CARI Captures Issue 651: Top ASEAN finance officials agree to expand cross-border QR payments

ASEAN
Top ASEAN financial officials agree to expand cross-border QR payments
(06 April 2024) Top financial officials from the Association of Southeast Asian Nations (ASEAN) have agreed to promote the expansion of cross-border QR payments through compatible platforms. The agreement, outlined in a 25-point statement issued during the 11th ASEAN Finance Ministers’ and Central Bank Governors’ Meeting (AFMGM) held in Luang Prabang, Lao PDR, covers areas such as financing, payment, and service connectivity. Lao PDR, as this year’s ASEAN chair, has agreed with Thailand to launch a cross-border QR payment system between the two countries, with full-scale operations expected to begin in June 2024. Similar arrangements are being pursued with Cambodia and Viet Nam. ASEAN countries aim to form joint QR payment networks to facilitate easier consumption, promote tourism, and facilitate investments. The goal is to unify standards and enlist payment operators to make these compatible QR payment standards widespread. Integrating QR payment standards is seen as aiding in preventing crimes such as money laundering.

MALAYSIA
Malaysia’s Port Klang to double capacity over coming decades
(10 April 2024) Port Klang, Malaysia’s largest port situated on the Malacca Strait, plans to double its capacity over the next few decades to compete with Singapore. The expansion plan aims to increase annual capacity from 14 million twenty-foot equivalent units (TEUs) to 27 million TEUs, with operator Westports Holdings investing US$8.34 billion. Port Klang’s strategic location and handling of various products contribute to its significance in Southeast Asia’s logistics sector. The expansion aligns with supply chain realignment trends, particularly the “China plus one” strategy, with Southeast Asia as a focus. Despite competition from neighbouring countries like Singapore and Thailand, Port Klang remains competitive due to its affordability.

THAILAND
Bank of Thailand holds rates steady for third straight meeting, defying Prime Minister
(10 April 2024) On 10 April, 2024, the Bank of Thailand (BOT) maintained its benchmark rate at 2.5% for the third consecutive meeting, defying Prime Minister Srettha Thavisin’s calls for monetary easing. The BOT cited structural economic challenges as limiting the effectiveness of monetary policy. The bank forecasts the Thai economy to grow by 2.6% in 2024, with headline inflation expected at 0.6%. Inflation has fallen below the target range of 1% to 3% due to government subsidies on diesel and electricity, both of whom are set to expire soon. Market analysts anticipate rate cuts later in 2024, with geopolitical tensions and energy subsidies to be monitored closely by the BOT.

SINGAPORE
Multinationals increasingly shift regional headquarters functions to save costs
(10 April 2024) Multinational corporations are increasingly shifting some of their Southeast Asian regional headquarters’ functions outside Singapore to leverage cost savings and growth opportunities. Sakata Inx, a Japanese printing ink manufacturer, established a regional head office in Malaysia in February 2024, aiming to serve customers more efficiently across South Asia and Southeast Asia. Malaysia’s proposed fiscal 2024 budget introduced tax incentives, including preferential income tax rates of 5% to 10%, attracting companies like Sakata Inx. Thailand is also becoming a preferred destination, with Nissin Foods Holdings relocating its Southeast Asian headquarters there in 2020. Japanese companies are increasingly considering partial relocations to countries like Thailand and Malaysia due to rising costs in Singapore. Despite this trend, Singapore retains advantages in location, language proficiency, and financial services, maintaining its status as a prime spot for regional headquarters.

VIET NAM
Gold smuggling due to high domestic prices negatively impacting dong
(7 April 2024) Vietnam faces challenges in stabilizing its gold market as smuggling activity increases due to high local prices for gold. Since smugglers need to buy dollars in the black market to pay for the commodity, the smuggling of gold leads to distortions in exchange rates and weakening of the dong. Gold imports surged to 55.5 tons in 2021, up from 39.8 tons in 2020, mainly through illegal channels. The rise in smuggling is driven by a shortage of official supplies and flight-to-safety demands amid economic struggles and geopolitical tensions. It is argued that the pressure on the dong negatively impacts the economy. The National Financial and Monetary Policy Advisory Council proposed ending the state monopoly on gold imports and bullion production, aiming to reduce smuggling and narrow the local premium. Abolishing the monopoly is expected to boost tax revenue from official imports and alleviate the reliance on illegal sources.

CAMBODIA
Cambodia’s economy expected to grow by 5.8% in 2024, according to Asian Development Bank
(11 April 2024) According to the Asian Development Bank’s flagship economic report, Cambodia’s economy is projected to grow by 5.8% in 2024, increasing from 5% in the previous year, with further growth expected at 6% in 2025. The ADB highlighted the positive momentum in the garments, footwear, and travel goods (GFT) sector, contributing to this growth. Inflation is anticipated to remain low at around 2% over the next two years due to expected lower energy prices. However, challenges such as potential global economic slowdowns, rising private debt, fluctuating energy prices, and climate vulnerabilities could affect the long-term outlook. Recent bilateral free trade agreements (FTAs) and participation in the Regional Comprehensive Economic Partnership (RCEP) are also expected to contribute positively to Cambodia’s economic performance, namely through a significant increase in export volume.

CAMBODIA
Cambodia confirms commitment to construct US$1.7 billion Funan Techo canal
(11 April 2024) Cambodian Prime Minister Hun Manet confirmed Cambodia’s commitment to constructing the US$1.7 billion Funan Techo canal connecting Phnom Penh to the sea. The project, backed by China, has raised concerns in Vietnam regarding potential access for Chinese warships near its coastline. However, Hun Manet dismissed these concerns, affirming the canal’s historic significance and economic benefits for Cambodia. Construction, funded by China, is set to commence later this year, although specific details are limited. The canal, measuring 100m wide and 5.4m deep, aims to bypass Vietnam’s traditional route and enhance economic prospects for millions. Hun Manet assured that the canal would not affect the mainstream Mekong’s water flow, crucial for regional fisheries. Despite concerns, Cambodian officials maintain that infrastructure developments, including the canal and naval base renovations, are not intended to serve foreign military interests.

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CHINA
China’s vehicle sales increase by 9.9% year-on-year in March 2024
(10 April 2024) China’s vehicle sales rebounded in March 2024 to reach 2.69 million units, a 9.9% increase from the previous year. First-quarter shipments surged by 10.6% to 6.72 million, the highest since the same period in 2019. Electric vehicles (EVs) played a significant role, with sales rising by 31.8% to 2.09 million units, driven by new models and price reductions. Exports of vehicles overall increased by 33.2% in the quarter. Concerns over China’s overcapacity in the EV sector have been raised by analysts and international figures such as the U.S. Treasury Secretary Janet Yellen, who stressed the importance of boosting domestic demand. Despite challenges such as declining profit margins, China’s EV industry is expected to become a significant contributor to economic growth by 2030, according to Moody’s Ratings.

JAPAN
Tokyo’s office vacancies fall to three-year low in March 2024
(11 April 2024) In March, Tokyo’s office vacancies hit a three-year low at 5.47%, marking a resilient commercial real estate market compared to global trends. Real estate broker Miki Shoji Co. reported this decline, with rents also increasing steadily throughout 2024 after a previous drop in 2023. The shift is attributed to companies relocating to central business districts or expanding their office spaces. Notably, the data includes occupied spaces, indicating sustained demand. Tokyo stands apart from other global cities facing record office vacancies and decreased property values due to remote work trends, which have not significantly impacted Japan.

AUSTRALIA
Australia to introduce ‘Future Made in Australia Act’ to boost manufacturing and clean energy sectors
(11 April 2024) Australia will introduce the ‘Future Made in Australia Act’ to boost its manufacturing and clean energy sectors in response to global competition. Prime Minister Anthony Albanese will unveil the scheme, departing from Australia’s traditional free-market policies. While specific figures are not provided, the taxpayer-funded initiative aims to compete with other nations’ substantial investments, such as those made by the US under President Joe Biden’s Inflation Reduction Act, as well as other initiatives by countries like China, the European Union, Canada, and Japan. Albanese stresses the need for Australia to actively participate in this global race, describing the current economic and climatic changes as significant. The act aims to foster renewable energy resources, including battery production and green hydrogen, to create jobs and ensure economic competitiveness.