CARI Captures Issue 652: Bank of Thailand resists government pressure to slash rates

THAILAND
Bank of Thailand resists government pressure to slash rates
(15 April 2024) Thai Prime Minister Srettha Thavisin’s push for a rate cut from the Bank of Thailand (BOT) to support his stimulus program has faced resistance from BOT Governor Sethaput Suthiwartnarueput. Despite pressure from Srettha, on 10 April, 2024 the BOT maintained its benchmark rate at 2.5%, aligning with market expectations. The baht remained stable at 36.30 to the dollar following the decision. It is feared that premature rate cuts may weaken the baht further, with the currency having already dropped by close to 6% this year relative to the dollar. However, the BOT may consider cuts later in 2024 depending on economic data and the Fed’s actions. Thailand has experienced six months of negative inflation, which likely ended in March 2024 due to the expiration of government subsidies and rising global energy prices.

ASEAN
Visitors to Southeast Asia tops 100 million in 2023, 70% of pre-COVID-19 numbers
(15 April 2024) In 2023, Southeast Asian countries received over 100 million visitors in 2023, reaching 70% of pre-COVID levels but still 29.8% lower than in 2019. Thailand led with 28 million tourists, benefitting from economic recovery and the legalization of cannabis. Chinese travellers played a significant role in Thailand’s recovery, drawn by its proximity and cultural appeal. Lao PDR and Cambodia saw increased tourism due to Chinese-led infrastructure projects, including the Laos-China Railway and a new international airport in Siem Reap, Cambodia. Tourism is expected to continue recovering in 2024, with Thailand and China implementing mutual visa waivers to boost travel. However, concerns over China’s economic slowdown may impact consumer spending and tourism in the region.

SINGAPORE
Singapore Prime Minister Lee Hsien Loong to step down in May 2024
(15 April 2024) Singapore Prime Minister Lee Hsien Loong announced on 15 April, 2024 that Deputy Prime Minister Lawrence Wong will succeed him on May 15, marking the city-state’s first leadership change in 20 years. Wong, 51, received unanimous support from the ruling People’s Action Party (PAP) lawmakers. Lee, 72, will continue in the cabinet as a senior minister. Wong began his career as a civil servant in 1997 and has held various ministerial positions, including minister for education and minister for national development. He gained prominence during the COVID-19 pandemic as co-chair of the multi-ministry task force. Wong will lead the PAP into the next general election, expected by November 2025. The succession’s timing suggests the ruling party may be accelerating its election plans amid geopolitical uncertainties. Lee’s original plan to step down by 2022 was disrupted by the pandemic. Wong was endorsed as the leader of the PAP’s “fourth generation” team in April 2022 and has since been involved in key policies and foreign diplomacy.

MALAYSIA
Sarawak state hopes to expand role in Malaysia’s semiconductor industry
(15 April 2024) Sarawak aims to expand its role in Malaysia’s semiconductor industry, leveraging past experience and new partnerships with U.K.-based firms. SMD Semiconductor, wholly owned by the Sarawakian government, focuses on chip design, and has signed agreements with UK-based companies Riverbeck and Big Innovation Centre. SMD’s collaboration with Riverbeck will focus on developing radio frequency integrated circuits for satellite applications, while its collaboration with Big Innovation Centre will focus on sustainable semiconductor manufacturing. Melexis, a Belgian company, is also expanding its presence in Sarawak with a significant investment into expanding its facility in Kuching. Malaysia plays a crucial role in the global semiconductor supply chain, with the country’s electrical and electronic product exports reaching US$120.5 billion in 2023. Sarawak’s semiconductor industry began with 1st Silicon, and has since attracted investments from companies like X-Fab and Taiyo Yuden. The Sama Jaya High Tech Park located in Kuching hosts major multinational corporations, helping make Sarawak an attractive investment destination in the semiconductor sector.

MALAYSIA
Malaysian exports rise by 2.2% in first quarter of 2024 to reach US$75.77 billion
(19 April 2024) Malaysia’s export values experienced a slight decline of 0.8% in March 2024 to RM128.64 billion (US$26.90 billion) but maintained growth momentum for the first quarter of 2024. Exports expanded by 2.2% to MYR 362.41 billion (US$75.77 billion) during the first three months of 2024, driven by increased shipments of manufactured and mining goods. Notable increases were observed in exports of iron and steel products, machinery, equipment and parts, manufactures of metal, crude petroleum, and liquefied natural gas (LNG). Total trade in March rose by 5.1% year-on-year to MYR 244.47 billion (US$51.11 billion), while the trade surplus decreased by half to MYR 12.81 billion (US$2.68 billion) compared to the same period last year. Imports increased by 12.5% year-on-year to MYR 115.83 billion (US$24.22 billion) in March, driven by a surge in capital goods, intermediate goods, and consumption goods. Overall, Malaysia’s total inbound shipments for January-March 2024 rose by 13.1% to MYR 328.19 billion (US$68.62 billion) compared to the same quarter in 2023.

THE PHILIPPINES, SINGAPORE
Singapore inspires the Philippines’ planned special economic zone north of Manila
(18 April 2024) On 18 April, 2024, Singapore Foreign Minister Vivian Balakrishnan concluded his four-day visit to the Philippines. During his visit, the Foreign Minister expressed Singapore’s readiness to exchange ideas with the Philippines with regards to a special economic zone (SEZ) located north of Manila, whose development plans take inspiration from Singaporean infrastructure and urban planning. The focus is on New Clark City, a 9,450-hectare community located within the Clark Freeport and Special Economic Zone, formerly a US military base. Philippines’ President Ferdinand Marcos Jr aims to transform it into the country’s first smart city. Sixteen Singapore firms already operate in Clark, contributing US$139.92 million in investments and employing over 1,600 people as of 2023. Plans for the SEZ include developing affordable housing inspired by Singapore’s HDB flats and transforming the civil aviation complex around Clark International Airport into a global hub akin to Changi Airport. Clark International Airport Corporation (CIAC) president Arrey Perez outlined plans for sports, entertainment, and agricultural trade facilities.

VIET NAM
Viet Nam’s central bank provides troubled bank with US$24 billion in emergency loans
(18 April 2024) Vietnam’s central bank has reportedly provided Saigon Joint Stock Commercial Bank (SCB) with approximately US$24 billion in “special loans” between October 2022 and the start of April 2024. This significant intervention, amounting to around 5.6% of GDP, underscores concerns about stability in Viet Nam’s financial sector. SCB, previously one of the country’s largest commercial lenders, has faced turmoil following the arrest of real estate tycoon Truong My Lan in October 2022, who was subsequently sentenced to death for her alleged role in siphoning US$12.5 billion from the bank. Despite efforts to restore confidence, including placing SCB under central bank supervision, the situation has highlighted potential risks in Viet Nam’s financial system. This development may prompt reassessment among global companies considering Viet Nam as an alternative to China for their supply chains.

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SOUTH KOREA, UNITED STATES
Samsung to invest US$45 billion in chipmaking facilities in US
(15 April 2024) The U.S. government will provide up to US$6.4 billion to Samsung Electronics to construct chipmaking facilities in Texas, part of efforts by the Biden administration to enhance domestic semiconductor production. Samsung’s total investments in the U.S. is set to more than double, reaching approximately US$45 billion. The grant will aid in building two chip factories for producing 2-nanometer chips, an advanced packaging facility, and a research and development fab in Taylor, Texas. Samsung also plans to expand an existing facility in Austin to produce power-efficient chips for the aerospace, defense, and automotive sectors. The first fab is expected to start production in 2026, followed by the second in 2027, the same year the R&D facility is set to open. The grant, although smaller than those given to Intel and TSMC, is substantial relative to Samsung’s investment.

CHINA, INDONESIA
Indonesia requests Chinese assistance in developing local infrastructure
(18 April 2024) During a meeting between Indonesian President Joko Widodo and Chinese Foreign Minister Wang Yi in Jakarta, Widodo requested China’s assistance in various sectors, including developing Indonesia’s new capital city Nusantara (namely its transportation system), as well as for investment in the petrochemical industry in North Kalimantan. The Indonesian president also urged the acceleration of feasibility studies for extending the China-backed Jakarta-Bandung high-speed railway to Surabaya. Wang’s visit aims to deepen bilateral economic cooperation, with discussions held on a wide range of topics including the Belt and Road Initiative. Meetings were also held with incoming President Prabowo Subianto. Indonesia hopes to solidify its relationship with China, especially amidst the upcoming change in leadership. China has been a significant trade and investment partner for Indonesia over the years, contributing to various projects.

SOUTH KOREA, JAPAN
South Korea and Japan signal readiness to respond excessive volatility in currency markets
(17 April 2024) South Korea and Japan have expressed concerns over the recent depreciation of their currencies and are prepared to take action against excessive exchange-rate volatility. South Korean Finance Minister Choi Sang-mok and his Japanese counterpart Shunichi Suzuki stated their readiness to deploy measures to stabilize currency markets during a meeting held in Washington D.C.. These concerns come amidst a weakening of the won and yen against the US Dollar. The won strengthened to 1,382.6 per dollar on 17 April, 2024, while the yen hit a 34-year low against the dollar, standing at 154.64 yen in Asia. The finance leaders of South Korea, Japan, and the United States are scheduled to hold their first trilateral meeting in Washington D.C. on 17 April on the sidelines of the ongoing IMF and G20 gatherings. Analysts speculate on potential currency intervention by Japanese authorities if the dollar surpasses 155 yen, though the impact may be limited. Additionally, Bank of Korea Governor Rhee Chang-yong stated readiness to implement measures to stabilize the market due to recent currency movements, which have been deemed excessive.