CARI Captures Issue 612: Return of El Nino expected to impact ASEAN agriculture
ASEAN
Return of El Nino weather pattern causing fears of forest fires and droughts across Southeast Asia
(23 June 2023) The return of the El Nino weather pattern to Southeast Asia, and the sweltering heat it is expected to bring to the region, is sparking fears of possible water shortages and forest fires. El Nino is a climate pattern originating in the Pacific Ocean which is marked by above-average sea surface temperatures. It typically brings hot and dry conditions to Southeast Asia. Higher temperatures are expected to impact agricultural production in the region, while pressures on water and electricity supply might impact manufacturing. The peak of El Nino is expected to occur in September 2023. Among the agricultural sectors expected to be impacted include palm oil production in Malaysia and Indonesia, coffee in Viet Nam, rice and sugar in Thailand, and rice and corn in the Philippines. Considering that agriculture accounts for a large share of GDP in emerging Asia, a decline in agricultural production and resulting inflation are expected to put strong downward pressure on their economies. El Nino is also expected to impact hydropower output and also push up demand for electricity.
INDONESIA
Indonesian solar energy startup seeking to close new funding round by end of 2023
(26 June 2023) Indonesian solar energy startup Xurya aims to close a new funding round by the end of 2023. Founded in 2018, the company develops rooftop solar panels for businesses and industries. The company had initially raised US$11.5 million in the second tranche of its Series A round in October 2022. It had raised US$21.5 million in the first tranche in December 2021. Altogether, the company had raised a total of US$33 million in its Series A round. Indonesia is believed to have huge solar power potential, with a report by the Institute for Essential Services Reform arguing that solar power will play an essential role in deep decarbonization goals in Indonesia in 2060 or sooner in 2050. According to a report by Mordor Intelligence, the solar energy market is projected to register a compound annual growth rate of about 10% from 2019 to 2028.
MALAYSIA
Exports expected to reach US$425 billion by 2030 according to Standard Chartered
(26 June 2023) According to a recent report by Standard Chartered, Malaysia’s exports are expected to reach US$425 million by 2030 with an annual growth rate of 6.8%. The report also emphasized the rapid growth of other economies such as India, Indonesia and Viet Nam as key trading partners for Malaysia. The report stated that Malaysia’s exports to India would reach US$18 billion with a compound annual growth rate (CAGR) of 10.1% by 2030, followed by Indonesia (US$12 billion with a CAGR of 9%) and Vietnam (US$13 billion with a CAGR of 8.7%). In line with the projected export growth, the Malaysian government has made significant investments into strengthening its export infrastructure. Machinery and electricals are expected to dominate its exports in 2030, making up 53% of the share of exports with a
CAGR of 6.8%.
THAILAND
Thai universities struggling with lower enrolments due to Thailand’s low birth rate
(25 June 2023) Thai universities are struggling with lower enrolments linked to a sharp decline in the country’s birth rate over the past few years. Thailand’s current higher education market is relatively small, with 200 to 300 universities taking in fewer students than their annual capacity. Over the past five years there has also been a continuous decline in the number of births, having dropped from over a million births 30 years ago to 500,000 to 600,000 a year. In 2021, Thailand registered some 544,000 births, its lowest in at least six decades. The head of the business analytics and intelligence programme at the Graduate School of Applied Statistics of the National Institute of Development Administration (Nida) warned that state and private universities may struggle to survive in the next five years if they do not adapt, possibly leading to mergers or closures. Some have managed to survive by actively recruiting Chinese students.
THAILAND, UK
Thailand and the UK to hold second Joint Economic and Trade Committee (Jetco) meeting in November 2023
(29 June 2023) The UK and Thailand are set to hold a second Joint Economic and Trade Committee (Jetco) meeting in Thailand in November 2023. Both parties had signed a memorandum of understanding (MoU) to establish Jetco in 2022, which aims to promote and enhance economic cooperation on trade and investment, particularly in sectors of mutual interest. According to Thailand’s Trade Negotiations Department, both parties are ready to elevate their economic cooperation to an enhanced trade partnership or a strategic economic partnership in sectors such as food, beverages, health, education, automotives, and agriculture. Both parties ultimately aim to pave the way for future free trade negotiations. In 2022, the UK was Thailand’s 22nd largest trading partner, with bilateral trade amounting to US$6.20 billion, up 12.3% from the previous year.
VIET NAM
Viet Nam has to take ‘aggressive’ measures to meet growth goals for 2023, claims finance minister
(24 June 2023) According to Viet Nam’s finance minister, Viet Nam needs to take ‘aggressive’ measures to meet the government’s growth goals for 2023. Viet Nam saw growth of more than 8% in 2022, its highest growth rate since 1997. But growth slowed in the first quarter of 2023 to 3.3 %, down from 5.9% in the fourth quarter of 2022, amidst declining global demand for its exports. The decline in global demand has been attributed to multiple factors, including the ongoing war in Ukraine which raised petroleum and consumer prices, thus putting pressure on manufacturing input and trade costs and depressing buyers’ appetite. Hanoi targets full-year growth of 6% to 6.5%, following anticipated first-half growth of about 4%. To meet these targets, the government is planning to undertake measures such as extending deadlines for tax payments as well as reducing value added tax and petrol levies.
SINGAPORE
National University of Singapore first Asian university to break into top 10 of QS World University Rankings
(28 June 2023) In the QS World University Rankings 2024, the National University of Singapore (NUS) became the first Asian university to break into the top 10 of the world ranking. NUS moved up three spots to reach Number 8. Singapore’s Nanyang Technological University, on the other hand, maintained its place within the top 30. QS’ latest ranking utilizes a new methodology, in which academic reputation is deemphasized in favor of new metrics like sustainability, employment outcomes and international research networks. NUS’ strong showing was attributed in part to funding in Singapore. NUS was placed Number 7 in terms of employment outcomes.
RCEP Monitor
JAPAN
Japanese megabank to acquire Indonesian automobile loan company Mandala Finance for US$465 million
(26 June 2023) Japanese megabank Mitsubishi UFJ Financial Group will acquire Indonesian automobile loan company Mandala Finance for US$465 million. MUFG’s banking unit MUFG Bank and PT Adira Dinamika Multi Finance — a car loan provider under MUFG’s local subsidiary Bank Danamon — will jointly acquire shares in Mandala Finance. Mandala Finance provides loans for motorcycle purchases, and has logged in revenue of about US$125 million for the year ending 31 December, 2022. It also provides loans in which motorcycles are put up as collateral, which are often used to buy furniture and appliances. This marks the latest instance of a Japanese megabank stepping up acquisitions in Southeast Asia to tap into the region’s growing middle class. Indonesia is Southeast Asia’s largest market for automobiles, including motorcycles. According to an industry group, auto sales jumped 18% to 1.04 million units in 2022, while motorcycle sales rose 3% to 5.05 million units.
JAPAN, SOUTH KOREA
Japan decides to restore South Korea to its list of preferred trading partners
(27 June 2023) Japan has decided to restore South Korea to its list of preferred trading partners after Seoul had made a similar move three months prior. The restored status to Japan’s so-called white list of trading partners will take effect on 21 July, 2023, and will smoothen export procedures to South Korea. Back in March 2023, Japan decided to roll back export restrictions of key semiconductor materials to South Korea, easing licensing requirements on the exports of fluorinated polyimide, hydrogen fluoride and photoresists. South Korea’s trade ministry had earlier stated that bilateral trust in the field of export controls had been fully restored. Both countries will also attend a trilateral summit with the United States, to be possibly held as early as late August 2023.
AUSTRALIA
Australia’s economic ties with ASEAN set to grow as companies seek alternative manufacturing sites outside China
(25 June 2023) Australia’s economic ties with Southeast Asia could be set to grow due to Canberra intensifying its interests in the region amidst softening ties with China. While events such as the Asian Financial Crisis have contributed to the risks of operating in the region, the culmination of businesses seeking alternative manufacturing hubs outside China and the maturing of economies in ASEAN could now change Australian mindsets. In 2022, Australian direct investments into ASEAN reached US$18.7 billion. Total trade between Australia and the region reached US$100.4 billion between 2021 and 2022. The Australian government is set to release the Southeast Asia Economic Strategy to 2040 later in 2023, which seeks to map trade and investment opportunities across key Southeast Asian sectors to Australian capabilities. This is part of Canberra’s larger efforts to boost ties with the region.