MALAYSIA
Malaysia government introduces record MYR 421 billion budget
(22 October 2024) Malaysia’s Prime Minister Anwar Ibrahim presented a record budget of MYR 421 billion (USD 96.8 billion) for 2025, driven by a USD3.1 billion increase, primarily due to salary bonuses for civil servants and pensioners. Civil service wages and retirement payouts will rise by RM6 billion each, with a MYR 500 (USD 115) bonus for civil servants and MYR 250 (USD 57.5) for pensioners in February. The statutory minimum wage for the private sector will increase to MYR 1,700 (USD 391) from February. Despite the budget rise, development expenditure remains unchanged at MYR 86 billion (USD 19.8 billion), while operating expenditure grows to MYR 335 billion (USD 77.0 billion), including MYR 4 billion (USD 919.8 million) for debt interest. Subsidies will be cut by MYR 9 billion (USD 2.1 million), though MYR 13 billion (USD 3 billion) in cash transfers will support the poorest 60% of adults. Fuel and public service subsidies will be reduced for the wealthiest 15%, but maintained for the rest. The fiscal deficit is projected to fall to 3.8% of GDP by 2025, supported by projected growth of up to 5.5% and an expansion of sales and services tax in May 2025. A new 2% levy on dividend income exceeding MYR 100,000 (USD 22,993) will also be introduced.

MALAYSIA, THAILAND, INDONESIA, VIET NAM
Malaysia, Indonesia, Viet Nam, and Thailand join BRICS as partner countries
(24 October 2024) Malaysia, Indonesia, Viet Nam, and Thailand have joined BRICS as partner countries, aligning with other recent additions including Algeria, Belarus, Bolivia, and Turkey. BRICS, founded in 2006 and comprising Brazil, Russia, India, China, and later South Africa, now represents economies valued at over USD 28.5 trillion and holds an annual summit, currently in Kazan, Russia. Malaysia’s Foreign Affairs Minister Mohamad Hasan cited enhanced trade potential and alignment with the Global South’s agenda, particularly as Malaysia prepares for ASEAN chairmanship in 2025. Minister of Economy Rafizi Ramli aims to strengthen Malaysia’s BRICS ties and resilience amid global economic challenges. Indonesia’s Foreign Minister Sugiono will highlight peace and solidarity for developing nations, while representatives from Thailand and Viet Nam also join the discussions. Political analysts suggest the ASEAN members’ BRICS association may reflect intentions to diversify trade and balance relations, especially with China’s prominent BRICS role. Despite concerns regarding ASEAN’s unity and BRICS’ ability to manage an expanded, diverse membership, these nations are expected to use their partner status to amplify ASEAN’s voice in BRICS discussions. 

THE PHILIPPINES
Tropical Storm Trami causes severe flooding, leads to 40 deaths and displacing of thousands
(25 October 2024) Tropical Storm Trami caused severe flooding in the Philippines, leading to at least 40 deaths and displacing tens of thousands. Over two months’ worth of rainfall fell in some areas within two days, particularly impacting Batangas and the Bicol region. In Batangas, six unidentified bodies were found, and several areas remain inaccessible to rescue teams. Flash floods in Subic Ilaya killed five people. Around 193,000 people have been evacuated, with 30,000 fleeing the Bicol region due to unexpectedly high flooding. Rescuers are struggling to reach people stranded on rooftops due to a shortage of rubber boats. A hospital in Lemery was forced to close due to flooding. Storm surge warnings along the west coast of Luzon remain in effect. Despite the storm moving out to sea, search efforts for a missing fisherman were suspended due to strong currents.

THE PHILIPPINES
The Philippines builds up its capital market to support growth and clean energy projects
(25 October 2024) The Philippines is reintroducing interest rate swaps (IRS) and enhancing the bond repurchase (repo) market to create alternative benchmarks for loan pricing, driven by an anticipated USD 20 billion annual capital requirement through 2050 to support growth and clean energy projects. The Peso IRS overnight reference rate, aligned with Bangko Sentral ng Pilipinas’ daily reverse repurchase rate, will be introduced as a floating benchmark for IRS transactions. Bloomberg LP is expected to provide the trading platform, with 15 banks, including BDO, Metrobank, and Citi, serving as market makers to quote one-, three-, and six-month swaps. Five additional banks will participate regularly. To boost repo market activity, fund managers and trust entities are seeking exemption from the documentary stamp tax (DST), which currently applies to non-bank repo participants. The Bankers Association of the Philippines (BAP) awaits the International Swaps and Derivatives Association’s recognition of the Peso IRS reference rate, which, alongside the proposed DST exemption, could enhance market depth and create a yield curve for pricing debt instruments of varying terms.

THAILAND
Thailand plans to introduce THB 300 travel tax for foreign visitors
(24 October 2024) Thailand plans to introduce a THB 300 (approximately MYR 39) travel tax for foreign visitors, initially targeting air passengers in mid-2025. Tourism and Sports Minister Sarawong Thienthong stated that the proposal will go to Cabinet for approval in January, with a phased implementation over six months. The first phase focuses on air travellers, who make up 70% of foreign arrivals, with a second phase planned for overland visitors. The tax will include a capped insurance premium of THB 60 per person and will use a system similar to South Korea’s Electronic Travel Authorisation, requiring online registration and payment before arrival. Frequent border crossers for trade purposes will be exempt via a border pass. The ministry aims to standardise the THB 300 levy across all entry points to ensure uniformity.

THAILAND
Thailand’s car production in September falls by 25.48% year-on-year
(24 October 2024) Thailand’s car production in September fell by 25.48% year-on-year, following a 20.56% decline in August, according to the Federation of Thai Industries. Domestic car sales also dropped significantly by 37.11% to 117,000 units, as reported by the spokesperson for the federation’s automotive division. Export figures declined by 10.83% from the previous year, attributed to economic challenges faced by trading partners and the ongoing conflict in the Middle East. Thailand remains a key production hub in Southeast Asia for major carmakers, including Toyota and Honda.  

VIET NAM
IMF projects Viet Nam’s economy to grow by 6.1% in 2025
(24 October 2024) The International Monetary Fund (IMF) projects Viet Nam’s economy to grow by 6.1% in 2025, consistent with its 2024 forecast, according to the World Economic Outlook 2025. Vietnam’s consumer price index is expected to increase by 3.5%, down by 0.6% from the previous year. In contrast, Viet Nam’s Ministry of Planning and Investment forecasts a more robust growth range of 6.5% to 7.5% for 2025. Prime Minister Pham Minh Chinh expressed the government’s ambition to target a higher growth rate between 7% and 7.5% in 2025, as stated in his recent address to the National Assembly.

RCEP Monitor

CHINA
China Iron & Steel Association urges steel mills to limit production after price rally
(25 October 2024) The China Iron & Steel Association (CISA) urged steel mills to limit production despite a recent rebound in steel prices triggered by government stimulus measures. CISA emphasised that the price increase does not reflect a long-term improvement in the industry, which continues to face oversupply and weak demand, particularly from the property sector. Steel production has exceeded 1 billion tonnes annually over the past four years, but output has recently declined, and the association aims to maintain this trend to balance supply and demand. CISA forecasts annual steel output to decrease to 800 million tons by 2035. Iron ore prices, a key steelmaking input, rose 1.9% to USD 101.15 per tonne in Singapore, while steel rebar and hot-rolled coil contracts increased by 1.3% and 1.5%, respectively, in Shanghai.

AUSTRALIA
Australian economy on track for soft landing, with inflation cooling
(25 October 2024) Australia’s economy is on track for a soft landing, with inflation cooling without major impacts on domestic growth, according to Treasurer Jim Chalmers at the IMF and World Bank meetings. While inflation is moderating, the IMF has advised reducing fiscal spending if disinflation slows further. The Reserve Bank of Australia (RBA) has maintained its key interest rate at 4.35%, despite slow economic growth, low unemployment, and rising house prices. The RBA has extended its core inflation target timeframe beyond 2026, noting robust hiring trends. Amid ongoing inflation concerns, the Labor government has reported consecutive budget surpluses to showcase fiscal prudence ahead of the upcoming election. In foreign policy, Australia has stabilised relations with China, its top trade partner, leading to lifted trade curbs on key exports like lobsters, wine, and coal, although broader tensions remain, especially with tightened security ties to the US. Third-quarter inflation data is due on 29 October.

NEW ZEALAND
Annual trade deficit narrows to NZD 9.1 billion in 12 months through September
(22 October 2024) New Zealand’s annual trade deficit narrowed to NZD 9.1 billion in the 12 months through September, the smallest shortfall since March 2022 and down from a peak of NZD 17.1 billion in May 2022, according to Statistics New Zealand. The contraction is driven by weak economic conditions that reduced import demand, with imports decreasing 8.4% year-on-year to NZD 78.5 billion, including an 11% fall in plant and machinery imports and a 23% drop in passenger vehicle imports. The Reserve Bank of New Zealand began easing monetary policy in August after sustained high interest rates curbed economic growth and business investment. Exports also declined 1.2% to NZD 69.4 billion, contributing to a narrower current account deficit, which reached NZD 27.6 billion or 6.7% of GDP for the year through June, down from a record 9.4% at the end of 2022.

ASEAN
Southeast Asian interest rates diverging after US Federal Reserve slashes rates
(16 October 2024) Interest rate paths in Southeast Asia are diverging after the U.S. Federal Reserve cut rates last month, with export-driven economies like Thailand and Malaysia expected to hold off on easing until 2025, while domestic demand-driven economies like Indonesia and the Philippines are moving towards further cuts. Indonesia, with a 5% GDP growth rate but weakening household consumption, has already cut its rate to 6% and may lower it again this year. Inflation has slowed to 1.84%, suggesting economic lethargy. Analysts predict the Philippines will also cut its key policy rate to 6% in response to easing inflation. Meanwhile, Malaysia and Thailand, both with current account surpluses and appreciating currencies, are under less pressure to reduce rates soon. Thailand’s central bank, focused on managing household debt, is resisting calls for a rate cut despite public pressure. The Malaysian central bank has held its rate at 3% and is expected to do so through 2025.

SINGAPORE
Singapore’s economy grew 4.1% year-on-year in Q3 2024, fastest pace in two years
(14  OCtober 2024) Singapore’s economy grew 4.1% year-on-year in Q3 2024, the fastest pace in two years, following 2.9% growth in the previous quarter. The manufacturing sector expanded by 7.5%, driven by growth across most clusters except for biomedical manufacturing, while the services and construction sectors grew by 3.3% and 3.1%, respectively. On a quarterly basis, seasonally adjusted GDP rose 2.1%, compared to 0.4% in the prior quarter. Non-oil domestic exports increased 15.7% in July and 10.7% in August. The Monetary Authority of Singapore (MAS) maintained its monetary policy stance, expecting GDP growth to reach the upper end of the 2% to 3% forecast range for 2024. Core inflation rose to 2.7% in August, though MAS expects inflation momentum to remain contained, forecasting core inflation to average between 2.5% and 3% for the year, down from a prior range of 2.5% to 3.5%.

INDONESIA
Sri Mulyani Indrawati asked by president-elect Prabowo to continue as finance minister
(15 October 2024) Sri Mulyani Indrawati has been asked by president-elect Prabowo Subianto to continue as Indonesia’s finance minister following a meeting on Monday night, potentially easing concerns about fiscal discipline under the new government. Indrawati, a respected technocrat, has not confirmed whether she will accept the role. Her previously expected departure had raised investor concerns over Prabowo’s ambitious spending plans, including a free meal program costing IDR 71 trillion in 2025. Following the news, the Jakarta Composite Index rose by 0.5% on Monday and another 0.25% on Tuesday morning. Prabowo, set to announce his cabinet on Sunday after his inauguration, plans to appoint 44 to 46 ministers, significantly more than the outgoing president’s 34. Indrawati confirmed that the Finance Ministry will remain a single entity, despite earlier plans in Prabowo’s manifesto to create an independent State Revenue Agency by combining the Directorate-General of Taxation and the Directorate-General of Customs and Excise. Other key figures likely to join the cabinet include Energy Minister Bahlil Lahadalia, Trade Minister Zulkifli Hasan, and State Enterprise Minister Erick Thohir.

MALAYSIA
Bursa Malaysia’s benchmark index rises by 17% over past year
(15 October 2024) Malaysia’s stock market has seen a steady revival, with the Bursa Malaysia’s benchmark index rising by up to 17% over the past year, driven by strong post-pandemic economic growth and significant foreign investments, particularly from US tech giants such as Nvidia, Google, and Microsoft. Investors opened 289,000 new trading accounts in the first seven months of 2024, nearly double the number in 2023. The country recorded MYR 83.7 billion (USD 19.3 billion) in approved investments in the first quarter, over half from foreign sources, and second-quarter GDP growth reached 5.9%. Malaysia’s stock exchange registered 34 initial public offerings in the first nine months of 2024, including 99 Speed Mart’s listing, which raised MYR 2.36 billion. Foreign investors bought a net total of MYR 1.50 billion in Malaysian stocks in the week ending 30 August. Malaysia’s IPO market led Southeast Asia during the first half of 2024, raising around USD 450 million. The Bursa’s market capitalisation hit MYR 2 trillion (USD 460 million) in May. Analysts see further potential for growth due to continued FDI momentum, Fed rate cuts, and infrastructure projects, though some caution is advised regarding foreign investor activity.

THE PHILIPPINES
Rice production falls 11.9% in third quarter of 2024, with output at 3.35 million metric tons
(17 October 2024) The Philippine Statistics Authority (PSA) reported an 11.9% drop in palay (unhusked rice) production for the third quarter of 2024, with output at 3.35 million metric tons (MT), down from 3.8 million MT in the same period last year. This figure also fell 1.2% below the PSA’s July forecast of 3.39 million MT. The total harvest area for palay decreased by 14.1% to 796,277 hectares, although yield per hectare increased by 2.4% to 4.20 MT. Meanwhile, corn production increased by 2.4% to 2.526 million MT, despite a 2% reduction in harvest area to 806,362 hectares. Challenges in the agricultural sector were exacerbated by the El Niño phenomenon, resulting in reduced rainfall and typhoons. The Department of Agriculture (DA) highlighted 2024 as a “litmus test” for the sector, facing high fuel costs, droughts, and floods. Supertyphoon Julian alone caused PHP 607.38 million in losses to the farm sector. The DA estimates annual palay losses of 500,000 to 600,000 MT due to natural calamities.

HONG KONG, CAMBODIA, LAO PDR, MYANMAR
Hong Kong relaxes visa criteria for Cambodian, Laotian, and Myanmar nationals
(17 October 2024) The Chief Executive of the Hong Kong Special Administrative Region (HKSAR) announced on 16 October that the HKSAR government has relaxed visa criteria for nationals of Cambodia, Lao PDR, and Myanmar, extending the validity of multiple-entry visas from two to three years. This policy has already applied to Vietnamese nationals since last year. The measures aim to strengthen ties with ASEAN countries. Additionally, the government will fast-track visa processing for group visitors from ASEAN countries via local travel agents and provide self-service immigration clearance for business and development participants from ASEAN. Effective immediately, the requirement for arrival or departure cards is canceled to streamline immigration. The government also plans to promote tourism from ASEAN and the Middle East, with initiatives including Arabic information at the airport and a list of halal restaurants.

VIET NAM
Viet Nam estimates cost of new railway to China at USD 7.2 billion
(17 October 2024) Viet Nam has estimated the cost of constructing a 427-kilometre railway connecting it with China’s Yunnan province at VND 179 trillion (USD 7.2 billion). The railway will run from Lao Cai province through Hanoi and Haiphong to Ha Long City. The plan, submitted by the Vietnam Railway Authority to the Transport Ministry, is expected to be reviewed and approved, with construction slated to begin in 2030. The railway is projected to handle 8.3 million passengers and 17.5 million tonnes of cargo annually by 2050. Vietnam is seeking Chinese technology and funding for this project, as part of its broader efforts to upgrade its aging railway infrastructure. Additionally, the National Assembly is expected to approve a USD 67 billion plan for a 1,541-km high-speed railway from Hanoi to Ho Chi Minh City, Vietnam’s largest infrastructure project to date. 

RCEP Monitor

JAPAN
Exports decline by 1.7% year-on-year in September 2024
(17 October 2024) Japan’s exports declined by 1.7% year-on-year in September 2024, marking the first drop in 10 months, according to Ministry of Finance data. This decline was worse than the forecasted 0.5% increase and followed a 5.5% rise in August. Exports to China, Japan’s largest trading partner, fell by 7.3%, while those to the U.S. decreased by 2.4%. Imports grew by 2.1%, below the expected 3.2% increase. As a result, Japan recorded a trade deficit of JPY 294.3 billion (USD 1.97 billion), larger than the forecasted JPY 237.6 billion deficit. The Bank of Japan (BOJ) Governor has pointed to external risks, such as U.S. economic uncertainties, in his cautious stance on timing the next interest rate hike. While the BOJ is expected to hold rates steady at its upcoming meeting, its forecast projects inflation to remain around the 2% target through March 2027. Despite these challenges, a central bank survey indicated that Japan’s business sentiment remains stable, though global economic uncertainties and geopolitical tensions may affect future performance.

AUSTRALIA, CHINA
Australia maintains open trade with China in electric vehicles and renewable energy products
(17 October 20240 Australia has maintained open trade with China, particularly in electric vehicles (EVs) and renewable energy products, despite tariffs imposed by the U.S., Canada, and the EU. Australian Prime Minister Anthony Albanese and Chinese Premier Li Qiang have emphasised the importance of institutional dialogue, including cooperation on climate change and renewable energy. In 2023, Chinese direct investment in Australia fell to USD 613 million, but bilateral ties have since improved, with a notable increase in Chinese investments in Australian renewable energy projects, such as the development of a 500MW solar farm in Queensland. Challenges remain, including lengthy foreign investment review processes and underdeveloped Australian energy infrastructure. Nonetheless, collaboration efforts, including the upcoming Smart Energy Conference and Exhibition starting in 2025, are expected to strengthen ties. Analysts suggest that balancing climate goals with geopolitical concerns will require a mature, independent Australian approach, leveraging China’s dominance in clean technology and Australia’s critical raw materials.

AUSTRALIA
Labour market adds 64,100 jobs in September, exceeding economists’ expectations
(17 October 2024) Australia’s labour market added 64,100 jobs in September 2024, significantly exceeding economists’ expectations of 25,000 jobs. Of these, 51,600 were full-time roles, bringing the total number of jobs created since the Albanese government took office to over 1 million. The unemployment rate was 4.1%, slightly lower than the initial 4.2% reported for August (the ABS has now revised August’s rate down to 4.1%). The labour force participation rate reached a record 67.2%, while hours worked rose to 1.97 billion. Although job ads and vacancies are shrinking, signalling potential employment challenges, the Reserve Bank of Australia (RBA) is expected to maintain its interest rate stance, with rate cuts unlikely until later in 2025. The Australian dollar rose to 67 US cents following the jobs data release, reflecting reduced investor expectations for early rate cuts.

VIET NAM
Viet Nam’s economy grew by 7.4% year-on-year in Q3 2024
(06 October 2024) Vietnam’s economy grew by 7.4% in Q3 2024 compared to the same period last year, surpassing the previous quarter’s 6.93%. The General Statistics Office attributed the growth to a 15.8% rise in exports, despite Typhoon Yagi’s impact, which caused factory activity to contract in September and hit agriculture, which grew by 2.58% versus 3.34% in Q2. The typhoon, which struck on 7 September, caused USD 3 billion in damages. Despite these disruptions, Vietnam’s GDP grew 6.82% in the first nine months of 2024, close to its pre-COVID-19 growth of 7.3%. However, VinaCapital warned that slowing U.S. demand, driven by the Federal Reserve’s recent rate cut, may reduce exports of goods like laptops and mobile phones. Electronics exports, which rose 20.6% in Q3, continue to play a crucial role in the country’s growth. The government is prioritising collaboration with global semiconductor and AI partners to strengthen its high-tech sector.

MALAYSIA
Stronger ringgit and softer oil prices present opportunity for government to remove petrol subsidies
(08 October 2024) Malaysia’s stronger ringgit, which appreciated over 14% against the US dollar in Q3 2024 and 8% year-to-date, along with softer oil prices, presents an opportunity for the government to remove petrol subsidies, particularly for RON95. Analysts suggest that subsidy rationalisation could reduce the government’s annual fuel subsidy burden of MYR 15-20 billion. Socio-Economic Research Centre’s Lee Heng Guie and Sunway University’s Yeah Kim Leng highlight that the current environment would result in a manageable 24% rise in RON95 prices to RM2.55 per litre, or lower if the ringgit strengthens further. Despite public dissatisfaction following targeted diesel subsidy cuts in June, inflationary pressures have remained subdued, and UOB maintains a 2024 inflation forecast of 2%. With Prime Minister Anwar Ibrahim’s upcoming 2025 budget announcement, analysts see this as a politically viable time to implement these reforms.

MALAYSIA
Malaysia and UAE finalize Comprehensive Economic Partnership Agreement
(10 October 2024) Malaysia and the United Arab Emirates (UAE) have finalised a Comprehensive Economic Partnership Agreement (CEPA), aimed at reducing tariffs, removing trade barriers, and fostering private-sector collaboration to boost investments. This marks Malaysia’s first free trade agreement with a Gulf Cooperation Council (GCC) nation. Key benefits include zero import duties for Malaysian exports such as electronics, machinery, jewellery, and palm oil. The agreement positions Malaysia as a gateway for UAE companies to access ASEAN markets, particularly benefiting small and medium enterprises (SMEs) through regional integration. Bilateral non-oil trade between the two nations reached USD 4.9 billion in 2023, and USD 2.5 billion in the first half of 2024, a 7% increase from the previous year. The UAE, Malaysia’s second-largest Arab trade partner, aims to elevate its non-oil foreign trade to USD 1 trillion, with the CEPA playing a key role in strengthening ties with Southeast Asia.

INDONESIA
Bank Indonesia intervenes to support rupiah following slump 
(07 October 2024) Indonesia’s central bank, Bank Indonesia (BI), is intervening in the spot, domestic non-deliverable forwards, and bond markets to support the rupiah, which is on its longest losing streak since 2023. Edi Susianto, executive director for monetary management, attributed the rupiah’s 1.3% decline to external factors, including global market developments, escalating tensions in the Middle East, and stronger-than-expected U.S. economic data. The rupiah reached 15,693 per dollar, following an 8% rally in Q3 based on expectations of further U.S. Federal Reserve rate cuts. BI’s foreign-exchange reserves, which stood at USD 149.9 billion in September, are sufficient to cover 6.4 months of imports and external debt obligations, providing the bank with resources to stabilise the currency. Market expectations now suggest BI may hold its policy rate in its upcoming meeting on 16 October, following a surprise rate cut in September.

INDONESIA, SINGAPORE
Indonesia introduces visa-free entry for Singapore permanent residents
(08 October 2024) Indonesia has introduced visa-free entry for Singapore permanent residents to visit Batam, Bintan, and the Karimun Islands, with the aim of boosting tourism and investment in these regional economic zones. The new policy, announced by Indonesia’s Director General of Immigration, allows visitors to stay up to four days and applies to several ports in the Riau region. This visa-free option is distinct from the broader ASEAN visa-free policy and targets Singapore’s 545,000 permanent residents. The initiative is part of Indonesia’s broader efforts, which include “second home” and golden visas, to attract leisure and business travellers, particularly to key areas like Nongsa Digital Park and Bintan Resort, which are important hubs for tourism and the digital economy.

THAILAND
Finance Ministry presses Bank of Thailand to lower rates to weaken baht
(09 October 2024) Thailand’s finance ministry is pressing the Bank of Thailand (BOT) to lower interest rates to support economic growth and weaken the baht, currently at 33.39 per US dollar. Thailand’s Deputy Finance Minister indicated a possible rate cut of 25 basis points, potentially this or the next meeting, to bring the baht closer to 34.5 per US dollar. Prime Minister Paetongtarn Shinawatra’s administration is prioritising economic growth, targeting a rate cut to address low inflation and weak GDP growth, which has averaged less than 2% annually. High household debt, however, is a factor in BOT’s reluctance to reduce rates, with the bank considering the current 2.5% rate “neutral”. The government is also weighing measures to support economic growth, such as tax incentives and soft loans for households, and adjusting the 2025 inflation target to 1.5%-3.5%. Efforts to influence BOT policy include potentially appointing Kittiratt Na-Ranong as BOT chairman, despite warnings from former BOT Governor Tarisa Watanagase about risks to the economy.

THE PHILIPPINES
Philippines’ sovereign bonds expected to continue gaining from falling rice prices
(10 October 2024) Philippine sovereign bonds are expected to continue gaining as falling rice prices reduce inflation, bolstering the case for more interest rate cuts by Bangko Sentral ng Pilipinas (BSP). Inflation in September reached a four-year low, aided by India’s easing of rice export restrictions, with HSBC identifying the Philippines as the primary beneficiary due to rice comprising 9% of its inflation basket. BSP began its easing cycle in August with a 25-basis-point rate cut, followed by a 250-basis-point reduction in banks’ reserve requirements, effective from 25 October. Further rate cuts are anticipated, with BSP Governor Eli Remolona signalling a 25-basis-point cut at the 16 October meeting, potentially followed by another in December. However, a larger reduction could occur after Finance Secretary Ralph Recto supported a half-point cut. Analysts expect 10-year bond yields to decline to 5.5% within six months, down from the current 5.74%. 

RCEP Monitor

CHINA, AUSTRALIA
Australia to resume rock lobster exports to China by end-2024
(10 October 2024) Australia will resume rock lobster exports to China by the end of 2024, marking the end of a nearly four-year ban that halted a AUD 700 million trade. Australian Prime Minister Anthony Albanese announced the agreement after a meeting with Chinese Premier Li Qiang at the ASEAN summit. Before the 2020 ban, over 90% of Australia’s rock lobsters were exported to China, but trade plummeted following sanctions linked to political tensions. The lifting of the ban is part of broader efforts to stabilise Australia-China relations, which have seen the removal of other trade barriers on products like wine and beef. Andrew Ferguson, managing director of a South Australian seafood company that relied on China for 98% of its lobster exports, expressed relief, noting the severe impact of the ban on his business. He emphasised the need to diversify markets moving forward, as the ban had forced many producers to exit the industry. The reopening of the Chinese market is expected to significantly benefit Australian exporters during the upcoming Lunar New Year season.

CHINA
China’s stock market rally slows after officials hold off on further stimulus measures
(09 October 2024) China’s stock market rally slowed after the National Development and Reform Commission (NDRC) refrained from announcing additional stimulus measures. The CSI 300 index rose 10.8% but closed 5.9% higher. Hong Kong’s Hang Seng index dropped 9.4%, and the Hang Seng Tech index fell 12.8%, as investors shifted funds to mainland markets. Analysts had anticipated more fiscal spending alongside existing monetary stimulus, which had contributed to a 33% rise in the CSI 300 over the past month. The NDRC Chair reaffirmed confidence in China achieving its 5% GDP growth target and noted plans to issue ultra-long-dated sovereign bonds in 2025. Industrial commodities also saw declines, with Brent crude falling 5.4% and copper dropping 1.7%. China recorded 765 million domestic trips during its Golden Week holiday, contributing RMB 700.8 billion in travel spending.

NEW ZEALAND
Reserve Bank of New Zealand cuts official cash rate by 50 basis points
(09 October 2024) The Reserve Bank of New Zealand (RBNZ) cut its official cash rate (OCR) by 50 basis points to 4.75%, marking the second consecutive reduction in its easing cycle. Despite inflation returning to the target range of 1%-3%, the central bank maintained that the current policy stance remains restrictive. The kiwi dollar dropped 0.9% to USD 0.6084 following the decision, while swap rates indicated further expected rate cuts. The RBNZ minutes indicated inflation is converging towards the 2% midpoint, and the economy is experiencing excess capacity, prompting the adjustment in policy. Economists anticipate further easing, with Citi projecting a 75 basis points cut at the November meeting. The central bank also warned of potential risks from the ongoing Middle East conflict and slowing growth in the US and China. ANZ and ASB economists highlighted the continued restrictive stance, despite the recent cuts.

ASEAN
US imposes preliminary duties on solar panels from Southeast Asia
(02 October 2024) The US Commerce Department has imposed preliminary countervailing duties on solar imports from Southeast Asia, citing illegal government subsidies benefiting foreign manufacturers. Rates include 8.25% for Cambodia, 9.13% for Malaysia, 23.06% for Thailand, and 2.85% for Viet Nam, with specific company rates such as 14.72% for Hanwha Q Cells Malaysia and 0.14% for Trina Solar Thailand. These duties, which apply retroactively to imports from Thailand and Viet Nam dating back to early July, are in response to claims from US solar manufacturers, including First Solar and Hanwha Qcells, that cheap imports harm domestic production. Chinese officials and some renewable developers oppose the tariffs, warning they could slow the US clean energy transition. A final determination, which may adjust these rates, is expected in spring 2024.

MALAYSIA
Ringgit appreciates 14.35% against US dollar over last three months
(01 October 2024) The Malaysian ringgit has appreciated 14.35% against the US dollar over the last three months, becoming the world’s best-performing currency, according to MUFG Bank. This surpasses gold, which rose 14.2% in the same period. The ringgit’s recovery is attributed to Malaysia’s economic growth and expectations of US Federal Reserve rate cuts, which have driven its sharp rally. The Thai baht followed closely with a 13.79% rise, and the Japanese yen gained 13.04%. MUFG Bank projects that the ringgit could strengthen to MYR 4 per US dollar by year-end, contingent on positive market sentiment and a potential 50 basis point interest rate cut by the US Federal Reserve. BMI revised its end-2024 forecast for the ringgit to MYR 4, from MYR 4.55, and predicted a 9% rise in 2025. On 27 September, the ringgit closed at MYR 4.12, recovering from MYR 4.81 in February. Analysts believe the ringgit could extend its rally, supported by narrowing interest rate differentials and improved trade performance.

MALAYSIA
Google commences construction of USD 2 billion data center in Malaysia
(02 October 2024) Google has commenced construction on its first data center in Malaysia with a groundbreaking ceremony attended by Prime Minister Anwar Ibrahim and Alphabet’s President and Chief Investment Officer, Ruth Porat. Located at Elmina Business Park, Sungai Buloh, the USD 2 billion (MYR 8.31 billion) investment is expected to contribute USD 3.2 billion (MYR 13.34 billion) to Malaysia’s GDP and create 26,500 jobs by 2030. Specific details on the data center’s capacity remain undisclosed, but it will support Google services such as Search, Maps, Workspace, and AI, while establishing Malaysia as a Google Cloud region. Additionally, Google announced initiatives including the restoration of Taman Aman Lake in Petaling Jaya to enhance water quality and biodiversity, and a partnership with the Future Skills For All programme to train 260 teachers in digital skills, reaching up to 61,000 students. Google also launched its Solar API in Malaysia, adopted by the Malaysian Green Technology and Climate Change Corporation to streamline solar energy system design.

THAILAND
Google announces USD 1 billion investment in digital infrastructure in Thailand 
(01 October 2024) Google has announced a USD 1 billion investment to develop digital infrastructure in Thailand, including a new data centre in Chonburi and cloud facilities in Bangkok, aimed at supporting the region’s growing demand for cloud computing. The project is expected to create 14,000 jobs between 2025 and 2029 and contribute USD 4 billion to Thailand’s GDP by 2029, according to a report from Deloitte. The announcement followed a meeting between Google President Ruth Porat and Thai Prime Minister Paetongtarn Shinawatra, who highlighted the move as a significant step towards establishing Thailand as a digital hub in Southeast Asia. The investment follows similar initiatives from Microsoft, which announced plans in May to build Thailand’s first data centre region. This investment is part of Thailand’s broader strategy to modernise its economy and strengthen its digital sector, with the goal of the digital economy contributing 30% to GDP by 2027.

VIET NAM
Vietnamese government aiming for 6.8% to 7% growth in 2024  
(03 October 2024) The Vietnamese government is aiming for an economic growth rate of 6.8% to 7% in 2024, exceeding the National Assembly’s target of 6% to 6.5%, according to the Ministry of Planning and Investment. The ministry reported that several economic indicators have already outperformed the National Assembly’s goals, despite challenging domestic and global conditions. The country’s GDP growth projections from international organizations remain lower, with the Asian Development Bank forecasting 6% and the International Monetary Fund predicting 6.1% for 2024.

THE PHILIPPINES
The Philippines to implement 12% VAT on foreign digital service providers
(03 October 2024) The Philippines will implement a 12% value-added tax (VAT) on digital services provided by foreign tech companies like Amazon, Netflix, Disney, and Alphabet, following a law signed by President Ferdinand Marcos Jr. This move aims to create fair competition between foreign digital service providers and domestic businesses, which already pay VAT. The Bureau of Internal Revenue expects to collect PHP 105 billion (MYR 8 billion) from this tax between 2025 and 2029, with 5% of the revenue allocated to projects supporting the Philippine creative industries. Educational and public interest services will be exempt from the VAT. The tax applies to digital services consumed within the Philippines.

THE PHILIPPINES
Inflation likely decreased between 2% and 2.8% in September 2024
(03 October 2024) Inflation in the Philippines likely decreased to between 2% and 2.8% in September, driven by lower food and oil prices, and high-base effects from the previous year, according to the Philippines’ central bank the Bangko Sentral ng Pilipinas (BSP). This would represent a significant drop from the 3.3% inflation rate recorded in August, placing inflation within the central bank’s target range of 2% to 4%. The BSP attributed the decline to cheaper food items, such as meat, vegetables, and rice, as well as lower oil prices and a stronger peso, which reduced import costs. The central bank indicated that this lower inflation may provide room to reduce borrowing costs.

RCEP Monitor

CHINA
China may issue up to RMB 10 trillion in special debt to support economy
(03 October 2024) China could issue up to RMB 10 trillion (USD 1.4 trillion) in special debt to support its economy, according to Jia Kang, former head of a Ministry of Finance-affiliated research institute. He suggested that increased government investment in public projects could stimulate jobs, income, and consumption. This proposed debt issuance would exceed the government’s planned RMB 1 trillion in ultra-long sovereign bonds for 2023. Jia emphasised that long-term bonds with 30-50 year maturities would not overburden the government. Current fiscal measures have boosted market optimism, leading to stock market gains, though some economists, such as those from Nomura and Morgan Stanley, have cautioned about risks related to China’s high debt-to-GDP ratio, which reached 286% earlier this year. The Ministry of Finance is expected to issue more details on fiscal stimulus, with economists projecting spending to focus on consumption, infrastructure, and supporting local governments.

SOUTH KOREA
South Korean President to visit the Philippines, Singapore, and Lao PDR
(03 October 2024) President Yoon Suk-yeol will visit the Philippines, Singapore, and Lao PDR for six days starting Sunday, attending the Association of Southeast Asian Nations (ASEAN) summit and holding multiple bilateral talks. In the Philippines, he will meet President Ferdinand Marcos Jr to explore strengthening bilateral relations. Yoon will then hold talks with Singapore’s Prime Minister Lawrence Wong and deliver a speech on Korea’s unification vision. In Lao PDR, he will attend ASEAN-related meetings, including the ASEAN plus three summit with South Korea, China, and Japan, and hold eight bilateral summits with countries such as Lao PDR, Viet Nam, and Thailand. South Korea plans to establish a comprehensive strategic partnership with ASEAN during the summit. Discussions are ongoing to arrange Yoon’s first summit with Japan’s new Prime Minister Shigeru Ishiba.

JAPAN
Market analysts maintain expectations for BOJ to hike rates despite PM’s dovish stance
(02 October 2024) Japanese Prime Minister Shigeru Ishiba’s recent dovish comments on not requiring further rate increases led to a significant depreciation of the yen, which fell to 147.15 against the U.S. dollar, marking its largest decline since June 2022. Despite this, market analysts maintain expectations for the Bank of Japan (BOJ) to hike rates, with some forecasting an increase in 2024 or early 2025. BOJ board member Asahi Noguchi supports maintaining accommodative monetary policy for now, while upcoming rate reviews are scheduled for 30-31 October and December. Analysts suggest potential rate hikes may be postponed due to Ishiba’s announcement of a general election on 27 October. Economic indicators and inflation remain key factors in determining the timing of any future rate adjustments, with some expecting further yen weakness to be limited. The BOJ’s coordination with the government aims to stabilise the currency following previous market disruptions triggered by rate increases.

ASEAN
Major e-commerce platforms raise merchant commission fees to improve profitability
(26 September 2024) Southeast Asia’s major online shopping platforms, including Shopee, Tokopedia, and Lazada, are raising merchant commission fees to improve profitability amid a challenging post-pandemic market. Tokopedia increased fees on 16 September, with commissions now reaching up to 10%, compared to the previous maximum of 6.5%. Shopee has also raised its commission fees in Indonesia, now ranging from 4.25% to 8%, up from 3.5% to 6.5%. These changes follow similar fee hikes in Malaysia by Shopee, Lazada, and TikTok Shop earlier this year. Some merchants have responded by closing their online stores, citing reduced margins and rising costs, while others remain due to the difficulty of establishing independent operations. Despite some dissatisfaction, analysts do not foresee significant impacts on transaction volumes or merchant availability in the short term. Shopee maintains its market lead with 48% market share in the region, followed by Lazada with 16.4%, and both Tokopedia and TikTok at 14.2%.

ASEAN
QR code payments usage expands rapidly across Southeast Asia
(18 September 2024) QR code payments are expanding rapidly across Southeast Asia, driven by low bank account ownership, limited ATM networks, and increased smartphone usage. Cambodia saw a 29% increase in QR transactions in 2023, totalling 601 million. The National Bank of Cambodia launched the Bakong Tourists mobile payment system, built on the 2020 Bakong digital payment infrastructure, which utilises the KHQR code and has 3.3 million payment locations nationwide. In Malaysia, DuitNow QR, launched in 2019, recorded 1.5 billion transactions worth MYR 1.37 billion in the first half of 2023, up 64% and 37% year-on-year. Cross-border interoperability allows Malaysian users to make payments in other ASEAN countries. Singapore’s PayNow system processed 437 million transactions worth SGD 157 billion in 2023, with increasing cross-border linkages. Thailand’s PromptPay recorded 5.7 billion transactions in 2023, nearly doubling from the previous year. Indonesia, Vietnam, and the Philippines also reported significant increases in QR transactions, reflecting growing regional adoption.

MALAYSIA
Malaysia generating enough energy surplus to support major development projects
(26 September 2024) Malaysia is generating an energy surplus sufficient to support major development projects and expand its energy exports, according to Prime Minister Anwar Ibrahim on 26 September. The surplus will support the upcoming Johor-Singapore Special Economic Zone (SEZ), which Malaysia and Singapore aim to finalise by year-end. The SEZ, located in Johor, is intended to attract investment and facilitate the movement of goods and people. Anwar confirmed that the government will continue its renewable energy and transition initiatives, aiming for net-zero emissions by 2050. Johor’s energy demand is expected to increase, driven by investments from companies like Nvidia and ByteDance in data centre facilities. These investments have contributed to stronger-than-expected economic growth in Malaysia over the past two quarters, with the local stock market outperforming others in the region. Anwar indicated that third-quarter economic performance also appears promising

CAMBODIA
Cambodia announces withdrawal from Cambodia-Laos-Vietnam Development Triangle Area
(25 September 2024) Cambodian Prime Minister Hun Manet announced Cambodia’s withdrawal from the Cambodia-Laos-Vietnam Development Triangle Area (CLV-DTA) agreement following protests claiming the deal primarily benefited foreign interests. The agreement, established in 2004, aimed at promoting cooperation on trade and migration in Cambodia’s northeastern provinces and border areas with Viet Nam and Lao PDR. Social media critics focused on land concessions, particularly with Viet Nam, a historically sensitive issue. In response to planned protests, authorities arrested at least 66 individuals, most of whom were released, though protest leaders face charges. Hun Manet labelled the opposition as extremists and dismissed allegations that Cambodia ceded territory to foreign countries. He stated that the decision to exit the agreement was made to address public concerns over territorial issues and prevent the exploitation of the CLV-DTA by opposition groups.

MALAYSIA, LAO PDR
Malaysia emphasizes significant potential of Malaysian investments for Lao PDR
(26 September 2024) Malaysian Ambassador to Lao PDR, Edi Irwan Mahmud, emphasised the significant potential for Malaysia to increase investments in Lao PDR, particularly in renewable energy, agriculture, tourism, and infrastructure. Malaysia is the fourth-largest investor in Lao PDR, following China, Thailand, and Viet Nam, with trade volume reaching MYR 48.3 million in the first half of this year. The largest Malaysian investment is the USD 430.32 million Don Sahong Hydropower Project, with a capacity of 260 megawatts, operated by Mega First Corp Bhd and supplying power to Cambodia through Lao PDR’s state-owned Electricité du Laos. Additional investment includes a 40-hectare Agro Vege Farm project in Champasak by Agrotech Pro Ltd. Tourism is also growing, with 7,059 visitors from Lao PDR to Malaysia in the first half of 2023, supported by direct AirAsia flights between Kuala Lumpur and Vientiane. Edi Irwan highlighted opportunities for Malaysia to contribute to Laos’ infrastructure development through investment and technology transfer.

INDONESIA
Indonesia submits request to join CPTPP mega-trade agreement
(26 September 2024) Indonesia has formally submitted a request to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in a bid to expand its export markets, according to coordinating minister for economic affairs Airlangga Hartarto. The request, sent to New Zealand as the agreement’s depository, aims to structurally reform Indonesia’s economy and improve market access. Indonesia initially announced its intent to join the 12-country trade pact in May, seeking to attract investment. The CPTPP includes members such as Australia, Canada, Japan, Malaysia, and the United Kingdom. The move has been endorsed by President-elect Prabowo Subianto, who will succeed President Joko Widodo on 20 October.

INDONESIA, RUSSIA, CHINA
Chinese and Russian projects officially commence in new capital of Nusantara
(26 September 2024) Multi-million dollar construction projects by Chinese and Russian firms have officially commenced in Indonesia’s new capital, Nusantara, as announced by President Joko Widodo. China’s Delonix Group is investing IDR 500 billion (USD 32.5 million) in a 2.42-hectare integrated complex featuring a hotel, luxury apartments, shopping malls, offices, and sports facilities. Russia’s Magnum Estate International is developing a 1.3-hectare resort complex with serviced apartments and commercial spaces, also with investments of IDR 500 billion. Australia’s AIS is building a IDR 150 billion (USD 9.8 million) educational facility for 750 students, featuring advanced science labs and STEM facilities. These projects, aimed at boosting Nusantara’s attractiveness to international investors, were inaugurated on 25 September. President-elect Prabowo Subianto has committed to continuing the development of Nusantara after taking office. Widodo mentioned that additional investor proposals are under review, with potential new projects set to launch soon.  

RCEP Monitor

CHINA
China’s market share for key EV battery components tops 80%
(26 September 2024) In 2023, Chinese companies held over 80% of the global market share for key EV battery components, with 89.4% for cathodes, 93.5% for anodes, 87.4% for separators, and 85% for electrolytes. The Chinese market share for separators increased by 13.1 percentage points in two years, while Japan’s share fell to 9.7%. Chinese firms, such as BTR New Material Group, are expanding internationally, with a USD 700 million investment in Morocco for cathode and anode production, set to equip 500,000 EVs annually by 2026. Meanwhile, Shenzhen Senior Technology Material is building a USD 700 million separator plant in Malaysia and has secured a contract with Samsung SDI through 2030. Despite the growing dominance of Chinese manufacturers, the global battery sector faces challenges, including reduced government subsidies for electric vehicles and declining sales for companies like Tesla. North America is seen as a growth area for Japanese firms, with Asahi Kasei building a USD 1.38 billion separator plant in Canada and Sumitomo Metal Mining considering expanding production of LFP cathodes.

AUSTRALIA
Sharp drop in global lithium prices severely impact Australia
(26 September 2024) Lithium prices have dropped sharply due to reduced electric vehicle sales and a global oversupply of lithium ore, falling by over 75% since June 2023. This has severely impacted Australia, the largest producer of lithium ore, with companies like Core Lithium and Arcadium Lithium suspending operations, leading to job losses. In contrast, companies like Pilbara Minerals and Liontown Resources are expanding production, confident in a future price recovery. Australia is increasing its focus on lithium refining, with firms such as IGO and Covalent Lithium investing in domestic refining to reduce reliance on Chinese processing. Government-backed efforts are underway to reduce environmental impacts of lithium extraction, including research into new methods like “shock quenching.” Additionally, companies like Lithium Australia are developing recycling initiatives to strengthen the country’s lithium battery industry and reduce waste.

SOUTH KOREA
Bank of Korea proposes cap on university admissions from affluent Gangnam district
(24 September 2024) The governor of the Bank of Korea (BoK) has proposed limiting university admissions from Seoul’s affluent Gangnam district to address housing market pressures and growing inequality. He argues that intense competition for education in Gangnam is driving up property prices and debt while exacerbating regional depopulation. Despite hitting its inflation target, the BoK has maintained its interest rate at 3.5%, citing concerns over household debt, which stands at 92% of GDP. South Korea’s demographic challenges, including the world’s lowest fertility rate, are a significant concern, with the BoK governor advocating for foreign labour recruitment. The BoK forecasts economic growth of 2.4% in 2024 and 2.1% in 2025 but warns the country’s manufacturing-based growth model may need restructuring. Additionally, Rhee, speaking as chair of the Bank for International Settlements’ committee, highlighted the August sell-off and the need for enhanced data collection on financial derivatives and swaps.

VIET NAM
Typhoon Yagi to trim off 0.15% off Viet Nam’s 2024 growth
(16 September 2024) Super Typhoon Yagi caused significant destruction in northern Viet Nam, resulting in estimated damages of VND 40 trillion (USD 1.6 billion), according to the Ministry of Planning and Investment. The storm, which made landfall on 7 September, is expected to reduce Vietnam’s 2024 economic growth by 0.15%, with third-quarter growth down by 0.35% and fourth-quarter growth by 0.22%. More than 350 people were reported dead or missing as of 15 September, with over 2,000 injured and 230,000 homes damaged. Additionally, 190,000 hectares of rice fields and 79,000 hectares of other crops, including fruit trees, were flooded. The storm also led to power outages, transportation disruptions, and landslides, though industrial parks housing companies like Samsung and Apple suppliers were largely unaffected. Taiwanese manufacturers in Haiphong, however, sustained damage and are seeking tax deductions.

MYANMAR
Housing prices in Yangon surge as residents flee civil war to city 
(15 September 2024) Housing prices in Yangon have surged as Myanmar’s civil war intensifies, prompting rural residents to flee to the city. Real estate brokers report a 30% rise in prices between June and July 2024, with standard condominiums reaching around MMK 500 million (USD 91,000) by August. This marks a 70% increase from February 2021, when the military took power. The influx of residents from Mandalay, driven by conflict in the region, has contributed to the demand. Additionally, many are shifting their investments from paper assets to property due to concerns over the currency’s value and banking stability. The rise in prices benefits major companies like Yoma Group, whose StarCity condo sales have helped Yoma Strategic Holdings return to profitability in the year ending March 2024. Business owners in Yangon are experiencing increased customer traffic, which is speculated to result from the growing population.

MYANMAR
Typhoon Yagi kills at least 226 people in Myanmar, with more than half a million affected
(17 September 2024) Typhoon Yagi, the most powerful storm in Asia this year, has killed at least 226 people in Myanmar, with over 70 missing and more than half a million affected. Flooding caused by torrential rains damaged infrastructure and crops across 84 townships, including Naypyidaw, displacing tens of thousands and destroying over 2,100 homes. The government has set up 438 relief camps to assist the displaced, while receiving 10 tons of aid from India. Myanmar’s junta leader, Min Aung Hlaing, has requested foreign aid for rescue and relief efforts. The United Nations estimated that 631,000 people were affected, with the death toll expected to rise. In neighboring Thailand, flooding has killed 45 people since mid-August, affecting 28,000 households. Yagi also impacted Vietnam, killing over 350 people and causing USD 1.6 billion in damage. Evacuation efforts in Myanmar continue, hindered by damaged infrastructure and ongoing conflict.

MALAYSIA
Government mulling raising tax on sugar-sweetened beverages (SSBs) by 20% 
(14 September 2024) Malaysia plans to increase the tax on sugar-sweetened beverages (SSBs) as part of its strategy to reduce sugar consumption and address non-communicable diseases such as diabetes. Malaysia’s Health Minister announced that the heavier tax will be included in the 2025 draft budget, to be presented in parliament on 18 October. The existing sugar tax, introduced in 2019 and raised to 0.5 ringgit per liter this year, has reduced sugary drink consumption by 9.25%. The new proposal, possibly increasing the levy by 20%, comes as 15.6% of Malaysian adults are diabetic, according to the 2023 National Health and Morbidity Survey. Experts support the tax but emphasize the need for education and awareness to combat non-communicable diseases.

MALAYSIA
Ringgit surges to 28-month high against US dollar following Fed’s rate cut  
(19 September 2024) The ringgit surged to a 28-month high against the US dollar, closing at 4.2025/2105, following the US Federal Reserve’s 50-basis-point interest rate cut. This marks a rise from the previous day’s close of 4.2410/2460, positioning the ringgit as one of Asia’s top-performing currencies. Bank Muamalat Malaysia’s chief economist noted that the Fed’s move reduced market uncertainties and aligned with its goals of disinflation and full employment. The ringgit is expected to appreciate further, with support levels around MYR 4.0728. Bank Negara Malaysia is likely to maintain its Overnight Policy Rate at 3.00% for the rest of the year. The ringgit also strengthened against major currencies, including the British pound, Japanese yen, and euro, and gained against ASEAN currencies such as the Singapore dollar, Thai baht, Philippine peso, and Indonesian rupiah.

THAILAND
Thai cabinet approves THB 10,000 handout for 14.5 million citizens  
(17 September 2024) The Thai cabinet has approved a THB 10,000 baht (USD 300) handout for 14.5 million vulnerable citizens, with disbursements starting between 25-30 September. The total cost for this phase is THB 145 billion. Thailand’s Finance Minister expects the initiative to boost consumption in Thailand’s sluggish economy, which grew by only 2.3% in Q2 2024. Approximately 21.5 million others have registered for the handout, though no timeline has been provided for their payments. The scheme, initially projected to cost up to THB 500 billion, has been scaled back due to a lower number of registrants and concerns over digital token distribution potentially violating currency laws. Payments will be made via the banking system. The government is under pressure to stimulate growth, and ministers are pushing the Bank of Thailand to cut its 2.5% policy interest rate. The central bank’s monetary policy committee will meet on 16 October to review rates.

CAMBODIA
Cambodia’s public debt reaches USD 11.27 billion by end of Q2 2024 
(17 September 2024) Cambodia’s public debt reached USD 11.27 billion by the end of Q2 2024, with 99% being external debt, according to the Ministry of Economy and Finance’s Public Debt Statistical Bulletin. The debt is predominantly in US dollars (47%), followed by Special Drawing Rights (19%), Chinese yuan (11%), Japanese yen (11%), and euro (7%). Bilateral development partners provided 63% of the loans, and multilateral partners contributed 37%. In the first half of 2024, Cambodia secured USD 313 million in new concessional loans, equivalent to 14% of its legal borrowing limit. Debt service payments amounted to USD 50 million. The loans support infrastructure projects aimed at long-term sustainable economic growth. The government’s public debt management strategy for 2024–2028 outlines borrowing plans of USD 2.3 to 2.7 billion annually from foreign financial institutions. The Ministry confirmed that the country’s public debt remains sustainable and low-risk. 

RCEP Monitor

JAPAN
Yen strengthen passes 140 level against the dollar, marking strongest position since July 2023
(16 September 2024) The yen strengthened past the JPY 140 level against the dollar, appreciating 0.6% to JPY 139.96, marking its strongest position since July 2023. The yen has gained 15% this quarter, becoming the top performer among Group-of-10 currencies, as investors anticipate a narrowing interest-rate gap between the US and Japan. The Federal Reserve is expected to lower US interest rates this week, with speculation of a 50 basis point cut, while the Bank of Japan is projected to hold its rate steady after two rate hikes earlier this year. The yen’s rapid appreciation, from its July low of JPY 161.95 against the dollar, is impacting Japanese exporters and Tokyo’s stock market. The BOJ Governor indicated that further rate hikes are possible if inflation forecasts align, with many economists expecting another rate increase by December. Additionally, the unwinding of carry trade strategies has contributed to the yen’s rise, with strategists now revising earlier predictions of yen weakness and forecasting further gains in the coming months.

JAPAN, UNITED STATES
US and Japan nearing agreement on export controls targeting China’s chip industry  
(17 September 2024) The US and Japan are nearing an agreement on export controls targeting China’s chip industry, with Washington pushing for non-US companies to obtain licences for selling tech products to China. The Biden administration seeks to close loopholes in existing export rules, aiming to limit China’s access to critical chipmaking tools, which would impact Japanese firms like Tokyo Electron and Dutch companies such as ASML. Japan, however, is concerned about potential Chinese retaliation, particularly the restriction of critical minerals like gallium and graphite. The US has been in talks with Japan and the Netherlands to align export control rules and avoid subjecting these countries to the US Foreign Direct Product Rule (FDPR). Negotiators, including the US Commerce Secretary, are attempting to finalise the agreement amid Tokyo’s growing concerns over the economic impact and a possible increase in mineral prices. Additionally, Japan is wary of US actions ahead of the 2024 presidential election, fearing further complications in their negotiations.

CHINA
China faces increasing pressure to meet its 2024 growth target of around 5% 
(16 September 2024) China’s economic outlook faces increasing pressure to meet its 2024 growth target of around 5%, as recent data reveals weakening industrial output, consumption, and investment. August’s data indicates GDP growth of 4.6%-4.7%, below the target, with full-year growth potentially missing the mark if current trends continue. The People’s Bank of China (PBOC) signalled a shift toward fighting deflation, indicating potential monetary easing. Despite this, aggressive stimulus appears unlikely as the government seeks to avoid large-scale measures that previously caused boom-bust cycles. Local governments have shown reluctance to spend, issuing fewer bonds, while real estate investment contracted, contributing to a property slump estimated to have caused USD 18 trillion in household wealth losses. President Xi Jinping has urged officials to faithfully implement existing policies but seemed to indicate tolerance for slightly missing the 5% target.

LAO PDR
Lao PDR facing severe economic downturn marked by escalating inflation
(09 September 2024) Lao PDR is facing a severe economic downturn marked by escalating inflation, a sharply depreciating currency, and high levels of external debt. Inflation in August 2024 stood at 24.3%, continuing a 28-month streak of double-digit rates, though down from a peak of 41.3% in February 2023. The kip has lost over half its value against the dollar and Thai baht in three years, exacerbating the impact on purchasing power and commodity costs. The IMF reported Lao PDR had the highest inflation rate among Southeast Asian countries at the end of 2023, surpassing even Myanmar. The central bank’s monetary tightening, with rates reaching 10.5%, has not stabilised the currency. Laos’ debt repayments surged to USD 950 million in 2023, with total government debt at 115% of GDP. A significant portion of this debt is linked to a USD 6 billion railway project financed largely by China. Experts suggest Lao PDR should renegotiate its debt and potentially seek IMF assistance, as the current economic model, reliant on foreign investment in natural resources, is contributing to instability.

MALAYSIA, UK
Malaysia and UK explore role of Islamic finance in promoting green investments 
(12 September 2024) Malaysia’s central bank Bank Negara Malaysia (BNM) and UK financial stakeholders convened at the MIFC-UK Business Forum to explore the role of Islamic finance in promoting green investments. Sultan Nazrin Muizzuddin Shah emphasised that Islamic finance, with its principles of ethical practices and equitable risk-sharing, is well-aligned with sustainability goals and can address global funding gaps. The forum, attended by over 140 participants, highlighted Malaysia’s position as a “global gateway” for Islamic finance in Asia and OIC markets, while leveraging the UK’s role as a global financial hub. BNM stated that Malaysia requires approximately MYR 1.2 trillion to MYR 1.3 trillion to finance its sustainable economic landscape. The event was co-organised by BNM, the MIFC Leadership Council, and UK Islamic finance stakeholders.

INDONESIA
Indonesia initiates construction of Jakarta’s second subway line 
(11 September 2024) Indonesian President Joko Widodo has initiated the construction of Jakarta’s second subway line, the East-West Line of the Mass Rapid Transit (MRT), which will span 84 kilometres from Cikarang in West Java to Balaraja in Banten province. This new line, which is substantially longer than the existing 15.7-kilometre North-South Line, aims to alleviate traffic congestion and enhance connectivity in Jakarta and its suburbs. The project will be completed in two phases, with the 24.5-kilometre Phase 1 expected to begin by the end of next year and finish by 2031. Japan is financing the project with a loan of up to JYP 140.7 billion (USD 982 million), using Japanese technology for the rolling stock and signal systems. Jakarta, with over 10 million residents, faces severe traffic congestion and air pollution, costing the country approximately USD 5.6 billion annually. The expansion of the North-South Line, also supported by Japan, is set to extend 5.8 kilometres by 2030. Additionally, Indonesia has introduced Southeast Asia’s first bullet train connecting Jakarta and Bandung as part of its broader transport infrastructure development.

INDONESIA
Indonesia to impose import duties of up to 200% on range of goods, eyeing Chinese imports
(19 August 2024) The Indonesian government plans to impose import duties of up to 200% on a range of goods, including textiles and electronics, primarily targeting Chinese imports. This move aims to protect local businesses, which are a significant part of the economy, contributing 60% to GDP and employing around 120 million people. Indonesia has also implemented strict curbs on e-commerce, including reducing the de minimis threshold for duty-free imports and banning social media shopping platforms, although TikTok Shop has since resumed operations. Other Southeast Asian countries are also considering higher tariffs and restrictions on imports to protect local industries. The government faces the challenge of balancing protection for local businesses with the need to manage trade relations and prevent illegal imports. Additionally, there is concern that high import duties may harm businesses reliant on foreign raw materials.

THAILAND
Thailand to tackle country’s USD 475 billion household debt through debt restructuring programme
(09 September 2024) Thailand’s new government, led by Prime Minister Paetongtarn Shinawatra, plans to address the country’s substantial household debt, estimated at USD 475 billion, through an extensive debt restructuring programme. This initiative will target relief for car and home loan borrowers and extend to the informal sector, and is supported by state-owned financial institutions, commercial banks, and asset management companies. The government is also focusing on financial aid for small businesses, which represent about 35% of the workforce and GDP, through debt suspension and improved liquidity access. Additionally, the administration aims to stimulate economic growth with fiscal measures and expedite constitutional reforms to enhance democratic governance and political stability. Shinawatra, elected after her predecessor was dismissed for ethical violations, faces the challenge of reviving Thailand’s slow-growing economy, which has averaged 1.9% growth over the past decade. The government is aiming to boost growth to avoid pushing public debt close to the 70% GDP ceiling by 2027 and to reassure both domestic and foreign investors of stable governance.

MALAYSIA
RHB Research downgrades Malaysian transportation sector from overweight to neutral 
(10 September 2024) RHB Research, the research arm of Malaysian bank RHB Bank, downgraded the Malaysian transportation sector from ‘overweight’ to ‘neutral,’ citing limited upside as Malaysia Airports Holdings Bhd (MAHB) and Westports Holdings Bhd reached fair valuations. MAHB reported a 74% year-on-year core profit increase for the first half of FY2024, driven by international passenger traffic recovery, but its share price is approaching the MYR 11 privatisation offer limit. Westports’ first-half earnings rose 7.9% year-on-year, though lower yard utilisation may limit transhipment volume. Tasco Bhd’s core net profit for 1QFY2025 dropped 25% to MYR 10.6 million, but RHB maintained a ‘buy’ call on the stock with a target price of MYR 1.15, citing its diversified client base, business segments, and the Integrated Logistics Services (ILS) tax incentive. RHB expects a rebound in freight forwarding, new warehouse contributions, and tax credits for Tasco. Global logistics challenges remain, with ocean freight capacity shortages expected through early October and higher air cargo demand during the holiday peak season.

SINGAPORE
Platform workers to have their own CPF contributions and work injury insurance coverage
(09 September 2024) The Platform Workers Bill, tabled for a second reading in Parliament on 9 September, will mandate increased Central Provident Fund (CPF) contributions and work injury insurance coverage for platform workers, aligning them with regular employees. CPF contributions will be compulsory for those born on or after 1 January 1995, with older workers able to opt in at any time. Lower-income workers earning less than SGD 3,000 per month will be supported by the Platform Workers CPF Transition Support scheme, offsetting 100% of their CPF contributions in 2025. Protections will initially cover ride-hailing and delivery workers, and platform work associations will represent workers in negotiations. Work injury compensation will fall on a single operator or be shared if workers engage with multiple platforms. The government expects increased CPF contributions to boost workers’ total earnings, especially for housing needs. From 2025, Workfare Income Supplement (WIS) payments will be disbursed monthly, with higher payments from 2029.

RCEP Monitor

JAPAN
Japanese companies seek foreign acquisitions due to contracting domestic market
(09 September 2024) Japanese companies are increasingly pursuing larger foreign acquisitions as their domestic market contracts. In 2023, Japan recorded approximately 660 outbound M&A transactions, a 6% increase from the previous year, with total deal value reaching USD 50.5 billion, up 7% from the previous year. Key transactions include Nippon Steel’s USD 14 billion bid for U.S. Steel, Renesas Electronics’ USD 5.9 billion acquisition of Australian firm Altium, and Sekisui House’s USD 4.9 billion purchase of MDC Holdings. The U.S. remains the top destination for these deals, followed by the U.K., Singapore, and India. Recent Japanese government reforms, including new guidelines and enhanced transparency on capital efficiency, are stimulating this surge. However, political challenges, particularly from the Committee on Foreign Investment in the United States (CFIUS), are creating hurdles for Japanese firms targeting American assets. Despite these challenges, the yen’s weakness has not deterred Japanese companies, which are supported by substantial cash reserves totalling JPY 600.9 trillion (USD 4.2 trillion) as of the end of March. These firms are primarily targeting markets with economic growth and young demographics, while sentiment towards China remains cautious.

JAPAN
Japan’s GDP grows at annualised rate of 2.9% in second quarter of 2024 
(09 September 2024) Japan’s gross domestic product (GDP) grew at an annualised rate of 2.9% in the second quarter of 2024, slightly below the preliminary estimate of 3.1%. The non-inflation-adjusted GDP growth was 1.8% from the previous quarter, with the total value of the economy surpassing JPY 600 trillion for the first time. Private consumption and capital investment were revised slightly lower, with consumer spending rising 0.9% after four quarters of decline. The data supports the Bank of Japan’s (BOJ) view of continued gradual recovery, though economists expect no immediate rate changes at the upcoming policy meeting in September. However, further rate hikes are anticipated by January 2024. Inflation remains a concern, as the consumer inflation rate has stayed above the BOJ’s 2% target for 28 consecutive months. Rising wages have not yet restored consumer spending to pre-pandemic levels, while inflationary pressures continue, driven by rising food prices. Economists forecast 1.7% growth in the third quarter, suggesting ongoing inflationary pressures.

NEW ZEALAND
New Zealand’s sovereign wealth fund reports 14.9% return for latest financial year 
(09 September 2024) New Zealand’s sovereign wealth fund, the New Zealand Superannuation Fund, reported a 14.9% return for the latest financial year, increasing its total funds under management to NZD 76.6 billion. The fund, managed by Guardians of New Zealand Superannuation, attributed its performance to strong global equity exposure, with 44% of its portfolio in global stocks and 4% in New Zealand stocks. Fixed income represents 21% of the portfolio. The fund’s annualised 10-year return was 10.33%, down from the 12.1% return reported in the 10 years through 2022. The fund has a 50/50 split between passive and active management. The fund beat its Treasury Bills benchmark by 9.33% but underperformed its reference portfolio, which returned 15.13%. CEO Jo Townsend highlighted the fund’s potential growth to NZD 185 billion by 2040, noting that tax savings could improve efficiencies.

MALAYSIA
Malaysia maintains overnight policy rate at 3%, citing continued economic support  
(05 September 2024) Malaysia’s central bank, Bank Negara Malaysia (BNM), maintained its overnight policy rate at 3%, in line with predictions, citing continued economic support. The central bank is optimistic about growth, inflation, and the ringgit, despite potential risks from weaker external demand and commodity production. BNM forecasts inflation to remain below 3%, although future domestic policy changes could affect this outlook. The ringgit, which has rebounded from a 26-year low, is expected to remain stable due to positive economic prospects and structural reforms. BNM emphasised caution regarding future rate adjustments, despite global trends of easing monetary policy, and signalled no changes to the rate through 2025.

SINGAPORE
Singapore dollar reaches strongest level against US dollar since 2014 
(05 September 2024) The Singapore dollar has reached its strongest level against the US dollar since 2014, driven by Singapore’s monetary policy that focuses on exchange rate management to combat inflation. The Singapore dollar is also nearing record highs against currencies like the Indonesian rupiah and Japanese yen. While businesses in sectors such as logistics, transportation, banking, and insurance are optimistic, others like hotels and restaurants are more concerned, particularly with Singaporeans spending abroad due to favourable exchange rates. The Monetary Authority of Singapore (MAS) maintains the currency within a set range, limiting extreme fluctuations, with the Singapore dollar’s rise being 16 cents from its pandemic low. Currency strength has led to increased transfers into US dollars, with a 364% rise from June to August year-on-year. Exporters face challenges as the strong currency could affect competitiveness. 

INDONESIA
Middle class contracts from 21.4% of population in 2019 to 17.1% in 2024
(06 September 2024) Indonesia’s middle class has contracted from 21.4% of the population in 2019 to 17.1% in 2024, with 9.5 million fewer people in this category, according to the Central Statistics Agency (BPS). The proportion of the aspiring middle class slightly increased to 49.2%, while the vulnerable population rose to 24.2%. Rising interest rates, deindustrialisation, and job losses, particularly during the pandemic, have driven this shift. Economic growth remains strong at over 5%, but inflation, currently at 2.12%, has heavily impacted middle-class spending, particularly on food (41.67%) and housing (28.52%). Economists warn that government policies, such as VAT increases and housing subsidies for the lower classes, may further strain middle-class spending power. Despite this, BPS expects recovery, while the government recognises the middle class’s critical role in driving economic consumption.

THAILAND
Thailand’s Ministry of Foreign Affairs to introduce compulsory Electronic Travel Authorization (ETA) for visa-exempt foreigners
(05 September 2024) Thailand’s Ministry of Foreign Affairs is set to introduce a compulsory Electronic Travel Authorization (ETA) for visa-exempt foreigners entering the country by air, land, or sea, with phased implementation scheduled between December 2024 and June 2025. The ETA, expected to be free, will require applications through an online portal, with email confirmations typically issued within 24 hours. While specific requirements are yet to be published, applicants may need to provide an accommodation address and proof of onward travel. The system aims to enhance security by conducting computerized checks on passport authenticity, criminal records, and Interpol notices, facilitating entry through electronic gates using a QR code. There is uncertainty regarding whether the ETA will limit the number of 60-day visa-exempt entries, potentially affecting individuals who currently extend stays indefinitely via border runs. The ETA will not apply to diplomats but appears to offer no exemption for tourists over 70. Concerns have been raised about potential links between the ETA and tax residency status for long-term visitors remitting funds into Thailand. The Ministry has yet to release comprehensive guidelines, prompting calls for detailed information well ahead of the rollout.

THAILAND
Thailand considering legalisation of casinos to boost tourism and economic growth
(01 September 2024) Thailand is considering the legalisation of casinos to boost tourism and economic growth, with a draft bill expected to be passed by the end of the decade. The proposed casinos could generate THB 187 billion (USD 5.5 billion) in revenues, equivalent to 1% of the country’s GDP. Prime Minister Srettha Thavisin initiated the drafting process, and despite leadership changes, the plan is likely to continue. Potential casino locations include the Eastern Economic Corridor and tourist hotspots like Phuket and Pattaya, with a projected USD 5 billion capital expenditure for the Pattaya project. Casinos are expected to follow an integrated resort model similar to Singapore’s, offering entertainment beyond gambling. Thai citizens may be required to pay a THB 5,000 (USD 147) entrance fee, while admission for foreigners would be free. 

BRUNEI DARUSSALAM, INDIA
Brunei Darussalam and India agree to elevate ties to Enhanced Partnership
(05 September 2024) Brunei Darussalam and India have agreed to elevate their bilateral relationship to an “Enhanced Partnership” following talks between Sultan Haji Hassanal Bolkiah and Indian Prime Minister Narendra Modi in Bandar Seri Begawan. The joint statement highlighted commitments to strengthening cooperation in defence, trade, investment, food security, energy, and technology. They also pledged to uphold peace, maritime security, and respect for international law. Both leaders agreed to collaborate on ICT, cyber security, renewable energy, and combating terrorism. They reiterated their commitment to enhancing the ASEAN-India Comprehensive Strategic Partnership and addressing climate change, with Brunei appreciating India’s support for hosting the ASEAN Centre for Climate Change.

LAO PDR
Lao PDR  prepares to connect with Korea through direct flights from Luang Prabang
(06 September 2024) The Korea Support Programme (KSP) aims to improve Luang Prabang International Airport’s airspace and flight procedures, with the goal of establishing direct flights from the Republic of Korea to Lao PDR. The project, funded by Korea’s Ministry of Economy and Finance and executed by KOTRA, seeks to enhance Lao PDR’s aviation infrastructure to meet International Civil Aviation Organization (ICAO) standards, boost tourism, and support economic recovery. During the final reporting seminar in Vientiane, Korean and Lao officials discussed the project’s proposed airspace redesign, updated flight procedures, and a conceptual airport design. The project also includes further design work and training for Lao airspace managers. Public-Private Partnerships (PPP) were highlighted as a means to finance infrastructure improvements. The project is expected to enhance air transport safety, attract Korean airlines, and strengthen economic ties between the two countries, particularly in tourism.

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CHINA
China’s wealthy shift capital abroad to pursue business opportunities
(05 September 2024) China’s wealthy are increasingly shifting capital abroad to pursue business opportunities, rather than solely for investment returns, according to asset managers. A significant trend has emerged this year, with Chinese family offices seeking to acquire smaller businesses in Japan, driven by slower domestic growth and a weaker yen. From January to July 2023, mainland China’s non-financial direct overseas investments rose 16.2% to USD 83.55 billion, covering over 6,100 businesses globally. Wealth management firm Noah Holdings reported a 23% increase in overseas registered clients, with assets under management abroad rising nearly 15%, while domestic assets declined by over 6%. The trend reflects affluent Chinese entrepreneurs’ growing interest in globalising their businesses, using markets such as Hong Kong, Singapore, and Japan as gateways for expansion.

AUSTRALIA
Australia’s economy records weakest performance in over 30 years
(04 September 2024) Australia’s economy recorded its weakest performance in over 30 years, excluding the early COVID-19 period. GDP grew by only 0.2% in the April-June quarter and by 1% year-on-year, marking the slowest annual growth since 1991-92, according to the Australian Bureau of Statistics. On a per capita basis, GDP declined by 0.4% quarterly and 1.5% annually, reflecting the impact of record immigration. The economy is under pressure from 13 consecutive interest rate hikes by the Reserve Bank of Australia between May 2022 and November 2023, aimed at controlling inflation, which remains above the 2-3% target. Rising dissatisfaction with economic conditions has contributed to declining support for Prime Minister Anthony Albanese, with only 41% of respondents approving of his performance in a recent poll, while 54% disapproved.

NEW ZEALAND
New Zealand to raise entry fees for international tourists starting 01 October, 2024  
(03 September 2024) New Zealand will raise entry fees for international tourists from NZD 35 (USD 22) to NZD 100 (USD 62) starting 01 October, 2024, to help cover the costs of public services and environmental upkeep. The government aims to address the financial strain of tourism on local communities and infrastructure, with international visitors spending over USD 11 billion in the year ending March 2024. However, the New Zealand Tourism Industry Association has expressed concerns that the fee hike, combined with increased regional airport taxes, could further hinder the country’s post-pandemic tourism recovery, with industry profits still 5% below pre-pandemic levels.

THAILAND
Thailand’s proposed 90-kilometer ‘Land Bridge’ faces fresh roadblocks
(28 August 2024) Thailand’s ambitious plan to create a 90-kilometre highway-and-rail link across the Malay Peninsula, aimed at reducing reliance on the congested Strait of Malacca, faces significant challenges. The project, which includes two new ports in Ranong and Chumphon provinces and a special economic zone, has sparked local opposition due to environmental concerns, particularly regarding the impact on Koh Phayam’s coral reefs. Despite these concerns, the Thai government is pushing ahead, estimating the ‘Land Bridge’ will cut shipping times by four days and reduce transportation costs by 15%, with Ranong’s port projected to handle 20 million TEUs annually by 2036. However, investor interest remains tepid, with no firm bids due to the project’s estimated THB trillion cost and uncertainties about financial returns. Regional competition from Malaysia’s East Coast Rail Link and political instability in Thailand, highlighted by the recent removal of Prime Minister Srettha Thavisin, further complicates the project’s future.

ASEAN
Investor interest in Southeast Asian markets surging due to expectations of US interest rate cut  
(26 August 2024) Investor interest in Southeast Asian markets has surged due to expectations of a U.S. interest rate cut, with stock indices in the region reaching new highs. Indonesia’s Jakarta Composite Index recently hit a record, and Malaysia’s Kuala Lumpur Composite Index reached its highest level since December 2020. The rally is driven by a narrowing rate gap between the U.S. and Southeast Asia, strengthening regional currencies, and higher-than-expected GDP growth in countries like Malaysia, which saw a 5.9% increase in Q2 2023. The MSCI ASEAN Index has risen 6% in August, outperforming the S&P 500. Structural reforms and initiatives in Malaysia, along with increased foreign direct investment in sectors like semiconductors, are boosting investor confidence. Southeast Asia’s growth prospects are robust, with projections indicating an average annual growth rate of 5.1% from 2024-2034, positioning the region as a key beneficiary of shifting global supply chains amid Sino-American tensions.

THAILAND
Ongoing flooding in Northern Thailand results in THB 491 million in losses for tourism sector   
(29 August 2024) Ongoing flooding in Northern Thailand has resulted in significant damage to the tourism sector, with losses estimated at THB 491 million. The floods have led to a reduction of 57,092 visitors and a decline in tourism spending of approximately THB 200 million, affecting the livelihoods of 628 tourism workers. Several tourist attractions have been temporarily closed due to floods and landslides. In response, the Ministry of Tourism and Sports, along with the Tourism Authority of Thailand, has developed a restoration plan that includes special offers from airlines, hotels, and restaurants, as well as promotional campaigns to attract tourists back to the region. Planned events include the Amazing Nan Marathon, Wet Series Music Festival 2024 in Chiang Rai, and an art and culture exhibition in Phrae. Additionally, the government has introduced urgent support measures for flood-affected businesses, including debt payment suspensions and low-interest recovery loans through state banks.

THAILAND
Bank of Thailand reiterates readiness to adjust borrowing costs as needed
(28 August 2024) Thailand’s central bank Governor Sethaput Suthiwartnarueput reiterated the Bank of Thailand’s readiness to adjust borrowing costs as needed while maintaining flexibility in response to unexpected risks. Speaking at a Stock Exchange of Thailand forum, Sethaput highlighted the need for a pragmatic approach to monetary policy, given the current economic challenges, including deteriorating credit quality and a widening gap between consumption and manufacturing growth. Despite maintaining the benchmark interest rate at 2.5% for the fifth consecutive time on 21 August, Sethaput indicated that the central bank remains open to supporting the economy if it weakens further, though it is unlikely to join the global trend towards easing monetary policy just yet. The Thai baht has appreciated nearly 5% this month, influenced by a weaker dollar and rising gold prices.

INDONESIA
Indonesian banks to be required to publish breakdown of lending rates
(27 August 2024) Starting in October 2024, Indonesian banks will be required to publish a detailed breakdown of their lending rates, including margins, under a new regulation issued by the Financial Services Authority (OJK). The regulation aims to increase industry competitiveness, promote lending growth, and prevent excessive charges to borrowers. The OJK stated that the rule is designed to encourage banks to set interest rates more efficiently, supporting economic financing. Indonesian banks currently have the highest net interest margin (NIM) in Southeast Asia, with a NIM of 4.57% as of June 2023. The regulation mandates that banks update clients with detailed rate changes, including costs and margins, and report monthly to the OJK on the risk premium charged. Penalties for inaccurate information can reach up to IDR 15 billion (USD 970,000). Major banks such as Bank Central Asia and Bank Mandiri have indicated they will adjust their lending rates based on market conditions, liquidity, and business strategies.

INDONESIA
President-elect aims to implement mandatory 50% palm oil-based biodiesel blending by 2025
(26 August 2024) Indonesia’s president-elect Prabowo Subianto aims to implement a mandatory 50% palm oil-based biodiesel blending (B50) by early 2025, projecting a reduction in fuel imports by USD 20 billion annually. Currently, the blending level is at 35%, with plans to increase to 40% by January 2025. Although Prabowo is pushing for rapid implementation, Indonesia’s palm oil producers and biofuel experts have expressed concerns about the feasibility, citing the need for further testing and production capacity expansion. Implementing B50 will require an estimated 18 million metric tonnes of crude palm oil, up from 11 million for B35, potentially reducing export volumes. The biodiesel industry also faces challenges related to product quality, particularly regarding sediment formation during storage and transportation, which could necessitate new equipment and extended testing. Experts suggest that full implementation by the end of 2025 is more realistic. The initiative is part of a broader effort to reduce fossil fuel dependency and develop palm-based biofuels, including for aviation.

INDONESIA
Global appetite for Indonesian bonds unaffected by pro-democracy protests
(26 August 2024) Foreign investors purchased USD 610 million worth of Indonesian bonds on Thursday, marking the largest single-day inflow in five years, driven by optimism around a potential Federal Reserve policy shift. Despite pro-democracy protests against a proposed revision of regional election laws, which led to the proposal being scrapped, investor interest remained strong, underscoring the prioritisation of yield-seeking. Indonesia’s 10-year bond yields now offer a premium of approximately 280 basis points over similar-dated U.S. Treasuries, attracting significant inflows, with rupiah bonds receiving USD 2.2 billion month-to-date. Factors such as Indonesia’s target deficit of 2.53% of GDP for 2025, lower currency hedging costs, and expectations of a rate cut by Bank Indonesia next month further support this trend. The 10-year yield closed slightly higher at 6.65% on Thursday, while the rupiah strengthened to its highest level since September, and foreign investors continued to buy Indonesian stocks.

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CHINA
Chinese officials dismiss speculations that country’s emissions may have already peaked
(29 August 2024) China’s top energy officials have dismissed speculation that the country’s carbon emissions may have already peaked, emphasizing that achieving the target by 2030 will still require significant effort. Despite a rapid increase in clean energy generation from solar and hydroelectric sources, which has reduced fossil fuel power output, officials highlighted that China’s ongoing development and rising energy demand make the outlook uncertain. The National Energy Administration stressed the need for continued efforts towards carbon neutrality. The clean energy boom, coupled with declining steel and cement production due to a real estate slump, and a reduction in gasoline consumption from the rise of electric vehicles, suggest a potential structural decline in emissions. Chinese officials are considering new targets for the country’s nationally determined contributions under the UN climate process. Last month, China’s solar and wind capacity exceeded 1,200 gigawatts, surpassing the 2030 goal set by President Xi Jinping.

AUSTRALIA
Housing crisis in Australia sees rents rise an annualized rate of 9%, fastest rate since 2008
(26 August 2024) Sydney’s rental market is facing significant challenges, with vacancy rates at 1.7% in the city and 1.3% nationally, leading to intense competition for rental properties. Rents in Australia are rising at an annualised rate of 9%, the fastest since 2008, driven by near-record low vacancy rates and a decade-long 90% increase in property prices. The median house price in Australia’s capital cities was AUD 1.1 million in June, with Sydney being the most expensive at AUD 1.6 million. Many renters are struggling to find affordable housing, often resorting to shared living arrangements. The Commonwealth Bank of Australia noted that the rising costs are delaying family formation, as more people choose to live in shared housing or with relatives. While rental price growth slowed to 0.1% in July, upward pressure remains due to a severe housing shortfall exacerbated by long-term policy decisions, construction constraints, and labour shortages. The Australian government, led by Prime Minister Anthony Albanese, has pledged AUD 32 billion to build 1.2 million homes by 2029, but faces political challenges from both the Greens and the opposition. Build-to-rent developments are being promoted as a solution, though they face high borrowing costs and policy uncertainty. The construction industry also faces significant challenges, with dwelling approvals at a 13-year low, and a need for 90,000 new workers to meet government goals.

JAPAN
Middle-aged workers sees wages rise by 2.7% and 1.0% year-on-year in second quarter of 2024
(29 August 2024) In the second quarter, wages for Japanese workers in their 40s and 50s increased by 2.7% and 1.0% year-on-year, respectively, according to data from Payroll, a Tokyo-based salary accounting service provider. This marks a significant improvement for the “lost generation,” who have faced pay stagnation since entering the workforce during the hiring freeze of the 1990s and 2000s. The wage increase, partly driven by the 5.1% rise negotiated in the spring wage negotiations (shuntō), contrasts with a 0.1% decline for these age groups in the same period last year. Despite these gains, economists remain cautious about sustained wage growth for middle-aged workers, citing the high costs for companies to increase their salaries compared to younger workers, whose wages rose 4.2% (under 30) and 3.6% (in their 30s) in the same quarter. Given the crucial role of middle-age workers in driving economic consumption, experts suggest that enhancing career flexibility and reskilling opportunities is essential for further wage growth. However, the moderate increase in wages is unlikely to significantly boost consumer confidence, and sustained efforts from both the government and companies are necessary to support this demographic.

MALAYSIA, INDIA
Malaysia and India elevate ties to Comprehensive Strategic Partnership
(21 August 2024) India and Malaysia have upgraded their relationship to a comprehensive strategic partnership, formalised during Prime Minister Narendra Modi’s meeting with Malaysian Prime Minister Anwar Ibrahim. The two countries signed nine Memorandums of Understanding (MoUs), including one focused on the welfare of 140,000 Indian workers in Malaysia. Discussions covered countering radicalisation, extremism, and the situation in the South China Sea, with both leaders affirming their commitment to freedom of navigation and peaceful dispute resolution. While terrorism was a key topic, Indian officials did not confirm if the extradition of Islamic preacher Zakir Naik was raised. India also announced a one-time allocation of 200,000 metric tonnes of white rice to Malaysia and highlighted defence cooperation possibilities. Additionally, Malaysia expressed support for India’s bid for permanent membership in the UN Security Council. The MoU on worker recruitment and repatriation includes simplified visa procedures, allowing Indian workers to be employed across all sectors open to foreign workers in Malaysia.

MALAYSIA
Foreign investment into Malaysia rising sharply due to improving growth and strengthening currency  
(22 August 2024) Foreign investment in Malaysia is rising sharply, driven by improving economic growth, political stability, and a strengthening currency. In July, foreign investors injected USD 1.75 billion into Malaysian debt markets, marking the highest inflow in a year. Malaysia’s stock market, represented by the KLCI index, has surged over 12% this year, outpacing the MSCI Southeast Asia index’s 6% rise. The ringgit, Asia’s best-performing currency in 2024, has gained over 5% this year, reaching an 18-month high against the dollar. Foreign ownership of Malaysian bonds has increased to 20%, supported by the currency’s appreciation and attractive bond yields as U.S. interest rates are expected to decrease. The economic momentum is further bolstered by a significant expansion in the second quarter, driven by sectors such as construction, power, and infrastructure. Analysts suggest that Malaysia’s appeal will continue to grow as the U.S. and regional economies cut rates while Malaysia maintains its current rates amid robust growth, which will keep the ringgit steady and make Malaysian bonds attractive.

MALAYSIA
Malaysian bonds exhibit highest correlation in emerging Asia to Treasury rally
(22 August 2024) Emerging Asian bonds have shown increasing sensitivity to U.S. Treasuries, with the 30-day correlation between EM Asia bonds and 10-year U.S. yields rising to around 0.29, nearing a seven-month peak. Malaysian bonds exhibit the highest correlation in the region at 0.53, positioning them as the most likely beneficiaries from anticipated Federal Reserve interest-rate cuts. This correlation surge has coincided with a weaker dollar, attracting foreign investors and boosting local currencies. Malaysian bonds have returned 8.3% to dollar-based investors this year, outperforming regional peers. Other bond markets in the region, including Thailand and South Korea, also show significant correlations with Treasuries. Despite dovish signals from central banks in the region, the growing link to U.S. yields increases the vulnerability of these bonds to potential increases in U.S. yields and a rebound in the dollar, which has recently shown signs of stabilising. 

VIET NAM, THAILAND
Vietnamese EV maker postpones launch of dealership network in Thailand   
(22 August 2024) VinFast Auto Ltd., the Vietnamese electric-vehicle manufacturer, has postponed the launch of its dealership network in Thailand due to a slowdown in passenger car sales in the country. The company stated that it will reassess the timing of its EV sales in Thailand to ensure alignment with its global standards. This decision comes amidst a broader downturn in the global EV market, with major manufacturers like Ford, General Motors, Volkswagen, and Tesla scaling back their ambitions. VinFast recently delayed the opening of its North Carolina factory by three years to 2028, reduced its 2023 sales target from 100,000 to 80,000 units, and has signed agreements with several dealers in Thailand, though no new timeline has been provided. Despite the delay, Thailand remains a key market for VinFast, and the company is continuing its expansion plans in other markets. 

VIET NAM
Tech firm FPT commences construction on USD 174 million AI project in Binh Dinh province  
(21 August 2024) Vietnam’s leading tech firm, FPT, has commenced construction on a USD 174 million artificial intelligence (AI) project in Binh Dinh province, developed in collaboration with FPT City Danang, FPT Investment, and FPT Software. The project spans 93.24 hectares and includes an AI centre focused on research, software production, digital transformation, and cybersecurity, along with an education zone and a supporting urban area. FPT, valued at USD 7.7 billion on Vietnam’s Ho Chi Minh City bourse, generated over USD 2 billion in revenue last year. In April, FPT also announced plans to build a USD 200 million AI factory utilising Nvidia’s technology.

MYANMAR
Rapid depreciation of Myanmar kyat sharply increases prices of essentials  
(21 August 2024) The rapid depreciation of Myanmar’s kyat, which recently plunged to a low of 7,500 to the dollar in the black market, has sharply increased the prices of essentials, including food and medicine, exacerbating the economic hardships faced by ordinary households. Although the kyat has since partially recovered to around 6,000 to the dollar, prices remain elevated, with grocery costs rising from 25,000 kyat to 40,000 kyat per week in some areas. Contributing factors include rising transportation costs due to fuel shortages, disruptions in border trade, and the junta’s alleged currency printing to prop up the kyat. The military’s attempts to stabilise the economy, including the arrest of 56 individuals involved in currency and gold trading, have so far failed to curb inflation. The World Bank reported that poverty is more widespread than at any time in the last six years, with economic growth expected to remain at 1% for the current fiscal year, while household incomes have declined and unemployment has risen. The National Unity Government criticises the junta for lacking a proper economic management plan, attributing the crisis to the regime’s policies. 

SINGAPORE, MALAYSIA
Malaysia and Singapore finalizing agreement to establish special economic zone in Johor state
(22 August 2024) Malaysia and Singapore are finalising an agreement to establish a special economic zone (SEZ) in Johor, Malaysia, aimed at transforming the region into a major trading and transportation hub. The SEZ, covering an area in southern Johor, is expected to attract billions in foreign investments, create 100,000 new jobs, and contribute approximately USD 26 billion annually to Malaysia’s economy by 2030. Tech companies such as Nvidia and GDS Holdings are already investing in data centres in the area, which will likely benefit from the SEZ. The agreement could also address Singapore’s land constraints and provide mutual economic benefits. However, challenges remain, including historical political tensions, differing tax rates, and potential implementation issues. The SEZ is supported by Malaysia’s King Sultan Ibrahim Iskandar, a pro-business ruler with significant investments in Johor. Both countries are expected to finalise the agreement by the end of the year, with updates anticipated during the upcoming meeting between Singapore Prime Minister Lawrence Wong and Malaysia Prime Minister Anwar Ibrahim.

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CHINA
Investors increasingly betting on continued strength of China’s bond market
(22 August 2024) Investors are increasingly betting on the continued strength of China’s bond market despite the People’s Bank of China’s (PBoC) efforts to manage long-term government bond yields, which have dropped to around 2.1% for 10-year and 2.3% for 30-year bonds due to weak domestic demand. While foreign investors have reduced their direct holdings in Chinese government bonds, they have increased investments in short-term debt issued by Chinese banks, with overseas holdings of negotiable certificates of deposit rising to over RMB 1 trillion by July, up from RMB 260 billion a year earlier. These investments are enhanced by currency trades that push yields above those of U.S. Treasuries, offering returns in the 6% range in U.S. dollar terms. The PBoC has signaled potential intervention to prevent long-term yields from falling too sharply, aiming to avoid financial instability and maintain a balanced yield curve. Despite these concerns, foreign investors remain attracted to Chinese bonds due to their uncorrelated performance with other global markets and potential for decent returns, particularly as domestic banks continue to buy government bonds in the absence of strong economic growth and consumer demand.

CHINA
China significantly reduces number of permits for new coal-fired power plants by nearly 80%  
(21 August 2024) China significantly reduced the number of permits for new coal-fired power plants by nearly 80% in the first half of 2024, according to a Greenpeace East Asia report. The report also highlighted that China’s combined wind and solar capacity, reaching 11.8 terawatts (TW), surpassed its coal capacity of 11.7 TW for the first time, with renewables accounting for 84.2% of new grid-connected capacity. Despite this, China commissioned 14 new coal plants totalling 10.3 gigawatts (GW) in the first half, marking a 79.3% decrease compared to the same period in 2023. The report suggests that improving grid connectivity is essential to maximize the output of the country’s wind and solar plants. Meanwhile, analysts from the Centre for Research on Energy and Clean Air indicated that China’s carbon emissions may have peaked in 2023, with a 1% year-on-year decline in the second quarter of 2024. China continues to justify coal plant construction for grid stability during peak demand periods, such as during extreme heat events.

AUSTRALIA, SINGAPORE
Australia aims to supply 15% of Singapore’s energy needs through solar energy exports
(21 August 2024) Australia has granted environmental approval for the USD 19 billion Australia-Asia Power Link project, which will involve a 12,000-hectare solar farm in the Northern Territory. The project aims to generate 6GW of renewable energy, with one-third of it transmitted to Singapore via an undersea cable. Once operational in the early 2030s, it is expected to supply up to 15% of Singapore’s energy needs and create 14,300 jobs. The approval includes conditions to protect the greater bilby habitat. SunCable, owned by billionaire Mike Cannon-Brookes, will now proceed to the planning stage with a target Final Investment Decision by 2027. The project still faces regulatory reviews in Singapore and Indonesia. The approval follows a period of uncertainty after SunCable entered voluntary administration in January last year due to a dispute between Cannon-Brookes and Andrew Forrest, but has since been revived. The project highlights Australia’s commitment to renewable energy amidst ongoing political debate over energy sources.