CARI Captures Issue 648: ASEAN startup sector facing declining funding

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.

ASEAN startup sector facing declining funding, prompting calls for restructuring and consolidation
(20 March 2024) ASEAN’s startup sector is facing a so-called ‘funding winter’, with startup investment in the region in the first quarter of 2024 dropping to around US$800 million as of 18 March, 2024, around the 2017 level. Although rising US interest rates have been blamed for a global downturn in tech startups, Southeast Asia’s startup scene is notably linked to the fortunes of one firm in particular — Japanese tech conglomerate SoftBank Group — which helped grow many of the region’s top tech companies, such as Grab and Tokopedia, the e-commerce unit of ride-hailing service GoTo, almost from scratch. After SoftBank Groups’ venture capital ambitions were crippled following the collapse of its Vision Fund in 2022, many of the region’s tech startups now face an uncertain future. Facing limited funding moving forward, the region’s startups may have to go through shutdowns, mergers and downrounds. This will impact Southeast Asian consumers, who have become heavily dependent on digital services for everyday life.

Malaysia to see faster economic growth of 4% to 5% in 2024
(20 March 2024) Malaysia’s central bank forecasts a faster economic growth rate of 4% to 5% in 2024, driven by increased investment and external demand, following 3.7% growth in 2023. Bank Negara Malaysia anticipates a global economic rebound this year, underpinned by technological advancements and a resurgence in tourism. Despite subdued global demand, Malaysia saw an improvement in labour market conditions and heightened investment activity, particularly in the IT and electronics sectors. Tourism Malaysia aims to surpass pre-COVID 19 tourist arrival levels, targeting 27.3 million visitors in 2024. The services and manufacturing sectors are expected to lead growth, while the agriculture industry may contract due to adverse weather conditions. Inflation is projected to remain moderate, averaging between 2.0% and 3.5% in 2024, following a downward trend observed in 2023.

Malaysians working in Singapore gain spending power due to slumping ringgit
(21 March 2024) A declining Malaysian ringgit has increased the purchasing power of Malaysians working in Singapore. The Malaysian ringgit has weakened against the US dollar, while the Singapore dollar remains robust and stable. Statistics from Singapore’s Monetary Authority show that one Singapore dollar now equals about MYR 3.5, up from MYR 3 five years ago, benefiting Malaysian expatriates who earn higher incomes in Singapore. The allure of better job prospects, higher salaries, and a strong Singapore dollar motivates many Malaysians to seek employment in Singapore, as evidenced by increased job applications from Malaysia to Singapore. However, Malaysia faces a talent drain as many skilled individuals migrate to Singapore, prompting calls for Malaysia to create more appealing job opportunities to retain local talent.

Peninsula Hotels group says US$130 million project in Yangon currently stalled
(19 March 2024) Hongkong and Shanghai Hotels, the operator of Peninsula Hotels chain, expressed uncertainty about resuming its US$130-million project in Yangon, stalled since Myanmar’s military coup three years ago. CEO Clement Kwok stated that while basic groundwork might proceed, there’s no clear timeline for the project’s completion. The joint venture with Myanmar tycoon Serge Pun’s Yoma Group aims to redevelop the Myanmar Railway headquarters into an 88-room hotel. Construction halted post-coup, leading to a significant impairment charge for the company. Despite challenges, Hongkong and Shanghai Hotels remain committed to the project and have agreed with local partners to complete the building’s roof.

Casino sector expected to see as much as US$6 billion in investments over next five years
(19 March 2024) The chairman of the Philippine Amusement and Gaming Corp, Alejandro Tengco, stated that both foreign and domestic firms are projected to invest up to US$6 billion in the Philippines’ casino sector over the next five years, strengthening its position as one of Asia’s leading gambling destinations. Tengco anticipates the opening of at least one new casino-resort every other year, expanding beyond Manila to areas like Clark and Cebu. The country aims to achieve a total gross gaming revenue (GGR) of US$8 to US$9 billion by 2027, a year earlier than previously expected. In 2023, the Philippines recorded a record total GGR of US$5.07 billion. Despite challenges, such as the absence of mainland Chinese high-rollers due to the pandemic and regulatory changes, casino resort operators like Bloomberry Resorts and Japan’s Universal Entertainment have performed strongly. The Philippines faces upcoming competition from Japan and Thailand, but Tengco believes there’s a window of opportunity to solidify its position in the gaming industry over the next five to six years.

Prabowo Subianto officially wins Indonesia’s February 2024 presidential elections
(21 March 2024) Prabowo Subianto has been elected as Indonesia’s next president, succeeding Joko “Jokowi” Widodo. Official results from the presidential election show Prabowo secured 96.2 million votes, or 58.59% of the total valid votes, beating two other candidates, Anies Baswedan and Ganjar Pranowo. The voter turnout was 80.18%, slightly down from the 2019 election. Prabowo won in 36 provinces, clearing the necessary electoral hurdles. He will be sworn in on 20 October, 2024 for a five-year term. However, only four out of nine political parties supporting Prabowo passed the parliamentary threshold in the national legislative election held on the same day as the presidential election, meaning Prabowo will need to gain additional coalition partners to gain a majority in the lower house. Prabowo has stated his intent to continue major policies, including shifting the country’s capital to Nusantara and developing a domestic mineral processing industry.

Vietnamese fruit and vegetable exports to reach US$1.25 billion in first quarter of 2024
(21 March 2024) Viet Nam’s fruit and vegetable export value is projected to reach approximately US$1.25 billion in the first quarter of 2024, marking a 27% increase compared to the same period in 2023, as reported by the Vietnam Fruit and Vegetable Association. Preliminary data from the General Department of Customs indicates that March’s fruit and vegetable exports are estimated at US$433 million, showing a nearly 4% growth year-on-year. This marks the first time Viet Nam’s fruit and vegetable exports have surpassed US$1 billion in the first quarter of the year, demonstrating promising prospects for future industry growth. Major export markets include China, South Korea, the US, Thailand, and Japan. In contrast, Viet Nam’s imports of fruits and vegetables in the first three months of 2024 are estimated to total nearly US$500 million, representing a more than 19% increase year-on-year.

RCEP Monitor

Hong Kong Monetary Authority maintains base rate unchanged, mirroring US Federal Reserve
(21 March 2024) The Hong Kong Monetary Authority (HKMA) opted to maintain its base rate charged through the overnight discount window at 5.75% on 21 March, 2024, aligning with the decision of the US Federal Reserve to keep rates steady. This decision follows Fed Chair Jerome Powell’s remarks on 20 March reaffirming the bank’s commitment to gradual rate cuts amidst ongoing inflation concerns, projecting three interest rate reductions in 2024. HKMA anticipates potential rate cuts totalling 75 basis points by the Fed in 2024, though the timing and subsequent rate trajectory remain uncertain, suggesting a sustained period of high interest rates. Despite this, HKMA assured that Hong Kong’s financial and monetary markets continue to function smoothly and that the exchange rate of the Hong Kong dollar remains stable. However, the public is advised to assess associated risks carefully when making financial decisions such as property purchases or borrowing. Hong Kong’s monetary policy closely mirrors that of the United States due to its currency peg to the US dollar within a narrow band of 7.75-7.85 per dollar.

Unemployment rate unexpectedly drops to 3.7% in February 2024
(21 March 2024) Australia’s jobless rate plummeted to 3.7% in February 2024, a significant drop from January’s 4.1%, surpassing economists’ expectations of 4.0%, as revealed by the Australian Bureau of Statistics (ABS) on 21 March, 2024. The economy added 116,600 jobs, predominantly full-time positions, in February, more than triple the anticipated figure of 40,000 positions. The ABS attributed the unexpected surge in employment to changes in how people enter the job market. The participation rate increased to 66.7%, and hours worked rose by 2.8%, reversing a decline in January 2024. The strong job market performance contrasts with Australia’s sluggish economic growth in the final quarter of 2023, driven by numerous interest rate hikes. The Reserve Bank of Australia (RBA) forecasted a slight increase in the unemployment rate to 4.2% by June and 4.3% by the end of 2024. The RBA governor hinted that rapid unemployment growth could prompt interest rate cuts, though the bank left rates unchanged. Regional variations were observed, with South Australia and New South Wales experiencing significant declines in unemployment rates, while Victoria and Tasmania remained stable. The Northern Territory recorded a rise in unemployment, contrasting with the Australian Capital Territory’s slight decrease. The surge in jobs coincided with a substantial net migrant influx, raising concerns among welfare groups about potential delays in interest rate cuts.

South Korea seeks multinational framework for semiconductor export controls
(22 March 2024) South Korea is considering utilising a multinational framework to review export controls for sensitive products such as semiconductor-related equipment. This approach could complicate US efforts to limit China’s access to advanced chip-making gear. Despite being a key US ally, South Korea faces pressure due to its significant trade ties with China. South Korea highlighted that any export controls would take months to implement and may not necessarily result in a ban. Seoul stressed that South Korea isn’t singling out China and aims to minimize impacts on domestic industries while fulfilling international obligations. Opting for a multilateral approach indicates caution among Korean policymakers regarding unilateral curbs. Following discussions in Washington with senior US officials, including Trade Representative Katherine Tai, South Korea’s Trade Minister highlighted South Korean investment and manufacturing growth in the US, potentially narrowing the gap between the US and China as destinations for South Korean exports.

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