds is considered more significant than domestic factors, with a stronger USD potentially leading to upward pressure on yields.

SINGAPORE
Total startup investment in Singapore reached US$6.1 billion in 2023
(04 April 2024) In 2023, Singapore emerged as the top startup investment destination in Southeast Asia, attracting a total investment of US$6.1 billion across 522 deals, according to a report by government agency Enterprise Singapore. Early-stage funding accounted for 94% of the deal volume and nearly half of the total deal value, marking an increase from the previous year. This contrasts with a 40% year-on-year drop in global early-stage funding for startups in 2023. The report suggests that startups in Singapore demonstrated resilience in securing funding compared to their counterparts. The director for the startup ecosystem at Enterprise Singapore argued that these funding results reflect investors’ confidence in Singapore as a prime destination for startup development in the region.

CAMBODIA
Cambodia approves investment projects worth US$2.2 billion in first quarter of 2024
(05 April 2024) In the first quarter of 2024, Cambodia experienced a significant surge in fixed-asset investment, reaching US$2.2 billion. This marked a 649% increase compared to the same period in 2023. This increase was accompanied by the approval of 106 investment projects during this period, generating approximately 107,000 jobs. The investments primarily targeted industries, infrastructure, hydroelectric power, agriculture, agro-industry, and tourism. China, Singapore, Vietnam, South Korea, and the United States emerged as the top five foreign investors in Cambodia, with China accounting for 35% of the total investment at US$777 million. The Secretary of State and Spokesperson for the Cambodian Ministry of Commerce highlighted the role of agreements such as the Regional Comprehensive Economic Partnership (RCEP) and the Cambodia-China Free Trade Agreement (CCFTA) in attracting foreign direct investment to Cambodia.


RCEP Monitor


SOUTH KOREA
Korean companies may boost share sales as authorities look to enhance corporate governance
(04 April 2024) Goldman Sachs Group Inc. predicts that South Korean companies may increase share sales as authorities aim to enhance corporate governance and lift a short-selling ban. The investment bank suggested that a plan to encourage firms to enhance valuations through better management practices could lead to more share sales, particularly from low-value traditional businesses. The proposed “Corporate Value-up Program,” aimed at improving profit, unwinding cross-holdings, and boosting shareholder returns, is expected to be finalised in May 2024. South Korea’s equity capital market (ECM) activity has seen a significant increase, accounting for 3% of global deals in the first quarter of 2024, up from 1% in the same period in 2023, with block sales and share placements reaching a record US$4.1 billion between January and March. Investors are also anticipating the potential end of the short-selling ban in June 2204, which  could pave the way for derivative-based equity products like convertible or exchangeable bonds.

JAPAN
Japan’s Nikkei average jumps 2% due to heightened domestic investor interest
(04 April 2024) The Nikkei Stock Average surged on 04 April, closing at 39,773.14, up 321.29 points or 0.81% from the previous day. Semiconductor-related stocks, buoyed by a rebound in U.S. tech stocks, led the rise, with Tokyo Electron hitting an all-time high. Investor sentiment was bolstered by Japanese companies’ improved asset efficiency, with trading house Itochu and cosmetics company Kao experiencing significant gains. The extended uptrend is also attributed to increased purchases of Japanese stocks through the revamped Nippon Individual Savings Account (NISA) program, which is designed to encourage people to move some of their savings into the stock market. According to a survey on NISA account openings at 10 securities companies, average monthly purchases in January and February tripled compared to the same period last year, reaching 1.77 trillion yen (US$11.67 billion).

AUSTRALIA
Government seeks to revitalize Australian manufacturing through US$9.7 billion fund
(04 April 2024) The Australian government is making efforts to revitalise its manufacturing sector through a US$9.7 billion National Reconstruction Fund fund aimed at commercializing local innovation. This initiative comes amidst concerns over the country’s economic resilience, particularly highlighted by recent trade tensions with China and vulnerabilities exposed by the Covid-19 pandemic. The decline of traditional manufacturing industries since the 1970s has left Australia heavily reliant on raw material exports, prompting calls to move up the value chain. However, Australia lags behind in research and development spending, with only 1.68% of GDP allocated to R&D, well below the OECD average. The National Reconstruction Fund aims to address these challenges by investing in maturing companies across various sectors, including renewable energy, medicine, defence, agriculture, and mining. While the vision to rebuild Australia’s manufacturing prowess is realistic, there are concerns about the country’s ability to compete with global players like China.