MALAYSIA
Infineon opens largest power chip plant in Malaysia
(08 August 2024) Infineon has begun production at its largest power chip plant in Kulim, Malaysia, which will become the world’s biggest silicon carbide (SiC) factory within five years. This plant is a significant development for Malaysia’s semiconductor industry. The facility is expected to support demand from sectors such as renewable energy, electric vehicles, and AI data centres. The Malaysian government is actively attracting chip investment, as highlighted by Prime Minister Anwar Ibrahim’s attendance at the inauguration. Infineon plans to invest an additional EUR 5 billion for a second phase of the plant, which has already secured EUR 1 billion in prepayments and EUR 5 billion in design win commitments. Infineon forecasts at least EUR 600 million in revenue from SiC-related solutions for fiscal 2024. The wide-bandgap semiconductor market, crucial for high-power applications, is projected to reach USD 13 billion by 2028, though SiC chips remain more expensive and challenging to produce than silicon-based alternatives. Malaysia’s role in the global semiconductor supply chain is expected to grow, but competition for investment remains intense.

MALAYSIA, THAILAND
Thailand and Malaysia agree to expedite construction of second Sungai Golok-Rantau Panjang bridge
(03 August 2024) Malaysia and Thailand have agreed to expedite the construction of the second Sungai Golok-Rantau Panjang bridge, highlighting their commitment to accelerating regional economic growth. Malaysian Prime Minister Datuk Seri Anwar Ibrahim stated that the bridge, which will connect Narathiwat in southern Thailand and northern Kelantan in Malaysia, is a key project aimed at enhancing economic cooperation between the two countries. Construction is set to begin in April 2024 and is expected to take two years, with hopes to complete it by late 2026, ahead of the initial 2027 timeline. Anwar emphasised the importance of initiating development projects around the bridge to boost local businesses in Kelantan. The project tender involves 10 companies from each country. Additionally, the existing bridge, operational since 1971, will be upgraded following the completion of the new bridge. Anwar praised Thai Prime Minister Srettha Thavisin for his practical approach and commitment to the project, noting that both governments will review a progress report within two weeks to ensure the project proceeds efficiently. 

CAMBODIA
Cambodia initiates construction of USD 1.7 billion 180-kilometre Funan Techo canal
(05 August 2024) Cambodia has initiated construction on the USD 1.7 billion, 180-kilometre Funan Techo canal, funded by China, to connect Phnom Penh with Kep province and provide access to the Gulf of Thailand. The canal, intended to reduce shipping costs and decrease reliance on Vietnamese ports, has raised environmental concerns, particularly regarding its impact on the Mekong River, which supports agriculture and fisheries across six countries. Despite Vietnam’s quiet concerns about the canal’s potential effects on its Mekong Delta rice production and shifting trade routes, Cambodia has dismissed these issues. The canal, expected to be controlled by Cambodian companies with a 51% share, will be constructed by the Chinese state-owned China Road and Bridge Corporation. This project underscores China’s significant influence in Cambodia, which includes numerous Chinese-funded infrastructure projects and nearly 40% of Cambodia’s foreign debt owed to China.

VIET NAM, UNITED STATES
US decides to maintain Viet Nam’s classification as non-market economy
(03 August 2024) The United States has decided to maintain Viet Nam’s classification as a non-market economy, a status it has held since 2002, despite Viet Nam’s request for removal of the designation. The US Commerce Department cited extensive government involvement in Viet Nam’s economy, which it says distorts prices and costs, making them unsuitable for calculating anti-dumping duties. The decision means that the US will continue to use market-based prices from countries with similar economic development to calculate these duties. Viet Nam’s Ministry of Industry and Trade expressed regret over the decision, noting that 72 countries, including Australia, Britain, and Japan, recognise Viet Nam as a market economy. The US remains Viet Nam’s largest export market, with a significant increase in export revenue and foreign direct investment from the US in recent years. Concerns about China potentially using Viet Nam for transshipments and pressure on the Biden administration to maintain a strong foreign policy stance were factors influencing the decision.

INDONESIA
Indonesia inaugurates USD 478 million China-built anode plant for EV batteries 
(07 August 2024) Indonesia’s President Joko Widodo inaugurated a new plant by China’s BTR New Material Group and Singapore’s Stellar Investment, which will produce anode materials for electric vehicle (EV) batteries. The plant, located in Kendal, Central Java, represents a USD 478 million investment in its first phase and will have an annual production capacity of 80,000 metric tons. BTR plans to start construction on a second phase in Q4 2024, aiming to double capacity to 160,000 tons annually with an additional USD 299 million investment. This project is part of Indonesia’s broader strategy to build a domestic EV industry by leveraging its rich nickel resources, following the 2020 ban on raw nickel exports. Once completed, the facility will position Indonesia as the second-largest global producer of anode materials, trailing only China. The development has attracted significant investments from major EV and battery manufacturers, including Hyundai Motor Group and LG Energy Solution, who have recently launched the country’s first battery cell production facility.

INDONESIA
Indonesia plans to increase palm oil-based biodiesel blending mandate from 35% to 50%
(07 August 2024) Indonesia is preparing to increase its palm oil-based biodiesel blending mandate from the current 35% to 50% under the incoming administration of President-elect Prabowo Subianto, who takes office in October 2024. The transition government has ordered tests for the B50 mandate, including static tests by the energy ministry and stakeholders, followed by vehicle road tests, which typically take a year. The increase aims to reduce oil imports but raises concerns in the palm oil industry over supply for exports. The Indonesian Biofuel Producers Association (APROBI) noted that B50 would require new processing capacity, while the Indonesian Palm Oil Producers Association (GAPKI) warned that a higher mandate could hurt exports due to stagnating production, which has grown less than 1% annually since 2019. GAPKI’s chairman, Eddy Martono, suggested maintaining the current B35 mandate, given stagnating production rates and the potential impact on domestic cooking oil prices, exports, and government revenues. The B50 mandate is expected to consume 18 million metric tons of crude palm oil annually, compared to 11 million tons under B35. 

THE PHILIPPINES
The Philippines’ GDP grows by 6.3% in Q2 2024, exceeding 6.2% forecast
(08 August 2024) The Philippines’ GDP grew by 6.3% in Q2 2024, exceeding the 6.2% forecast and improving from the 5.8% growth in Q1. Government expenditure, driven by infrastructure projects and defence upgrades, increased by 10.7% year-on-year, contributing to this growth. However, household spending, which makes up a significant portion of GDP, rose by only 4.6%, reflecting weaker consumer demand amid high inflation and interest rates. The Bangko Sentral ng Pilipinas’ key policy rate is at 6.5%, with consumer inflation at 4.4% in July 2024, above the target range. The revised GDP growth for Q1 was 5.8%, slightly up from the initial estimate of 5.7%. Despite an average GDP growth of 6.0% across the first two quarters, concerns remain about sustaining this momentum due to a decelerating quarter-on-quarter growth trend, uneven sector performance, and reliance on government spending.

RCEP Monitor

NEW ZEALAND
New Zealand experiences significant emigration of its citizens to Australia
(08 August 2024) New Zealand is experiencing a significant emigration of its citizens to Australia, driven by higher wages and lower living costs across the Tasman. In 2023, 44,534 New Zealanders, nearly 1% of the population, relocated to Australia, resulting in a net migration loss of 27,011, an 85% increase from 2022. This trend is attributed to the contrasting economic strategies of the two countries, with New Zealand’s aggressive interest rate hikes leading to a double-dip recession and rising unemployment at 4.6%, compared to Australia’s more moderate 4.1%. Average weekly earnings in Australia are 30% higher than in New Zealand, making it a more attractive destination, especially for young professionals facing job insecurity and high living costs. Meanwhile, inward migration to New Zealand, though at a record 239,000, has not offset the exodus of 25 to 44 year olds, raising concerns about the country’s long-term economic prospects.

JAPAN
Recent rate hike by Bank of Japan triggers substantial market volatility 
(07 August 2024) Japan’s financial landscape has undergone a significant shift following the Bank of Japan’s recent interest rate hike, led by Governor Kazuo Ueda, which marked a departure from its long-standing zero or negative rate policy. This move triggered a sharp appreciation of the yen, substantial market volatility, and forced investors to reassess strategies dependent on a weak yen and stable rates. The Nikkei 225 experienced its most severe decline since 1987, followed by a 10% rebound, highlighting the market’s instability. The yen’s rise also disrupted carry trades, leading to a swift closure of positions. Despite Deputy Governor Shinichi Uchida’s assurance of not raising rates in unstable markets, concerns persist about the potential negative impact on consumer confidence and investment. Analysts are divided on the BOJ’s actions, with some viewing them as necessary given Japan’s macroeconomic conditions, while others suggest political pressure may have influenced the decision, risking tension between the government and the central bank. 

SOUTH KOREA
Korean think tank recommends early interest rate cuts citing weaker economic growth
(08 August 2024) The Korea Development Institute (KDI) has recommended early interest rate cuts, citing weaker economic growth and inflation due to sluggish domestic demand. The KDI revised its 2024 growth forecast to 2.5%, slightly down from 2.6% predicted three months prior, while maintaining a 2025 growth projection of 2.1%. Inflation forecasts were also lowered to 2.4% for 2024 and 2.0% for 2025, compared to previous estimates of 2.6% and 2.1%, respectively. Despite an export-led growth, domestic demand remains weak, hindering economic recovery. KDI’s inflation outlook for the second half of 2024 aligns with the central bank’s target of 2.0%. The think tank’s recommendation for rate cuts follows South Korea’s unexpected economic contraction in Q2 2024 and the Bank of Korea’s recent indication of potential rate cuts after maintaining a 3.50% interest rate for 12 consecutive meetings.