CARI Captures Issue 583: South Korean President Yoon Suk-yeol seeks closer ties with ASEAN as part of Indo-Pacific strategy
ASEAN, SOUTH KOREA
South Korean President Yoon Suk-yeol seeks closer ties with ASEAN as part of Indo-Pacific strategy
(06 December 2022) South Korean President Yoon Suk-Yeol is seeking closer ties with ASEAN as part of his Indo-Pacific strategy. On 05 December, 2022, President Yoon hosted Vietnamese President Nguyen Xuan Phuc in Seoul as his first state guest since taking office in May 2022. During the state visit, both South Korea and Viet Nam reaffirmed plans to cooperate in the defense industry and in the development of rare earth metals. President Yoon described Viet Nam as a ‘core partnering nation’ in South Korea’s Indo-Pacific strategy and in the Korea-ASEAN Solidarity Initiative. Yoon had outlined a new strategy for engaging with ASEAN during his visit to Cambodia in November 2022 to attend the East Asia Summit. Yoon seeks to expand South Korean investments, currently focused in Viet Nam and Singapore, to the rest of the region.
Malaysia remains preferred investment destination for Chinese investors in the digital economy
(07 December 2022) According to the Malaysia Digital Economy Corporation (MDEC), Malaysia remains the preferred investment destination for Chinese investors in the digital economy. Among the prominent Chinese companies awarded Malaysia Digital Status recently included Bytedance, Chin Data, ChinaSoft International and GDS Data Centers. The Malaysia Digital initiative was launched by the government in July 2022, and is designed to help drive digital transformation in focus areas in Malaysia. The Malaysia Digital Status is awarded to eligible companies to participate in and undertake any of Malaysia Digital’s activities. Malaysia Digital Status companies will be entitled to a set of incentives, rights and privileges from the government.
Singapore to introduce new ‘complex’ safety net rules for gig economy
(08 December 2022) Singapore will introduce new safety net rules for the gig economy from late 2024 onwards. Described as ‘complex’ by tech companies, the new set of rules will require ride-hailing and food delivery companies to contribute to social security savings programmes for workers, and compensate them for workplace injuries. Following the release of recommendations by a government advisory committee, major tech platforms like Singapore’s Grab, Foodpanda and Indonesia’s Gojek, all of whom heavily rely on gig workers, broadly welcomed the move to provide basic protections for gig workers in Singapore, of whom there are more than 73,000. However, there are concerns that these regulations will cause platform services to become more expensive, adding further uncertainty to the still-unprofitable tech companies.
Business groups attack government plan to set up US$4.9 billion sovereign wealth fund
(05 December 2022) Filipino business groups have attacked a government plan backed by President Ferdinand Marcos Jr. to set up a US$4.9 billion sovereign wealth fund. Critics of the plan claim it could end up becoming like 1MDB, the controversial debt-ridden Malaysian sovereign wealth fund. On 05 December 2022, 12 business and economic policy groups, including the prominent Makati Business Club and Management Association of the Philippines, stated that they did not support creating the Maharlika Investments Fund. They noted that while in other countries sovereign wealth funds are funded by commodities or export revenue surpluses, the Philippines faces ballooning fiscal deficits and debt. Under the proposed plan, the fund will draw initial capital mainly from state pension funds and from two major state-owned lenders.
Jobless rate eases to 4.5% in October 2022, with number of unemployed people dropping to 2.24 million
(07 December 2022) The jobless rate in the Philippines eased to 4.5% in October 2022, with the total number of unemployed people in the country dropping to 2.24 million from 3.5 million in October 2021, with 1.26 million escaping joblessness in 2022 amid record high inflation. The unemployment rate in October was lower than the 7.4% recorded in October 2021 and the 5% recorded in September 2022. The employment rate in October rose to 95.5%, from 95% in September. This was the highest rate recorded since January 2020. It meant there were 47.11 million employed Filipinos in October, up from 43.82 million in the same period in 2021.
VIET NAM, CAMBODIA, JAPAN
More Japanese apparel manufacturers shift production away from China to Cambodia and Viet Nam
(08 December 2022) More Japanese apparel manufacturers are shifting production away from China to Southeast Asia, including in Cambodia and Viet Nam, due in part to China’s rising labor costs and zero-COVID-19 policies. As Japanese companies seek to reduce costs amidst a depreciating yen and rising costs of raw materials, many are leveraging upon the Regional Comprehensive Economic Partnership (RCEP) to expand production to RCEP countries in Southeast Asia. Adastria, which owns popular fashion brands including Global Work, has increased production in Cambodia and Viet Nam in 2022, mainly for standard products such as blouses. Meanwhile, major menswear company Aoyama Trading is expanding its product procurement from Indonesia and Viet Nam, while Matsuoka Corporation, a contract manufacturer for Uniqlo subsidiary Fast Retailing, is planning on increasing its production in Viet Nam from 16% to 28% by fiscal year 2025.
Tesla enters Thai market as EV competitors seek to set up local production
(07 December 2022) EV manufacturer Tesla has officially entered the Thai market, the second market in Southeast Asia that Tesla has entered. The first Tesla showroom in Southeast Asia had opened in Singapore in 2021. Tesla opened its first pop-up outlet in Thailand in Bangkok’s Siam Paragon mall, and they plan to set up at least 10 supercharging stations in the country in 2023. This comes amidst greater competition from other EV players to set up local production in Thailand, hoping to take advantage of government incentives. The Thai government in 2022 cut the import tax on electric vehicles from 8% to 2% for foreign makers who promise to begin local production within a certain time frame. Tesla, however, has no plans to set up production in Thailand.
China’s imports and exports plunged in November 2022 to levels not seen since early 2020
(08 December 2022) China’s imports and exports plunged in November 2022 to levels not seen since early 2020, as the economy reels from heavy COVID-19-related restrictions. Imports fell by 10.6% year-on-year, the biggest drop since May 2020, while exports fell 8.7% over the same period, the steepest decline since February 2020. This comes as the latest in a series of gloomy economic indicators for China, with data released last week showing that China’s factory activity shrank for a second straight month in November. Business activity has been impacted by policies of snap lockdowns, travel curbs and mass testing. These policies have caused supply chain disruptions and dampened consumption, among other things. Authorities have recently signaled a shift in its COVID-19-related policies after protests last week.
Authorities may further soften their stance on property at key economic meeting on 15 December, 2022
(08 December 2022) Authorities may further soften their stance on property at the key Central Economic Work Conference on 15 December, 2022, where policymakers discuss next year’s economic goals (including GDP targets and the budget deficit). According to reports by Bloomberg, Chinese officials may downplay their years-long campaign of curbing speculation in the housing sector, reigning in soaring housing prices, and containing debt risks. Authorities may declare that the original goal of deleveraging the property market has been achieved, and that the focus in 2023 should be on boosting consumer demand. The Chinese Communist Party (CCP) is pushing for an overall improvement in the economy in 2023, and over the last few weeks have scaled back its zero-COVID-19 policies as well as rolled out measures to backstop the slumping property market.
Contraction in third quarter of 2022 revised to 0.8% from previous estimate of 1.2%
(08 December 2022) Japan’s economy shrank less than initially estimated in the third quarter of 2022, suggesting that it is slowly recovering from the effects of COVID-19. Japan’s annualised quarterly contraction in the third quarter was revised to 0.8% from the previous estimate of 1.2%. The revision was driven by the upward change in private inventories and compared with the 4.5% annualised quarterly gain in the previous quarter. Data also showed that Japan had recorded its first current account deficit in eight years in October, reflecting high import costs imposed on households and businesses by the decline in the value of yen in 2022. Private consumption, which makes up more than half of Japan’s GDP, helped drive growth, while capital expenditure and exports were the other main contributors to growth. However, a weak yen and rising import bills helped offset GDP growth contributors.