ASEAN
Southeast Asian countries raise barriers against cheap Chinese imports
(31 July 2024) Kurniadi Eka Mulyana, a 26-year-old worker in Bandung, West Java, was laid off in March due to declining sales at his textile factory, attributed to competition from TikTok Shop’s Chinese imports. This year, 49,000 workers in Indonesia’s textile, garment, and footwear sectors have been laid off across Banten, West Java, and Central Java. In response, Indonesian Trade Minister Zulkifli Hasan proposed up to 200% duties on imported fabrics and other goods. Southeast Asian countries, including Malaysia and Thailand, are also raising barriers against cheap Chinese imports. Thailand imposed a 7% VAT on low-value imports, and Malaysia added a 10% sales tax on online purchases under MYR 500. Southeast Asia’s trade deficit with China is widening, with Malaysia’s deficit growing from USD 3.1 billion in 2020 to USD 14.2 billion in 2023, and Thailand’s from USD 20 billion to USD 36.6 billion. Indonesia posted a USD 5 billion non-oil and gas trade deficit with China in the first half of 2024. China is redirecting exports to Southeast Asia due to Western trade tensions, impacting local industries like Thailand’s steel sector, where domestic production fell by 497,000 tonnes last year.

THAILAND
Top stocks in Thailand benefiting from digital wallet rollout
(01 August 2024) Thailand’s digital wallet initiative, worth THB 500 billion (USD 14 billion), is set to benefit major conglomerates and wealthy families. Stocks such as CP All and Muang Thai Capital have risen with each announcement about the program, despite the Stock Exchange of Thailand’s main index falling by 15% over the past year. Approximately 50 million adults earning less than THB 70,000 monthly will receive a one-time THB 10,000 payment via a mobile app, to be spent on necessities within their voting district. Goods making up nearly 60% of CP All’s sales, which totalled THB 921 billion in 2023, will be purchasable under the scheme. The program has also boosted shares in CP Group’s CP Axtra and other retailers like Berli Jucker and Central Retail Corp. However, department stores and hypermarkets are excluded from accepting digital wallet payments. Geographical restrictions may limit the scheme’s success, particularly in cities like Bangkok and Chiang Mai. The initiative is projected to boost GDP by 1.2% to 1.8% in 2025, though the Bank of Thailand predicts a smaller impact. 

THAILAND
Thailand to be second Southeast Asian country to introduce carbon tax
(30 JUly 2024) Thailand will introduce a carbon tax next year, becoming Southeast Asia’s second country to do so after Singapore. The tax will be THB 200 (USD 5.60) per tonne of CO2 on oil products like diesel and gasoline, converted from existing oil product taxes, thus not increasing revenue or consumer costs. This initiative aims to signal a priority for reducing carbon footprints, despite its minimal immediate impact on emissions. The tax will likely expand to more sectors and increase over time, forming part of the Thailand Climate Change Act, which includes mandatory emissions reporting and a potential emissions trading scheme. The Thai government will negotiate with the EU to prevent double penalties on Thai exports under the EU’s Carbon Border Adjustment Mechanism starting in 2026. Experts emphasize the need for regional cooperation within ASEAN for effective carbon pricing and the importance of investing carbon tax revenues in renewable energy and technology to ensure long-term benefits.

THAILAND
Thailand welcomes 20.3 million overseas visitors in first seven months of 2024
(31 July 2024) Between 01 January 1 and 28 July, Thailand welcomed 20,335,107 overseas visitors, generating approximately THB 957.31 billion for local businesses. China was the top source market with 4,065,109 arrivals, followed by Malaysia (2,837,922), India (1,186,288), South Korea (1,073,792), and Russia (996,990). Minister Sermsak Pongpanich reported 716,631 foreign arrivals from 22-28 July, averaging 102,376 daily, a 1.04% increase from the previous week. Short haul markets, including South Korea, Japan, and Taiwan, saw a 0.85% increase due to school holidays, while long haul markets rose by 1.57% with the start of summer holidays in Europe and the Middle East. Sermsak anticipates stable arrival numbers for the following week, influenced by European summer holidays, eased travel measures, and increased flights. The government targets 36.7 million foreign visitors in 2024, compared to nearly 40 million in 2019.

INDONESIA
Indonesian President starts work from presidential palace in Nusantara
(30 July 2024) Indonesian President Joko Widodo has started working from the presidential palace in Nusantara, the new administrative capital planned for East Kalimantan province. The USD 33 billion project, announced in 2019, aims to move the capital from Jakarta but is significantly delayed. Widodo noted the palace is 90% complete, with thousands of workers still on-site. Nusantara is set to host its first Indonesia Independence Day celebration on 17 August, marking the official capital transfer. However, construction delays and missed deadlines have led to the resignation of key officials and adjustments to the relocation timeline for 12,000 civil servants. Widodo expects the city to be 15% complete by Independence Day, with full completion by 2045. The project relies heavily on private investment, with the state covering 20% of costs. A presidential regulation was signed to grant investors land rights up to 190 years. Current infrastructure includes a 10-megawatt solar power plant and a reservoir for drinking water, but an additional 40 megawatts is needed.

MALAYSIA
Malaysian ringgit erases yearly losses to mark eight-day gain streak
(31 July 2024) The Malaysian ringgit has erased its yearly losses, rising 0.6% to 4.5922 against the dollar, marking an eight-day gain streak, the best since November 2019. After hitting a 26-year low in February, it has become Asia’s top performer this year. This recovery is supported by Bank Negara Malaysia’s encouragement for state-linked firms to repatriate and convert foreign income, use of forwards, and a global technology cycle upturn aiding export recovery. Analysts attribute the ringgit’s strength to expectations of a Fed rate cut, foreign inflows into local shares, and a recovering semiconductor cycle. KWAP, Malaysia’s largest state pension fund, paused its foreign investment plans to support the ringgit. With US swaps pricing a quarter-point cut by September, the Fed’s potential rate cut could make ringgit-denominated assets more attractive. Malaysia’s economy, showing growth momentum and a second-quarter GDP exceeding expectations, supports the central bank’s steady borrowing costs, further buoying the ringgit.

CAMBODIA, HONG KONG
Cambodia and Hong Kong pledge to enhance trade and investment cooperation
(31 July 2024) Cambodia and the Hong Kong Special Administrative Region (HKSAR) have pledged to enhance trade and investment cooperation, as stated during a meeting between Cambodian Prime Minister Hun Manet and HKSAR Chief Executive John Lee on 31 July. The discussions, held at the Peace Palace in Phnom Penh, covered potential areas for collaboration including trade, investment, banking, finance, technology, digital economy, tourism, education, and people-to-people connectivity. Both parties also explored increasing direct flights between HKSAR and Siem Reap. The meeting concluded with the signing of two memorandums of understanding focused on trade and investment promotion. Lee’s visit to Cambodia is part of a broader Southeast Asian tour, which includes stops in Laos and Vietnam.

RCEP Monitor

SOUTH KOREA
South Korea’s CPI rises 2.6% year-on-year in July 2024
(01 August 2024) South Korea’s consumer inflation increased in July, ending a three-month decline, driven by supply-side pressures and surpassing market expectations. The consumer price index (CPI) rose 2.6% year-on-year, compared to June’s 11-month low of 2.4%, while economists had predicted a 2.5% rise. Monthly CPI increased by 0.3%, the fastest rise in five months, against an expected 0.25% increase. Petroleum product prices grew by 3.3%, and agricultural products increased by 0.9%, with vegetable prices surging 6.3%. Core inflation, excluding volatile food and energy items, remained steady at 2.2% for the third consecutive month. Last month, the Bank of Korea indicated potential future rate cuts while maintaining interest rates at a 15-year high of 3.50%.

JAPAN
Japanese authorities spent JPY 5.53 trillion to support the yen in July 2024
(31 July 2024) Japanese authorities spent JPY 5.53 trillion (USD 36.8 billion) to support the yen in July, according to Japan’s Ministry of Finance data covering 27 June to 29 July. This intervention aligns with expectations and follows official warnings about countering volatile currency movements. The action occurred after the yen reached a 38-year low against the U.S. dollar. In response, the Bank of Japan (BOJ) raised its benchmark interest rate to “around 0.25%” from 0% to 0.1%, the highest since 2008. Following the BOJ’s decision, the yen appreciated sharply, trading around 150 per dollar, a significant recovery from its earlier decline to 161.96 per dollar. The yen has faced pressure since the BOJ ended its negative interest rate policy in March. 

JAPAN
Japanese companies see limited impact on fundraising costs after BOJ raises rates
(01 August 2024) Japanese companies foresee limited impact on fundraising costs after the Bank of Japan’s recent monetary policy shift. Marubeni’s CFO stated that the impact would be manageable given the company’s profit levels, while Sumitomo Corp’s CFO highlighted measures to minimise interest rate fluctuation risks. On 31 August, the BOJ raised its policy interest rate to 0.25%, the highest since 2008, suggesting potential future hikes. Although the rate increase may affect fundraising costs and strengthen the yen, most companies do not anticipate significant earnings impacts. Hokkaido Electric Power mentioned that long-term loans with fixed interest rates would not be immediately affected, but future financing could be. The yen’s appreciation reached 148.5 per dollar, which could moderate benefits from a weak yen for trading houses. Japan Airlines’ CEO noted that a stronger yen would positively impact outbound tourism, offsetting fuel cost increases.