CARI Captures Issue 629: Southeast Asia’s Internet economy to log slowest growth on record in 2023

ASEAN
Southeast Asia’s Internet economy to log slowest growth on record in 2023
(01 November 2023) According to research by Google, Temasek, and Bain & Co., Southeast Asia’s Internet economy will log its slowest growth on record in 2023. Total online spending in the region will rise about 11% in 2023 to US$218 billion, slowing from 20% the year prior and reaching its lowest rate since at least 2017. E-commerce alone is set to reach only US$186 billion in 2025, down from the previous estimate of US$211 billion. This slowdown in online spending is attributed to consumers curbing expenditures to deal with elevated inflation and interest rates. Southeast Asia’s entire internet economy is expected to reach US$295 billion by 2025, down from a previous forecast of US$330 billion. As well, private funding of companies in Southeast Asia in 2023 dropped to its lowest level in six years.

MALAYSIA, SINGAPORE
Singapore and Malaysia to jointly set up special economic zone on border area
(30 October 2023) Singapore and Malaysia will jointly set up a special economic zone on the border area in order to benefit from tighter business links and better connectivity. The Special Economic Zone will be set up in the Malaysian state of Johor, and will tap into the complementary strengths of both parties to foster economic connectivity by improving the cross-border flows of goods, investments, and people. Both parties aim to sign an agreement regarding the special economic zone in January 2024. Singapore and Malaysia were both each other’s second-largest trading partners in 2022, with bilateral trade flows reaching US$83.53 billion. Singapore was also one of Malaysia’s top sources of foreign direct investments in 2022, contributing 8.3% of its total investments.

INDONESIA, UNITED STATES
US senators oppose limited free trade agreement with Indonesia over latter’s critical minerals exports
(02 November 2023) A bipartisan group of US senators has expressed concern about the United States signing a limited free trade agreement with Indonesia, particularly concerning Indonesia’s critical minerals exports benefiting from subsidies created under the United States’ Inflation Reduction Act (IRA). The US$430 billion IRA includes a US$7,500 credit for the purchase of each new clean-energy vehicle. The credit is conditioned on the critical minerals used in making the car being sourced from within the U.S. or a country with which it has a free-trade agreement. The senators opposed to the free trade agreement argued that Indonesia’s mining and refining industry is dominated by Chinese companies, and that eligibility for the critical minerals credit should prioritize domestic producers and existing free trade agreement partners such as Canada and Australia.

THAILAND
Thailand’s total population expected to drop from 66 million to 33 million by 2083
(02 November 2023) According to experts, falling birth rates in Thailand will see the country’s total population fall from 66 million to 33 million by 2083. The working-age population (ages 15 to 64) will drop from 44 million to just 14 million, while the population of children (ages 0 to 14) will drop from 10 million to just 1 million. Meanwhile, the elderly population (ages 65 and above) will increase from 8 million to 18 million, making up 50% of Thailand’s total population. Thailand’s Total Fertility Rate (TFR) has been below the replacement level of about 2.1 children per woman since 1993. In 2022, Thailand’s TFR was as low as 1.16 in nearly every province of Thailand except Yala, the latter of which bucked the trend with a TFR of 2.27.

VIET NAM
Low-cost carrier Vietjet Aviation receives US$100 million funding to support fleet expansion
(31 October 2023) Viet Nam’s low-cost carrier Vietjet Aviation stated it had received a US$100 million funding commitment to support its fleet expansion amidst a robust post-COVID-19 pandemic earnings recovery. Preliminary agreements were signed during the third quarter of 2023 with three Viet Nam-based institutional investors, with the transactions expected to be completed this quarter. The funding will help bankroll Vietjet’s investments in new aircraft, network expansion, and supporting the airline’s growth. The funding comes as the airline reported robust post-pandemic earnings, with consolidated net profit increasing 30% to US$2.3 million in the first nine months of 2023. Vietjet has been expanding its international destinations, particularly to Australia.

LAO PDR, THAILAND
Lao PDR and Thailand mull constructing railway bridge over Mekong River
(02 November 2023) Lao PDR and Thailand have begun talks on the construction of a railway bridge over the Mekong River that would connect Vientiane, Lao PDR with Nong Khai in Thailand. Both parties also discussed the extension of the cross-border rail link from Nong Khai to Vientiane train station in order to promote tourism and enable easier access to the Laos-China railway. Both countries are seeking to further promote bilateral trade volumes by removing existing trade barriers and making it easier to do business. Both countries are also seeking to bolster tourism, especially given the influx of visitors expected during Visit Laos Year 2024.

MYANMAR, UNITED STATES
United States announces sanctions against junta’s most lucrative state-owned enterprise
(01 November 2023) The United States announced sanctions against Myanma Oil and Gas Enterprise or MOGE, the Myanmar junta’s most lucrative state-owned enterprise. The curbs prevent Americans from the provision, exportation, or re-exportation of financial services, directly or indirectly, to or for the benefit of MOGE. These newest sanctions follow repeated calls from rights groups and the military’s opponents in Myanmar to do so since the military seized power in a coup nearly three years ago. The United States claimed it was coordinating with the UK and Canada to align sanctions.

---

RCEP Monitor

---

CHINA, JAPAN, SOUTH KOREA
PMI data for China, Japan, and South Korea shows shrinking factory activity
(01 November 2023) Recent purchasing manager’s index (PMI) data for China, Japan, and South Korea showed shrinking factory activity, amidst a global economy squeezed by weaker global demand and higher prices. China’s Caixin/S&P Global manufacturing PMI fell to 49.5 in October 2023 from 50.6 in September, falling back below the 50.0 point threshold that separates growth from contraction. The results of this survey echoed official PMI data released on 31 October, 2023, which also showed an unexpected contraction in activity. Meanwhile, factory activity in Japan shrank for a fifth straight month in October, the final au Jibun Bank PMI showed. As well, factory activity in South Korea fell for the 16th straight month.

JAPAN
Government announces US$113 billion stimulus package including tax cuts and cash handouts
(02 November 2023) Japan’s prime minister Fumio Kishida announced a sweeping stimulus package of about US$113 billion to address higher cost of living. The package includes temporary cuts to income and residential taxes as well as cash handouts to low-income households. The package also includes an extension of subsidies to offset rising petroleum and electricity prices as well as support for businesses to raise wages. According to Nomura Research Institute, the temporary tax cuts and handouts are expected to boost Japan’s real GDP by just 0.2% on an annual basis. The announcement of the stimulus package comes days after the Bank of Japan ended its seven-year policy of capping long-term interest rates, setting the stage for a gradual unwinding of its ultra-loose monetary easing measures.

SOUTH KOREA
Consumer inflation accelerates for third straight month in October 2023
(02 November 2023) South Korea’s consumer inflation accelerated for the third straight month in October 2023 amidst higher food prices. The consumer price index in October rose 3.8% year-on-year, marking the fastest gain since March 2023 and beating a 3.6% gain projected in a Reuters poll. On a monthly basis, the index rose by 0.3%. Prices of fruit surged 24.6% year-on-year in October, while coffee prices jumped 11.9%. An index of energy prices combining petroleum and electricity prices also jumped by 2.8% year-on-year. It is believed by authorities that the slowing of inflation in South Korea will be more gradual than initially expected due to current geopolitical risks in the Middle East as well as abnormally low temperatures.