CARI Captures Issue 649: Green transition in ASEAN countries face hurdles due to greenflation concerns

ASEAN
Green transition in ASEAN countries face hurdles due to greenflation concerns
(25 March 2024) Several ASEAN countries are facing hurdles in their renewable energy transitions, largely due to concerns over ‘greenflation’. Greenflation occurs when fossil fuels are discarded in favour of more expensive low-carbon technologies. For instance, Indonesia recently trimmed its future targets for renewable portions in the country’s primary energy mix. The cuts in the country’s renewables targets were attributed to concerns over burdening the poor with expensive R&D and energy transition costs. In neighboring Malaysia, government officials have warned that a weaker ringgit will make it more expensive to import technologies, equipment, and expertise needed for large-scale decarbonization projects. In Viet Nam, meanwhile, coal imports soared 217% year-on-year in January 2024 year on year, despite Vietnam being Southeast Asia’s leader in terms of solar and wind power capacity.

ASEAN
HSBC sets up US$1 billion growth fund to scale up ASEAN digital platform businesses
(27 March 2024) HSBC announced the establishment of the ASEAN Growth Fund, a US$1 billion lending initiative aimed at supporting companies scaling up through digital platforms across Southeast Asia. The London-based bank aims to capitalize on the region’s rapidly expanding digital economy, projected to reach a value of US$600 billion by the end of the decade, up from US$218 billion in 2023. Amanda Murphy, HSBC’s head of commercial banking for South and Southeast Asia, highlighted the region’s digitally native and expanding workforce as a key driver of growth, particularly in e-commerce. Alongside the ASEAN Growth Fund, HSBC introduced a US$150 million venture debt fund specifically tailored for the Singaporean market. This fund aims to provide financial support to companies in Singapore backed by venture capital or private equity firms.

THAILAND
Weak demand and oversupply may prompt price war in Thai auto market
(27 March 2024) Car sales in Thailand dropped by 26.15% in the first two months of 2024, attributed to factors such as high consumer debt and tighter financing conditions. Hybrid and electric car sales increased, but failed to offset the decline in internal combustion vehicle sales. 2023’s surge in repossessed cars and subsequent fall in resale prices exacerbated the situation, causing potential buyers to delay purchases. Import of electric vehicles further impacted domestic production, though the Federation of Thai Industries downplayed concerns, citing the need for industry development. A ‘vicious cycle’ of weak demand and oversupply have prompted carmakers to offer significant discounts. A price war is anticipated, with luxury brands also lowering prices. EV sales in Thailand are projected to reach 100,000 units in 2024.

THAILAND
Thailand could boost tourism revenue by US$12 billion by legalizing casinos
(26 March 2024) A study suggests that legalizing casinos within large entertainment complexes in Thailand could increase tourism revenue by approximately US$12 billion. Tourist spending is estimated to rise by 52%, reaching THB 65,050 baht (USD$1,790) per trip, potentially adding up to THB 448.8 billion baht in additional earnings. The proposed entertainment complexes would not only feature casinos but also luxury hotels, restaurants, and other attractions. Thailand aims to double foreign tourist arrivals to 80 million by 2027, with tourism already contributing 12% to the nation’s economy. The global fun economy industry, including integrated entertainment venues, is rapidly expanding, presenting significant revenue opportunities for Thailand.

THAILAND, MALAYSIA
Malaysia considering extending its US$10.6 billion East Coast Railway Link project to Thailand
(27 March 2024) Malaysia is considering extending its US$10.6 billion East Coast Railway Link (ECRL) closer to the Thai border to enhance cross-border connectivity and mitigate economic competition with Thailand. Malaysia’s Transport Minister stated that both countries face shared challenges and could benefit from collaboration in areas like transportation infrastructure. The ECRL project, scheduled for completion by 2027, currently terminates at Kota Bharu, around 40 kilometers from the Thai border. Thailand’s proposed US$29 billion Chumphon-Ranong Land Bridge project aims to construct two new ports, potentially creating an alternative trade route to the Malacca Strait. Loke highlighted that the impact of the land bridge on Malaysia’s major ports is expected to be limited. He noted that the implementation of the land bridge project could take up to 15 years, if initiated.

SINGAPORE
Office rents reach 15-year high in first quarter of 2024
(27 March 2024) In the first quarter of 2024, office rents in Singapore reached a 15-year peak, with gross effective monthly rents for premium office space in the Central Business District rising to SG$11.42 (US$8.47) per sq ft, the highest since late 2008. This bucks the trend of commercial property downturns observed in other global financial centres. The resilience of Singapore’s commercial real estate market can be attributed to a resurgence in office occupancy rates and a surge in private wealth. Vacancies for prime office space dipped to 5.3% in the first quarter, a post-pandemic low, compared to 5.5% in the previous quarter. However, significant demand from large occupiers remains subdued. Real estate consultancy firm JLL forecasts a shortfall in securing tenants for over 1.5 million sq ft of office space scheduled for completion between 2024 and 2025.

VIET NAM, INDONESIA, TAIWAN
Taiwan bets on Southeast Asian countries to address semiconductor sector talent shortage
(26 March 2024) Taiwan is addressing its potential talent shortage in the semiconductor industry by turning to Southeast Asian students, notably from Viet Nam, as a source of workers. Minghsin University of Science and Technology (MUST) in Taiwan, for example, provides training in semiconductor manufacturing, with internships offered at leading chip companies. Approximately 700 of the university’s 2,300 students are from Viet Nam. Taiwan’s declining birthrate, stagnant wages, and rising property prices have exacerbated concerns, with annual births falling to a record low of around 135,000 in 2023. To address this, Taiwan plans to spend US$163 million by 2028 to attract 320,000 foreign students, focusing on science, technology, engineering, and math (STEM) fields. Additionally, a new framework encourages foreign students to work in Taiwan after graduation, aiming for a 70% retention rate. Southeast Asian students are a key focus of recruitment efforts, with programmes established in Vietnam, Indonesia, the Philippines, and other countries in the region.

---

RCEP Monitor

---

JAPAN
Bank of Japan steps up intervention warning amidst declining yen
(27 March 2024) The Japanese yen experienced a significant decline against the US dollar on 28 March, 2024, nearing its lowest level in 34 years, prompting concerns of potential intervention by Japanese authorities. Japan’s Finance Minister indicated a readiness to take action against excessive movements in the yen. Despite these warnings, the currency dropped to ¥151.94 against the dollar during morning trading, defying efforts by the Japanese government to stem its decline. The Bank of Japan’s recent shift away from ultra-loose monetary policy, including its first interest rate hike since 2007, failed to exert upward pressure on the yen. Dovish comments by the bank’s governor further weakened the exchange rate, with investors maintaining bets on a significant interest rate differential between Japan and the US. Japanese officials have identified ¥152 against the dollar as a potential trigger for direct intervention, echoing similar actions taken in 2022. Finance officials attributed the recent yen weakening to speculative activities.

SOUTH KOREA
South Korea announces financial aid for small businesses and construction companies
(27 March 2024) South Korea has announced financial aid measures for small businesses and construction companies impacted by high-interest rates. The government, in collaboration with commercial banks, aims to provide KRW 40.6 trillion (US$30.3 billion) in financial support through loan guarantees and reduced interest rates starting in April 2024. Additionally, there are plans to expand schemes returning interest income to small businesses and self-employed individuals with loans. For struggling builders facing high raw material costs and interest rates, liquidity support will be offered through increased guarantees and additional loans to finance profitable real estate projects. The Financial Services Commission (FSC) also intends to expedite assistance through its market stabilising fund.

AUSTRALIA
Consumer price index rises by 3.4% in February 2024, in line with economists’ expectations
(27 March 2024) Inflation in Australia remained steady for the second consecutive month, with the consumer price index rising by 3.4% in the year to February 2024, in line with economists’ predictions. Excluding volatile items, inflation decreased from 4.1% in January 2024 to 3.9% in February 2024. The moderation was attributed to declines in meat and seafood prices, which dropped by 2% due to livestock sell-offs, and a 0.5% decrease in fruit and vegetable prices. Insurance prices saw a significant increase of 16.5% annually, the highest since the calculation of the CPI began in 2022. Rent prices continued to rise, albeit slightly, reaching 7.6% annually, although government measures restrained the increase. Energy prices also eased, with electricity prices growing only 0.3% in February. However, the underlying annual inflation measure rose from 3.8% in January to 3.9% in February, indicating ongoing economic challenges. The RBA is set to make its next decision on interest rates on 07 May, 2024, following the release of March quarter inflation data.