CARI Captures Issue 646: Australia pledges US$41.8 million in funding for maritime security in ASEAN

ASEAN, AUSTRALIA
Australia pledges US$41.8 million in funding for maritime security in ASEAN

(4 March 2024) On the first day of the ASEAN-Australia Special Summit 2024, Australia’s Foreign Minister Penny Wong pledged US$41.8 million in funding for maritime security for ASEAN. The funding aims to support maritime cooperation and secure sea lanes, especially in the South China Sea. Although it was not specified which countries the funding would go to, Wong commended Indonesia, Malaysia, Vietnam, and the Philippines for their efforts in delineating maritime boundaries. The summit, held from 4 – 6 March, 2024 in Melbourne, marks 50 years since Australia became a ‘dialogue partner’ of ASEAN. Additionally, Wong highlighted Australian funding for climate resilience in the Mekong region amidst growing regional concerns over a focus on militarisation amid a climate crisis.

INDONESIA
Incoming president Subianto Prabowo vows fiscal discipline and faster growth during his term
(5 March 2024) Indonesia’s presumed president-elect Prabowo Subianto recently outlined his economic agenda at the Mandiri Investment Forum. He aimed for 8% economic growth over the next five years, broadening the tax base, and maintaining fiscal discipline. Preserving fiscal prudence will help bolster Indonesia’s credit profile, with the legal budget deficit cap set at 3% of GDP. Prabowo’s proposed spending initiatives, including free school lunches and milk for 80 million children, aim to enhance health, education, and employment opportunities. This has reportedly faced pushback within the cabinet, particularly regarding fiscal policy, with Finance Minister Sri Mulyani cautioning against an overreliance on state budget expansion. This uncertainty has led to investor apprehension, reflected in recent bond market fluctuations. Prabowo has also pledged to continue existing policies while enhancing efficiency, potentially through state-owned enterprise rationalisation and privatisation. He also seeks collaboration with the financial sector to address inflation, reduce poverty, and bolster food self-sufficiency.

THE PHILIPPINES, UNITED STATES
United States to invest US$30.36 billion in the Philippines
(01 March 2024) According to the Philippines’ Ambassador to the United States Jose Manuel Romualdez, the United States will invest US$30.36 billion in the Philippines. In response to concerns by Filipino exporters that China will reduce the volume of Filipino fruits it imports, Romualduez stated that the US$30.36 billion invested by the United States will help counter economic coercion by Beijing. Noting that the American investment has already been ‘programmed and approved’, Romualdez noted that American businesses are diversifying and will invest in infrastructure, energy, artificial intelligence, health care, manufacturing, and semiconductors.

THE PHILIPPINES
Philippines’ central bank unlikely to return to tightening cycle due to cooling inflation
(6 March 2024) The Philippines’ central bank, Bangko Sentral ng Pilipinas (BSP), is unlikely to resume its tightening cycle, according to BSP Governor Eli Remolona Jr. In its February 2024 policy meeting, the BSP’s Monetary Board opted to maintain key policy rates for the third time, citing a revised inflation outlook for 2024. The target reverse repurchase rate remains at 6.5%, with the overnight deposit and lending facility rates at 6.0% and 7.0% respectively, maintaining the highest levels in 16 years. Since May 2022, the BSP has increased key policy rates by 450 basis points to combat inflation, which averaged 6.0% in 2023, surpassing the target range of 2.0% to 4.0%. The BSP revised its inflation forecast for 2024 to 3.9% from 4.2% in December, stating that it was considering factors like supply-side shocks and potential second-round effects. In February, inflation reversed its downward trend, reaching 3.4%, with rice prices notably contributing to the rise.

MALAYSIA
Malaysian ringgit rises to a one-month high after policymakers ramp up coordination
(04 March 2024) Malaysia’s ringgit rose to a one-month high after policymakers ramped up their coordination with state-linked firms to lift the Malaysian currency from a 26-year low. The Malaysian ringgit advanced as much as 0.6% to 4.7185 per dollar in early Asian trading, its strongest level since 02 February, 2024. Over the past week, the ringgit has emerged as Asia’s best-performing currency. Malaysian policymakers have sought to drive more inflows into the market by urging government-linked companies (GLCs) to repatriate foreign investment income and convert it into ringgit more consistently. Malaysia’s central bank, Bank Negara Malaysia (BNM), will be enhancing its engagement with corporates and investors to further encourage conversions and bolster sentiments towards the ringgit.

MALAYSIA
Malaysia achieves victory in WTO case against EU over ‘discriminatory’ renewable fuel regulation
(6 March 2024) Malaysia has achieved a favourable outcome in its World Trade Organisation (WTO) case against the European Delegated Act, which was perceived as discriminatory towards the country’s palm oil biofuel. Malaysia’s Plantation and Commodities Minister confirmed that the WTO panel’s final report, issued on 5 March, deemed the EU act discriminatory. The dispute originated in 2018 when the EU introduced regulations on renewable fuel usage, particularly concerning biofuels derived from oil palm crops, a key industry in Malaysia. Malaysia argued that these measures violated fair trade practices and initiated legal action against the EU in 2021. The WTO’s final report criticised the EU’s approach to banning palm oil biofuels based on indirect land use change and its lack of consultation with affected economies. The EU has agreed to comply with the WTO ruling, necessitating amendments to its regulations regarding Malaysian palm oil biofuels. The Malaysian government pledges to monitor these changes closely and pursue further action if necessary to ensure compliance.

LAO PDR, VIET NAM
Laotian and Vietnamese provinces partner to jointly promote tourism
(06 March 2024) The northern Laotian province of Huaphan is collaborating with neighbouring Son La province in Viet Nam to organise a joint tourism fair scheduled for 21 – 22 March, 2024. The event will showcase literary and cultural activities reflecting the close relationship between the two provinces, including a theme song symbolising the enduring bond between their peoples. Highlights will include photo exhibitions, displays of tourism and cultural products, and information on tourist attractions and services available in each province. The fair aims to strengthen tourism ties between Huaphan and Son La, fostering friendly relations between Lao PDR and Viet Nam, particularly in the shared border area. Organisers hope the event will attract foreign tourists, boosting cross-border tourism and generating income for local communities.

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CHINA
China to improve policies supporting childbirth and elderly population
(5 March 2024) China will improve policies supporting childbirth as well as the country’s rapidly ageing population. This comes as China’s population fell for the second consecutive year in 2023, with new births dropping to about half of those in 2016, while marriages hit a record low in 2022. According to a report by the country’s state planner, China will seek to improve policies to boost birth rates by refining parental leave policies, improving the mechanism for sharing the related labour costs of employers, and increasing the supply of childcare services. In response to China’s ageing population, the minimum basic old-age benefits for rural and non-working urban residents will be raised, while basic pensions for retirees will continue to increase. Authorities are also seeking to implement a private pension system nationwide.

CHINA
China sets economic growth target of around 5% for 2024
(5 March 2024) On 05 March, 2024, China announced a GDP growth target of ‘around 5%’ for 2024, matching 2023’s goal. China’s economy had expanded by 5.2% in 2023, but matching that this year may be more ambitious given that the economy’s post-pandemic rebound has been considered largely disappointing. China’s economic recovery has been held down by subdued domestic consumption, overcapacity in certain industries, a depressed property sector, and restrained manufacturing activity. In January 2024, the World Bank projected that China’s economy would expand 4.5% in 2024 amid weaker domestic demand and rising geopolitical tensions. The budget deficit target for 2024 is set at 3% of GDP, while consumer inflation is expected to reach 3%.

JAPAN
Japan’s benchmark stock index Nikkei reaches 40,000 for first time
(4 March 2024) On 4 March, 2024, Japan’s benchmark stock index the Nikkei 225 reached the 40,000 level for the first time. Japan’s Nikkei 225 share index rose to 40,314.64 but fell back slightly. It was up 0.5% to 40,150.00 by early afternoon. Shares in Japan have made significant gains over the past year due to strong demand for technology associated with artificial intelligence, the Bank of Japan’s easy credit policy, and a weak Japanese yen. The rally in the Nikkei 225 was led by semiconductor-related stocks such as equipment makers Tokyo Electron and Advantest, which rose by 2.4% and 3.7% respectively. After having risen by 28% in 2023, the Nikkei Stock Average has risen by 19% since the start of 2024.