CARI Captures Issue 614: 56th ASEAN Foreign Ministers’ Meeting and Related Meetings to be held this week

Myanmar crisis expected to dominate ASEAN Foreign Ministers’ Meeting this week
(14 July 2023) The ongoing Myanmar crisis is expected to dominate the ASEAN Foreign Ministers’ Meeting as well as the post-ministerial conferences and related meetings being held this week, including the ASEAN Regional Forum to be held on 14 July, 2023. An estimated 3,750 civilians have been killed by Myanmar security forces and nearly 24,000 arrested since the military overthrew the civilian government of Aung San Suu Kyi in February 2021. Little progress has been made on the Five Point Plan devised by ASEAN that calls for, among other things, an immediate end to the violence and dialogue among all contending parties. Other issues expected to be discussed at the forum include the tensions in the South China Sea as well as a growing arms race within the region. The foreign ministers of ASEAN dialogue partners will also be attending, including U.S. Secretary of State Antony Blinken, Russian Foreign Minister Sergey Lavrov and Chinese Foreign Minister Qin Gang.

Rate hikes squeezes profit margins for ASEAN’s millions of MSMEs
(12 July 2023) Recent rate hikes across Southeast Asia are squeezing the profit margins of the region’s estimated 71 million micro, small and medium-sized enterprises (MSMEs). According to the chairman of the ASEAN Business Advisory Council, any surge in interest rates directly escalates the costs of financing for MSMEs, leading to decreased profitability, further limiting their access to capital, and amplifying the risks of default. MSMEs account for 97% of the region’s businesses and employ 67% of the working population, while contributing an average of 40.5% to each country’s GDP. Higher interest rates will also impact the demand side for MSMEs, leading to lower sales. By one estimate, a 1% hike in interest rates could result in a 0.5% drop in the profitability of MSMEs.

Indonesian government passes new healthcare bill aimed at reforming healthcare industry
(11 July 2023) The Indonesian parliament passed a new healthcare bill aimed at reforming the healthcare industry and improving life expectancy within the country. Parliament approved the law in a plenary session after deliberating the bill for months. The bill has received opposition from Indonesia’s nurses and doctors due to fears that policy changes allowing foreign doctors to operate in Indonesia could jeopardize their jobs. They also argued that the deliberation process at parliament lacked transparency. Life expectancy in Indonesia stood at 71.3 years in 2019, compared with the 76.3 years average for upper-middle-income countries. Indonesia has six doctors for every 10,000 people, according to World Bank data.

The Philippines to remain expanding and young population in 2050
(10 July 2023) According to the World Bank’s Development Research Group, the Philippines will remain an expanding and young population by 2050. The number of children per woman in the Philippines is about 2.8, well above the 2.1 replacement rate. With developed and some middle income countries facing declining populations, this will intensify the global competition for workers, with the Philippines well positioned to meet this future global demand for manpower. However, many young people in countries whose populations are expanding are also entering the workforce without the skills needed in the global labor market, including in the Philippines. Bangko Sentral ng Pilipinas expects the country’s remittances, a key driver of consumer spending, to grow 3% in 2023 and 2024.

Malaysian Prime Minister Anwar Ibrahim to hold virtual meeting with Tesla CEO Elon Musk by end of week
(10 July 2023) Malaysian Prime Minister Anwar Ibrahim will hold a virtual meeting with Tesla Inc. CEO Elon Musk by the end of this week. It is also confirmed that Tesla will officially launch in Malaysia on 20 July, 2023. In March 2023, Tesla stated it would start selling electric vehicles (EVs) in Malaysia to tap into the rising foreign demand for EVs in Southeast Asia. The company plans to open an office in Malaysia, introduce service centers, and build a network of superchargers. The virtual meeting between Anwar Ibrahim and Elon Musk may go beyond exploring EV investment opportunities in Malaysia, and look into other areas of potential collaboration. The Malaysian government plans to increase its network of EV chargers tenfold within the next two years.

Visiting delegation from Nebraska hopes to grow agricultural trade with Viet Nam
(12 July 2023) A visiting delegation from the US state of Nebraska, led by Governor Jim Pillen, hopes to expand the state’s trade with Viet Nam, particularly in terms of agricultural products. The delegation visited MM Mega Market in Ho Chi Minh City’s Thu Duc City on 11 July, 2023 to understand what Vietnamese customers look for at the grocery store as well as distribution networks in Viet Nam. The governor noted that agriculture drives the Nebraskan economy, and that the delegations’ aim is to help Nebraskan businesses and companies make connections in the Vietnamese market. Viet Nam already imports goods worth almost US$1 billion from Nebraska. The delegation is seeking to promote beef, corn gluten, soybean meals, and other agricultural goods from Nebraska.

Sovereign wealth fund Temasek reports US$6 billion net loss for year through March 2023
(11 July 2023) Singapore’s sovereign wealth fund Temasek reported a US$6 billion net loss for the year through March 2023, coming largely from paper losses booked as a result of a downturn in equity markets over the past year, as well as new accounting principles it adopted in 2018. Temasek logged a one-year total shareholder return of -5.07% in Singapore dollar terms, compared with a 5.81% annual return a year ago. The company stated its overall portfolio continued to recover from the COVID-19 pandemic, despite the drops in valuations in areas such as technology, health care and payments that led to the net loss. Singapore remained the wealth fund’s top investment destination, with assets there comprising 28% of its portfolio. China came second at 22%, followed by the Americas at 21%.

RCEP Monitor

China’s economy teeters on the brink of deflation as per June 2023 data
(10 July 2023) As per the latest inflationary data in June 2023, the Chinese economy is believed to be teetering on the brink of deflation. Consumer price index (CPI) data was flat year on year and declined 0.2% month-on-month, while factory gate prices fell at the fastest pace since 2016 as demand for consumer and manufactured products softened. The producer price index dropped 5.4% year-on-year, accelerating from a drop of 4.6% in May 2023 and faster than the 5% fall forecasted by Reuters. Economists believe that the low inflation readings will push the People’s Bank of China (PBoC) to implement two more rounds of policy rate cuts. The central bank might also seek to release more liquidity into the system by further reducing the reserve requirement ratio.

Vehicle sales grew 9.8% in the first half of 2023, partly driven by low base
(11 July 2023) According to the China Association of Automobile Manufacturers (CAAM), Chinese vehicle sales grew 9.8% to 13.24 million in the first half of 2023, partly driven by a low base in the same period in 2022. The industry group left its 3% growth projection for 2023 intact. The sales data for the first half of 2023 included China’s new energy vehicles, which include full electric and hybrid vehicles, as well as exports. Sales of new energy vehicles grew by 44.1% to 3.75 million units, accounting for 28% of the Chinese market despite the withdrawal of a subsidy program at the end of 2022. During the first quarter of 2023, China overtook Japan as the world’s largest auto exporter and is likely to maintain that position for the first half of 2023.

Japan hopes to hold regular working-level consultations with ASEAN to bolster supply chain security
(12 July 2023) Japan wants to create regular working-level consultations with ASEAN with a focus on bolstering supply chain security. Through the talks, Japan hopes to strengthen supply chains for key materials and craft a joint response to any economic coercion by countries like China. Japan and ASEAN will celebrate 50 years of friendship at a summit in December 2023, during which they plan to upgrade ties to a “comprehensive strategic partnership.” Japan hopes to establish alternative supply chains for key minerals with ASEAN, with the region being a major producer of cobalt and nickel, which are critical for electric vehicles and defense-related technologies.

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