CARI Captures Issue 661: Minimum wage hikes across Southeast Asia causes concerns to industries

Captures has widened its scope to include news related to all the members of the Regional Comprehensive Economic Partnership (RCEP) agreement which was signed towards the end of 2020. Besides the ASEAN Member States, this includes Australia, New Zealand, China, Japan, and South Korea. 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.

Minimum wage hikes across Southeast Asia causes concerns to industries
(02 July 2024) Southeast Asia’s manufacturing hubs are planning significant increases in their minimum wages starting in the second half of 2024. Minimum wages across Viet Nam rose by an average of 6% in July 2024, with workers in major cities like Hanoi and Ho Chi Minh City now guaranteed VND 4.96 million (US$193) per month. Concerns over wage inflation are prompting businesses to consider expanding beyond urban centres. Thailand plans a 14% increase in its daily minimum wage to THB 400 baht (US$10.9) from October 2024, a move met with industry opposition citing concerns about maintaining competitiveness. Meanwhile, the Philippines will raise Metro Manila’s daily minimum wage by 6% to PHP 645 (US$11), effective mid-July, aiming to mitigate consumer hardship amidst economic challenges. In contrast, Malaysia is maintaining its minimum wage at MYR 1,500 (US$318) per month for 2024, while introducing a new voluntary Progressive Wage Policy to stimulate wage growth through skill development and productivity incentives in specific sectors.

Filipino fast food chain Jollibee Foods acquires 70% stake in South Korea’s Compose Coffee
(02 July 2024) Jollibee Foods (JFC) is acquiring a 70% stake in South Korea’s Compose Coffee for US$238 million to enhance its brand profile in Asia. Compose Coffee, with 2,612 stores, has the highest growth rate in South Korea’s coffee industry. JFC’s chairman, Tony Tan Caktiong, highlighted the strategic fit and growth potential of Compose Coffee. Local competitors Ediya Coffee and Mega Coffee each have over 3,000 outlets, while Starbucks operates 1,893 locations. Compose Coffee ranked sixth in consumer preference surveys. This acquisition follows JFC’s previous investments in Highlands Coffee, The Coffee Bean and Tea Leaf, and Common Man Coffee Roasters.

Taiwanese companies seeking investors in Singapore amidst China tensions
(04 July 2024) Taiwanese companies are actively seeking investors in Singapore as tensions with China rise. In April, two Taiwanese business delegations visited Singapore, including a group led by the Taiwan Stock Exchange (TWSE), which features major companies like Hon Hai Technology Group and Acer. The TWSE partnered with the Singapore Exchange for the first time to host an investment pitch event, aiming to attract more Singaporean investors. The appeal of Singapore lies in its political stability and status as a regional headquarters hub. The Taiwan government recently heightened travel warnings for China following threats from Beijing. Taiwanese firms, like CyCraft and Bamboo Technologies, are prioritising Singapore for fundraising due to regulatory predictability and restrictions on Chinese investment. This trend reflects a broader strategy to engage neutral venues and secure capital amidst geopolitical challenges.

Malaysia and Thailand set bilateral trade target of US$30 billion by 2027
(04 July 2024) Malaysia and Thailand have set a bilateral trade target of US$30 billion (MYR 141.29 billion) by 2027 following the third Malaysia-Thailand Joint Trade Committee (JTC) meeting. The meeting, chaired by Malaysia’s investment, trade and industry minister and Thailand’s deputy prime minister and commerce minister, highlighted the economic ties between the countries. Trade between the two nations averaged US$24.73 billion (MYR 116.47 billion) annually from 2017-2023, peaking at US$27.74 billion (MYR 130.64 billion) in 2022 but dropping to US$24.83 billion (MYR 116.94 billion) in 2023 due to slower global trade. Key agreements included forming a trade and investment task force to enhance border trade and cross-border connectivity. Both countries will also facilitate agricultural trade and explore cooperation in rubber, land transport, connectivity, entrepreneurship, agriculture, and digital environments.

The Philippines invites Malaysian companies to invest in southern Philippines
(02 July 2024) Philippine President Ferdinand Marcos Jr has invited Malaysian companies to invest in the southern Philippines, according to the Malaysian foreign ministry. During a meeting with Malaysia’s Foreign Minister Mohamad Hasan, Marcos highlighted positive developments in the region and encouraged Malaysian participation in economic activities to promote socio-economic growth. Mohamad Hasan’s visit, which coincided with the 60th anniversary of diplomatic relations between Malaysia and the Philippines, included discussions with his counterpart Enrique Manalo on enhancing bilateral cooperation in trade, investment, the halal industry, Islamic finance, and food security. The southern Philippines, affected by long-standing Muslim separatist insurgencies and extremist groups, remains a focus for development efforts following a 2014 peace pact with the Moro Islamic Liberation Front.

Incoming president to fund nationwide school meal programme estimated at US$28 billion
(04 July 2024) Indonesia’s incoming president, Prabowo Subianto, plans to fund a nationwide school meal programme, estimated to cost IDR 460tn (US$28 billion), through stricter tax enforcement, reduced subsidies, potential borrowing, and budget cuts for the US$32bn new capital project, Nusantara. Discussions indicate an expansion of the cabinet from 34 to up to 43 portfolios and possibly creating new ministries or government agencies to manage the meal programme and boost tax collection. Prabowo’s administration faces challenges in increasing the tax revenue-to-GDP ratio from 10% to 16% and finding fiscal headroom without increasing the fiscal deficit. Prabowo may also prioritise spending plans over Nusantara, which faces financial and logistical issues. Although Indonesia’s debt-to-GDP ratio is relatively low at 39%, increased borrowing is considered a last resort due to potential impacts on investor confidence and public opinion. The school meal programme is expected to cost US$4.3bn in its first year and will be implemented in phases.

Robusta coffee futures rise as traders monitor rainfall levels in Viet Nam
(04 July 2024) Robusta coffee futures have increased as traders monitor rainfall levels in Viet Nam, the leading producer of these beans, due to concerns over potentially reduced production. Weather forecaster Maxar predicts parts of Vietnam will receive enough rain to slightly improve soil moisture, although the amounts have been overestimated. Earlier this year, hot and dry weather in Vietnam damaged coffee trees, impacting the upcoming harvest. Rabobank analysts note the market’s focus on Vietnam’s wet season to determine if next year’s crop can recover from the April drought. Normal precipitation levels are expected in Vietnam for the coming week. However, coffee prices might decrease as hedge funds’ extreme net-long positions in futures could unwind with improved weather and historical breaking points being reached, according to Bloomberg Intelligence analysts led by Mike McGlone.

RCEP Monitor

Nikkei Stock Average reaches all-time closing high on 04 July, 2024
(04 July 2024) The Nikkei Stock Average reached an all-time closing high on 04 July, 2024, climbing 332.89 points (0.82%) to 40,913.65, surpassing its previous high of 40,888.43 from 22 March. The index peaked at 40,971.23 during trading but did not surpass the intraday high of 41,087.75 reached on 22 March. The Tokyo Stock Price Index (Topix) closed at 2,898.47, exceeding its previous high of 2,884.80 from 18 December, 1989. This surge mirrors gains in U.S. tech stocks driven by AI investment and expectations of the Federal Reserve lowering rates in September. Shuji Hosoi of Daiwa Securities attributed the rise to increased demand for AI chips and materials. Despite a weak yen, Hosoi anticipates a shift towards positive real wage growth and stronger domestic demand in the second half of the year. Masatoshi Kikuchi of Mizuho Securities noted that foreign investors are propelling Japan’s stock rally, overlooking the yen’s weakness.

China’s GDP for Q2 of 2024 forecasted at 5.1% year-on-year
(04 July 2024) China’s GDP growth for Q2 of 2024 is forecasted at 5.1% year-on-year, following a 5.3% increase in Q1, according to a survey by Nikkei and Nikkei Quick News. Economists predict quarter-on-quarter growth to slow to 0.8% from 1.6%. Legal & General Investment Management describes the economic trajectory as “stable-to-downward” due to a stagnant property sector and lack of substantial government intervention. The average full-year GDP forecast is raised to 4.9%, with a range of 4.7% to 5.3%. Economists cite fiscal support and strong external demand as positive factors but note domestic demand remains weak. Trade tensions, particularly potential U.S. tariffs and EU tariffs on electric vehicles, pose risks. The yuan is expected to weaken to an average of 7.23 yuan per dollar by year-end. Long-term growth forecasts are 4.5% for 2025 and 4.3% for 2026, reflecting structural slowdowns and demographic challenges.

South Korean government announces US$18 billion support package for debt-laden small business owners
(04 July 2024) South Korea’s President Yoon Suk Yeol announced a US$18 billion support package for small business owners and the self-employed burdened by loans. This includes extended loan repayment periods up to five years and lower interest rates for up to 800,000 individuals, along with regulatory reforms to reduce fixed costs such as rent and utilities. The Finance Ministry upgraded its 2024 growth forecast to 2.6% from January’s 2.2%t. The government introduced a “Dynamic Economic Road Map” to address economic challenges, including improving shareholder returns and corporate governance, with tax incentives for increased dividends and reduced corporate tax rates. Key sectors identified for productivity innovation include artificial intelligence semiconductors, quantum technology, and biotechnology, with financial support worth 18.1 trillion won allocated for the semiconductor ecosystem.

15 participating countries

20 chapters

2.2 billion

US$26.2 trillion


ASEAN member states, Australia, China, Japan, South Korea, New Zealand

trade in goods and services, investment, intellectual property, e-commerce, competition, SMEs, economic and technical cooperation, and government procurement

combined population, 30% world’s population

combined GDP, 30% global GDP

global trade (based on 2019 figures)

Leave a Reply

Your email address will not be published. Required fields are marked *