CARI Captures Issue 598: Malaysia losing out to Indonesia in attracting foreign direct investment
MALAYSIA, INDONESIA
Malaysia losing out to Indonesia in attracting foreign direct investment
(21 March 2023) Over the last few years, Malaysia has been increasingly losing out to Indonesia in the race to attract foreign direct investment. According to data by UNCTAD, since 2008 Malaysia has attracted less annual investment than Indonesia in every year except 2016. In 2021, Malaysia was able to attract US$11.6 billion in investments, while Indonesia drew US$20.1 billion. Among Indonesia’s advantages over Malaysia include its vast resources, larger population base, relatively stable politics, favorable investment climate, and finally strong growth prospects. In particular, Indonesia’s digital economy has proved particularly attractive to international investors. Malaysia’s government has recognized the need to make the country more attractive to FDI, stating in February 2023 its commitment to easing its procedures for doing business. Malaysia’s Prime Minister Anwar Ibrahim has stated that investment bodies will take the lead to speed up approvals for projects with high potential.
MALAYSIA, SOUTH KOREA
Malaysia secures US$5.43 billion in potential investments from South Korea
(21 March 2023) According to the Malaysian Investment Development Authority (MIDA), a trade and investment mission to South Korea secured some US$5.43 billion in potential investments. Among the Korean companies that have expressed interest in investing in Malaysia include SKC, POSCO Holdings, Coway and LOTTE Fine Chemical. SKC is considering making additional investments in the electric vehicle (EV) segment in Malaysia due to increasing worldwide demand for Li-ion batteries. POSCO Holdings, for their part, plans to develop a carbon capture storage project and further expand its steel processing plant in Malaysia in order to support new business segments such as EV, batteries, and green energy. Coway plans to establish its first manufacturing hub and research and development (R&D) facilities outside of South Korea, while Lotte Fine Chemical stated they plan to invest in Malaysia’s chemical sector. In 2022, South Korea ranked as Malaysia’s seventh largest foreign investor in Malaysia in terms of approved investments.
THAILAND
Thailand raises its rice export target for 2023 to 8 million tonnes
(22 March 2023) Thailand raised its rice export target for 2023 to 8 million tonnes, up from its previous target of 7.5 million tonnes, due to higher rice output. Thailand’s rice exports in the first two months of 2023 were recorded at 1.39 million tonnes, with 52% shipped to Asian markets. Thailand’s government plans to increase its rice output by 6% from the previous season to 29.3 million tonnes of paddy in the 2023/24 season. Of the total production, 10.12 million tonnes of milled rice are allocated for domestic consumption, while eight million tonnes are set for export, while another 1.41 million tonnes of paddy are reserved for seed stock. Thailand exported 7.69 million tonnes of rice in 2022, beating its annual target of 7.5 million tonnes. Its top export markets included Iraq, South Africa, and China.
THE PHILIPPINES
Central bank slows rate hike to 25 basis points amidst stubbornly high inflation
(23 March 2023) The Philippines’ central bank, the Bangko Sentral ng Pilipinas (BSP), slowed its key rate hikes to 25 basis points on 23 March, 2023. This comes as the BSP attempts to combat stubbornly high inflation. With core inflation rising in February 2023 despite a modest decline in headline inflation, the BSP deemed further monetary policy action necessary to address broadening price impulses attributed to robust domestic demand and lingering supply-side constraints. The rate hike follows a 50 basis point increase in February. The benchmark rate now stands at 6.25%. The central bank has now cumulatively raised the key rate by 4.25 percentage points since it kicked off a tightening cycle in May 2022.
THE PHILIPPINES
Philippines’ export groups request exemption from 12% VAT on local purchases
(21 March 2023) The Philippines’ largest exporter groups urged the government to exempt their local purchases from a 12% value-added tax (VAT) in order to ensure they remain competitive in the international market. A tax regulation implemented in June 2021 began imposing a 12% VAT on sales transactions that were previously not taxed, including purchases of exporters. In July 2021, the Philippines’ tax agency suspended that rule amidst the COVID-19 pandemic and plans to review the regulation further. The exporter groups in question included business-process outsourcing firms, electronics and garments groups. They warned that failure to address their concerns might have a crippling consequence on the parts localization initiatives of exporters, and will particularly affect their local suppliers.
SINGAPORE
Local shares make second consecutive session of gains on 22 March, 2023, on expectations global banking crisis is abating
(22 March 2023) Local shares made a second consecutive session of gains on 22 March, 2023. This was attributed to expectations that the global banking crisis may be abating. The Straits Time Index (STI) rise by 47.05 points, or 1.5%, to 3,220.98, with gainers outstripping losers 386 to 208 on trades of 1.87 billion shares worth US$1.39 billion. It was noted that the absence of any recent negative developments in the global banking sector has brought more calm to traders. Local Singaporean banks were among the top gainers, with DBS rising 1.8% to US$33.50, OCBC rising 1.3% to US$12.36, and UOB jumping by 2.9% to end at US$29.50.
VIET NAM
Government considering extending e-visa stay from 30 days to 90 days
(22 March 2023) The Vietnamese government is considering allowing e-visa holders to be able to stay in Viet Nam for up to 90 days, three times longer than the current 30 days. The e-visa, which is single entry, is currently being granted to citizens from 80 countries, and authorities are to decide on the list of countries and territories whose citizens are granted e-visas and the list of international border gates that will allow entry and exit with e-visas. The government is also considering extending the visa-free duration of stay to 30 days (from the current 15 days) for citizens from countries where Viet Nam has unilaterally waived visa requirements. These countries include many in Europe as well as South Korea and Japan. Viet Nam is targeting to welcome eight million tourists into the country in 2023.
RCEP Monitor
CHINA
Imports rise 4.2% year-on-year to US$197 billion in February 2023
(18 March 2023) China saw its biggest gain in imports in a year in February 2023, as imports rise 4.2% year-on-year to US$197 billion, following a decline of 21.4% in January 2023. February’s data put a stop to four months of declining imports. Meanwhile, exports declined by 1.3% year-on-year to US$214 billion, a deacceleration from the 10.5% decline seen in January. China’s trade surplus narrowed to US$16.8 billion, its smallest since March 2021. These figures have bolstered signs that the Chinese economy is picking up following the surge in infections after the Chinese government abruptly abandoned its zero-COVID-19 strategy in end-2022. Rising imports signal a recovery in domestic consumption.
CHINA
Chinese automobile manufacturer Geely Automobile sees net income rise 9% in 2022, beating estimates
(21 March 2023) Chinese automobile manufacturer Geely Automobile Holdings Ltd. saw its net income rise by 9% to US$764 million in 2022, beating analyst estimates of US$704.5 million. Revenue climbed by 46% to US$21.5 billion. According to Geely, the group sharpened its operational focus on new-energy transformation. While the company’s revenue climbed, the surging costs of batteries, chips and other components, as well as investment into Zeekr — the firm’s new electric-vehicle brand — put pressure on their profitability. Gross margin fell 3% in 2022 to 14.1%. The company has set a sales target of 1.65 million units for 2023, up 15% from 2022. Geely has identified new opportunities in areas including autonomous driving and exports. The company also plans to leverage its relationships with partners such as France’s Renault SA to promote overseas development.
NEW ZEALAND
New Zealand’s central bank states that aggressive monetary tightening is having desired effect of slowing economy
(23 March 2023) The Reserve Bank of New Zealand (RBNZ) stated that its aggressive monetary policy tightening is having the desired effect of slowing New Zealand’s economy. The RBNZ’s Chief Economist noted in a speech on 23 March, 2023, that the Official Cash Rate “is now comfortably above neutral and having the desired contractionary effect” on the economy. The RBNZ has hiked rates by 450 basis points since late 2021, and is expected to raise the benchmark by another 25 points to 5% at its next review on 05 April, 2023. The economy contracted 0.6% in the final three months of 2022, and is forecast to enter a recession in 2023 as spending slows and the housing market slumps. However, the RBNZ has also flagged some uncertainties, including the impact of rebuilding following a recent cyclone and flooding. As well, knowing when interest rate hikes have done enough to get inflation back within target has also been flagged as another uncertainty.