CARI Captures 369
Growing interest in Impact Investing in Southeast Asia
(23 August 2018) Global Impact Investing are investments made into companies, organizations and funds with the intention to generate social and environmental positive externalities in addition to financial gain. Impact investments are primarily brokered by Private Impact Investors (PII) and Development Finance Institutions (DFI). The former consists of a myriad of investors, such as fund managers, family offices and foundations. According to the Landscape for Impact Investing in Southeast Asia report, since 2007 until 2017, PIIs have deployed around US$904 million through 225 direct deals and Developmental Finance Institutions (DFI) have transacted US$11.3 billion through 289 direct deals. Cambodia is the leading country of the PII activity in ASEAN, which absorbed 45 per cent of all PII capital between 2007 and 2017. This was followed by Indonesia, Philippines and Thailand. Due mainly to Cambodia’s use of the U.S. Dollar and its open economy, it has garnered nearly as much PII capital as in Indonesia, the Philippines and Vietnam combined. High income countries like Singapore garnered comparatively less PII activity to date, however, many regional enterprises that have received impact investments are still headquartered in Singapore. Meanwhile, Indonesia has the highest DFI worth US$3.595 billion, followed by Philippines (US$2.310 billion) and Thailand (US$1.589 billion). The financial services sector has received the most impact of PII capital to date, accounting for roughly 60 per cent of all PII capital deployed, with 18 per cent of capital going into clean energy, followed by ICT and agriculture.
Indonesia aims for less foreign ownership of bonds
(23 August 2018) Following a massive withdrawal of foreign bonds from the bonds market, totalling up to US$759 million within the past two weeks, Indonesia aims to slash the amount of government bonds owned by offshore funds to 20 per cent from the current 38 per cent in order to protect its assets from external shocks. Foreign ownership of bonds was at a peak of 42 per cent in January this year. Thus, a drop in the level of confidence among the foreign investors to invest in the emerging markets is being seen as a great opportunity to expand domestic ownership. Indonesia has been highly reliant on Foreign Direct Investment (FDI) as a source of funding to finance its current account and budget deficits. According to the data from the Indonesia’s Ministry of Finance, foreign investors held US$58 billion of Indonesian bonds as of August 2018.
Bank of Thailand to launch digital currency in 2019
(22 August 2018) The Central Bank of Thailand (BoT) is planning to introduce a state-issued cryptocurrency based on R3’s Corda blockchain through the Central Bank Digital Currency (CBDC) project called Inthanon. Eight of the country’s largest commercial banks are participating in the projects such as Bangkok Bank, Standard Chartered Bank Thai and HSBC. The first phase which is intended to be used for interbank fund transfers and is expected to be completed within the first quarter of 2019. In the second phase, the participating commercial banks and R3 plan will expand the usage of the digital currency to include third-party fund transfers and cross-border payments. BoT noted that the project is similar to those in development by other central banks such as the Bank of Canada, the Hong Kong Monetary Authority and the Monetary Authority in Singapore. Bank of Thailand’s governor envisioned the project would increase efficiency in the Thai financial market infrastructure and reduce interbank settlement costs.
Malaysian government cancelled ECRL and gas pipeline projects
(21 August 2018) Malaysia has decided to cancel the East Coast Rail Link (ECRL) and other multibillion-dollar Chinese infrastructure projects which were previously endorsed by former premier Datuk Seri Najib Abdul Razak as the new government aims to cut down on the country’s ballooning debt. The Chinese government has agreed with Tun Mahathir’s stand to scrap the US$20 billion East Coast Rail Link Project and the energy pipeline projects which has been suspended over issues relating to escalating costs as well as their effect on the country’s debt burden. Malaysian government officials will negotiate for the compensation and other issues with the Chinese companies involved. This latest pronouncement from Tun Mahathir ended speculation that his five-day official visit to China would revive the projects which are currently under a stop-work order.
Singapore lays out costly plans for affordable healthcare and housing to curb rising living costs
(19 August 2018) The Singaporean Prime Minister said in his National Day Rally, outlined plans to ensure the affordability of healthcare and public housing to alleviate worries of rising cost of living although Singapore’s economy is showing strong growth with a low rate of unemployment and high wages.Therefore, the government has introduced schemes such as the Community Health Assist Scheme (CHAS) which applies to all Singaporean with chronic health conditions regardless of income. The government plans to implement, among other things, 99-year leases on public housing and is concentrating on plans to build more desalination plants to produce clean water in Singapore. These measures will require the government to find new revenue streams for its growing government expenditure. According to experts, higher taxes or a broader tax base may be anticipated in order to protect the government’s fiscal prudence.
Philippines’ tax reform to generate US$5.01 billion annually
(23 August 2018) The Duterte administration’s proposed tax reform program, Tax Reform for Acceleration and Inclusion or (TRAIN) seeks to improve the tax system and generate steady revenue streams, raising an estimated US$5.01 billion yearly to fund the massive infrastructure projects that are in the pipeline. The revenue from the tax as the percentage of its GDP was 15.7 per cent last year. According to the Fiscal Year 2017 Annual Fiscal Report, the tax reform would generate an additional income equal to about 1.2 per cent of Philippine’s GDP. Apart from that, the new proposed tax system would propel the growth of disbursements from 17.9 percent of the GDP in 2017 to 20.6 per cent in 2022. TRAIN, which took effect in January 2018 has been imposed on oil products, raised levies on sugary drinks and automobiles.
Indonesia launches its first blockchain hub
(23 August 2018) Indonesia has launched its first blockchain hub through the joint efforts of prominent players from Indonesia’s financial system, including the Creative Economy Agency (BEKRAF), Indonesian Chamber of Commerce (KADIN), Indonesian Blockchain Association (ABI) and HARA (a blockchain for social impact). The hub acts as a gateway to the growing blockchain ecosystem in Indonesia for all global and local projects, it also aims to drive the innovation among the blockchain communities and to offer education about the blockchain technology. According to the former Indonesia Minister of Finance, Chatib Basri, the blockchain would allow the access to granular, connected and open data which could improve business efficiency and policy-making process for the government. However, HARA acknowledged the information asymmetry in the blockchain ecosystem and the difficulties in explaining the social and economic impact of blockchain technology to the businesses, regulators and to the society which altogether hinder the expansion of blockchain technology across the world.
Laos embraces ASEAN tariff code
(23 August 2018) Laos has adopted a new ASEAN tariff code, signifying the country’s commitment to ASEAN’s economic integration and community building process, according to a statement by Lao’s Ministry of Finance. Vietnam started to implement the ASEAN Harmonized Tariff Nomenclature 2017 in May 2018. The updated version of the tariff code provides a much clearer definition for goods traded among the ASEAN countries. By adopting the new tariff code, Vietnam was able to overcome the difficulties in levying tariffs on goods from ASEAN countries since there was no commodity description and tariff code for international use in the past. Currently, the country has liberalised tariffs on selected goods. As Laos is the last country to join the trade bloc, the country is permitted to withhold its tariffs on strategic goods at the moment.
Myanmar’s Construction Industry Board will be formed under the new law
(22 August 2018) According to Myanmar’s Ministry of Construction, a new law is being drafted to form a Construction Industry Development Board (CIDB) to enforce a set of standards for the construction industry. Vietnam is working together with Building and Construction Authority of Singapore and the Malaysian CIDB in drafting the new law. The new law will force all construction businesses across the region to comply with the international standards of safety, health and environment. The CIDB intends to foster further transparency in procurement and tendering for both public and private projects as well as creating transparency in public spending. Apart from that, the government will set a minimum quality standard for the materials used in the construction to prevent contractors cutting corners to reduce costs.
Implementation of Vietnam’s National Single Window (NSW) and ASEAN Single Window (ASW) falls below expectations
(20 August 2018) Vietnam’s National Single Window (NSW) is a prerequisite of the ASEAN Single Window (ASW), both play a vital role in meeting the trade facilitation and economic integration between the ASEAN nations. According to the General Department of Vietnam Customs, only 11 ministries and sectors were connecting administrative procedures to NSW. Vietnam has targeted to connect an additional 143 procedures to NSW in 2018, however, ministries and sectors linked just 53 formalities to the system, only 37 per cent of the total as of June. Most of the ministries are evaluating, putting forward solutions, and drafting legal documents to implement administrative reform measures. Since there is no decree on mutual recognition of electronic documentation and licenses between Vietnam and its trading partner, Vietnam aims to improve the Information Technology (IT) to enhance connectivity between the ministries and between Vietnam and Malaysia, Thailand, Singapore and Indonesia.