CARI Captures Issue 581: Anwar Ibrahim sworn in as Malaysia’s tenth prime minister following 15th general election

Anwar Ibrahim sworn in as Malaysia’s tenth prime minister following 15th general election

(24 November 2022) On 24 November, 2022, opposition leader Anwar Ibrahim was sworn in as Malaysia’s tenth Prime Minister, following the country’s fifteenth general election on 19 November.The election had led to Malaysia’s first hung parliament, after which followed days of behind-the-scenes negotiations between the various parties. The breakthrough came when the Barisan Nasional (National Front) coalition, which emerged with 30 seats, agreed to back a unity government under Anwar. Anwar’s Hope Pact secured 82 seats of its own, short of the 112 needed for a simple majority. The rival National Alliance under former Prime Minister Muhyiddin Yassin secured 73 seats in the election, and had at one point received the support of Borneo-based parties which had won a combined 28 seats.

The Philippines central bank ready to move at slower pace of rate increases

(22 November 2022) The Philippines’ central bank, the Bangko Sentral ng Pilipinas (BSP), is ready to move at a slower pace of rate increases amidst expectations of the US Federal Reserve turning less hawkish in the near future. Governor Felipe Medalla expects the Fed’s next rate move to be a half-point increase followed by a quarter-point. The BSP has delivered the most aggressive tightening in Southeast Asia in 2022, with 300 basis points of moves since May 2022 to contain inflation and support the peso. By the second half of 2023, the BSP expects inflation to slow to the midpoint of their 2% to 4% target range. The Philippines’ peso has remained Southeast Asia’s worst performing currency. The BSP is unlikely to change limits on bank’s foreign exchange position.

Thailand’s economy expands by 4.5% year-on-year in the third quarter of 2022

(21 November 2022) Thailand’s economy expanded by 4.5% year-on-year in the third quarter of 2022, buoyed by a reinvigorated tourism sector. Thailand’s economy had expanded by 2.5% during the previous three months. On a seasonally adjusted quarter-on-quarter basis, the economy grew at an annualized 1.2% from the second quarter which ended in June 2022. Officials predict full-year growth to reach 3.2%, an increase from the 2.7% to 3.2% prediction announced in August 2022. For 2023, 3% to 4% growth is now being forecast. According to the Tourism Authority of Thailand, the country is expected to welcome up to 10 million foreign tourists in 2022, as well as 18 million in 2023. However, headline inflation remains a problem, hitting a 14-year-high of 7.86% in August 2022, followed by 6.41% in September and 5.98% in October.

Cambodian government advisor claims China’s BRI has contributed enormously to Cambodia’s economic growth

(23 November 2022) Senior advisor to the Cambodian government Sok Siphana has claimed that China’s Belt and Road Initiative (BRI) has contributed enormously to Cambodia’s economic growth. Siphana stated that the BRI has helped develop a lot of Cambodia’s infrastructure, including the Phnom Penh-Sihanoukville Expressway, the Sihanoukville Coal Power Plant and the Siem Reap Angkor International Airport. He pointed to the Sihanoukville Special Economic Zone, which he claimed would help accelerate Cambodia’s development of a modern industrial mix. He also claimed that the Regional Comprehensive Economic Partnership (RCEP) trade pact and the Cambodia-China Free Trade Agreement (CCFTA), which both entered into force earlier in 2022, will help promote additional trade of Cambodia’s agricultural products and commodities.

Singapore predicts GDP growth in 2023 to come in as low as 0.5% due to export slump

(23 November 2022) Singapore predicted its GDP growth for 2023 to come in as low as 0.5%, as an export slump underscores a worsening global economic outlook. Trade officials believe the growth range for 2023 could start from the floor of 0.5% to a ceiling of 2.5%, weaker than the 3.5%” expansion forecast for 2022. For the July-September quarter, the preliminary figure of 4.4% year-on-year growth was downgraded to 4.1%. Earlier in November 2022, Singapore reported that non-oil exports shrank 5.6% on the year in October 2022, pulling back from September’s 3.1% rise. For the rest of 2023, the weaker external outlook will weigh on the growth of Singapore’s outward-oriented sectors. The decline in October in non-oil exports broke an almost two-year streak of consistent expansion for Singapore’s exports.

Viet Nam will promote the usage of e-commerce channels to expand export markets

(22 November 2022) Viet Nam will promote the usage of e-commerce channels to expand export markets and enable enterprises to participate in foreign distribution channels. It is believed that e-commerce channels will play an important part in helping Viet Nam’s enterprises to develop a strategic relationship with foreign distribution networks, part of Hanoi’s plan to build a stable and sustainable export distribution model. Authorities plan to provide support in market information to around 20,000 enterprises and training and consultancy to another 15,000, in order to help them improve competitiveness and participate more in the global value chains. In addition, 5,000 enterprises will be provided with support to build the capacity for joining cross-border e-commerce. Viet Nam hopes to develop import and export markets to ensure sustainable growth in the long term and encourage Vietnamese firms to participate more in global production networks.

Indonesia to use excess budget cash to reduce borrowing in 2023
(24 November 2022) Indonesia will accumulate excess cash in its 2022 budget, which it intends to use to reduce borrowing in 2023, when it is expected to face market volatility and a weakening global economy. Indonesia has overseen a strong fiscal position in 2022, with tax revenues gaining a boost from exports (driven by high commodity prices) as well as the post-pandemic recovery in economic activity. As of end-October 2022, the government had collected excess cash of US$17.26 billion, although its overall budget was in a deficit representing 0.91% of GDP. In 2023, the government is targeting a budget deficit of 2.8% of GDP assuming economic growth of 5.3%, compared with the actual forecast range of 5% to 5.3% for 2022. However, Indonesia’s central bank stated this week that growth in 2023 may slow to 4.37%.

RCEP Monitor

Government notes moderate recovery for economy, remains cautious over risks from global economic slowdown

(24 November 2022) In its monthly report for November 2022, Japan’s government noted a moderate recovery for the economy, while remaining cautious over risks from a global economic slowdown as well as financial market fluctuations. This comes as data last week showed that the economy had shrank for the first time in a year in the third quarter, due to sluggish global growth and import costs hurting consumption and business activity. Other data had shown manufacturing activity in Japan contracting at the fastest pace in two years in November due to inflationary pressures. Japan’s government also stated that private consumption and capital spending were also recovering, while exports and imports were ‘almost flat’. In October 2022, the government compiled a stimulus package to alleviate the impact of accelerating inflation.

South Korea’s central bank raises its benchmark interest rate by 0.25%

(24 November 2022) South Korea’s central bank, the Bank of Korea, raised its benchmark interest rate by 0.25% to 3.25% in order to battle high inflation amid a global economic slowdown. The Bank of Korea has lifted rates six times since August 2021 in its efforts to boost the recovery from the COVID-19 pandemic, as well as to tame inflation. Consumer prices surged 5.7% year-on-year in October 2022 due to price hikes in electricity, gas and processed food products, although the increases in the prices of petroleum products has moderated. With inflation expected to remain high, the bank sees continued rate hikes as warranted ‘for some time’. The official outlook for economic growth in 2023 has been lowered to 1.7% from the previous estimate of 2.1% made in August 2022.

Australia to become more selective about who it will let invest in its critical minerals industry

(25 November 2022) Top lithium supplier Australia is set to become more selective about who it will allow to invest in its growing critical minerals industry. Australia is a major supplier of minerals key to the green energy industry like rare earths, and has stated that it has ‘more to gain’ by encouraging investments from allied countries in order to build up its minerals processing industry. The Australian government stopped short of announcing any review of existing international holdings of operations. Australia is revising its critical minerals strategy and hopes to position itself as a green superpower, backed by its rich mineral endowments. It recently signed a Critical Minerals Partnership with Japan in October 2022, while its Southeast Asia Economic Strategy to 2040 will include a focus on resources, energy and the green economy.

CARI Captures Issue 580: ASEAN holds 40th ASEAN Summit and other meetings in Phnom Penh, Cambodia

ASEAN holds 40th ASEAN Summit and other meetings in Phnom Penh, Cambodia

(13 November 2022) ASEAN held the 40th ASEAN Summit in Phnom Penh, Cambodia, on 11th November, 2022, while other meetings were also held in conjunction with it, including the East Asia Summit and the US-ASEAN Summit. Among the main takeaways from the ASEAN Summit included the fact that no joint statement was released following the East Asia Summit after the US and Russia failed to agree on the necessary language. No progress was also made with regards to the ongoing Myanmar Crisis, with ASEAN merely stating they would continue to review Myanmar’s representation at ASEAN meetings should the situation require it. On the other hand, US-ASEAN ties were elevated to a comprehensive strategic partnership, while East Timor was granted observer status in ASEAN, paving the way for full membership.

Malaysia’s political leaders offer slew of promises ahead of general election on 19 November, 2022

(18 November 2022) Malaysia’s political leaders are offering a slew of promises ahead of its general election on 19 November, 2022. Prime Minister Ismail Sabri and his ruling United Malays National Organization has promised new infrastructure projects including improved online connectivity and highways to the East Malaysian state of Sarawak. He has also promised to create a new deputy prime minister post to be helmed by a leader from Sarawak. The ruling National Front coalition’s election manifesto has focused on people’s welfare and improving the country’s competitiveness. The opposition Hope Pact for their part has pledged to address Malaysia’s aging society by creating a special agency to look after citizens’ welfare, as well as make Malaysia a data center hub. The Hope Pact’s leader, Anwar Ibrahim, has also pledged to forgo his salary if he becomes Prime Minister.

Rich countries pledge to raise at least US$20 billion to help Indonesia wean off coal

(15 November 2022) Rich nations, including the United States, Japan, Canada, and six European countries pledged to raise at least US$20 billion to help Indonesia wean off coal and reach carbon neutrality by 2050, a decade earlier than initially planned. An accord was signed with Indonesia on the sidelines of the G20 summit in Bali. Under the deal, Indonesia pledges to be carbon-neutral by 2050, — 10 years earlier than previously planned — and to almost double its renewable energy generation by 2030. As part of the deal, Indonesia had committed to a shift towards clean energy in return for US$10 billion in public sector finance and US$10 billion in private funding over three to five years. The financing provided will include grants, concessional loans, guarantees, and private investments.

Thailand’s bourse plans to offer ETFs and depository receipts on foreign companies

(16 November 2022) Thailand’s bourse plans to offer exchange traded funds (ETFs) and depository receipts (DRs) on foreign companies to boost business and attract international investors. As part of their plan to promote the Thai exchange as a trading center for overseas stocks, the Stock Exchange of Thailand is working with other Asian trading venues to promote such products. Foreign investors who do not want to invest directly into Myanmar, Lao PDR, Cambodia and Viet Nam, can instead invest in those equities through ETFs and DRs on the Thai stock exchange. International funds have poured more than US$500 million net into local equities in Thailand in November 2022, drawn to the strong growth outlook in tourism, restaurant, hotel and healthcare shares.

Singapore’s non-oil domestic exports contract by 5.6% year-on-year in October 2022

(17 November 2022) Singapore’s non-oil domestic exports contracted by 5.6% year-on-year in October 2022. This presented the first decline since November 2020. This was a reversal from the 3.1% growth registered in September 2022. On a seasonally-adjusted monthly basis, non-oil domestic exports decreased by 3.7% in October, extending the 3.9% decline in the preceding month. The export of electronics products fell 9.3% year on year in October, continuing the previous month’s 10.6% contraction, while non-electronics exports fell by 4.5% from the previous year, reversing from September’s 7.6% expansion. According to certain experts, the decline in both industries signal a slowdown in global growth.

The Philippines and Indonesia hike key interest rates to tame inflation

(17 November 2022) The Philippines and Indonesia both hiked their key interest rates on 17 November, 2022, as both countries seek to tame inflation. Bank Indonesia raised its seven-day reverse repurchase rate by 50 basis points to 5.25%, the highest since September 2019. Inflation in Indonesia has dropped to 5.71% in October 2022 from 5.95% in September, above Bank Indonesia’s target range of 2% to 4% in 2022. The Philippines’ central bank, for their part, raised its key rate by 75 basis points to 5.0%, the highest since March 2009. Inflation in the Philippines accelerated to 7.7% in October 2022, the highest level since 2008. That puts the year-to-date average to 5.4%, well above the government’s 2% to 4% target.

Tourist arrivals in Brunei Darussalam has seen steady increase since easing of travel restrictions
(18 November 2022) Tourist arrivals in Brunei Darussalam have seen a steady increase since the easing of travel restrictions and the re-opening of land borders. Hospitality and tourism service providers have seen an increase in bookings and visits from foreign tourists, signaling the tourism industry is returning to pre-pandemic levels. Fifteen leading hotels in the country reported a hike in room bookings, from 8,271 to 12,406 – or a 50% increase – from August to September in 2022. The Acting CEO of Royal Brunei Airlines has stated that the increase in flight frequencies and resumptions of flights in the coming months will boost the number of travelers coming into the country.

RCEP Monitor

Regulators ask banks to report on their liquidity after rapid selloff in bonds

(17 November 2022) Chinese regulators have asked banks to report on their liquidity after a rapid selloff in bonds triggered a flood of investor withdrawals from fixed-income products. The queries from regulators comes as China witnesses the biggest decline in short-term government bonds since mid-2020. Spurred by a shift toward riskier assets including stocks, this prompted retail investors to pull money from wealth-management products, fueling a spiral of price declines and accelerating withdrawals. These losses also spread to top-rated corporate bonds, fueling a record surge in yields this week. The turbulence in the bond market comes as China’s overall economy begins to pick up, driven by the government easing COVID-19 restrictions, rolling out a rescue package for the property sector, and cooling tensions with the West. As money is now flowing towards riskier assets such as shares, safe haven investments such as bonds have suffered.

New home prices fall at their fastest pace in seven years in October 2022

(16 November 2022) New home prices in China fell at their fastest pace in seven years in October 2022, weighed down by COVID-19 restrictions and problems in the property sector. New home prices slumped 1.6% year-on-year after a 1.5% fall in September 2022. This was the sixth month of contraction and the biggest annual drop since August 2015. Regulators presented a rescue package on 13 November, 2022, aimed at boosting liquidity in the property sector. The property sector has struggled with defaults and stalled projects since authorities began clamping down on excessive leverage in the mid-2020s, which impacted market sentiment. New home prices declined 0.3% month-on-month after easing 0.2% in September.

Jobless rate in Australia drops to 3.4% in October 2022, matching five decades low

(18 November 2022) The jobless rate in Australia dropped to 3.4% in October 2022, matching a five decade low. The jobless rate had dropped from 3.5% in September. According to data by the Australian Bureau of Statistics, net employment rose 32,200 in October from September, when they fell a revised 3,800. Full-time employment jumped 47,100, bringing total job gains for the 12 months to October to a massive 762,000. The Reserve Bank of Australia (RBA) sees unemployment rising only slightly to 3.7% by end-2023, while forecasting inflation at 4.7%, which is still well above its long-term target band of 2% to 3%. Australia’s tight labor market have raised expectations of the RBA continuing to raise interest rates.

CARI Captures Issue 579: ASEAN Fintech Segment Keeps its Charm

ASEAN fintech segment keeps its charm

(7 Nov 2022) The Fintech in ASEAN report, a joint production by UOB, PWC and the Singapore Fintech Association found that fintech funding activity in ASEAN posted US$4.3 billion in the first nine months of 2022 despite geopolitical uncertainties and rate hikes to combat high inflation. The average deal size has also increased to US$26.5 million from US$23 million year-on-year since 2021. Together, Singapore (43%) and Indonesia (33%) accounted for more than three-quarters of ASEAN’s total funding. Of the 163 funding deals, more than half (55%) went to Singapore-based fintech firms. The payments category received the most funding at US$1.9 billion, followed by alternative lending at US$506 million. Despite the broader crypto market’s volatile performance this year, the cryptocurrency category took third place at US$461 million.

40th and 41st ASEAN Summits commence in Cambodia from 10-13 November 2022

(10 Nov 2022) This is the first time the ASEAN will be holding the event in person since the start of the COVID-19 pandemic. The 2020 summit, chaired by Vietnam, and the 2021 summit, chaired by Brunei, were held online. Cambodia is this year’s ASEAN chair, and the leaders at the summit, to be held in the capital Phnom Penh, will discuss how the 10 countries in the association can promote peace, prosperity and stability in the region as it recovers from the pandemic. The theme for this year’s summit is “ASEAN A.C.T: Addressing Challenges Together”. Leaders will discuss the worsening situation in Myanmar and other regional and international developments.

Laos PDR
Inflation in Laos surges to recorded high of 36.75% in October 2022

(7 Nov 2022) Laos recorded the highest year-on-year inflation rate at 36.75% in October, up from 34% in September, according to the latest report from the Lao Statistics Bureau. According to the report released on Saturday from the Lao Statistics Bureau website, the price of food and non-alcoholic beverages has surged by 38.8% year on year, driven by the rising price of rice and other daily food items such as pork, poultry, fish, seafood, eggs, vegetable oil, fruit, and vegetables. Commercial transport and delivery charges rose by 58.1% compared to the previous month, especially for fuel, which was recorded at 95% in October. The cost of other consumer goods and many other products also rose, including clothing, footwear, construction materials, household items, medical equipment, and medicines.

Bursa’s carbon exchange to be operational by end og 2022

(9 Nov 2022) Bursa Malaysia’s Voluntary Carbon Market (VCM) will be operational by way of the auction before year-end of 2022. Bursa Malaysia chairman Tan Sri Abdul Wahid Omar said it was crucial to support industries that can generate economic progress and environmental change. Abdul Wahid said VCM facilitated price discovery for new products by serving as a reference price for carbon credit trading and generating tangible price signals for potential issuers to embark on domestic carbon credits projects.

Singapore proposes raising carbon tax from S$5 to S$25 per tonne for greenhouse gas emissions in 2024 and 2025

(8 Nov 2022) Singapore plans to raise its carbon tax to S$25 per tonne for greenhouse gas emissions in 2024 and 2025, and S$45 per tonne for greenhouse gas emissions in 2026 and beyond. Speaking in Parliament on 8 November at the second reading of the Carbon Pricing (Amendment) Bill, Minister for Sustainability and the Environment Grace Fu said that the progressive increases will set Singapore on a trajectory to reach between S$50 and S$80 per tonne by 2030. The carbon price provides an effective policy to motivate emitters to take action to reduce their emissions, and in helping Singapore achieve its net zero ambitions.

Thailand scraps plan to allow foreigners to buy land

(8 Nov 2022) Thailand is walking back a policy that would have allowed limited land ownership by wealthy foreigners after a public backlash against the plan. Earlier this year, the government announced the plan aimed at attracting investment from overseas, limiting foreigners to 0.16 ha of land if they invest at least 40 million baht (US$1.07 million) in securities or bonds for at least three years. Critics have argued the investment sum was too small and that the policy could drive up property prices, crowding out local ownership. Interior Minister Anupong Paochinda called the issue “a delicate matter” and said a study was needed to weigh the advantages and disadvantages.

Vietnam to require 24-hour take-down for “false” social media content
(4 Nov 2022) Vietnam’s Minister of Information and Communications, Nguyen Manh Hung, said that authorities had tightened regulations to deal with “false” content on social media platforms so that it must be taken down within 24 hours instead of 48 hours previously. Speaking to the legislature, Hung proposed by 2023 to completely deal with “News-lisation”, a term used by authorities to describe when people are misled into thinking that social media accounts are authorised news outlets. Vietnam, which is a US$1 billion market for Facebook, has tightened internet rules over the past few years, culminating in a cybersecurity law that came into effect in 2019 and national guidelines on social media behaviour introduced in June last year. Critics have raised concerns the laws could hand the authorities more power to crack down on dissidents.

RCEP Monitor

Japan to support ASEAN decarbonization

(10 Nov 2022) Japan’s Prime Minister Kishida Fumio has expressed intent to help businesses in the ASEAN member nations to raise funds needed for achieving carbon neutrality. He referred to Japan’s support for expanding a “transition finance” framework to help with decarbonization. Kishida said the ASEAN economy is expected to grow 2.7-fold by 2050, and securing the energy and infrastructure needed for growth while taking measures to cope with climate change is a major challenge. Kishida said the idea of pursuing growth while reducing carbon dioxide emissions as much as possible is important and added that Japan will face this challenge with ASEAN members.

China reaffirms commitment to Covid-Zero policy

(7 Nov 2022) Oil slumped as China’s continued adherence to its Covid-Zero policy dampened hopes of a demand rebound. Most commodities dropped Monday as China signaled a continuation of its Covid-Zero policy. Tight fuel supplies and a weakening dollar contained the drop, at one point propelling the Brent above US$99 a barrel to its highest intraday since the end of August.

Alibaba’s international arm spending millions to expand into South Korea

(7 Nov 2022) Alibaba’s international e-commerce business AliExpress is spending the equivalent of US$7 million to reach consumers in South Korea. AliExpress said it launched three-to-five-day shipping to South Korea last year, allowing South Korean residents to buy some products, especially in fashion, from Taobao, Alibaba’s main e-commerce site in China. The investment looks to tap a market that’s valued at billions of dollars, and currently dominated by the U.S. South Koreans’ online purchases from foreign retail sites grew by US$1 billion in 2021 to US$4.5 billion, with 41% stemming from the U.S., according to a August 2022 report by the U.S. International Trade Administration.

CARI Captures Issue 578: Southeast Asia to host three major diplomatic gatherings in November 2022

Southeast Asia to host three major diplomatic gatherings in November 2022

(31 October 2022) Southeast Asia will host three major diplomatic gatherings in November 2022. This includes the ASEAN Summit and related meetings, which will be held in Phnom Penh, Cambodia on 08-13 November 2022. Following this, the Group of 20 (G-20) Summit will be held from 15-16 November in Bali, Indonesia, after which the annual Asia-Pacific Economic Cooperation (APEC) summit will be held between 18-19 November in Bangkok, Thailand. US President Joe Biden will attend the US-ASEAN Summit and the East Asia Summit in Cambodia, as well as the G-20 Summit in Indonesia. During his time in Indonesia, President Biden is also likely to hold a bilateral meeting with Indonesian President Joko Widodo. US Vice President Kamala Harris, for her part, will be attending the APEC conference in Thailand.

Malaysia’s central bank raises overnight policy rate by 25 basis points

(03 November 2022) Malaysia’s central bank, Bank Negara Malaysia (BNM), raised its overnight policy rate (OPR) by 25 basis points to 2.75%, its fourth consecutive rate hike since May 2022. In May, the central bank raised the OPR to 2% from 1.75%, reportedly the lowest on record following a 25 basis point cut in July 2020. It raised the OPR by another 25 basis points to 2.25% in July 2022, followed by another 25 basis points to 2.5% in September. BNM stated that the policy adjustment was in response to inflationary pressures being more persistent than expected. BNM attributed this to strong demand, tight labor markets, and elevated commodity prices. BNM also projected that underlying inflation, as measured by core inflation, will average closer to the upper hand of the 2% to 3% forecast range for 2022.

New fund inflows to Singapore jump 59% year-on-year in 2021

(02 November 2022) Singapore attracted US$317 billion in new funds in 2021, a 59% increase from the previous year, according to data by the Monetary Authority of Singapore (MAS). Due to concerns that these new money inflows are flowing into the property market, thereby driving up prices, regulators have imposed measures on the real estate sector to prevent overheating. Singapore is marketing itself as an international wealth hub, and is enjoying a post-COVID-19 resurgence as investors are drawn to its stability. Assets managed by local firms soared 16% in 2021 to US$4 trillion, mostly from overseas, exceeding the global growth rate. These new money inflows come on top of gains from higher asset prices in 2021. Singapore hopes to add as many as 20,000 finance jobs over the next five years.

Factory activity in Singapore contracts for second straight month, suggesting continued deterioration in outlook

(02 November 2022) Factory activity in Singapore contracted for the second consecutive month in October 2022, while the electronics sector pulled back for the third straight month. This suggested a continued deterioration in momentum, outlook, and confidence in the last quarter of 2022. October became the second consecutive month of contraction in overall activity for the manufacturing sector after having expanded for 26 straight months. This has been attributed to a faster drop in key indexes such as new orders, factory output, and inventory. Singapore’s overall purchasing managers’ index (PMI) fell to 49.7, 0.2 point below September’s PMI reading. Singapore’s electronics sector recorded a decline of 0.3 point from September 2022 to post a further contraction at 49.1. This has strengthened the view that an electronics down cycle is underway.

Thailand posts surprise current-account surplus in September 2022, offering reprieve for Thai baht

(02 November 2022) Thailand posted a surprise current-account surplus in September 2022, offering a reprieve for the Thai baht. This is due to a better than expected rebound in tourism, lower oil prices and falling shipping costs. The current-account surplus may reach as much as US$3 billion during the October-December period, although much will depend on the trajectory of energy prices. The current account posted a deficit of US$17.7 billion in the first nine months of 2022, and Thailand’s finance ministry predicted it might swing back to a surplus of US$5.6 billion in 2023. A return to a current-account surplus may help prop up the Thai baht, which has slumped almost 12% in 2022 to a 2006-low. Thailand’s central bank has lagged behind its peers in terms of hiking rates.

Shell completes exit from the Malampaya gas field in the Philippines

(01 November 2022) Oil and gas giant Shell has completed the sale of its stake in an operator of the Malampaya gas field in the Philippines, effective 01 November, 2022. The sale will move full control of Shell Philippines Exploration B.V., which owns a 45% operating interest in and operates the Malampaya gas field, to Malampaya Energy XP, a subsidiary of Prime Infrastructure Capital. The other members of the field’s service contract consortium are a subsidiary of Udenna and PNOC Exploration, which own a 45% and 10% interest respectively. Shell had agreed to sell its stake in the gas field in May 2021. The gas field had been discovered in 1991, and currently provides fuel to power plants that deliver about a fifth of the Philippines’ electricity requirements. However, the field’s output is declining and is expected to finish by 2027.

Cambodia exports US$1.325 billion worth of footwear in the first nine months of 2022
(02 November 2022) Cambodia exported some US$1.325 billion worth of footwear in the first nine months of 2022, up 32.69% year-on-year from the same period in 2021, which recorded US$998.238 million worth of footwear exports. Footwear-related goods accounted for 7.67% of the total value of Cambodia’s exports in the same period, or US$17.258 billion. In September alone, footwear-related exports were US$141.815 million – up 35.58% from US$104.601 million in the same month of 2021. According to industry insiders, there has been a slowdown in new orders in the third quarter of 2022, and signs of possible weakness in exports in the coming months. There are about 70 footwear factories in Cambodia, most of which are invested by entities from mainland China, Hong Kong, Taiwan, South Korea, and Japan.

RCEP Monitor

Authorities impose lockdown measures in areas surrounding world’s largest iPhone factory in Zhengzhou

(02 November 2022) Authorities have imposed lockdown measures in the area surrounding the world’s largest iPhone factory in Zhengzhou Airport Economy Zone, located in a district of Zhengzhou city, located in Henan province. The lockdown measures were imposed on 02 November, 2022, and currently affects some 600,000 people. The district in Zhengzhou city announced that all businesses would be required to work from home, with only “key enterprises” allowed to continue operating. The district’s more than 600,000 residents will also be required to take nucleic acid tests every day. According to one analyst, the Zhengzhou factory accounts for around 80% of iPhone 14 production. With outbreaks in more than 50 cities across China, the number of people in quarantine in China is at its highest level since the Shanghai lockdown in the spring.

South Korea’s foreign exchange reserves fall for third consecutive month in October 2022

(03 November 2022) South Korea’s foreign exchange reserves fell for the third consecutive month in October 2022, albeit by a relatively small amount. This was attributed to efforts by South Korea’s central bank to stem the won’s fall against the US Dollar. The country’s foreign exchange reserves fell by US$2.76 billion in October to US$414.01 billion. In September 2022, it had dropped by US$19.67 billion, which was the second-biggest monthly drop on record. The Bank of Korea stated that its efforts to prop up the weakening won was a factor for the decline, which it said more than offset gains of reserves in dollar value coming from the U.S. Dollar’s drop in value against major currencies. October would mark the 10th out of the past 12 months that South Korea’s foreign exchange reserves shrank.

Japan’s Finance Minister warns of downside risks to yen due to monetary tightening in the US

(04 November 2022) Japan’s Finance Minister Shunichi Suzuki warned authorities to be vigilant about any downside risks to the Japanese yen arising from the US Federal Reserve’s current course of monetary tightening. The widening spread between US and Japanese interest rates have seen the yen tumble to historic lows, with the Fed’s aggressive interest rates hikes contrasting sharply with the Bank of Japan’s massive monetary stimulus. The US Federal Reserve raised interest rates by three-quarters of a percentage point this week. Japan has spent a record US$43 billion supporting the yen in October after it slumped to a 32-year low. In September, it conducted its first yen-buying intervention since 1998.

CARI Captures Issue 572: AANZFTA in process of being upgraded, to focus on rules of origin and e-commerce

AANZFTA in process of being upgraded, to focus on rules of origin and e-commerce

(18 September 2022) The ASEAN-Australia-New Zealand Free Trade Agreement is in the process of being upgraded, with key upgrades expected to include a simpler process to validate the origin of goods and improved e-commerce arrangements. Australia’s two-way trade with ASEAN has pulled ahead of the United States and Japan, and is currently second only to China. Among the changes proposed include switching from government organizations issuing certificates of origin to self-declaration. The AANZFTA was the first region-to-region trade deal signed by ASEAN, although industry groups now argue that the agreement needs to be updated with the times. On 20th September, Australia’s Assistant Minister for Trade Senator Tim Ayres released a statement noting that ASEAN, Australia and New Zealand had ‘progressed negotiations’ to upgrade the agreement. He noted that the purpose of the upgrades is to modernize the trade agreement, further reduce trade barriers and boost trade and investment within the region.

Thailand and Viet Nam top crypto trading hubs within ASEAN, recording over US$100 billion in transactions in one year

(21 September 2022) Thailand and Viet Nam have become the top crypto trading hubs among the ASEAN states, even beating traditional financial center Singapore. Both countries recorded over US$100 billion in crypto-related transactions each from July 2021 to June 2022, according to numbers published on Wednesday by blockchain data platform Chainalysis. Thailand recorded US$135.9 billion in crypto value transacted over the year, while Vietnam logged US$112.6 billion. Meanwhile, Singapore booked just US$100.3 billion as financial regulators within the country tighten scrutiny over the crypto sector. Both Thailand and Viet Nam also saw high traffic to marketplaces for non-fungible tokens (NFTs) that give their owners the deeds to items like virtual art pieces on blockchain.

Thailand and Viet Nam to meet in October 2022 to discuss raising export prices for rice

(16 September 2022) Thailand and Viet Nam, the world’s third-largest and second-largest rice exporters respectively, will hold talks in October 2022 to discuss raising export prices for rice. On 06 – 07 October, Thai Agriculture and Cooperatives Minister Chalermchai Sri-on will visit Vietnam for talks with Vietnamese Agriculture and Rural Development Minister Le Minh Hoan regarding the countries’ agricultural cooperation including rice export prices. Both countries could reportedly raise rice export prices by some 20%, adding to global inflationary pressures. Earlier in September, both countries had agreed to cooperate in raising rice export prices as their farmers are unable to cover higher production costs due to soaring costs of fertilizers, agricultural chemicals and fuel. In August, export prices for Thai rice stood at US$446 per ton, up about 7% year-on-year, while those of Vietnamese rice leveled off at about US$385. In 2021, Thailand and Viet Nam accounted for 12% of global rice exports each.

Central bank of the Philippines and Indonesia raise benchmark interest rates in response to inflation

(22 September 2022) The central banks of the Philippines and Indonesia raised their benchmark interest rates on 22 September, 2022 in response to inflationary pressures. The Philippines raised rates by 50 basis points or half a percentage point, bringing the benchmark to 4.25%, the highest since August 2019. Bank Indonesia, for their part, hiked its policy rate for the second consecutive month, also by 50 basis points to 4.25%. The Philippines has increased its rates by 225 basis points since May 2022, with inflation averaging 4.9% on the year from January to August. As well, the Philippines’ central bank raised its full-year inflation outlook for 2022 to 5.6%, from 5.4%. Meanwhile, in Indonesia, Bank Indonesia projects CPI to reach higher than 6% by the end of 2022. The central bank noted that inflationary pressures are expected to increase in September following an adjustment of subsidized fuel prices while global energy and food prices remain high.

Gojek launches joint venture with TBS Energi Utama to supply 2 million electric e-motorbikes

(20 September 2022) Indonesian ride-hailing group Gojek launched a joint venture with energy group TBS Energi Utama in 2021 to supply e-motorbikes, in order to help Gojek make its fleet all-electric this decade. The joint venture, called Electrum, will be able to supply some 2 million e-motorbikes, according to a recent interview of a Gojek top executive. The new company is also expected to help develop Indonesia’s electric vehicle ecosystem by leveraging Gojek’s nationwide presence and TBS’s energy expertise. Thus far, Electrum operates 13 battery-swapping stations in Jakarta and has supplied Gojek with about 300 e-motorbikes. Gojek currently has more than 2 million registered drivers for its Indonesian ride hailing and delivery services, both of which overwhelmingly use motorcycles. Recent hikes in fuel prices are expected to accelerate the movement towards electric vehicles.

The Philippines posts balance of payment deficit for fifth straight month in August 2022

(19 September 2022) According to the Bangko Sentral ng Pilipinas (BSP), the Philippines posted a balance of payment (BOP) deficit for a fifth straight month in August 2022, as the national government withdrew from its deposits to settle foreign currency debt obligations during the month. The BSP reported a US$572-million BOP deficit in August, which compares with the US$1.819-billion deficit in July and the US$1.044-billion surplus the same month in 2021. The latest data from the Bureau of the Treasury found that the government’s running debt rose to a fresh record-high of US$220 billion as of end-July 2022. The latest monthly deficit brought the year-to-date BOP level to a US$5.492-billion deficit, higher than the US$253-million deficit in the comparable period of 2021. In terms of the balance of trade in goods, it was noted that it stood at a US$5.93 billion shortfall in July, up 69.1% from the US$3.5 billion gap in July 2021.

Cost of business in Singapore outpacing that of rival Hong Kong, including in cost of office space and utilities
(22 September 2022) The cost of business in Singapore is rising at a faster pace than that of rival Hong Kong, with expenses including the hiring of talent, office space and utilities outpacing that of its rival, which has seen only modest price increases. Despite this, the rate of new business formation in Singapore reached a 17-month high in August 2022, signaling its current attractiveness to firms wanting to exit Hong Kong. In Hong Kong, the number of new local businesses held roughly steady with 2021’s pace but is down from a peak in 2017. In terms of the office rental market, while Singapore’s rental costs remain well below Hong Kong’s, landlords in the latter have slashed office rents in core business districts through June 2022 by 4% from December 2021. In contrast, the cost of rent in Singapore’s central business area accelerated for a third quarter. As well, both city-states are seeing a divergence in labor tightness, with Singapore’s high ratio of job vacancies to those unemployed resulting in salaries for new job offers rising faster than those in Hong Kong in many key sectors in 2021.

RCEP Monitor

Central bank states that interest rates are approaching ‘normal settings’ according to minutes

(20 September 2022) The Reserve Bank of Australia (RBA) stated that interest rates are approaching ‘normal settings’ in minutes of its meeting on 06 September, 2022, when it raised rates by half a percentage point to 2.35%. The minutes noted that the RBA expects to raise rates further over the coming months, although not on a ‘pre-set path’ given uncertainties over the future path of inflation and growth. The minutes also noted that the central RBA discussed whether to raise rates by a quarter-point or half-point.The RBA has recently overseen the sharpest tightening cycle in a generation, pointing to a very tight labor market and resilient household spending to argue that the Australian economy can absorb the moves. Australia, like many other developed economies, is currently attempting to reign in inflation which is expected to peak at just under 8% later in 2022.

Japan to resume visa-free entry for individual travelers on 11 October

(22 September 2022) Japan will resume visa-free travel for individual travelers on 11 October, as the country moves to return its border rules to pre-pandemic norms for the first time in about two and a half years. Japan will also remove the cap on the number of people allowed to enter the country. As of now, Japan only allows package tours and requires visas for all visitors, due to efforts to control COVID-19. Daily arrivals have also been capped at 50,000. As of 11 October, short-term visitors will no longer be required to apply for tourist visas. The Japanese government hopes to take advantage of its weak yen to boost the economy through inbound tourism. The yen is currently at a 24 year low, touching 145 per dollar at one point. Prior to COVID-19, Japan accepted a record 31.8 million visitors in 2019.

New Zealand set to become only OECD country that will not publish monthly CPI data

(23 September 2022) New Zealand is set to become the only OECD country that will not publish monthly Consumer Price Index (CPI) data. While Australia’s statistics bureau announced in August 2022 that it will start publishing monthly CPI data from October onwards, Statistics New Zealand stated it has no current plans to follow suit. This will leave New Zealand the last remaining OECD country still relying on quarterly data, meaning a three-month gap between its inflation reports. As such, although New Zealand’s central bank’s next monetary policy review is on 05 October, third-quarter inflation data won’t be published until 18 October. Statistics New Zealand attributed a lack of funding as to why it won’t be publishing monthly CPI data.

CARI Captures Issue 571: Five Southeast Asian countries among global top ten for e-commerce sales growth in 2022

Five Southeast Asian countries among global top ten for e-commerce sales growth in 2022

(15 September 2022) Five ASEAN countries are among the global top ten for e-commerce sales growth in 2022, according to data by eMarketer. These top ten countries include Indonesia, Malaysia, The Philippines, Thailand, and Vietnam. The Philippines topped the chart at 25.9% growth year-on-year, while Indonesia came second at 23%. eMarketer predicted the entire region’s 2022 ecommerce sales growth year-on-year at 20.6%, the highest in the world, totaling US$89.67 billion. The COVID-19 pandemic caused a shift in consumer behavior with regards to e-commerce, with a recent report from Google, Temasek and Bain & Company predicting that as many as 40 million people in Singapore, Malaysia, Indonesia, The Philippines, Vietnam, and Thailand became new internet users in 2020. While most residents in Southeast Asia lack computers, almost all of them have mobile devices and thus internet access.

Thai government expects a 22% drop in investment pledges in 2022

(12 September 2022) The Thai government is expecting a 22% drop in investment pledges in 2022 to US$13.76 billion, after a first-half slump. Nevertheless, the government hopes that its measures to promote investment, including a long-term resident visa launched in September, will draw more foreign investors later in 2022. Among the areas which the country hopes to attract investments into include high-tech sectors. The Thai government has supported electric vehicles to maintain its status as a regional auto production base. For the January to June period of 2022, Thai and foreign investment pledges slumped 42% to about 220 billion baht, due mainly to a large power plant project in 2021. Foreign investments, which made up 60% of the overall applications in the January-June period, more than halved year-on-year.

JP Morgan is optimistic that Malaysia will be able to meet the annual GDP growth of 7.7% in 2022

(15 September 2022) JP Morgan is optimistic that Malaysia will be able to meet the annual GDP growth of 7.7% in 2022, which would make it one of the highest in the region. It was noted that Malaysia remains resilient, with a strong banking sector, supportive government policies and prudent corporate citizens. JP Morgan stated they were ‘bullish’ about Malaysia’s electrical and electronic industry, with the country currently supplying 10% of the semiconductor components globally. Furthermore, she said the country has managed to attract the highest foreign direct investment in the last six years, totalling US$1.9 billion into the country as of August 2022. Previously, Malaysia’s Finance Minister stated that the country’s economic growth may surpass the official estimates of between 5.3% and 6.3% in 2022, attributing this to rapid growth in the second quarter of 2022 at 8.9% and expected improved performance in the third quarter.

Non-oil domestic exports grow by 11.4% year-on-year in August 2022

(16 September 2022) Non-oil domestic exports grew by 11.4% year-on-year in August 2022, following 7% growth in July. According to data by Enterprise Singapore, non-electronics exports grew while electronics exports decreased from a high base a year ago. While exports to the top ten markets as a whole rose in August 2022, including to the US, the EU and Indonesia, exports to China, Taiwan and Hong Kong declined. On a month-on-month seasonally adjusted basis, non-oil domestic exports decreased by 3.9% in August, following the previous month’s 1.4% growth. Total trade grew by 26% year-on-year in August, following the expansion of 30.5% in July. Total exports rose by 21.8% while total imports grew by 30.9%.

Indonesia records a US$5.76 billion trade surplus in August 2022, largest in four months

(15 September 2022) Indonesia recorded a US$5.76 billion trade surplus in August 2022, the largest in four months. The resource-rich country has reported a trade surplus every month since May 2020, with exports boosted by high commodity prices. The surplus in August 2022 was the largest since April’s US$7.56 billion, which was the biggest on record for Indonesia. Exports rose 30.15% on a yearly basis in August to US$27.91 billion, with shipments of oil and gas and mineral products recording the biggest increase. Meanwhile, imports measured at US$22.15 billion, up 32.81% on a yearly basis. Analysts have warned that Indonesia’s trade surplus would narrow near the end of the year, as prices of certain commodities such as palm oil and iron ore start to ease. For the period of January to August 2022, it is predicted that Indonesia would record a current account balance within a range of 0% to 0.45% of GDP in 2022.

Filipino electronics exporters expect sales to grow by 10% in 2022 due to peso’s weakness

(14 September 2022) Philippines electronics exporters expect sales to grow by 10% in 2022, due in part to a weak peso which will attract buyers (including holiday shoppers). Historically, there is a catch up that happens near the end of the year, as people buy electronics as gifts. The Philippines has registered a recent decline in electronics shipments, its largest export. Sales grew 2% from January to July. The industry group Semiconductor and Electronics Industries in the Philippines Inc. aims to grow the electronics sector’s revenue by 5% to 6% and produce higher-value products in the coming years. It is believed the previous government’s move to scrap tax incentives could put the industry’s growth target and jobs in peril, with US$3.2 billion worth of investments having already been diverted to other countries.

Brunei Darussalam records 62.5% year-on-year increase in total trade in June 2022
(13 September 2022) Brunei Darussalam recorded a 62.5% increase year-on-year in total trade in June 2022. According to the latest data by the Department of Economic Planning and Statistics at the Ministry of Finance and Economy, Brunei Darussalam’’s exports increased by 61.1% yearly, which was mainly due to the increase in mineral fuel exports. Mineral fuels also recorded the highest contribution to total exports at 76.2%, followed by chemicals at 21.3%. Imports increased by 64.3% year on year for June 2022. The highest share of exports in June 2022 went to Malaysia at 30.7%, followed by Australia at 14.4% and Singapore at 12.6%. The highest share of imports came from Malaysia at 23.7%, followed by the United Arab Emirates at 22.9% and Iraq at 10.1%.

RCEP Monitor

Unemployment rate falls to record low in August 2022, while employed persons increased for 18th straight month

(16th September 2022) The unemployment rate in South Korea fell to a record low in August 2022, while the number of employed persons increased for the 18th straight month. According to government data, the seasonally adjusted unemployment rate for August fell to 2.5% from 2.9% in July, hitting the lowest since the data release began in June 1999. The number of employed people increased by 807,000 year-on-year, extending annual gains to an 18th consecutive month. Employment growth is expected to slow going forward due to worsening external conditions as well as weaker consumption due to high inflation and interest rate hikes. The increase in employment numbers was driven by the manufacturing sector, which added 240,000 employees, followed by health and social welfare services’ 123,000 and agriculture and fisheries’ 9,000.

Yuan falls below key level against the US Dollar for the first time since July 2020
(15 September 2022) China’ s yuan has fallen below a key level against the US Dollar for the first time since July 2020, breaking 7 yuan for a dollar. The offshore yuan has fallen more than 9% against the US Dollar in 2022, amid a slide of global currencies against the dollar due to aggressive and ongoing monetary tightening by the US Federal Reserve. The yuan is expected to weaken further as China’s economic conditions continue to deteriorate, largely due to difficulties Chinese authorities are facing in containing COVID-19 outbreaks in the summer. China’s economy grew by 0.4% year-on-year in the second quarter of 2022, the slowest growth rate in more than two years. While a weaker yuan may help Chinese exports, much of that benefit is being wiped out by high inflation in China’s major import markets. The latest data is showing that exports from China are starting to weaken.

New Zealand’s economy rebounds in second quarter of 2022 due to return of tourists

(16 September 2022) New Zealand’s economy rebounded sharply in the second quarter of 2022, due in part to a loosening of COVID-19 restrictions as well as returning tourists. Official data showed that GDP expanded by 1.7% in the June quarter, beating forecasts of a 1% gain and providing a timely recovery from the first quarter’s 0.2% drop. Annual growth slowed to just 0.4%. In response to soaring cost pressures, the Reserve Bank of New Zealand (RBNZ) lifted interest rates by an eye-watering 275 basis points to 3%, and believes it will have to get to at least 4% to slow demand enough to contain inflation. Consumer price inflation hit a three-decade peak of 7.3% in the June quarter. While petrol prices have dropped somewhat in the last couple of months, food prices remain elevated due to poor growing conditions and rising production costs.

CARI Captures Issue 570: ASEAN equities outperform global peers despite gloomy global outlook

ASEAN equities outperform global peers despite gloomy global outlook

(04 September 2022) While global equities are struggling due to ongoing monetary tightening by the US Federal Reserve, ASEAN equities are outperforming global peers and are becoming a haven for global investors. The benchmark MSCI Asean Index is outperforming the broader MSCI Asia Pacific Index and is set to fare better than a gauge of global stocks for a third straight quarter. The bullish sentiments towards the region is due to a resurgence of tourism, booming domestic demand, and promising earnings outlooks due to commodity exports. Most of the region’s major economies are expected to grow by at least 5% in 2022. The heavy weightage of Southeast Asia’s equity benchmarks towards banks rather than tech make the region’s equities favorable in a high interest rate environment. Market watchers do not expect an exodus of capital due to tightening by the Fed as had occurred in 2013, due to the region’s stronger fundamentals. Inflation is also less acute in Southeast Asia compared to other regions.

Central bank raises overnight policy rate (OPR) by 25 basis points in response to inflation

(08 September 2022) Malaysia’s central bank, Bank Negara Malaysia (BNM), has raised its overnight policy rate (OPR) by 25 basis points to 2.5% in line with expectations. This is BNM’s third consecutive 25 basis point OPR hike in 2022, bringing the year-to-date increase to 75 basis points. The ceiling and floor rates of the OPR’s corridor are correspondingly increased to 2.75% and 2.25% respectively. Given the positive growth prospects of the Malaysian economy, BNM’s current stance of monetary policy is expected to remain accommodative and supportive of economic growth moving forward. Downside risks to the Malaysian economy include weaker-than-expected global growth, further escalation of geopolitical conflicts, and worsening supply chain disruptions. In terms of inflation, BNM stated that the consumer price index (CPI) is projected to peak in the third quarter of 2022 before moderating thereafter.

Malaysia and Singapore removed from Taiwan’s initial list of countries eligible for visa-free entry

(06 September 2022) Malaysia and Singapore were removed from Taiwan’s initial list of countries eligible for visa-free entry starting on the week of 12 September. On 05 September, a table published online by Taiwan’s Bureau of Consular Affairs showed that visitors from a list of countries including Singapore and Malaysia were allowed to travel to Taiwan visa-free and stay for up to 30 days. On 06 September, the website was updated to reflect that Taiwan would be “temporarily suspending” visa-free entry for visitors from Singapore, Malaysia, and other countries. The Taipei Representative Office in Singapore stated in a press release on 06 September that the adjustment of border control measures had been due to a ‘misunderstanding’. On 05 September, Taiwan announced that it would resume visa-free entry for visitors from several countries, as it seeks to ease restrictions related to the COVID-19 pandemic. Taiwan has already ended the requirement for pre-departure negative PCR tests.

President Marcos Jr.’s visit to Indonesia secures about US$8.5 billion in investment pledges

(07 September 2022) The Philippines President Ferdinand Marcos Jr. secured about US$8.5 billion in investment pledges during his visit to Indonesia. Among the preliminary agreements signed in Jakarta included US$7 billion in infrastructure projects through private-public partnerships (including a four-level expressway), as well as a US$662-million trade value for the supply of coal and fertilizers. As well, Marcos Jr. also secured about US$822 million in investments in several sectors including textiles, garments, renewable energy, technology and agriculture. Altogether, the deals are expected to generate some 7,000 new jobs in the Philippines. After visiting Indonesia, Marcos. Jr is now visiting Singapore on the second leg of his first official trip abroad.

Indonesia raises about US$2.65 billion from the sale of dollar bonds, defying global selloff

(07 September 2022) Indonesia raised about US$2.65 billion from the sale of dollar bonds, defying the global selloff, defying the global selloff caused by the rise in borrowing costs. Bolstered by its commodity exposure, Indonesian assets have emerged as a haven for investors in 2022, with Indonesia’s equity market up nearly 10%. Spreads on the country’s dollar-denominated debt narrowed the most in more than two years in August. While the five year and ten year maturities were in line with the market, the 30-year portion of the debt priced more than 20 basis points outside the curve, indicating the government had to pay extra. However, the longest maturity was still six times oversubscribed. Proceeds of the bond sale will be used to repurchase outstanding debt as well as for government expenditure, which has risen due to surging energy costs. While US dollar bond sales across Asia have stalled due to a strong dollar and rising interest rates, Indonesia still managed to attract investors from Europe and North America.

Singapore hotel room prices rise to highest in almost a decade as tourism surges

(05 September 2022) Singapore hotel prices have surged to its highest in almost a decade as the country seeks to reposition itself as the tourism and business destination in Asia following the COVID-19 pandemic. The average hotel room rate in July rose nearly 70% year-on-year to US$184 a night, the highest since September 2012. Visitors to Singapore continue to accelerate amidst a loosening of COVID-19 restrictions, with arrivals rising for the sixth straight month in July to 726,601, up from 543,733 in June. This growth in tourist arrivals is likely to hold as the country plays host to a growing number of international business and sporting events in 2022, including the Formula One Grand Prix from 30 September to 02 October, several music concerts later this year, the Milken Institute Asia Summit, Forbes Global CEO Conference and several crypto events in September, followed by gamescom asia in October. Between four to six million visitors are expected in 2022, with 1.5 million arrivals in the first half of 2022 alone.

Hotel occupancy rate in Thailand rebounds from pandemic low due to resurgence in tourism
(08 September 2022) The hotel occupancy rate in Thailand is rebounding from a record low during the COVID-19 pandemic, according to a joint survey by the Bank of Thailand (BoT) and the Thai Hotels Association (THA). The average room occupancy at Thai hotels was 48% in August 2022, up from 46% a month earlier. This helped lift the average employment rate at these hotels to 75% from 71% in July. Hotels in Thailand are benefiting from a global rebound in tourism as authorities scrap all COVID-19-related restrictions. Hotels were also supported by a government-funded air travel and hotel subsidy program. Tourism is a major economic sector for Thailand, accounting for 12% of GDP and 20% of total employment. Authorities expect foreign tourist arrivals in 2022 to exceed 8 million.

RCEP Monitor

Australia’s economy expands 3.6% y-o-y in second quarter, buoyed by household spending and exports

(07 September 2022) Australia’s economy expanded by 3.6% in the second quarter of 2022, buoyed by household spending and high export values. The economy also expanded by 0.9% from the first quarter. The strong growth validated the central bank’s hawkish approach towards tackling inflation, having hiked by a half percentage point on 06 September to take the cash rate to 2.35%. The central bank is relying on strong household spending in the face of surging prices and rising borrowing costs. GDP growth is expected to decelerate in 2023 to less than 2% as higher interest rates weigh on demand. Tackling the fastest inflation Australia has faced since the early 1990s, the central bank has raised rates by 2.25% since it began the current tightening cycle in May 2022. Money markets are betting that Australia’s rate will rise to 3.2% by end-2022, before peaking at 3.75% in 2023.

Japan’s economy expands by annualized 3.5% in second quarter of 2022, beating initial estimates

(08 September 2022) Japan’s economy expanded by an annualized 3.5% in the second quarter of 2022, beating initial estimates. Economists had expected a 2.9% expansion, compared with an initial reading of 2.2%. The main driver of the upward revision was stronger business spending, private consumption, and net exports. Japan’s pace of growth is expected to slow in the third quarter of 2022 due to a record virus wave and continued supply chain snarls hitting production and consumer spending, while inflation impacts households. The yen has reached a 24 year low against the US dollar, fueling higher energy and imported food costs. While a weaker yen boosts Japanese companies’ overseas earnings, it is also negatively affecting wage growth in Japan itself, likely impacting the recovery in household expenditure moving forward. Due to the lack of wage gains, the Bank of Japan is keeping its monetary stimulus program intact to ensure inflation becomes more sustainable.

Outflow of foreign investment funds likely to accelerate if global financial risks persists

(08 September 2022) The Bank of Korea (BOK) warned that an outflow of foreign investment funds from South Korea is likely to accelerate if global risks continue to affect global financial markets. Among the global risks which would impact developing economies as well as South Korea include US Federal Reserve tightening, an escalation of Russia’s war on Ukraine and China’s deepening economic slowdown. The BOK has raised interest rates by 2% since August 2021, acting in advance of most developed-world peers. Rapid tightening by the US Federal Reserve is pressuring the BOK to remain aggressive as the won weakens to a 13 year low. The won is also being impacted by widening trade deficits and ongoing policy easing in neighboring Japan and China. The anticipation of a further weakening of the won is putting pressure on foreign investors to withdraw funds, which in itself further weakens the currency.

CARI Captures Issue 564: President Jokowi visits China, Japan and South Korea

President Jokowi visits China, Japan and South Korea

(26 July 2022) President Joko Widodo embarked on a three-day visit to Northeast Asia this week ahead of the G20 leader’s summit to be held in Bali in November. The president started his tour in Beijing where he met President Xi Jinping and Premier Li Keqiang. China pledged to import another one million tonnes of crude palm oil and prioritise agricultural imports from Indonesia during the meeting. He then visited Japanese Prime Minister Fumio Kishida in Tokyo, where the latter agreed to provide US$318.25 million in infrastructure and disaster prevention loans to Indonesia. In Seoul, he met President Yoon suk-yeol and Korean business leaders.

Mitsubishi and Toyota to expand production in Indonesia

(26 July 2022) Mitsubishi Motors Corp will invest some US$666.9 million in the next three years to produce hybrid and battery electric vehicles, as well as increase its export capacity from Indonesia from 42,000 units in 2021 to 72,000 units in 2022 and 98,000 units in 2024. Separately, Toyota Motor Corp says that it will invest US$1.8 billion in the country in the next five years to produce hybrid electric vehicles. Indonesia hopes to transition fully to electric vehicles by 2050, and have 2.2 million electric cars and 13 million electric motorcycles on its roads by 2030.

Singapore’s core inflation is at its highest since November 2008

(25 July 2022) Singapore’s core inflation rose by 4.4% year-on-year in June, up from a 13-year high of 3.6% recorded in May, bringing core inflation to its highest in almost 14 years when it came in at 5.5%. Overall inflation or the headline consumer price index rose by 6.7% year-on-year in June, up from 5.6% in May. This was similarly reflected across all sectors — food inflation came in at 5.4%, retail and other goods at 3.1%, electricity and gas prices at 20%, services inflation at 3.4%, accommodation inflation at 4.2%, and private transport at 21.9%. The government expects core inflation to reach between 4-4.5% in the third quarter before easing to 3.5-4% in the fourth quarter.

Central bank expects a low inflation rate in 2022

(24 July 2022) Brunei’s central bank expects inflation to remain low at between 2-3% this year despite global inflation and Singapore’s monetary policy tightening. Brunei’s monetary system is underpinned by the Currency Interchangeability Agreement that it has with Singapore and the Brunei dollar is pegged to the Singapore dollar. Inflation in Brunei averaged 1.2% between 1981-2018, though it rose by 3.8% year-on-year in March 2022 due to higher food import prices. Meanwhile, assets in the financial sector grew by 7.9% year-on-year to US$17.2 billion, with deposit-taking institutions accounting for 92% of total assets.

Central bank says growth might exceed 3% in 2Q22

(23 July 2022) Thailand’s central bank believes that economic growth could surpass 3% in the second quarter of 2022 on the back of steady recovery and domestic consumption. The country’s private consumption index expanded 2.9% year-on-year in the first quarter and could surge to 9.9% year-on-year in the second quarter. Non-farm income is expected to grow by 10.3% in the second quarter, while farm income is expected to grow by 16.7% during the period. Thailand expects to receive at least six million international tourists this year, with every additional one million tourists contributing to the GDP by 0.4%. Annual growth is expected to reach 3.3% in 2022.

Bilateral trade was up 20.6% in 1H22

(26 July 2022) Trade between Vietnam and Laos rose by 20.6% year-on-year to US$824 million in the first six months of 2022. Of the sum, Vietnam’s imports from Laos grew by 45.4% to US$514.6 million, though its exports to Laos fell by 6% to US$309.4 million. Vietnam’s top export product to Laos—petrol—was up by 254.7%, accounting for US$30.2 million of the sum. Its exports of fruits and vegetables were also up by 78.1%, accounting for US$22.4 million. Bilateral trade in June alone totalled US$134 million and the uptrend is expected to continue following the Lao government’s recent approval of a credit package to import 200 million litres of fuel.

Internet subscribers surge to 17.7 million

(27 July 2022) The number of mobile and fixed broadband internet subscribers in Cambodia rose from 16.1 million in 2019 before the pandemic to 17.7 million as of March 2022, according to a report from the country’s telecommunications regulator. However, the number of mobile phone subscribers dipped by half a million in the past year to 19.4 million. Cambodia’s e-commerce market also grew 19% on the year to US$970 million, up from US$813 million in 2021. Meanwhile, its total number of mobile payment users grew 42% to 13.6 million from 9.56 million in 2020.

RCEP Monitor

Australia’s inflation rate reaches 6.1% in June

(27 July 2022) Australian inflation rose further in the second quarter, coming in at 6.1% in the year through June, up from 5.1% in the quarter through March — its fastest annual increase since 2001. Transportation prices increased by 13.1% as petrol prices also rose for the fourth quarter in a row fuelled by the Russia-Ukraine war, while vegetable and fruit prices increased by nearly 6%. Analysts say that the central bank will likely respond by raising interest rates again. Meanwhile, inflation in neighbouring New Zealand reached a 32-year high as it rose by 7.3% in the June quarter.

South Korea emerges as the world’s fastest-growing arms exporter

(24 July 2022) South Korea’s arms exports rose by 177% during the 2017-2021 period compared to the 2012-2016 period, making it the fastest-growing arms exporter in the world according to a report by the Export-Import Bank of Korea. The country is now the eighth largest arms exporter globally and the second largest player in Asia after China. Its share of global arms exports also grew threefold from 1% to 2.8%, with exports expected to reach US$10 billion in 2022. The Philippines and Indonesia are its two biggest buyers, accounting for 16% and 14% of sales respectively.

China Belt and Road spending dips in 1H22

(26 July 2022) China’s investment in Belt and Road countries fell to US$28.4 billion in the first half of the year from the US$29.6 billion recorded the previous year, according to research published by the Shanghai-based Green Finance and Development Center, bringing total cumulative investment to US$932 billion since the initiative was launched in 2013. The report also noted that there were no new investments in Russia, Egypt and Sri Lanka, as well as no new investments in coal projects ever since China pledged to stop funding coal projects overseas at the United Nations in September 2021.

CARI Captures Issue 563: ADB cuts growth forecasts for developing Asia for 2022, with only Indonesia and the Philippines upgraded

ADB cuts growth forecasts for developing Asia for 2022, with only Indonesia and the Philippines upgraded

(21 July 2022) The Asian Development Bank recently slashed its growth forecasts for developing Asia in 2022 to 4.6% from an earlier forecast of 5.2% in April 2022, amidst monetary tightening by the US Federal Reserve, fallout from the war in Ukraine, and zero-COVID-19 strategies pursued in China. However, Indonesia and the Philippines were the only two out of about a dozen economies to see their growth forecasts revised upwards. The Philippines’ growth forecast was upgraded to 6.5% growth for 2022 from 6%, while Indonesia was raised to 5.2% from 5%. The Philippines’ growth momentum is underpinned by strong domestic demand, a pick up in employment and remittances, and large infrastructure projects. In Indonesia, strong growth has been underpinned by robust domestic demand and exports. For Southeast Asia as a whole, the growth forecast was marginally upgraded from 4.9% to 5.0%.

Indonesia’s central bank keeps rates unchanged to support economic growth

(21 July 2022) Indonesia’s central bank kept its rates unchanged to support economic growth, bucking the current international trend towards monetary tightening. Bank Indonesia left the seven-day reverse repurchase rate at a record low 3.5% on 21 July. Bank Indonesia’s Governor cited within-target core inflation to justify the case for continuing with the easy policy. Indonesia’s economy has the fiscal room to cope with supply-driven price pressures, thanks in part due to the windfall from commodity exports. Although headline inflation breached the central bank’s 2%-4% target range, the governor stated that it will return to target in 2023, while pointing out that price gains in the core measures tracked by the central bank will remain within range. The central bank stated that it sees the economy expanding more toward the lower end of a 4.5%-5.3% outlook range.

Samsung SDI Co Ltd breaks ground on US$1.3 billion battery factory in Negeri Sembilan state

(21 July 2022) On 21 July, South Korean company Samsung SDI Co Ltd broke ground on a US$1.3 billion battery factory in Negeria Sembilan state. The factory will produce cylindrical batteries, and will be located in Seremban, Negeri Sembilan. The batteries will meet the rising demand for cylindrical batteries, and will be used in applications including electrical tools and electric vehicles (EVs). The factory plans to start mass production in 2024. Malaysian officials stated that Samsung SDI’s investment in Malaysia is integral to the country’s vision of driving robust economic growth in the country and Negeri Sembilan as outlined in the Malaysia Vision Valley 2.0 plan. Samsung SDI is undertaking its Malaysian operations through its local subsidiary Samsung SDI Energy Malaysia Sdn Bhd (SDIEM). Established in 1991, SDIEM was the first overseas business entity of Samsung SDI.

The Philippines looking to strike deals with world’s largest fertilizer suppliers, including Russia and China

(19 July 2022) The Philippines is seeking to strike deals with some of the world’s largest fertilizer suppliers, including Russia and China, in order to lower costs and increase food production amidst high inflation. President Ferdinand Marcos Jr. plans to reach out to countries such as China, Russia, Indonesia, United Arab Emirates and Malaysia to secure fertilizer supplies at favorable prices. President Marcos has stated that he wants to boost agricultural output over the next six months, in order to increase the country’s food security. Agriculture officials have warned of higher local prices of rice in the coming months due to surging fertilizer costs. Inflation in the Philippines averaged 4.4% in the first half of 2022, above the official 2% to 4% target band, with the June rate of 6.1% being the highest in nearly four years.

Combined market for medical marijuana and hemp to grow to US$1.2 billion by 2025

(21 July 2022) According to the University of Thai Chamber of Commerce, the combined market for medical marijuana and hemp in Thailand will expand by about 15% annually through 2025, when it’s likely to reach US$1.2 billion, creating opportunities for growers and small businesses. Thailand decriminalized cannabis on 09 June to help kickstart the economy, particularly in the agriculture, tourism and wellness sectors. According to the university, cannabis has the potential to become a key economic crop, which can generate a lot of income for both growers and small- and medium-size enterprises. While many people are concerned about the misuse of the drug, they aren’t rejecting legalization due to the economic value. According to a survey carried out by the university, 78% of Thais have yet to try out cannabis.

Big Four audit firms dangling higher pay to keep Singapore talent amidst labor shortage

(20 July 2022) The Big Four accounting firms are dangling higher pay to keep Singaporean talent amidst a labor shortage in the country. PricewaterhouseCoopers LLP and Deloitte LLP lifted base salaries starting from 01 July, while Ernst & Young LLP had an off-cycle pay adjustment in April 2022 for some parts of the firm, on top of a special bonus payout in 2021 and the annual salary review in October. KPMG LLP said in May 2022 that it will raise entry-level salaries by as much as 20%, along with providing ‘market-competitive bonuses.’ A departure of expats from the city-state during the pandemic, coupled with stricter rules on bringing in staff from abroad, have led to the worst labor shortage in decades. The average attrition rate among the Big Four firms in Singapore rose to 38% in the 12 months ending 30 September, 2021, compared with 24% in the year-earlier period.

Hong Kong conglomerate Swire Pacific to buy Coke’s bottling operations in Viet Nam and Cambodia for US$1 billion
(18 July 2022) Hong Kong conglomerate Swire Pacific is buying Coke’s bottling operations in Viet Nam and Cambodia for US$1 billion, marking the company’s first foray into Southeast Asia’s beverage industry. The transaction is expected to be completed within six months, subject to antitrust approval. Swire is best known for controlling Cathay Pacific Airways, one of Asia’s best known airlines. The company has been redirecting investment into key operations including beverages and property, two of its most profitable businesses, as well as going into emerging sectors like health care. Swire has a long partnership with Coca-Cola, and previously bought the soft-drink maker’s bottling operations in southern China in 2016.

RCEP Monitor

Number of visitors to Japan falls in June 2022 despite borders being partially reopened

(20 July 2022) The number of visitors to Japan fell in June 2022 despite borders being partially reopened to foreign tourists. A total of 120,400 visitors entered Japan in June 2022 after tourists were allowed back into the nation on group tours after a two-year hiatus, according to data by the Japan National Tourism Organization. That’s down 18% from May and 14% from April. In June, Japan doubled its daily cap on entrants to 20,000 and began accepting tour groups from nations and regions classified as having a low number of positive COVID-19 cases. A total of 507,600 foreign travelers entered Japan in the first half of 2022, barely 3% of the total from the first half of 2019. The nation had a record 31.8 million arrivals in 2019.

Producer prices accelerate in June 2022, underscoring inflation challenge

(22 July 2022) Producer prices accelerated in June 2022, underscoring the challenge of reining in inflation at a time of high commodity prices and supply chain disruptions. According to data by the Bank of Korea, the price index climbed 9.9% year-on-year, compared with 9.7% in May. Services and industrial products were among the largest contributors to the increase. Consumer price inflation is currently standing at a near 23 year high in South Korea, with rising manufacturing costs being a key factor behind this. Earlier in June, the central bank executed a half-percentage-point interest-rate hike for the first time. COVID-19-related lockdowns, the war in Ukraine, and labor strikes have added to the difficulties of controlling manufacturing costs.

Government creates new investor migrant visa to attract experienced, high-value investors

(20 July 2022) The New Zealand government has created a new investor migrant visa to attract experienced, high-quality investors to invest in domestic businesses. Dubbed the Active Investor Plus visa, it replaces the old investment visa categories and would require migrants to make investments in New Zealand businesses. According to the Economic and Regional Development Minister, the original visa had often resulted in migrants investing in shares and bonds rather than businesses directly. The new visa hopes to create more active investment into the country, thereby generating more high-skilled jobs and economic growth compared to passive investment. The eligibility requirement for the new visa includes a minimum US$3.1 million investment and only 50% of that can be invested in listed equities.

CARI Captures Issue 562: Thailand establishes mini-FTA with Busan

Thailand establishes mini-FTA with Busan

(14 July 2022) Thailand has entered a “mini free trade agreement” or mini-FTA with Busan to boost trade between the parties. The agreement, signed by the Thai Commerce Ministry and the Busan Economic Promotion Agency, is the first mini-FTA Thailand has entered into with a South Korean city and its fourth mini-FTA. The first four agreements of its kind were with Japan’s Kofu city, China’s Hainan and Gansu provinces, and India’s Telangana state. Busan is both South Korea’s second-largest city after Seoul and the city which handles the largest amount of Thai imports. Trade between the two countries reached US$15.5 billion.

UK exports to Vietnam grow by over 23% in 2021

(10 July 2022) Trade between Vietnam and the United Kingdom returned to pre-pandemic levels last year and rose 17% year-on-year totalling US$6.6 billion. Vietnam’s exports to the UK grew by 16.4% on the year to US$5.7 billion, while its imports from the UK grew by 23.6% to some US$850 million. Furthermore, the country has exported US$2.9 billion worth of commodities to the UK and imported US$372.5 million of the same during the first half of 2022. The Vietnamese government has attributed the quick recovery and growth despite the pandemic to the UK-Vietnam Free Trade Agreement (UKVFTA) which came into force in May 2021.

Indonesia commences chicken exports to Singapore

(13 July 2022) Indonesia began exporting chicken to Singapore for the first time on July 13 through a business-to-business agreement between Charoen Pokphand Indonesia (CPI) and a Singaporean importer. The shipment contained 50 tonnes of frozen chicken, with a contract in place for CPI to supply 1,000 tonnes in total this year. Three Indonesian suppliers have been authorised to export chicken meat and related products to Singapore so far, with 12 other applications being reviewed. Two approved companies are Indonesian subsidiaries of Thailand’s Charoen Pokphand, while the third is a subsidiary of Indonesian agri-food conglomerate Japfa Comfeed.

Philippine central bank hikes interest rates by 75 basis points

(14 July 2022) The Philippines’ central bank announced this week that it has raised key interest rates by 75 basis points in a surprise off-cycle move. The key overnight reverse repurchase facility rate rose to 3.25%, the overnight deposit rate rose to 2.75%, and the lending facility rate rose to 3.75%. The announcement came as a surprise since the central bank was not scheduled to have a regular policy meeting until mid-August. The country’s finance minister said that the economy was robust enough to absorb the latest hike, while the central bank governor said that they were ready to take further action to tighten monetary policy.

Singapore tightens monetary policy to slow inflation

(14 July 2022) Singapore’s central bank tightened its monetary policy this week to temper rising inflation and re-centre the Singapore dollar. The off-cycle move, which was made to address inflation arising from rising commodity prices and the Russia-Ukraine conflict, came as a surprise as it fell outside of the central bank’s normal cycle of monetary policy reviews typically done in April and October. The central bank also expects core inflation to breach 4% in the near term and come in between 3-4% in 2022, with non-cooked food prices expected to rise sharply.

Singapore’s economy grows 4.8% in Q2
(14 July 2022) The Singaporean economy expanded by 4.8% on the year in the second quarter of the year, according to early government estimates, though the country’s gross domestic product (GDP) remained unchanged on a quarter-on-quarter basis. The expansion was driven by continued growth in the manufacturing sector, particularly in electronics and precision engineering due to global demand for semiconductors and semiconductor equipment. Construction activity also picked up in the second quarter as it grew by 3.8%, up from 1.8% in the first quarter, though output remains below pre-pandemic levels due to labour shortages.

Tourism expected to reach pre-pandemic levels in 2026
(14 July 2022) The Cambodian government expects tourism to return to pre-pandemic levels in 2026 or 2027 as factors such as economic crises, China’s zero-COVID policy, and the Russia-Ukraine war continue to impede the sector’s recovery. Furthermore, the government expects regional competition and changes in tourist behaviour to affect growth in the tourism sector. The country expects inflows of around one million international visitors in 2022 and double that in 2023 when the country hosts the SEA Games. Cambodia received 6.6 million international tourists in 2019, 1.3 million in 2020 and 0.19 million in 2021.

RCEP Monitor

Australia’s unemployment dives to a 48-year low

(14 July 2022) The unemployment rate in Australia fell to 3.5% in June from 3.9% the month before — its lowest unemployment rate since August 1974. Net employment reached 88,400 in June, up from 60,600 in May, bringing the total for the year so far to 438,000. The country’s underutilisation rate remained at its lowest since 1982 at 9.6%, while the number of unemployed fell by 54,300. Nevertheless, analysts also expect inflation to hit its highest since 1990 this year at around 6.3% especially with pandemic-related restrictions fully lifted.

Hyundai Motor to build its first South Korean EV factory

(12 July 2022) Hyundai Motor announced that it will build a factory dedicated to producing electric vehicles in South Korea — its first automobile plant in the country in almost three decades. The company also said that it has reached a tentative wage deal with its local labour union to avoid a strike for the fourth consecutive year. Hyundai Motor has also agreed to increase its investment in South Korea and committed to investing US$48.1 billion in the country through 2025. The company will also increase workers’ basic monthly wages by US$74.93, and give them each a one-off bonus as well as 20 shares.

Japan’s JERA to start a new coal-fired power plant

(14 July 2022) Japan’s largest power generation company JERA will be firing up a new 1.07-gigawatt coal-fired power plant in Taketoyo next month to help ease the electricity crunch before winter. The new plant is a rare development, especially in developed countries, since most are phasing out coal plants. Japan’s environment minister called for the plan to be reconsidered but it was eventually approved due to energy security risks that the country faces. JERA says that the plant has achieved the highest levels of generation efficiency for coal power in the world and that it is considering various options to further reduce emissions.