CARI Captures Issue 585: Southeast Asian venture capital firms expected to be pickier in 2023 amidst economic headwinds

Southeast Asian venture capital firms expected to be pickier in 2023 amidst economic headwinds

(19 December, 2022) Southeast Asian venture capital firms are expected to be pickier in 2023 than in 2022 amidst plunging valuations and economic headwinds worldwide. According to data firm Crunchbase, venture capital-backed companies raised only US$369 billion in the first three quarters of 2022, compared to the whole of 2021’s record-breaking feat of US$679.4 billion invested globally. Tech stocks began stumbling in the beginning of 2022 amidst rising interest rates and disappointing earnings results. Mahy Southeast Asian tech firms have lost most of their valuations since going public. For instance, Sea Group’s market capitalization currently stands at around US$30 billion, down from more than US$200 billion recorded in late 2021. GoTo’s US$28 billion valuation has dropped more than 75% since it went public in Jakarta in April, while Grab has lost 69% of its initial valuation of about US$40 billion since its December 2021 debut. While many Southeast Asian funds have capital to deploy, they are currently awaiting greater investment opportunities.

Foreign ministers from five ASEAN Member States meet to discuss developments in Myanmar

(23 December 2022) Foreign ministers from five ASEAN Member States met in Bangkok on 23 December, 2022, to discuss the ongoing crisis in Myanmar. Thailand hosted the meeting with Myanmar’s military-appointed Foreign Minister Wunna Maung Lwin, while foreign ministers from Cambodia, Viet Nam and Lao PDR also attended. The other five ASEAN Member States – Malaysia, Indonesia, the Philippines, Singapore and Brunei Darussalam – were invited but declined to attend. In April 2021, ASEAN put forth a “five-point consensus” on the situation in Myanmar, calling for an immediate end to violence. But Myanmar’s military has made little progress on its implementation. While ASEAN had agreed to set a deadline for Myanmar to implement the five-point consensus in October 2022, it failed to reach a concrete agreement in November.

The Philippines and South Korea sign US$3 billion ODA loan package

(23 December 2022) The Philippines and South Korea signed a Korean Development Assistance loan package worth US$3 billion on 21 December, 2022. The Framework Arrangement signed between both countries concerned loans from the Economic Development Cooperation Fund for the years 2022 through 2026. This enables the Philippine government to obtain ODA loans from the Korean government up to a maximum commitment of US$3 billion until 2026. The Framework Arrangement paves the way for the implementation of more development cooperation projects between both countries. The amount of US$3 billion is three times that of the previous 2017-2022 term arrangement. In 2021, South Korea was the Philippines’ 6th largest ODA source. South Korea has participated in several Philippines infrastructure development projects, including the construction of highways, railways, ports and airports.

Japanese lender MUFG Bank will invest US$200 million in Indonesian fintech firm Akulaku

(23 December 2022) Japanese lender MUFG Bank will invest US$200 million in Indonesian fintech firm Akulaku, and is expected to hold a stake of around 10%. Akulaku was established in 2014 and offers ‘buy now, pay later’ services to its subscribed customers of about 30 million. The company posted revenue of around US$600 million in 2021 and is one of the most promising fintech companies in Indonesia. Akulaku mainly offers its services to partner e-commerce operators. MUFG Bank plans to expand its customer base in Indonesia by investing into fintech companies that offer its services online. As well, the company also aims to grow its services through investments in diverse financial companies throughout the Southeast Asian region.

Thailand to exceed its most-recent target for foreign tourist arrivals by about 15%

(23 December 2022) Thailand will exceed its most-recent target for foreign tourist arrivals by about 15%, due to a year-end rush of tourists from Europe and the US. According to the Tourism Authority of Thailand, at least 11.5 million international travelers will come in 2022, compared to the initial target of 10 million. Thailand’s foreign-arrival numbers has largely picked up since mid-2022, after almost all COVID-19-related restrictions were lifted, giving a boost to Southeast Asia’s second-largest economy. About 12% of Thailand’s GDP came from foreign tourism prior to the pandemic. Total revenue from the tourism sector, including domestic tourists, is expected to reach US$43 billion in 2022, about half the pre-COVID-19 levels. The Tourism Authority of Thailand has kept its target for foreign visitors in 2023 unchanged at 20 million.

Malaysia’s urbanization rate nearly triples since 1970, with three quarters of population living in cities now

(23 December 2022) Malaysia’s urbanization rate has nearly tripled since 1970, with three quarters of the country’s residents now living in cities. According to the Department of Statistics, Malaysia’s urban population expanded to 24.4 million in 2020 from 3 million in 1970. Concurrently, the rural population rose slightly to 8.1 million from 7.5 million within the same period. The data underlines the Malaysian economy’s shift away from a major producer of commodities such as rubber and tin to one of the world’s leading producers of semiconductors. Shipments of manufactured goods, including the growing electrical and electronics sector, made up almost 85% of total exports in November 2022, with agricultural goods accounting for just 7%. In 2021, Malaysia was the world’s sixth-largest exporter of semiconductor devices and integrated circuits.

Core inflation in Singapore holds steady at 5.1% year-on-year in November 2022
(23 December 2022) Core inflation in Singapore held steady at 5.1% year-on-year in November 2022, the same rate as in the previous month. This was due to smaller increases in the costs of services and electricity and gas being broadly offset by a steeper pickup in the costs of retail and other goods and food. Core inflation excludes accommodation and private transport costs. The headline consumer price index, or overall inflation, also remained unchanged in November 2022 at 6.7%. On a month-on-month basis, core inflation increased marginally by 0.2% and overall inflation by 1%. Core inflation is expected to remain elevated in the next few quarters before slowing down in the second half of 2023. For 2022 as a whole, overall inflation is expected to average about 6% and core inflation about 4%.

RCEP Monitor

Australia-India trade expected to double over the next five years after trade pact comes into effect on 29 December, 2022

(23 December 2022) Bilateral trade between India and Australia is expected to double over the next five years after a trade pact that cuts or eliminates tariffs on a number of goods and services and gives greater recognition of professional qualifications, comes into place on 29 December, 2022. Australia is targeting India’s middle class to help offset the economic damage caused by the COVID-19 pandemic and trade restrictions imposed by its biggest trade partner China. Between April and October 2022, India’s imports of Australian goods climbed to US$12.3 billion, up 48% year-on-year. Following the trade pact coming into effect, India’s imports of Australian coal, copper, aluminum, cobalt, and wine are expected to go up.

Core inflation rises by 3.7% year-on-year in November 2022, at fastest pace in nearly 41 years

(23 December 2022) The core consumer price index in Japan, which does not include volatile fresh food prices, rose 3.7% year-on-year in November 2022, exceeding the Bank of Japan’s 2% target for the eighth consecutive month. This is the fastest pace of increase in Japan’s core inflation in nearly 41 years, having gained pace on the back of a historic fall in the yen against the dollar and price rises in food and electricity bills. Earlier this week, the Bank of Japan maintained its forecast that inflation was likely to slow down by the second half of 2023, and stressed it was not engaging in further monetary tightening. The Japanese government recently approved a record budget totalling US$862 billion for the next fiscal year from April 2022.

Parliament approves nearly US$500 billion 2023 budget, which is 6% less than this year’s

(24 November 2022) South Korea’s parliament approved President Yoon Suk-yeol administration’s first full-year budget bill for 2023 on 24 December, 2022. The nearly US$500 billion budget is 6% less than the 2022 budget, and is set to cut the fiscal deficit to 0.6% of GDP from 3.3% in 2022. Out of the total, a bulk of 35.4% was allocated for public health, welfare and employment programmes, followed by 15.1% for the education sector and 8.9% for defence expenditure. South Korea’s government debt-to-GDP ratio has risen to hit an estimated 49.7% in 2022 from below 40% in 2019 and below 30% in 2010, as the country recently expanded its welfare system in response to its aging society. The new government is seeking to contain South Korea’s debt growth by keeping the fiscal deficit at between 0.5% to 0.6% over the next several years, compared with 3.3% estimated for 2022.

Leave a Reply

Your email address will not be published. Required fields are marked *