CARI Captures Issue 645: Many ASEAN social safety nets inadequate despite ageing populations

Given recent developments in the region, Captures will widen its scope to include news related to members of the Regional Comprehensive Economic Partnership (RCEP) agreement which was signed towards the end of 2020. The other weekly newsletters under CARI, China-ASEAN Monitor and Mekong Monitor will also be consolidated into the Captures newsletter. We hope this new version of Captures will serve you better and look forward to providing a curation of stories relevant to ASEAN and its trading partners.

Many ASEAN social safety nets remain inadequate despite ageing populations
(17 February 2024) ASEAN governments are under pressure to bolster social safety nets to ensure the well-being of their elderly amid ageing populations across the region. According to estimates by the United Nations, the share of working-age people in the region’s 11 countries peaked at 68% in 2023. This ratio already peaked in Thailand in 2013 and Viet Nam in 2014. Indonesia, one of the more youthful countries in the region, is expected to see its ratio top out in 2030. Meanwhile, the ratio of people age 65 or older in the region topped 7%, the threshold for being considered an ‘aging society.’ Despite these figures, in countries like Indonesia and Viet Nam less than 30% of working-age populations are covered by public pension schemes. In many ASEAN economies, social security outlays account for less than 10%, but are expected to grow moving forward.

ASEAN countries implementing more cash handouts to deal with inflationary pressures
(17 February 2024) ASEAN governments are distributing more money directly to households to help them deal with inflationary pressures. Singapore’s recently announced fiscal 2024 budget, for instance, includes SG$600 (US$445) in shopping vouchers for each household, to be distributed across two rounds in June 2024 and January 2025. This follows a SG$500 voucher handout in January 2024. Meanwhile, Thailand’s new government plans to spend US$14 billion to send THB 10,000 through digital wallets to all Thais aged 16 and over who meet certain requirements. Malaysia, for its part, plans to expand its cash aid for low-income households to MYR 10 billion (US$2.1 billion) in 2024 from MYR 8 billion (US$1.7 billion) in 2023. Economists have questioned these expanded cash aid programs, noting that inflation in Southeast Asia has already been cooling. As well, these programs are expected to impact the fiscal health of these economies.

Number of electric vehicles in Myanmar increases sixfold in a year
(17 February 2024) According to Myanmar’s Ministry of Transport and Communications, the number of registered electric vehicles jumped 6.5 times from a year earlier. Roughly 1,900 EVs were registered in the year through January 2023 alone. This has been attributed to the ruling military regime banning the import of gas-powered cars in 2022 as part of efforts to shore up their dwindling foreign currency reserves. Import tariffs for EVs were also removed in January 2023, and are expected to continue until March 2024. EVs have also become more attractive to Myanmarese consumers due to skyrocketing gas prices, which have been blamed on fuel imports and distribution being disrupted by the shortage of foreign currencies.

Bank of Thailand resists calls to hold emergency meeting to slash rates
(21 February 2024) The Bank of Thailand (BOT) is resisting calls from the Thai government to hold an emergency meeting to slash rates in response to weak economic growth and negative headline inflation. GDP grew by only 1.9% in 2023, missing market expectations. In response to these weak GDP figures, Prime Minister Srettha Thavisin urged the BOT to hold an emergency meeting before the next regular meeting on 10 April, 2024 to cut rates. Refuting claims by Srettha that the Thai economy is in crisis, the governor of the BOT instead pointed to weak spending by Chinese tourists, a slowdown in Chinese imports from Thailand, and a delay in passing the government’s 2024 budget as reasons why the country’s growth remains sluggish. The ongoing dispute between the government and the BOT has raised fears about the long-term independence of the latter.

Malaysian ringgit hits lowest level in 26 years
(20 February 2024) On 20 February, 2024, the Malaysian ringgit hit its lowest level since the Asian Financial Crisis of 1998, which was 26 years ago. The Malaysian ringgit fell nearly 0.3% to almost 4.8 against the US Dollar. The ringgit has suffered a more than 4% drop already in 2024, which has been blamed on Malaysia’s poor export performance, uncertainties about China’s current economic prospects, and rising US interest rates. Malaysia’s central bank argued that growth in global trade and Malaysian exports will nevertheless have a positive impact on the ringgit in 2024. Malaysia’s ringgit is also expected to strengthen against the US Dollar after US authorities recently signaled an end to rate hikes.

68% of Malaysian diaspora working in Brunei Darussalam are skilled workers
(21 February 2024) According to data by the Department of Statistics Malaysia (DOSM), 68% of the Malaysian diaspora working in Brunei Darussalam are skilled workers, while 24.1% are semi-skilled. It was also found that for those Malaysians working in Brunei, 41.3% were earning monthly gross salaries between BND 1,000 (MYR 3559.51) and BND 3,000 (MYR 10,678.53), while a further 43.5% received between BND3,001 (MYR 10678.53) and BND10,000 (MYR 35,595.09). Most Malaysians were working in Brunei because of job opportunities, higher salaries, and the high exchange rate of the Bruneian Dollar vis-a-vis the Malaysian Ringgit.

Singapore hosted regional headquarters for 4,200 multinational firms in 2023
(22 February 2024) According to a Bloomberg Intelligence report, Singapore hosted the regional headquarters for 4,200 multinational firms in 2023, extending its lead and dwarfing the 1,336 found in its lead rival Hong Kong. It was noted that even many Chinese companies are seeking to station their operations in Singapore to hedge their geopolitical risks. Multinational firms are choosing Singapore due to its better relations with the West, broader talent pool, diversified economy, and tax incentives. Furthermore, while Hong Kong has a lower standard corporate tax rate of 16.5%, this is bested by Singaporean programs that can cut its 17% tax rate to 13.5% or less for certain activities.

RCEP Monitor

Bank of Korea maintains its growth projections for 2024 at 2.1%
(22 February 2024) The Bank of Korea maintained its growth projections for 2024 at 2.1%, while also pointing to stubbornly high inflation and household debt as potential headwinds. The Bank of Korea also announced it would keep its key rate steady at 3.5%, marking the ninth consecutive session where it has held the rate. The central bank also maintained its inflation projection at 2.6%. Analysts noted that inflation remains higher than the Bank of Korea’s target, and that risks remain in the form of high real estate prices and household debt.

China circumvents US tariffs by shipping more goods via Mexico
(21 February 2024) According to analysis data by the Financial Times, China is circumventing US tariffs by shipping more goods via Mexico. According to figures by Container Trades Statistics, the number of 20ft containers shipped from China to Mexico reached 881,000 in the first three quarters of 2023, the most recent period for which data is available, up from 689,000 in the same period of 2022. The rise came as Mexico overtook China as the largest exporter of goods to the US in 2023. Due to tariffs implemented by the Trump administration in 2018 and which were maintained by the subsequent Biden administration, shipments arriving directly from China now account for less than 15% of US imports, down from more than a fifth in 2017.

Japan’s benchmark Nikkei Stock Average closes above all-time high set in 1989
(22 February 2024) On 22 February, 2024, Japan’s benchmark Nikkei Stock Average closed above its all-time high set in December 1989. The average rose to 39,098, up 836.52 points or 2.19% from the previous day’s close, surpassing the all-time closing high of 38,915.87 recorded on 29 December, 1989. Year-to-date, the Nikkei Stock Average has gained 16.8%. It has been one of the top-performing global indexes since 2023, when it rose by around 30%. The rally in the index was led by semiconductor stocks such as equipment makers Tokyo Electron and Advantest. The rise of the Nikkei Stock Average has been fueled by global investors, who have been lured by corporate governance reforms, a weak yen, an ultra-low interest rate environment, and a tax-deferred investment program aimed at small investors.

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