CARI Captures Issue 557: Australia pledges total of US$482 million to ASEAN and Indonesia for development purposes
AUSTRALIA, ASEAN
Australia pledges total of US$482 million to ASEAN and Indonesia for development purposes
(06 June 2022) Australia’s new Prime Minister Anthony Albanese pledged a total of US$482 million to its ASEAN neighbors and in particular Indonesia. Canberra pledged US$142 million to Indonesia for infrastructure development and climate resilience projects, while also pledging another US$335 million to ASEAN to be distributed through bilateral and regional development assistance programs. Prime Minister Albanese made these pledges during a recent three day visit to Indonesia. Canberra also pledged to appoint a high-level envoy to ASEAN, as well as establish a Southeast Asia office in the Australian Department of Foreign Affairs and Trade. It will also prepare an ASEAN economic strategy 2040 “to map current and future export and investment opportunities across key ASEAN markets.” With regards to Australia’s relations with Indonesia, Albanese stated that his government will work with Australian super funds and other major investors to explore investment opportunities in Indonesia. For his part, Jokowi requested greater access to Australia for high-value Indonesian products.
THE PHILIPPINES
Revenue by business outsourcing industry rises by 10.6% to US$29.5 billion in 2021
(08 June 2022) Revenue for the Philippines’ economically crucial business process outsourcing (BPO) industry rose by 10.6% to reach US$29.5 billion in 2021, according to data by the IT and Business Process Association of the Philippines. The industry also recorded a 9.1% increase in new hires, adding 120,000 new workers. The expansion in the call center-dominated sector was fueled by pent-up demand from global customers, e-commerce and fintech growth, and companies increasingly turning to BPO services to cut costs. The industry is currently lobbying the current and incoming government for legislation allowing the implementation of hybrid work. Currently, the government has ordered BPO companies to return to full on-site work by April 1 as part of the country’s economic reopening. With many workers now accustomed to working from home, the industry is requesting for a smoother transition to on-site work.
THE PHILIPPINES
Filipino billionaire Enrique Razon Jr. plans to build the world’s largest solar facility in the Philippines
(09 June 2022) Filipino company Prime Infrastructure Holdings, controlled by Filipino billionaire Enrique Razon Jr., plans to build the world’s largest solar facility in the Philippines. The company stated that its subsidiary Terra Solar Philippines will build a solar farm that can generate between 2,500 megawatts to 3,500 megawatts of electricity. When completed, the facility will surpass the capacity of the Bhadla Solar Park in India, the world’s biggest operating solar farm which produces 2,250 megawatts. Prime Infrastructure stated it will leverage its partnership with solar company Solar Philippines to identify potential sites for the project in northern and southern Luzon. Prime Infrastructure hopes to leverage upon a steep decline in installation costs over the past decade, as well as improvements in battery energy storage system technologies. Besides solar energy, Prime Infrastructure has been investing in hydropower plants and water utilities in recent years.
SINGAPORE
Family offices in Singapore reviewing their strategic asset allocation in light of global market conditions
(09 June 2022) According to wealth manager UBS in its third annual survey for the Global Family Office Report, released on 09 June, family offices based in Singapore are reviewing their strategic asset allocation in light of current global market conditions. In light of concerns over inflation, rising interest rates, global geopolitical concerns and elevated valuations for different asset classes, many family offices are now cutting their allocation to long-duration fixed income assets and raising their investments in alternative asset classes, thus giving up liquidity for higher returns. Such alternative assets include private equity, property and private debt, all of which currently account for 35% of Asia-Pacific family offices’ asset allocation. In terms of private equity, the technology sector tends to be the most popular for investments, with family offices preferring automation and robotics, digital transformation, and health tech. Beyond alternatives, the second most popular asset class is equities.
INDONESIA
Indonesian government mulling special five-year visa for digital nomads
(06 June 2022) The Indonesian government is mulling a special five-year visa for digital nomads, and is also keen to attract more ecological and spiritual tourists. Indonesia recently scrapped most of its travel restrictions, allowing fully-vaccinated visitors to come without testing or quarantine requirements. Tourist arrivals jumped 500% to 111,000 in April 2022, its highest monthly tally since the pandemic. The Indonesian government is hoping to lure employees of global companies like Airbnb Inc. and Twitter Inc. that are letting their people work from anywhere, through streamlined visa processing and more frequent flights. The proposed five year visa would allow holders to stay for as long as five years without paying taxes if they don’t earn their income within Indonesia.
THAILAND
Thailand’s central bank keeps policy rate unchanged at 0.5%, resisting pressure from rising prices
(08 June 2022) Thailand’s central bank kept its policy rate unchanged at 0.5% on 08 June, resisting pressure from rising inflation and monetary tightening by other central banks. The Bank of Thailand has not moved its policy rate since May 2020, and the last time it raised rates was in December 2018. Inflation in Thailand hit a 14-year high of 7.1% in May 2022. The Bank of Thailand also upwardly revised its annual inflation projection for 2022 to 6.2% from 4.9%, and also revised its growth projection for 2022 to 3.3%, up 0.1% from the previous projection. While the bank expects exports to keep growing and more international tourists to arrive, supply-side pressures in terms of higher commodity prices will weigh on Thailand’s economic recovery. It is believed the higher cost of energy and raw materials in particular may depress business profits and investments.
VIET NAM
Government considering cutting fuel tax to help ease inflationary pressures
(08 June 2022) Viet Nam’s Finance Minister stated that the government is considering cutting fuel tax to help ease inflationary pressure. Taxes of all kinds account for around 30% of retail prices, including an 8% import tax and 10% value added tax. It is believed that cutting fuel tax would help reduce prices and cut production costs for businesses, helping boost growth. However, it was not specified which fuel tax would be cut exactly, or by how much. Vietnam is currently facing mounting inflation pressure due to its reliance on imported fuel, equipment, fertilizers and materials. However, the Finance Minister stated that inflation still remains under control, with consumer prices in the first five months of 2022 having risen by only 2.25% from a year earlier. The country targets inflation below 4% for 2022. The Finance Minister stated that Viet Nam’s domestic food production, particularly in rice, has helped offset inflationary pressure.
RCEP Monitor
JAPAN
Japan government bonds remain in negative yields as other central banks hike rates
(10 June 2022) Japan is the last major economy with negative yields beyond short-term interest rates, with Japan’s central bank committed to maintaining its low interest rates despite other major central banks raising rates. This is due to economic growth in Japan remaining sluggish while inflation remains lower than in other major economies. The yield on two-year Japanese government bonds came to minus 0.07% as of 08 June 2022. The five-year yield was also negative. Japan’s low rates have been a major factor in the yen’s weakness among other major currencies, which shows no signs of abating. Japan’s currency on 09 June touched 134.50 yen against the dollar — its weakest point since February 2002. Should it weaken beyond 135.20 yen, it would bring the exchange rate to a level not seen since the Asian Financial Crisis in 1998.
SOUTH KOREA
Production and port activity in South Korea disrupted by truckers strike
(09 June 2022) Truckers in South Korea went on strike for a third day to protest rising fuel prices, disrupting production and port activity, and further straining global supply chains. About 7,200 members, or roughly 30% of the Cargo Truckers Solidarity union, were on strike. Steelmaker POSCO said it had been unable to ship about 35,000 tonnes of steel products from two plants daily since the strike began – equivalent to roughly a third of its daily shipments from those plants. Hyundai Motors had also seen disruptions to production at plants in Ulsan due to truck drivers refusing to deliver components. The Korean Shippers Council also stated that ports were being affected, with ‘only a minimal amount of cargo getting into ports right now.’ The truckers, regarded as self-employed contractors in South Korea, are seeking wage increases and a pledge that an emergency measure guaranteeing freight rates will be extended beyond December 2022.
CHINA
Chinese financial markets see rebound in activity following lifting of Shanghai lockdowns(10 June 2022) Chinese financial markets have seen a rebound in activity after Shanghai officially reopened following a two-month lockdown and Beijing further loosened COVID-19 curbs, spurring bets of an economic rebound and a return of foreign inflows into the country. The introduction of pro-growth measures has also helped stabilize expectations for China’s economy. Yuan-trading volumes in the onshore market bounced off two-year lows while stock market turnover topped the 1 trillion yuan (US$149 billion) mark for two straight sessions this week, pushing the benchmark CSI 300 Index to a two-month high. Borrowing activity from financial institutions is also on the rise. Meanwhile, the Institute of International Finance estimated that China may have seen bond inflows in May after three straight months of outflows through April.