China-ASEAN Monitor: Coronavirus hits tourism sectors of Southeast Asian countries

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China-ASEAN Monitor: Coronavirus hits tourism sectors of Southeast Asian countries

Photo Credit: Nikkei Asian Review

Economy, Investment and Trade

Coronavirus hits tourism sectors of Southeast Asian countries
(27 January 2020) China’s implementation of a ban on outbound tour groups due to the outbreak of the coronavirus has affected the tourism industry in ASEAN countries which rely primarily on Chinese holidaymakers. With nearly 27% of Thailand’s tourist arrivals coming from China and tourism contributing over 20% to the Thai GDP, the travel ban has hit the industry hard. In Indonesia, Bali is bracing for the effect of the travel ban even though the country has not had any cases of coronavirus yet. The island welcomed 1.1 million Chinese tourists in the 11 months ended in November 2019, representing 20% of all arrivals during that period and almost twice the full-year total in 2014. Cambodia is also preparing for the effect of the coronavirus on its tourism sector. The country welcomed 5.3 million international visitors in the first 10 months of 2019 and out of these, 38% were from China.
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Southeast Asian countries remain in contact with constituents in Wuhan
(27 January 2020) Several Southeast Asian countries are in contact with their constituents who are currently in Wuhan, China and are making preparations for possible evacuation. Thai Prime Minister Prayut Chan-o-cha said on 27 January said he had ordered an aircraft to remain on standby for the possible evacuation of Thai nationals who wished to return home. The Philippine government said it is in contact with 150 Filipinos in Wuhan and according to Indonesian Foreign Minister Retno LP Marsudi, there were 428 Indonesians in Wuhan; 1,280 were in Beijing; and 849 in Shanghai. The respective governments are in contact with their constituents and have advised them to follow the advice of the health authorities in their areas. Meanwhile, Malaysian Prime Minister Mahathir Mohamad announced on 29 January that his government is in discussion with the Chinese government on the possible evacuation of Malaysians who are not ill. There are currently 78 Malaysians stranded in Wuhan.
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iQiyi launches Qisubo streaming service in Myanmar
(22 January 2020) Chinese online video platform iQiyi has launched its “Qisubo” streaming service in Myanmar, in partnership with local operator Myanmar Broadband Telecom (MBT) and optimisation services provider Panabit. MBT customers can now view content in 1080P and 4K quality using the iQiyi App via the Qisubo platform. The Qisubo service will be available throughout 14 major cities in the country. iQiyi first launched its international services through the iQiyi app in June 2019 and established a strategic partnership with Myanmar’s neighbour Malaysia through media brand Astro in November 2019.
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Laos eyes sale of 500,000 cattle to China
(23 January 2020) Laos is currently seeking ways to boost the annual sale of locally-reared cattle to over 500,000 animals, which is the number required by Yunnan province in China. According to Lao Prime Minister Thongloun Sisoulith, China has opened its markets to Lao products including vegetables, fruits, rice and animals however, Laos has been unable to meet the cattle demand. He advised the National Institute for Economic Research to focus on livestock farming in order to increase the number of animals raised and also recommended that the farming of goats, sheep and other animals should be studied and analysed. Figures from the Ministry of Industry and Commerce showed that Laos earned about US$36.6 million from the export of cattle and buffaloes in 2017 and the figure hit US$69.5 million in the first 10 months of 2018. Exports to China increased from US$8.73 million in 2017 to US$9.77 million in the first 10 months of 2018.
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ASEAN stands to gain from US-China Phase One trade deal, AMRO says
(20 January 2020) The ASEAN+3 Macroeconomic Research Office (AMRO) has upgraded its 2020 growth forecast for ASEAN+3 nations by 0.2 percentage points to 4.9%, just one month after its previous prediction of 4.7%. The macroeconomic watchdog upgraded its growth forecast in view of the recent signing of the Phase One trade deal between the US and China. According to AMRO, the ASEAN+3 countries stand to gain from trade diversions, in the interim. Vietnam and Malaysia were highlighted as the two countries in prime positions to attract more investments and trading activity. However, to fully reap these benefits, AMRO advises a mixture of structural, macroprudential, fiscal and monetary policies to prevent financial imbalances and enhance growth.
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CARI Captures 438: IMF trims growth forecast for ASEAN-5 countries due to sluggish exports

ASEAN

IMF trims growth forecast for ASEAN-5 countries due to sluggish exports
(21 January 2020) The International Monetary Fund (IMF) has trimmed its growth forecast for the ASEAN-5 countries by 0.1% for both 2020 and 2021, amid continued weak export figures. The ASEAN-5 countries, composing of Malaysia, Indonesia, Singapore, the Philippines, and Thailand, are now expected to grow by 4.8% and 5.1% respectively. The IMF has also revised its growth figures for the global economy for 2019, now believing it grew by 2.9% (another decrease of 0.1%). According to the organisation, global growth is projected to rise to 3.3% in 2020 and 3.4% in 2021.

ASEAN

Tourist arrivals to ASEAN in 2019 record 5% growth
(21 January 2020) Tourist arrivals to ASEAN recorded a 5% growth in 2019, exceeding the global average of 4%, according to the ASEAN Economic Community deputy secretary-general Dr. Aladdin D. Rillo. The region recorded a total of 133 million international arrivals in 2019, with intra-ASEAN arrivals making up 36.7% of the total arrivals. This was revealed during the conclusion of the recent ASEAN Tourism Forum 2020 in Brunei, where ministers convened to discuss efforts in making ASEAN a single tourism destination. Also discussed were efforts in making ASEAN tourism more sustainable and inclusive.

VIETNAM

EU’s Committee on International Trade agree on EU-Vietnam free trade deal
(21 January 2020) The European Union (EU)’s Committee on International Trade voted in favour of the free trade and investment protection agreements between the EU and Vietnam on 21 January. The agreement will remove almost all tariffs between both parties in ten years, protect emblematic European products, and allow European access to the Vietnamese public procurement market. The agreement also contains legally-binding rules on environmental protections and labour rights. Vietnam is the EU’s second-largest trading partner in Southeast Asia.

THAILAND

Thailand’s exports fall by 2.7% y-o-y in 2019 due to external uncertainties
(23 January 2020) Thailand’s exports fell by 2.7% in 2019 year-on-year due to the global economic slowdown, weak agricultural prices, and decreasing exports of major industrial products. Imports also dropped by 4.7% in the same year, and Thailand’s trade surplus for the year was US$9.6 billion. Thai exports to the US and China in December 2019 recorded y-o-y growth of 15.6% and 7.3% respectively. The Commerce Ministry stated that exports are likely to improve in the future as the impact of external factors start to “neutralise.”

THAILAND

Central banks of Thailand and Hong Kong mull issuing digital currencies for cross-border payments
(22 January 2020) The central banks of Thailand and Hong Kong have stated that they are moving towards issuing digital currencies to help facilitate cross-border payments between both countries. A report issued by the two banks discussed the technical feasibility of using central bank digital currencies (CBDC) to make cross-border payments more efficient and cheaper. The report also looked into practical issues such as foreign exchange pricing and its impact on liquidity. No timeframe has been set yet for a real transaction.

MALAYSIA

Non-financial institutions among those keen to apply for digital banking licences in Malaysia
(23 January 2020) Grab, Razer, AirAsia Group Bhd, and Axiata Group Bhd are among those looking to apply for digital banking licences in Malaysia. According to an international news wire, some of the firms were in discussions with consultancies on the possibilities of venturing into digital banking. In December 2019, Bank Negara Malaysia (BNM) announced that it would issue up to five licences to new online banks offering either conventional or Islamic banking under a proposed licencing framework that is scheduled to be finalised by June 2020. Based on BNM’s exposure draft revealed last December, digital banks have to maintain minimum capital funds unimpaired by losses of RM100 million (US$25 million) during the foundational phase and thereafter, the sum must be increased to RM300 million (US$74 million).

THE PHILIPPINES

The Philippines’ economic growth seen to hit 6.1% in 2020
(22 January 2020) The Philippine economy is projected to grow 6.1% this year, according to an IHS Markit economist. The figure is the same as the one projected by the World Bank but lower than the 6.2% projected by the Asian Development Bank. According to IHS Markit Asia-Pacific chief economist Rajiv Biswas, “GDP growth momentum is forecast to strengthen to 6.1% in 2020, helped by stronger exports as improving global electronics orders and the US-China ‘phase one’ trade deal [would] support Philippines exports [amid the] continued ramping-up of the Duterte administration’s Build, Build, Build infrastructure program.”

SINGAPORE

Singapore announces new AI initiatives at WEF
(21 January 2020) Singapore announced a set of three initiatives aimed at improving consumer trust on the use and governance of artificial intelligence (AI) at the World Economic Forum (WEF) on 21 January. The initiatives are an Implementation and Self-Assessment Guide for Organisations (ISAGO); a compendium of use cases; and a second edition of the Model AI Governance Framework. The announcement followed a similar move at the WEF meeting in November 2019 where Singapore launched the first edition of Model AI and announced its National AI Strategy. The Model AI Governance Framework was updated to include additional considerations such as robustness and reproducibility, and is aimed at making it more relevant and usable.

INDONESIA

Indonesia records lower trade deficit in December 2019
(20 January 2020) Indonesia registered a trade balance of US$0.03 billion in December 2019, shrinking significantly from the US$1.39 billion it registered in November 2019.”The improvement stemmed from a non-oil and gas trade surplus due to declining non-oil and gas imports across all commodity groups coupled with stronger non-oil and gas export performance,” Onny Widjanarko, Executive Director of the BI Communication Department, noted in a statement dated 20 January. Indonesia’s trade balance recorded a deficit of US$3.20 billion in 2019, considerably lower than the US$8.70 billion deficit recorded in 2018.

INDONESIA

WeChat Pay now legally accepted in Indonesia
(16 January 2020) China-based e-wallet We-Chat Pay has been granted a permit by Bank Indonesia (BI) to operate in the country. According to BI deputy governor Sugeng, the central bank granted the permit on 1 January. The permit was granted after WeChat Pay formed a partnership with private bank CIMB Niaga. The bank will serve as an “acquirer” in charge of processing each transaction made through the e-wallet platform. WeChat Pay’s entry into the Indonesian growing cashless ecosystem coincided with the implementation of BI’s Quick Response Indonesia Standard (QRIS) code, which is a nationwide standard QR payment system. Customers using WeChat Pay will be able to use it when buying from merchants that support QRIS.

Mekong Monitor: World Bank cautions Thailand on GDP growth outlook

Photo credit: Bangkok Post

TRADE, ECONOMY, AND INVESTMENT

THAILAND

World Bank cautions Thailand on GDP growth outlook
(18 January 2020) The World Bank has downgraded Thailand’s economic growth outlook for 2020 to 2.7%. The latest revised figure is still higher than the bank’s growth estimate of 2.5% for 2019 but it cautioned that Thailand’s average annual economic growth will remain below 3% if there is no significant increase in productivity growth and investment. According to the World Bank’s Thailand Economic Monitor report, productivity growth fell from 3.6% during 1999-2007 to 1.3% during 2010-2016. Private investment has halved from 30% of GDP in 1997 to 15% in 2018, as foreign direct investment slowed and progress stalled on projects related to the Eastern Economic Corridor. The country’s economy grew by 2.5% during the January-September 2019, dampened by an export slump that stemmed from the global economic slowdown and US-China trade tensions, elevated household debt weighing on domestic consumption and weak investment after a months-long delay in annual budget spending for fiscal 2020.
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CAMBODIA, VIETNAM

Cambodia, Vietnam pledge to combat cross-border offences
(21 January 2020) Cambodia and Vietnam have committed to continue taking tough measures to prevent and crack down on all forms of cross-border offences, particularly drug and forestry offences along the common border. The joint commitment was made by Cambodian Deputy Prime Minister Sar Kheng and Gen. To Lam, Vietnam’s Minister of Public Security, during their meeting to review the outcome of their countries’ cooperation in 2019. Sar Kheng was on a working visit to Ho Chi Minh City from 17 to 19 January. The two sides have also agreed to counter illegal border crossing and have also pledged to continue their cooperation in borderline management and peaceful resolution of different issues based on the principles of mutual respect of independence and sovereignty.
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VIETNAM

Viettel becomes world’s 6th provider of 5G devices
(20 January 2020) Vietnam telecom company Viettel announced that it is now the sixth provider of 5G devices globally, behind Ericsson, Nokia, Huawei, Samsung and ZTE. According to Viettel general director Le Dang Dung, the 5G network will determine the success of the digital economy and that many countries are using 5G services to strengthen their science-technology position on the global market and develop their economies. Viettel said it will start commercialising the devices by June 2020 and produce the devices on a large scale in 2021. Viettel currently has more than 110 million customers in 11 countries. The telecom company hopes to build civil and military products by using “5G technology system” developed and manufactured in Vietnam.
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CAMBODIA

Cambodian government takes steps to lower logistics, transport costs
(20 January 2020) The Cambodian government is taking measures to reduce logistics and transport costs to maintain its competitiveness in light of the possible loss of the European Union’s Everything But Arms (EBA) scheme. The EU is scheduled to decide in February 2020 whether or not it would like to withdraw the trade privileges from Cambodia. The reduction in logistics and transport costs include the terminal handling charge in Sihanoukville Autonomous Port and Phnom Penh Autonomous Port which has been reduced by $5 per twenty-foot equivalent unit (TEU), and the container imbalance charge that has been reduced by $12 for a 20-foot container and $40 for a 40-foot one.
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MYANMAR

Myanmar, Japan sign Exchange of Notes on 4 projects worth about US$1.1 billion
(22 January 2020) Myanmar and Japan have signed four Exchange Notes for four loan projects, worth US$1.1 billion. The four loan projects are the Yangon Sewerage System Development Project in Yangon; Urban Development Project; the Power Distribution Improvement Project in Yangon and Mandalay; and Providing funds to the Regional Infrastructure Improvement Project in Chin, Rakhine, Mon and Kayin states and Taninthayi Region. The Exchange of Notes for the projects were signed in Nay Pyi Taw on 21 January by Ambassador of Japan Mr Maruyama Ichiro and Deputy Minister for Planning, Finance and Industry U Maung Maung Win.
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About Greater Mekong Subregion (GMS)

The Greater Mekong Subregion (GMS) Economic Programme was launched by the Asian Development Bank in 1992 connecting five developing ASEAN countries, namely Cambodia, Laos, Myanmar, Vietnam and Thailand, and Chinese provinces of Yunnan and Guangxi Zhuang Autonomous region. The region has some of the most robust economies sharing the Mekong River Basin thanks to its reform and liberalisation. The subregion is growing at a faster pace than the whole of East Asia and the Asia Pacific as the GDP growth rate for 2017 was at 6.4 percent, according to the World Bank. The population at the subregion as of 2016 is at 340 million while the GDP at PPP is at US$3.1 trillion in 2016. In 2015, trading within the region was at US$444 billion.

China-ASEAN Monitor: Malaysia-China 2019 bilateral trade register record growth of 14.2% y-o-y

Photo Credit: Malaysiakini

Economy, Investment and Trade

Malaysia-China 2019 bilateral trade register record growth of 14.2% y-o-y
(20 January 2020) Trade between China and Malaysia registered a record growth of 14.2% year-on-year to US$124.0 billion in 2019 from US$108.6 billion in 2018. China’s ambassador to Malaysia Bai Tian stated that this growth in trade demonstrated Chinese investor’s continued confidence in Malaysia after 45 years of diplomatic relations. He believes that with the encouraging investment atmosphere and friendship with Malaysia, China will continue to work closely and create investment opportunities with Malaysia, he said after the signing of a memorandum of agreement (MoA) between InvestKL’s China Special Channel (CSC) and the Chinese Business Chambers.
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Malaysia fears drop in palm oil exports after US-China trade truce
(16 January 2020) The Malaysian Palm Oil Board stated that Malaysian palm oil exports to China might suffer after the US and China had signed the so-called “phase one” trade deal on January 15. As part of the deal, China had agreed to purchase more agricultural products from the US, including palm oil’s major competitor, soybean. Malaysian palm oil exports to China had jumped 27.6% in the first 10 months of 2019 as compared to the same period last year. Malaysia exported a total of 2.49 million metric tons of palm oil to China last year.
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Chinese coronavirus outbreak threatens Thai tourism industry during Lunar New Year
(22 January 2020) The recent outbreak of a coronavirus virus originating from Wuhan, China, is threatening Thailand’s vital tourism industry during the approaching Lunar New Year, normally a peak travel period. Thai authorities have set up temperature detectors at airport arrival gates for flights from Wuhan in order to prevent a wider panic which might scare away tourists. Chinese tourists have become the largest spenders in Thailand, accounting for 30% of tourist receipts last year. The World Health Organization emergency committee is set to meet on 22 January to discuss whether the outbreak constitutes a public health emergency.
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Myanmar and China sign 33 bilateral agreements under Belt and Road Initiative
(18 January 2020) Myanmar and China signed 33 bilateral agreements under the Belt and Road Initiative. Among the projects agreed upon included railways linking China to Kyaukpyu on the Bay of Bengal in Rakhine, a deep sea port in Rakhine, and a special economic zone near the Chinese border. It was reported, however that key details of the agreements, including key bidding and financing arrangements, have been left open to future negotiations. Left off the table was the now-suspended Myitsone hydropower dam in Kachin state, which is valued at US$3.6 billion.
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Chinese company looking to invest ‘millions of dollars’ into cotton industry in Cambodian province
(20 January 2020) A Chinese company is reportedly looking to invest “millions of dollars” Kampong Speu province’s cotton industry, according to the provincial governor Vei Samnang. The Chinese firm is looking to invest money into 30,000 hectares for growing and processing the crop. The name of the company or exact figures on the amount to be invested was not revealed. Provincial authorities will reportedly help the firm buy land by connecting them with landowners.
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ASEAN Roundtable | Series Smart Showcase Series on Making Digital Healthcare Affordable and Accessible in ASEAN 4.0

Published on 20 January 2020

ASEAN Roundtable Series

CARI Viewpoints: Innovations in Digital Healthcare provides opportunities for ASEAN to provide more affordable and inclusive healthcare for the poor

The CIMB ASEAN Research Institute (CARI) in collaboration with the ASEAN-BAC Malaysia Healthcare Working Group held an ASEAN Roundtable Series on “Smart Showcase Series: ASEAN Healthcare Dialogue”. The roundtable was held on 20 November 2019 alongside the ASEAN Health Summit & Exhibition which was held at Perdana Hall, MITI Tower, from 20-21 November.

Entitled “Making Digital Healthcare Affordable and Accessible in ASEAN 4.0,” the roundtable looked at how innovation in the digital space, whether it be artificial intelligence (AI), blockchain, robotics and the internet-of-things (IoT), could be leveraged to increase efficiencies, reduce medical costs, and detect life-threatening illnesses earlier.

To bring clarity to an important yet complex issue, the roundtable was headlined by Malaysia’s deputy health minister YB Dr. Lee Boon Chye. Other speakers featured in the roundtable included Franck Perraudin, Asia Head, External Affairs & Public Affairs, Sanofi; Prof. David Bloom, Professor of Health Economics and Demography, Harvard School of Public Health, Department of Global Health, Harvard University; Hazmin Abdul Rahim, SAP Public Services Director for SAP Malaysia; Dr. Marcus Schabacker, President & CEO, ECRI Institute, USA; and Arin Jira, Chairman, 2019 ASEAN Business Advisory Council Thailand.

Moderating the talk was Tan Sri Munir Majid, Chairman of CIMB ASEAN Research Institute (CARI), President of the ASEAN Business Club, and member of Malaysia’s Economic Action Council chaired by the Prime Minister.

Malaysia in the Digital Healthcare Sphere

The session was opened by YB Dr. Lee Boon Chye, who discussed what Malaysia is doing specifically in the realm of Digital Healthcare. He stated that Malaysia has a “real vision” in providing accessible healthcare for all Malaysians, and that he hopes private enterprises can aid in this endeavour by providing innovative solutions such as wearables, online appointment making, home care etc. He gave an example of one initiative the Malaysian government is undertaking, which is the Malaysian Health Data Warehouse, a patient data collection system.

Hazmin Rahim stated that a technology company such as SAP Malaysia would welcome opportunities to collaborate with governments and non-profit organisations to find new innovative ways of providing better quality healthcare.

Digital Healthcare in ASEAN

Tan Sri Munir Majid elaborated on what ASEAN as a whole is doing in terms of Digital Healthcare. He noted that the Healthcare Working Group established by ASEAN-BAC Malaysia is the first of its kind, and was set up to push for specific proposals on ASEAN healthcare integration. One example he provides is establishing common standards on the manufacturing of healthcare equipment, which would help facilitate the free flow of products within ASEAN.

Dr. Schabacker observed that ASEAN is currently undergoing the twin dynamics of an ageing population and rapid urbanisation. While he agrees that digital technologies may provide solutions to some of the problems brought on by these dynamics, the adoption of said technologies must be based on evidence-based standards and independent evaluations given the humanitarian cost of healthcare. He believes that ASEAN has the obligation to set these standards before allowing the free flow of goods. He also opines that given the speed at which the healthcare world is moving, it is incumbent on all stakeholders in the healthcare world to work together.

Arin Jira for his part reiterated his concern that any discussions involving healthcare should be mindful of the fact that healthcare remains out of reach for many of ASEAN’s poorest. He challenged healthcare technologists to come up with a scheme that would replicate the evolution of the mobile phone, pointing to the increasing affordability of the latter.

Can innovation make healthcare more accessible?

On how ASEAN could deliver better and more affordable health care, Dr. Schabacker believes that ASEAN must focus on proven solutions rather than exciting or “fancy” solutions in light of limited resources.

Professor Bloom expanded the discussion by noting that this focus on urbanisation might ignore the needs of rural populations, and that digital innovations might help meet both needs. He provided the example of the US-based startup HealthTap, which provides free medical consultations from certified doctors.

Professor Bloom complimented the idea of integrating data systems across ASEAN, since it would allow the pooling together of data from different countries to allow policymakers to make optimal decisions when designing healthcare systems. YB Dr. Lee, however, observed that there are still many barriers in implementing a uniform ASEAN-wide framework.

The issue of price benchmarking was raised where inconsistent pricing has been observed. YB Dr. Lee suggested that ASEAN could leverage upon its single community when negotiating for lower prices with pharmaceutical and technology companies. He added however that the disparity of economic development across ASEAN would make benchmarking difficult.

In response to another query on how pharmaceutical companies can be encouraged to lower drug prices to meet public policy objectives, YB Dr. Lee stated that lowering the costs of doing business through a single regulatory agency may be beneficial, although he conceded this is not a foolproof plan.

A Digital Healthcare Roadmap for ASEAN?

Noting the common consensus among the panellists for greater cooperation, the panellists discussed whether it was time for a digital healthcare roadmap for ASEAN. YB Dr. Lee opined that Malaysia could perhaps serve as a “conduit” for cooperation between more and less developed ASEAN Member States, although Tan Sri Munir believes that implementing specific projects would be more impactful than more roadmaps.

Mr Perraudin stressed an effective roadmap and/or public-private partnership would require identifying the appropriate end goals and working backwards from there. Dr. Schabacker added that one end goal in particular, we should consider is patient safety, since new technologies may bring their own problems with them.

Diagnostics and preventative care

On the topic of the importance of diagnostics and preventative care, Dr. Bloom argued that promoting cheaper diagnostics could certainly be useful in reducing healthcare costs by catching diseases early on. He also argued that from a financial standpoint, it would make more sense to finance certain health systems through debt rather than taxation, since the benefits would be accrued later on. YB Dr. Lee also agreed, pointing to recent advancements in creating a more accurate and faster diagnostics. Dr. Schabacker warned that better diagnostics will ultimately have to be accompanied by effective care to have a meaningful impact.

Concluding remarks

In his concluding remarks, YB Dr. Lee observed that to expand the quality and cost-effectiveness of healthcare, two key areas that should be focused on include preventative care and patient empowerment. He stated that digital healthcare can serve as an enabler, rather than an end goal, in achieving these two respective objectives.

Dr. Bloom, for his part, observed that the discussions made in the session provided optimism that the future challenges facing the healthcare sector can be overcome.

ASEAN Roundtable Series

CARI Captures 437: Healthtech investments in Southeast Asia reach US$266m in 2019

ASEAN

Healthtech investments in Southeast Asia reach US$266m in 2019
(11 January 2020) Southeast Asia recorded a total of US$266 million in healthtech investments in 2019, with Singapore and Indonesia capturing around 93% of the total funding value, according to a report by a Singapore-based advisory firm. The amount is 2.25 times higher than the total of US$118 million in investments received in 2018. In terms of deal volume share, Singapore kept its lead with a 54% share, followed by Indonesia which tripled its deal volume share to 15%. The healthtech categories that received the most funding by value in Southeast Asia were health management solutions, patient solutions, medical diagnostics, medical education, and population health management.

VIETNAM

Vietnam proposes 14 initiatives for ASEAN 2020
(15 January 2020) Vietnam, as ASEAN Chair for 2020, proposed 14 initiatives, priorities and specific cooperation plans that were discussed with ASEAN member states at the first meeting of the ASEAN senior economic officials for the 51st ASEAN Economic Ministers’ Meeting held in Hanoi from 12-14 January. The initiatives were built around ASEAN’s 2020 theme, “Cohesive and Responsive,” which prioritises three areas under the ASEAN economic pillar: promoting intra-ASEAN economic integration and connectivity, intensifying partnerships for peace and sustainable development, and enhancing ASEAN’s adaptive capacity and operational efficiency. Vietnam has collected the suggestions on the proposals from participants of the meeting and will submit them to the ministers for approval.

THE PHILIPPINES

The Philippines’ economy expected to accelerate to 6.6% in 2020
(14 January 2020) The Philippines’ economy is expected to improve in 2020, rising from 6.2% growth in 2019 to 6.6% in 2020. This projected increase in growth is attributed to stronger consumer spending, growing tourism, and easing monetary conditions. The government is committed to spend aggressively on infrastructure until the end of 2020, which is expected to boost consumer spending. The country’s central bank, Bangko Sentral ng Pilipinas, is also expected to cut reserve requirement by 1-2% and potentially reduce the policy rate by 50 basis points from current levels, according to a local investment bank spokesperson. The reserve requirement currently stands at 14%.

MALAYSIA, SINGAPORE

Malaysia, Singapore committed to concluding RTS Link agreement by April 2020
(10 January 2020) Malaysia and Singapore are committed to concluding the agreement on the Johor Bahru-Singapore Rapid Transit System (RTS) Link project by April 2020, according to Malaysia’s Transport Minister Anthony Loke. The status of the RTS Link project looked uncertain after the 2018 Malaysian general elections as the then new government embarked on a review of agreements signed by the previous administration and in November 2019, Malaysia suspended the RTS Link project for the third time. Upon completion, RTS Link will connect Bukit Chagar in Johor Bahru to Woodlands in Singapore, ferrying 10,000 passengers per hour each way and is expected to ease traffic congestion on the Causeway. The project, which was meant to be completed in 2024 is now behind schedule.

MALAYSIA

Malaysia considering breaking up state-controlled firms to foster more competition
(15 January 2020) The Malaysian government has stated that it is considering divesting its “golden shares” in state-owned firms in order to foster more transparency and competition in the economy, as well as allow more participation by private investment. A golden share allows the government to outvote all other shareholders on certain matters, such as the appointment of chief executive officers. The Malaysian government said it will look at each company on a case-by-case basis but analysts warned that efforts to overhaul state-owned firms may also trigger upheaval in the market if not done through proper consultation with stakeholders and given enough time. The government’s move of slashing broadband prices after the May 2018 election has caused state-owned telecom operator Telekom Malaysia Berhad to lose almost US$1 billion in market value since May 2018.

THAILAND

Thailand avoids US ‘currency manipulator’ tag
(14 January 2020) Thailand has avoided being included in the latest watch list of “currency manipulators” issued by the US Treasury. In the 12 months through November 2019, Thailand’s goods trade surplus with the US passed the US$20 billion mark while its current surplus account exceeded 2% of its GDP, according to US government data. However, the Thai baht’s almost 9% rise against the US dollar last year means “no one should consider Thailand as one that has tried to manipulate” its exchange rate to gain an export advantage, said the country’s central bank governor in an interview on 8 January. Ten countries that are possibly using their exchange rates to gain an export advantage over the US were listed in the semi-annual report released on 13 January. Three ASEAN countries, Singapore, Malaysia, and Vietnam, remained on the list from May 2019.

MYANMAR

Myanmar economic growth expected to reach to 6.4% in fiscal year 2019/2020
(15 January 2020) The World Bank expects economic growth in Myanmar’s fiscal year 2019/2020 to rise to 6.4%, up from 6.3% in 2018/2019 and 6.2% in 2017/2018. The projected growth was attributed to increasing government investment in transportation and communication. A larger inflow of FDI into construction is also expected to boost growth. Other expected growth sectors include tourism, the services sector, and agriculture. However, pressure on core inflation is expected to intensify this year due to higher electricity tariffs and an ongoing power shortage.

INDONESIA

Indonesia’s stock market to overtake Thailand’s as the largest in Southeast Asia
(16 January 2020) Indonesia’s stock market is poised to overtake Thailand as Southeast Asia’s largest equity market by market valuation. Indonesia’s stock market gained 5.5% in US dollar terms in the last three months to reach US$529 billion, nearly matching the market value of Thailand’s which took the top spot from Singapore in May 2019. Before 2019, Singapore’s equity market had been the region’s leader for the vast majority of the time since 2003. The growth of the Indonesian bourse was attributed to President Joko Widodo’s infrastructure projects, political landscape, and reforms.

INDONESIA

Abu Dhabi Crown Prince and former British PM to chair panel on construction of new capital
(14 January 2020) Indonesia nominated Abu Dhabi’s Crown Prince Mohammed Bin Zayed Al Nahyan, former British Prime Minister Tony Blair, and SoftBank Chief Executive Officer Masayoshi Son for a panel to advise the government on the building of a new capital city in east Kalimantan province on the island of Borneo. The panel is also intended to provide confidence to prospective investors. The new capital is expected to cost around US$34 billion, and 80% of the cost will be covered by private investors and state-owned corporations. Civil servants will start moving into the city in phases starting in 2024, and the eventual population of the city is expected be about 6-7 million.

SINGAPORE

Hong Kong asset managers keen to open offices in Singapore
(14 January 2020) The protests in Hong Kong have increased the number of queries from the city’s fund managers about possibly opening offices in Singapore. According to a corporate finance consulting firm, there has been an increase in the number of applications from Hong Kong asset managers to open offices in Singapore and apply for licenses to do regulated business. The total number of fund management companies, licensed and registered by the Monetary Authority of Singapore grew 9% to 892 as of 8 January 2020 from 820 as of 31 May 2019. The corporate finance consulting firm added that while the protests accelerated the decision by Hong Kong fund managers to open offices in Singapore, it is not the main driver of the firms applying to do regulated business in the city-state.

Mekong Monitor: Challenging year expected for Vietnam’s steel industry

Photo credit: SGGP

TRADE, ECONOMY, AND INVESTMENT

VIETNAM

Challenging year expected for Vietnam’s steel industry
(15 January 2020) The steel industry in Vietnam is expected to face difficulties in 2020 due to an increase in production capacity, lower demand and protectionist measures by countries reducing imports. In 2019, exports to the US and the EU markets, the second and third largest markets for Vietnamese steel, fell by a combined 44% in terms of volume. While opportunities in 2020 such as the EU-Vietnam Free Trade Agreement is expected to boost steel production and exports, a slowdown in the Chinese economy may negatively impact steel demand, indirectly affecting steel prices in Việtnam. According to the Vietnam Steel Association, China’s steel demand is forecasted to rise by only 1% in 2020, much lower than the estimated 2019 growth rate of 7.8%.
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THAILAND, MYANMAR

Thailand’s Kasikorn Bank to acquire a 35% stake in Myanmar’s Ayeyarwaddy Farmers Development Bank
(13 January 2020) Thailand’s Kasikorn Bank has sought approval from the Central Bank of Myanmar to acquire a 35% stake in Myanmar’s Ayeyarwaddy Farmers Development Bank. The move follows the Central Bank of Myanmar’s decision in January 2019 to allow foreign banks to hold shares in local banks. Kasikorn Bank mainly provides services in small and medium-size enterprise lending, and retail and digital banking. The acquisition will allow it to expand its reach in Myanmar by leveraging Ayeyarwaddy Farmers Development Bank’s network. Ayeyarwaddy Farmers Development Bank has registered capital worth US$27 million and assets worth US$213 million.
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THAILAND, MYANMAR

Thailand, Myanmar to collaborate on cross border transfers
(9 January 2020) Thailand’s Siam Commercial Bank (SCB) and Myanmar’s Ayeyarwady Bank (AYA Bank) signed a memorandum of understanding (MoU) to work together on the development of cross border payments and fund transfer services between the two countries. The move cements an October 2019 agreement between the two countries’ central banks to promote the official use of the Thai baht and Myanmar kyat for cross-border trading. Trading at the Thai-Myanmar border is already conducted in baht and kyat but for payments that are processed through banks, the transactions are conducted in US dollars which results in leakages through foreign exchange losses.
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CAMBODIA, THAILAND

Cambodia seeks further inroads into Thailand’s retail market
(14 January 2020) Cambodia is looking into ways to increase the display of its products in supermarkets across Thailand. Ouk Sorphorn, the Cambodian Ambassador to Thailand has asked Thailand’s Siam Piwat Company Limited to distribute Cambodian goods in its retail outlets. According to him, Cambodia currently has a trade deficit with Thailand and stocking its products in Thai supermarkets can help reduce the deficit. The products to be displayed include the Kampot Pepper and Kampong Speu Sugar. A report by the Thai Embassy in Phnom Penh revealed that the trade volume between the two countries reached US$4.2 billion in the first half of 2019, marking a 7% increase over the same period in 2018.
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VIETNAM

MoU signed for the development of sustainable clam supply chain in the Mekong Delta
(10 January 2020) Vietnam’s Ben Tre, Tien Giang and Tra Vinh provinces signed an agreement with the Netherland’s Lenger Seafoods Vietnam to establish closed clam supply chains encompassing all stages from breeding and harvesting to transporting and processing. The memorandum of understanding (MoU) was signed under the EU-funded “Inclusive and sustainable clam and bamboo value chains development in Vietnam” project carried out by Oxfam, ICAFIS and the Vietnam Chamber of Commerce and Industry in 2018-2022. The project aims to achieve sustainable clam production in the country and prevent overexploitation.
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About Greater Mekong Subregion (GMS)

China-ASEAN Monitor: China boosts trade with ASEAN to offset declining trade with the US

Photo Credit: Nikkei Asian Review

Economy, Investment and Trade

China boosts trade with ASEAN to offset declining trade with the US
(15 January 2020) According to recent data released by China’s General Administration of Customs, China had boosted trade with ASEAN to offset declining trade with the US. It was reported that exports to Vietnam rose by 16.7% y-o-y, the Philippines by 16.3%, Malaysia by 14.9%, and Singapore by 11.6%. This comes amidst a historic low in trade with the US, with Chinese exports to the US dropping by 12.5% for 2019, while imports plunged by 20.9%. Overall, ASEAN overtook the US to become China’s second-largest trading partner in 2019.
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Ceasefire in US-China trade war may help boost Southeast Asian property market
(14 January 2020) The stabilisation in the trade war between the US and China may help bolster the Southeast Asian property market in 2020, according to industry players at a recent real estate summit in Beijing. The uncertainty caused by the two-year trade spat between both economies pushed many Asian currencies down, deterring many property investors worried about their investment being devalued. The potential phase-one deal between the US and China announced in December 2019 puts Southeast Asia in a good spot as the currencies have begun to stabilise, according to an Indonesian property developer.
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Chinese President Xi Jinping to visit Myanmar to boost trade and investment ties
(13 January 2020) Chinese President Xi Jinping is set to visit Myanmar on 17 January as part of commemorations of 70 years of diplomatic ties and to boost bilateral trade and investment. It is believed that both countries will seek to deepen economic relations through China’s Belt and Road Initiative, while also discussing stalled Chinese projects such as the Myitsone hydropower dam project in Kachin state and its deep-sea port and special economic zone in Rakhine state. One academic stated that the fact that Myanmar was chosen as Xi’s first state visit of 2020 highlights the strategic importance of Myanmar to Beijing.
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Thai brands hope to tap Chinese market through Chinese tourists
(13 January 2020) Several Thai brands hope to gain popularity among Chinese tourists visiting the country, looking to use them as a gateway to the Chinese market. It is believed that around 10.5 million people from mainland China visited Thailand in 2018, taking home local products including dried durian and mango, beauty creams, coconut waters, and latex pillows. While some brands prefer to sell their goods on Chinese e-commerce platforms such as Tmall.com or JD.com, others have also set up shop in China itself. However, one academic warned that only businesses with ‘financial clout and business acumen’ have made it in China, due to the high operating costs there.
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China and Laos sign agreement to initiate direct currency exchange

(13 January 2020) The central banks of China and Laos signed the Agreement on Bilateral Local Currency Cooperation on 6 January 2020 in Beijing. Through the agreement, both countries agreed to facilitate the direct exchange of the Lao kip and the Chinese yuan instead of having to make conversions to other currencies. Under the currency cooperation agreement, both central banks agreed to enhance cooperation and advance settlements and payments for trade and investment between the residents of both countries. It is hoped that through the agreement monetary and financial cooperation would be boosted, while also facilitating trade and investment.
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Press Release: Vietnam should galvanise ASEAN to support the call for world economic peace during ASEAN 2020 Chairmanship

Vietnam should galvanise ASEAN to support the call for world economic peace during ASEAN 2020 Chairmanship

(From left): Tan Sri Dr. Munir Majid, Chairman of CARI and ASEAN-BAC Malaysia; and H.E. Dr. Le Quy Quynh, Ambassador of Vietnam to Malaysia

Kuala Lumpur, 14 January 2020 – Vietnam, as the ASEAN Chair for 2020, will focus on enhancing ASEAN solidarity, economic integration and identity while being more responsive by promoting ASEAN pro-activeness, under the ASEAN 2020 theme, “Cohesive and Responsive”.

The key agenda for Vietnam this year includes boosting intra-ASEAN trade and investment through regional dialogues and discussions; the development of the circular economy through a best practices sharing platform; and the development of a Digital Integration Index to monitor and improve the key areas under the ASEAN Digital Integration Framework.

H.E. Dr. Le Quy Quynh, Ambassador of Vietnam to Malaysia presented at the exclusive event titled “CARI Briefings: ASEAN 2020 Outlook and Vietnam’s ASEAN Chairmanship 2020.”

“ASEAN as a whole must stand together and speak out for a rules-based international order to meet the challenges of an increasingly unstable international security and trade environment. In this time of global uncertainty, which was recently heightened by the ongoing US-Iran standoff, unity and solidarity among ASEAN Member States remain crucial as is ASEAN centrality in the international arena,” said Dr. Quynh.

Dr. Quynh explained that for ASEAN to be a more responsive force on the global stage, Vietnam intends to improve institutional capacity through institutional reforms and improvements in the rules of procedures and processes within ASEAN-led mechanisms. The adoption of ASEAN Outlook on the Indo-Pacific (AOIP) in 2019 under Thailand’s chairmanship demonstrates ASEAN’s unity in its desire to maintain a central role in regional integration efforts. Designed as a guide to cooperation in the region, particularly the Asia-Pacific and Indian Ocean regions, the AOIP could also serve as a guide on how ASEAN can address other future issues threatening peace and prosperity in the region.

Tan Sri Dr. Munir Majid, Chairman of CIMB ASEAN Research Institute (CARI), who delivered the keynote presentation at the briefing expects Vietnam’s chairmanship of ASEAN to demonstrate a more robust leadership that would go beyond its theme of “cohesive and responsive” to being action-oriented and proactive.

“Vietnam should next take the lead in galvanising ASEAN towards challenging anti-international trade and the rules-based world economy, by speaking with one voice with a well-prepared stance, at APEC, at the G-20 (both coming up in November). ASEAN must be the region that leads the call for world economic peace,” said Tan Sri Munir.

The percentage for intra-ASEAN trade has dropped to 23.0% in 2018 even though the value of intra-ASEAN trade in goods increased from US$591 billion in 2017 to US$647.5 billion in 2018.

“Trade is the lifeblood of the US$3 trillion ASEAN economy, constituting 90% of its GDP. Improving intra-ASEAN trade (and investment) is essential at a time particularly of headwinds against international trade. ASEAN must be the region that leads the call for world economic peace,” said Tan Sri Munir.

He added that another area of concern hindering ASEAN trade is non-tariff barriers.

“Vietnam should focus on reducing the non-tariff barriers which make a nonsense of the ASEAN Economic Community (AEC). They have been rising instead of falling since the AEC was pronounced in Kuala Lumpur in 2015. Intra-ASEAN trade has stubbornly stuck at less than 25%. Even intra-RCEP trade is higher at 32%,” Tan Sri Munir pointed out.

ASEAN performed well in 2018, having risen to the fifth-largest economy in the world with a nominal GDP totalling US$3.0 trillion and capturing its highest ever total FDI inflows of US$154.7 billion. However, after achieving a growth rate of 5.2% in 2018, forecasts predict a year-on-year slowdown in 2019 before the growth rate is expected to pick up in 2020, explained Tan Sri Munir.

CARI Captures 436: Indian restrictions on refined palm oil may cause price war between Malaysia and Indonesia

MALAYSIA, INDONESIA

Indian restrictions on refined palm oil may result in price war between Malaysia and Indonesia
(9 January 2020) The Palm Oil Refiners Association of Malaysia claimed that India’s move on 8 January to amend the import of refined palm oil to ‘restricted’ will lead to a price war between Indonesia and Malaysia on crude palm oil sales to India. This is because Malaysia would now have to compete on crude palm oil sales to India, where Indonesia has traditionally been more cost-competitive. The recent restrictions could amount to quotas or more regulations. It is widely suspected that India’s move was due to diplomatic rifts with Malaysia over the fugitive preacher Zakir Naik and comments made by Malaysian Prime Minister Mahathir over Kashmir. A recent report by a prominent Indian news outlet suggested that India may consider imposing formal checks on Malaysia’s exports of palm oil and electronic goods.

MALAYSIA

Malaysia’s shadow economy takes up 20% of GDP, claims finance minister
(8 January 2020) Malaysia’s Finance Minister Lim Guan Eng stated that Malaysia’s so-called shadow economy comprises 20% of its GDP, referring to it as ‘uncommonly high for a developing country’ (which is normally around 12%). He described the shadow economy as consisting of corruption, smuggling, and unreported income, and that the 1MDB financial scandal alone was worth RM52 billion (US$13 billion). He also stated that the government’s tax revenue target for 2020 is RM155 billion (US$38 billion), as compared to RM145 billion (US$35 billion) in 2019.

TINDONESIA

Indonesia’s 2019 budget deficit rises to 2.2%
(7 January 2020) Indonesia’s 2019 state budget deficit reached 2.2% of its GDP, higher than the 1.8% government target due to a revenue shortfall of around US$15 billion. According to Finance Minister Sri Mulyani Indrawati, the government collected US$142 billion in state revenue in 2019, which was below the targeted amount of US$157 billion. The shortfall in tax revenue totalled US$18 billion, the lowest in at least five years. The lower tax revenue was the result of contractions in the manufacturing sector and mining industry.

THE PHILIPPINES

Instability in the Middle East expected to impact the economy
(8 January 2020) Instability in the Middle East could potentially affect the Philippine economy due to possible reduction in remittances if the situation escalates. Almost 2.3 Filipinos work abroad, with an estimated 1.25 million working in the Middle East. Remittance payments to families of overseas workers contribute significantly to the Philippine economy as the average Filipino overseas worker sends back US$1,630 back annually. Foreign remittance payments account for the second-largest source of foreign capital and contribute more than 10% to the country’s GDP. If the situation in the Middle East escalates and Filipino overseas workers are forced to return from Iraq and Iran, the families of the overseas workers stand to lose around US$12 million annually.

THE PHILIPPINES

The Philippines’ 2019 inflation reaches 2.5%, staying within government target
(7 January 2020) The inflation rate in the Philippines reached 2.5% in December 2019, bringing the entire year’s inflation rate to 2.5%. This was within the government’s 2019 target range of 2.0%-4.0%, according to the Philippines Socioeconomic Planning Secretary Ernesto Pernia. The inflation in December was primarily driven by the increase in the prices of both food and non-food items as a result of typhoons and rising oil prices. According to Pernia, even though the inflation rate was within the targeted range, the government must remain vigilant and proactive in managing the effects of potential price pressures caused by events such as typhoons, African swine fever and the heightened conflict in the Middle East.

SINGAPORE

Singapore exchange to remove quarterly reporting requirements starting in February
(9 January 2020) The regulatory arm of Singapore’s bourse plans to end requirements for listed companies with market capitalisation of above US$56 million to report their quarterly earnings. The rule change will take effect on February 7, and will only apply to companies not deemed as risky. Other changes to take effect include the tightening of other disclosure rules and the introduction of a new whistleblowing policy to protect investors. The Singapore Exchange Regulation stated that these changes were to encourage companies to focus ‘on the long term’. The quarterly reporting requirements will still apply to 100 companies when the rules change in February.

THAILAND

Thailand now at risk of being deemed currency manipulator by US Treasury
(8 January 2020) Thailand is now at risk of being placed on the US Treasury’s currency manipulators watchlist after its 12-month trade surplus with the US exceeded US$20 billion. The surplus had reached US$20.05 billion in the 12 months through November according to recent US data. This comes amidst the Thai government’s efforts in stemming the rise of the baht as one of Asia’s fastest appreciating currency, with a 6% gain against the dollar over the past year. Bank of Thailand Governor Veerathai Santiprabhob recently stated that Thailand is engaged in close dialogue with US officials concerning the matter.

THAILAND

Thailand Central Bank to further ease restrictions on capital outflows to ease gains in the baht
(8 January 2020) The Bank of Thailand Governor Veerathai Santiprabhob has stated plans to ease restrictions on capital outflows in the coming months to curb gains made by the baht. Thailand’s central bank has been struggling to rein in the baht after it gained almost 6% against the dollar over the past year, hurting tourism and exports. Among the plans the bank have considered include increasing the amount of proceeds exporters can hold overseas, the liberalisation of foreign-currency deposit accounts, and allowing insurance companies to invest more abroad. Previous measures taken by the central bank to curb the baht’s gains have included cutting interest rates to a record low last year.

MYANMAR

ASEAN countries contributed over 46% of Myanmar’s total FDI during the period 1988-2019
(8 January 2020) According to Myanmar’s Ministry of Investment and Foreign Economic Relations, Myanmar has potential investments from ASEAN countries such as Singapore and Thailand for the fiscal year 2019/2020. It was further revealed that between 1988 to November 2019, all nine ASEAN countries invested a total amount of US$38 billion into Myanmar, which was equivalent to over 46% of total foreign investment into the country.

ASEAN

Consumer sector in ASEAN set for a soft start in 2020
(6 January 2020) The beginning of 2020 for ASEAN’s consumer sector is set for a soft start due to macro headwinds and soft consumer sentiments, according to a research report. Singapore, Malaysia and Thailand are expected to see an uptick in GDP but the increase will still be below the countries’ historical trends. On the other hand, the Philippines’ consumer market is projected to recover after it was hit during the period 2018-2019.