China-ASEAN Monitor


Photo Credit: South China Morning Post

 

Economy, Investment and Trade

 

Indonesia’s Batam to benefit from Apple supplier relocation
(27 June 2019) Apple product manufacturer Pegatron will establish a US$40 million factory in Indonesia’s Batamindo Industrial Park as the company looks to insulate itself from the impact of the US-China trade war. Pegatron’s Batam factory — its first in Indonesia — will manufacture wireless chips and semiconductors. Additionally, Indonesian electronics manufacturer PT Sat Nusapersada Tbk announced that Pegatron will be expanding its production floor space in the Indonesian company’s new manufacturing facility that will be completed by the end of 2019, as part of a partnership between both companies. According to PT Sat Nusapersada Tbk head Abidin Fan, the company has seen a rise in orders of up to 30% in the past year — a trend that the Indonesian government hopes to see more of as it hopes to position the country as an alternative manufacturing and shipping hub in view of the ongoing trade war.
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Chinese exporters shift production to low-cost nations in Southeast Asia
(27 June 2019) Even in the absence of the US-China trade war, a number of Chinese manufacturers had already begun diversifying their manufacturing base to Southeast Asian countries such as Vietnam, Myanmar and Cambodia due to growing operating costs on the Chinese mainland, according to a Reuters report. The report suggests that this trend will only continue as the trade war pushes more manufacturers to follow suit, especially for companies producing low-tech and low-value goods. The impact of this surge in Chinese capital can be seen in Myanmar’s burgeoning industrial sector. According to the Nikkei Manufacturing Purchasing Managers’ Index, Myanmar manufacturers reached a 13-month high in May and recorded its fastest rise in workforce numbers since 2015. Nevertheless, one factory manager said that manufacturing in countries such as Myanmar comes with its fair share of problems, such as lower labour productivity when compared with those in China, flooded roads during the rainy season and frequent power cuts.
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US urges Cambodia to probe allegations of tariff evasion by Chinese companies
(28 June 2019) The US again urged the Cambodian government on June 28 to “look closely at governance and compliance issues” in the Sihanoukville Special Economic Zone (SEZ) despite Cambodian authorities denying allegations of any such activity in its SEZ. The US’ comments follow its recent accusations that there were Chinese companies using Sihanoukville SEZ to evade duties on goods to be exported to the US. The Cambodian Ministry of Commerce responded to the US’ initial complaints by launching an internal investigation which resulted in it publishing a statement on June 23 saying that it had found no evidence of such activity and that the operating procedures in such zones were clear. In response, a US embassy spokesperson in a statement to Reuters said that the US “will aggressively pursue allegations of duty evasion and utilize all available legal tools, to deter violators of U.S. customs and trade laws.”
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Brunei eyes food, agricultural product export opportunities in China
(26 June 2019) Brunei hopes to export more food and agricultural products to China in the near future, particularly through the creation of a bilateral trade facilitation agreement, said Bruneian finance and economy deputy minister Abdul Manaf. Abdul Manaf’s remarks were made during a working visit by the General Administration of Customs of China (GACC) on June 25. Abdul Manaf also expressed his hope for the establishment of more formal mechanisms to increase exports of Bruneian goods to China, especially at a time when Brunei is working to diversify its economy from oil and gas to other sectors such as food, tourism, services, downstream oil and gas, and ICT. According to figures from the Chinese government, trade between China and Brunei grew 86% in 2018 over 2017, reaching US$1.84 billion.
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Over US$26 billion worth of projects signed under China-Singapore intergovernmental programme
(1 July 2019) Over US$26.3 billion has been invested in 169 projects under the China-Singapore (Chongqing) Demonstration Initiative on Strategic Connectivity, according to the programme’s administration bureau head Han Baochang. Of the sum, 104 of them are cross-border financing projects with a combined value of over US$10 billion. As of April 2019, these projects are located in six Chinese provinces including Yunnan, Sichuan and Qinghai. According to Han, the programme was first created to enable bilateral cooperation in the financial, aviation, logistics, and information technology sectors, but cooperation under the programme has since expanded to other sectors such as education, healthcare and tourism.
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Mekong Monitor


Photo credit: VNA

 

TRADE, ECONOMY, AND INVESTMENT

 

LAOS, VIETNAM

Laos, Vietnam investment ministries to enhance cooperation
(22 June 2019) Vietnamese planning and investment minister Nguyen Chi Dung’s working visit to Laos concluded with the signing of a bilateral cooperation agreement for the 2019-2021 period with his Lao counterpart Suphan Keomixay on June 22. Under the agreement, both ministries will work closely to help facilitate the investment environment, boost bilateral enterprise connectivity, and diversify trade activities in order to meet the targeted bilateral trade growth rate of 10-15% per year. Both sides also agreed to push for speedier investment progress, especially for projects related to transport connectivity. During his trip, the Vietnamese minister also met Lao Prime Minister Thongloun Sisoulith on June 21, during which the premier reaffirmed the country’s commitment in ensuring favourable conditions for Vietnamese investors, especially in the tourism and organic agriculture sectors.
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VIETNAM, LAOS, CAMBODIA

Prime Ministers meet in Bangkok on the sidelines of the ASEAN Summit
(23 June 2019) Vietnamese Prime Minister Nguyen Xuan Phuc, Lao Prime Minister Thongloun Sisoulith and Cambodian Prime Minister Hun Sen’s working session held on the sidelines of the 34th ASEAN Summit in Bangkok on June 23 concluded with the three leaders noting the progress made by each country in developing their economy and their efforts to “reform and integrate into the world.” According to Vietnamese media, the three premiers also agreed to enhance cooperation both through the Cambodia-Laos-Vietnam (CLV) Development Triangle Area and as part of the Mekong subregion, with plans to “soon build a blueprint for connecting the three economies.” Furthermore, Prime Minister Nguyen Xuan Phuc reaffirmed Vietnam’s commitment in helping Laos and Cambodia’s socio-economic and human capital development. The Lao and Cambodian premiers, for their part, congratulated Vietnam on being named a non-permanent member of the United Nations Security Council 2020-2021, and pledged to support Vietnam when it serves as ASEAN Chair next year.
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MYANMAR, VIETNAM

Myanmar, Vietnam to deepen investment and trade ties
(20 June 2019) Vietnamese Deputy Prime Minister Vuong Dinh Hue led a working visit to Myanmar on June 16-17 where he met several senior government officials in Nay Pyi Taw to discuss enhancing bilateral trade and investment ties. DPM Hue expressed his hope for more trade and investment between the countries, particularly through the Bank for Investment and Development of Vietnam (BIDV). According to BIDV chair Phan Duc Tu, BIDV has US$130 million in assets with US$46.5 million in mobilised capital and US$20 million in loans in Myanmar as at the end of May 2019. The bank, which first opened a representative office in April 2010, has partnerships with three major local banks and hopes for longer economic ties between both countries. Trade between Myanmar and Vietnam totalled US$860 million last year. Vietnam is also Myanmar’s seventh largest investor, with over 200 projects worth US$2.2 billion.
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VIETNAM, THAILAND

Vietnamese PM invites Thai investors to invest in high-tech and environmentally-friendly fields
(23 June 2019) Vietnamese Prime Minister Nguyen Xuan Phuc hosted a reception for Thai investors on June 23 on the sidelines of the 34th ASEAN Summit, during which he invited the Thai companies present to increase their investments in Vietnam. However, he stressed that Vietnam will not accept foreign direct investments blindly, but will seek to ensure that projects are “high-tech, environmentally-friendly and energy-saving.” To this end, he said that the government will also work to ensure that Thai investors are provided the best conditions to do business in Vietnam. In response to the Prime Minister’s remarks, Thai beverage company ThaiBev said that it will consider the Vietnamese government’s suggestion to invest in related fields such as waste and plastic treatment, while Amata Group expressed their interest in the development of smart cities, and Siam Cement Group said that they will consider investing in high-technology sectors.
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LAOS, VIETNAM

Laos, Vietnam Deputy Prime Ministers agree to promote sustainable bilateral cooperation
(24 June 2019) Vietnamese Deputy Prime Minister (DPM) Trinh Dinh Dung’s working visit to Laos on June 24-25 concluded with both sides agreeing to continue enhancing cooperation between the countries, particularly in the areas of trade and defence. During a meeting with his Lao counterpart Sonexay Siphandone, DPM Dung expressed his wish for more favourable conditions for Vietnamese enterprises looking to invest in Laos, especially in border zones. DPM Sonexay Siphandone, for his part, said that he hoped that a bilateral agreement on the development of border trade infrastructure can be signed this year, alongside the review and adjustments of their existing bilateral trade and border trade agreements which were signed in 2015. Trade between Laos and Vietnam saw a 13.4% year-on-year increase in the first five months of 2019, reaching US$493 million. Vietnam also remains Laos’ third largest investor with 410 projects worth US$4.22 billion at present.
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mekong-monitor-map

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

Photo Credit:
Bangkok Post

 

Economy, Investment and Trade

 

Apple explores moving 15-30% of production capacity from China to Southeast Asia
(19 June 2019) Apple Inc has asked its major suppliers to explore shifting 15-30% of their production capacity from China to other countries in order to lower its dependency on manufacturing in China, according to a Nikkei Asian Review report. The report, which cited anonymous sources, said that the countries being considered include Indonesia, Malaysia, Vietnam, India and Mexico. Apple product manufacturers and assemblers that have been asked to explore options outside of China are iPhone assemblers Foxconn, Pegatron, Wistron, as well as manufacturers Quanta Computer, Compal Electronics, Inventec, Luxshare-ICT and Goertek. Nevertheless, some analysts remain sceptical over whether Apple will ultimately shift production outside of China since it will likely take 12 to 18 months to shift 5-7% of its iPhone production to India, and at least two to three years to move 15% of the production of the same to other regions.
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Cambodia, China to jointly build rice warehouses and silos
(20 June 2019) The Cambodian government and Chinese state-owned CITIC Construction signed an agreement for the development of 12 warehouses and 10 silos in 11 provinces to boost Cambodia’s rice exports to China. Speaking at the signing ceremony held at the Cambodian Ministry of Economy and Finance, Cambodian commerce minister Pan Sorasak said that the infrastructure will help both paddy rice farmers and milled rice exporters store their stock for a longer period, therefore allowing them to export more and at a better price. The 12 warehouses can store 827,000 tonnes of rice while the 10 silos can dry around 13,000 tonnes per day. This will, in turn, help the government reach its export target of one million tonnes of milled rice per year. According to the Ministry of Agriculture, Cambodia saw a 59% year-on-year increase in milled rice exports to China in the first quarter of 2019 totalling 75,214 metric tonnes. The country is also expected to export 400,000 tonnes of jasmine, fragrant and white rice to China from August 2019 to December 2020.
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Cambodia to probe Chinese exports sent to the US via Sihanoukville SEZ
(21 June 2019) The Cambodian government “will not ignore” allegations made by the US that several Chinese companies are using Chinese-owned special economic zones (SEZ) in Cambodia to circumvent tariffs imposed by the US on Chinese exports, said commerce ministry spokesman Seang Thay. The ministry’s comments follow US embassy spokesman Arend Zwartjes’s recent announcement that the US Department of Homeland Security has penalised several companies for exporting Chinese goods to the US through Cambodia’s Sihanoukville SEZ. According to Seang Thay, the Cambodian government takes the matter seriously as they may lose access to the US’ Generalised System of Preferences (GSP) if no action is taken. The Sihanoukville SEZ incident follows an announcement by the Vietnamese customs earlier in June that it is investigating Chinese exporters who slapped “Made in Vietnam” labels on their goods in order to avoid US tariffs.
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Vietnam, China localities to create “two nations, six destinations” travel tour
(22 June 2019) Vietnam’s Lao Cai province and Chinese Yunnan province’s Honghe prefecture signed an agreement for the development of a “two nations – six destinations” travel tour in a bid to boost tourism cooperation between the provinces. The six destinations are Vietnam’s Lao Cai, Hanoi, Hai Phong and Quang Ninh, plus China’s Kunming and Honghe. Under the agreement, both sides will cooperate in ensuring that tour companies from both countries will enjoy “optimal conditions” whether in terms of transportation arrangements, promotional activities, or other resources. Furthermore, the Honghe administration has asked Lao Cai to identify places in Honghe that the late President Ho Chi Minh stayed in 1940-1941 in order to develop a tour related to the Vietnamese leader.
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Chinese conglomerate Dalian Wanda mulls Singapore REIT listing
(24 June 2019) Chinese real estate company Dalian Wanda is planning to list one of its real estate businesses as a real-estate investment trust (REIT) in Singapore, according to a Wall Street Journal report citing anonymous sources. The REIT, whose IPO will reportedly be worth over US$1 billion, will comprise a collection of properties owned by Dalian Wanda. According to the report, the listing comes on the back of the company’s recent sale of all 37 of its department stores as part of its effort to reduce corporate debt, which has so far seen the company unload over US$9 billion in assets. The company has also announced that it intends to focus on local investments and developing leisure and commercial facilities this year, such as through its US$11.6 billion project in Shenyang city.
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Bank Indonesia expected to lower policy rate in 2H19


HIGHLIGHTS

June 2019 BI meeting

  • Bank Indonesia left the 7-Day Reverse Repo Rate (7DRRR) at 6% but decided to lower Rupiah reserve requirement by 50bp, effective 1 July 2019.
  • Dovish turn in global monetary policy opens window for BI to lower policy rate in 2H19, conditional on a smaller CAD in 2H19.
  • We expect BI to deliver one rate cut in August and one in 4Q19, bringing 7DRRR to 5.50% by end-2019.

No change in policy rate; Rupiah RR lowered by 50bp
Bank Indonesia (BI) left the 7-Day Reverse Repo Rate unchanged at 6.00% for the seventh consecutive meeting, as expected. The central bank opted to lower rupiah reserve requirement (RR) for conventional and Islamic banks by 50bp to 6.00% and 4.50%, respectively. The average reserve requirements remain at 3.00%. The new RR will be effective from 1 Jul 2019. Governor Perry Warjiyo indicated the cut in RR would provide an additional Rp25tr of liquidity in the banking system.

Dovish global monetary policy opens room for BI to cut…
Over the past few months, the central bank has been resorting to measures other than the policy rate to support growth, most of which centred around ensuring adequate liquidity in the banking system. A few developments have ticked the boxes for a lower policy rate, including 1) the need to support domestic demand in view of downside risks to global growth, 2) stable inflation rate (2.8% yoy in 5M19 vs. 3.2% yoy in 2018), and 3) dovish global monetary policy, with the US Federal Reserve signaling interest rate cuts. The only deciding factor is current account deficit (CAD), which was the main reason for BI’s reluctance to join many emerging economies in easing policy rate for the time being. The Governor highlighted that the rate cut is “a matter of time and magnitude, which we expect to be guided by trade/CAD performance.

…as soon as in August
CAD is expected to widen in 2Q19 (2.6% of GDP in 1Q19) amid seasonal factors as well as weaker trade balance performance. Following the record-high trade deficit of US$2.5bn in April, we expect trade balance in May, which will be released on 24 Jun, to remain in deficit, albeit at a lower magnitude of US$1.5bn. We see CAD improving in 2H19, hence opening the room for BI to lower 7DRRR by 25bp in its 21-22 August Board of Governor’s meeting.

7DRRR revised lower to 5.50% by end-2019
Nonetheless, given its twin deficit position and high foreign shareholding in its equity and bond markets, we do not expect an aggressive easing cycle. We pencil in one cut in August and one in 4Q19, bringing the 7-Day Reverse Repo Rate (7DRRR) to 5.50% by end 2019.

 

 

Originally published by CIMB Research and Economics on 21 June 2019.

Despite protests, most Indonesians believe Jokowi is the right person to lead the country

The people of Indonesia exercised their democratic rights when they participated in the general presidential and legislative elections on 17 April 2019. The presidential election, in particular, has been seen as arguably the most divisive in the history of the country. It was a rematch of the last election in 2014 when the incumbent, Joko Widodo, popularly known as Jokowi, came out as the winner, to become the president of Indonesia for 2015 to 2019.

The official result was announced in the early hours of 21 May: Jokowi won by a margin of around 12%, a significant margin that is hard to dispute. Having had two unsuccessful attempts: as a vice-presidential candidate in 2009, and the losing side five years ago, the other contender, Prabowo Subianto, has found it very hard to accept that he has lost the race again, and is attempting to challenge the result through judiciary measures, alleging fraud in the election that cost him the presidency.

When it was certain that Jokowi and Prabowo would again run for the chief position, their immediate task was to select their running mates. Jokowi selected Ma’ruf Amin, a senior Muslim cleric, who was the Chairman of the Majelis Ulama Indonesia (MUI), to be his running mate. This was a stark contrast to Prabowo’s choice, Sandiaga Uno, a well-known businessman, as his vice-presidential candidate. Sandiaga was previously the deputy governor of Jakarta who, together with governor Anies Baswedan, defeated the popular incumbent, Basuki Tjahaja Purnama, or better known as Ahok.

Jokowi’s choice of Ma’ruf Amin was largely based on his need to win the hearts of the majority of Muslims in Indonesia. While it has never claimed to be an Islamic country, no country has a larger Muslim population than Indonesia. The constitution guarantees equal rights and opportunity for its people to practice their religious beliefs, but during the last decade, Indonesia has seen the emergence of more radical Islamic movements, which seem to have gained more attention and followers. Somehow, Jokowi has never been able to portray himself as a devout Muslim, to the point of his opponents accusing him of being a communist, which he constantly and strongly denies. Having Ma’ruf Amin was expected to prove that he would be a good representative of the majority of Indonesian Muslims.

Former general Prabowo is actually not known as a representative of the Muslim population of Indonesia (many of his family members are Christians), but has managed to gain the sympathy and support of the radicals, who see him as someone who can strengthen the influence of Islam in the country. This is an expectation that Prabowo must be able to manage if he had won the election, given that Indonesia is known as a country with many ethnic groups and religions, and that this unity in diversity is what makes Indonesia unique.

Prabowo’s choice of running mate was a bit surprising since Sandiaga had only been Anies’ deputy for less than a year, and as a businessman, he has very little political experience, especially in the circles close to the central government. He is also not known as a representative of Indonesian Muslims, but he and Anies somehow managed to play the religion card against Ahok, who was accused of blasphemy during the Jakarta gubernatorial election, which cost him the top position in Jakarta.

The voting on 17 April saw the majority of Indonesians strongly decisive in their choice of who should lead the country in the next five years. 01 was the code number for Jokowi-Ma’ruf and 02, for Prabowo-Sandi. Indonesians were rooting for either 01 or 02. The early quick counts, based on random sampling conducted by survey institutes, which had proved to be accurate in the previous elections, suggested that Jokowi was on his way to his second term as president. The earlier response from the 02 camp was immediate rejection of the results and quick counts, claiming that they have their own more accurate calculations. However, they have rejected requests to disclose their methodology and compare the findings, raising suspicion that their data are statistically unreliable.

 

Quick Count and Real Count

The official result based on the real count of all the ballots, was published by the General Elections Commission, or Komisi Pemilihan Umum (KPU), in the early hours of 21 May 2019, showing 55.41% for Jokowi-Ma’ruf and 44.59% for Prabowo-Sandi.

The result, which had been predicted by many, could be attributed to the following reasons:

  • Although radicalism is allegedly growing in Indonesia, the religion card is not working effectively given that the majority of Indonesian Muslims are moderate. Indonesia has never declared itself as an Islamic country and the idea that one day it will become one does not sit well with most Indonesians. The eastern part of Indonesia has a large non-Muslim population and they mostly reject Indonesia becoming more and more Islamic, and will strongly support the current existence and form of Negara Kesatuan Republik Indonesia (Unitary State of the Republic of Indonesia).
  • The younger voters are frequent users of social media and Jokowi, with the help of his sons, is more adept at this and, therefore, has been able to win the hearts of the millennials. He also understands how younger people do business and has actively encouraged the development of unicorns, startups and businesses focusing on information and communication technology.
  • Unlike Susilo Bambang Yudhoyono’s sons, who entered politics, Jokowi’s family chose to stay away and focus more on developing their own simple businesses. As a result, he is not seen as part of the political elite but more as a leader who is close to the common people.
  • Although he has many uncompleted plans, Jokowi has shown concrete results in developing Indonesia and he has clearly explained what would become his priorities in the next term, should he be given the mandate for the second time. Prabowo, on the other hand, struggled to find something different and new that would set him apart from Jokowi.
  • Prabowo’s premature declaration that he would become the next president has been ridiculed by many, including the foreign media. While this may not change the vote count, it may make him more vulnerable and if he loses in the courts, it would be very difficult for him to run again in the future because no one will believe him anymore.

 

Prabowo’s Response

Prabowo has maintained his position in rejecting the official results, claiming a massive, structured and systematic fraud taking place in the counting process that benefitted Jokowi. Immediately after the announcement, demonstrations by his supporters took place at the KPU and Supervisory Election Agency or Badan Pengawas Pemilu (Bawaslu) offices. However, the conflicts with the police authorities were short-lived and did not spread all over Jakarta. Prabowo’s camp maintained that they never advocated violence and the conflicts were initiated by paid thugs aiming to discredit him.

Prabowo and Sandiaga are now taking judiciary action to challenge the official outcome of the election, attempting to prove that the fraud has cost them a fair process of electing the next president of Indonesia and to overturn the official real count. This is understandable given that they have spent a lot of resources to defeat the incumbent.

However, this may be a very difficult attempt with very little likelihood of success. With a difference of slightly below 17 million votes and their ongoing reluctance to share their data and counting methodology, it is unlikely that the Constitutional Court, or Mahkamah Konstitusi, will reverse KPU’s official decision.

Despite the protest and street rallies, it is most likely that Jokowi will continue to serve his second term and attempt to keep his promises and finish what he had started. What is important for Indonesia right now is sustainable peace, stability and growth in its effort to become the next global economic giant. Most Indonesians believe that Jokowi is the right person to lead the country towards that goal.

CARI Captures 409



 

ASEAN

ASEAN leaders convene in Bangkok for the 34th ASEAN Summit
(17 June 2019) All 10 ASEAN heads of state are in Bangkok for the 34th ASEAN Summit, held under the theme “Advancing Partnership for Sustainability” and chaired by Thai leader Prayut Chan-o-cha. According to Thai officials, key discussion points on the agenda include the Regional Cooperation Economic Partnership (RCEP) negotiations, an Indo-Pacific strategy, the Rohingya crisis in Myanmar, as well as policy directions on marine debris. Ahead of the meeting, the ASEAN Secretariat published its fifth and latest issue of the ASEAN Economic Integration Brief (AEIB), which concludes that the 2019 outlook for the region “remains uncertain” due to tensions in the global economic environment, particularly those brought upon by the ongoing trade negotiations between the US and China. The AEIB also provides preliminary trade data for 2018, which sees growth for ASEAN’s trade in goods moderating to 8.1% in 2018, down from 15.0% in 2017. The report notes that while global foreign direct investment (FDI) declined by 13.4% in 2018, the Southeast Asian bloc saw a 5.3% growth in FDI inflows in the same year, reaching US$151.2 billion.

ASEAN

ASEAN identifies 19 potential ASEAN Connectivity 2025 infrastructure projects
(14 June 2019) The ASEAN Secretariat announced on June 10 that it has identified 19 projects to be included in the Initial Rolling Priority Pipeline of Potential ASEAN Infrastructure Projects, an initiative under the Master Plan on ASEAN Connectivity 2025. Of the 19 projects, five are in Myanmar, four in Laos, three in Thailand, three in Indonesia, two in Vietnam, one in Cambodia and one in Brunei. Broken down by sector, 11 of the 19 projects involve the development of roads, three involve power projects, two are ports, and one project each involving the development of airports, ICT infrastructure and railways. According to the secretariat, the projects were selected based on their “strategic relevance, impact on regional connectivity, environmental and social (E&S) impact, project feasibility, and contracting agencies’ implementation capacity”, and the next step will be to determine the financing options for each project. According to ASEAN secretary-general Lim Jock Hoi, these projects will contribute to the overall infrastructure network at a regional level as part of the bloc’s goal of achieving ASEAN Connectivity.

SINGAPORE

Singapore non-oil exports record biggest fall in over three years
(17 June 2019) Singapore’s non-oil domestic exports recorded a 15.9% year-on-year decline in May — its biggest drop in over three years. According to data published by Enterprise Singapore, the overall drop was largely due to the continued downtrend of electronic exports, which saw a 31.4% drop in May following a 16.3% dip in April. The electronic exports which contributed the most to the slump were integrated circuits (-39.8%), disk media products (-42.4%), and integrated circuit parts (-54.2%). Meanwhile, Singapore’s non-electronic exports also continued to fall in May as it fell 10.8% following April’s 8% drop. This was largely attributed to a decline in exports of civil engineering equipment parts (-92.4%), non-monetary gold (-72.4%), and petrochemicals (-14.7%). However, analysts say that Singapore might enjoy some respite in June as China’s front-loading of exports to the US ahead of further tariff increases may create a temporary increase in export demand from Singapore.

MALAYSIA

Malaysia aspires to be E&E hub despite escalating US-China tech war
(16 June 2019) Malaysia will continue taking a neutral stance in the US-China technology and trade war as it works to become a hub for investments, said Malaysian international trade and industry minister Darell Leiking. He added that Malaysia continues to attract investments despite ongoing global economic tensions, evidenced by the positive performance in terms of the increase in investments in the manufacturing, services and primary sectors. According to the Malaysian Investment Development Authority (MIDA), the country saw a 3.1% increase in investment inflows in the first quarter of 2019 reaching US$12.9 billion, up from the US$12.5 billion recorded during the same period last year. Foreign investments accounted for 54.5% or US$7 billion of the sum, while domestic investments accounted for the remaining 45.6% or US$5.9 billion. Leiking also urged local electrical and electronic (E&E) industry players to step up their game in leveraging opportunities presented by the technological trade war.

MALAYSIA, THAILAND

24/7 border gate expected to boost bilateral trade during three-month trial period
(19 June 2019) Malaysia’s Bukit Kayu Hitam and Thailand’s Sadao border gates will be open to lorries and trailers 24/7 beginning June 18 for a three-month trial period to boost the flow of goods between the countries. Previously, the gates were only open from 6am till midnight. According to Malaysian foreign affairs deputy minister Marzuki Yahya, greater connectivity between Malaysia and Thailand is vital since border trade accounts for over 60% of bilateral trade between the countries. Furthermore, the countries’ total trade saw a 13.7% increase last year, reaching US$26.12 billion. Thai foreign minister advisor Chaisiri Anamarn, for his part, said that the longer operating hours will help reduce traffic congestion in the day and subsequently improve cross-border trade, business and tourism. He added that Thailand is also constructing a new customs complex for the Sadao checkpoint, one which will be able to connect directly with the Bukit Kayu Hitam customs complex once it begins operations in early 2020.

VIETNAM

Vietnamese rubber exports plummet due to trade war
(18 June 2019) Vietnam’s rubber exports saw a 6% increase in volume reaching 80,000 tonnes and 7% increase in value reaching US$116 million in May as compared to April, but recorded a 26.5% decline in volume and 26.2% decline in value when compared with figures from the same period last year, according to data from the Vietnamese Ministry of Industry and Trade. Nevertheless, when taken together, Vietnam’s rubber exports in the first five months of 2019 recorded a 12% increase in volume and 4% increase in value reaching US$673 million on a year-on-year basis. According to the Vietnam Rubber Group (VRG), the fall in May exports can be attributed to uncertainties caused by the US-China trade war and a shift in Chinese policies. China’s increase of import tariffs on mixture rubber to 10% has had a significant impact on Vietnamese exports since mixture rubber make up half of its total rubber exports to China in the first four months of this year.

MYANMAR

World Bank predicts 6.5% growth for Myanmar in the current fiscal year
(18 June 2019) The World Bank’s Myanmar Economic Monitor published on June 18 projects a positive outlook for the country’s economy due to accelerated implementation of reforms, higher infrastructure spending and greater liberalisation and investments in key sectors such as wholesale and retail, insurance and banking. On the whole, it expects Myanmar’s economic growth to expand to 6.5% in the 2018/2019 fiscal year which began in October 2018, up from 6.4% during the April to September 2018 transition period. It also expects this uptrend to continue in the next fiscal year with growth expected to reach 6.7%. Furthermore, the report expects Myanmar’s services sector to remain its key driver of growth, supported by industrial activity driven by the garment and construction sectors. According to the report, there is an increase in the rate of mega-project implementation in the country such as the China-Myanmar Economic Corridor, as well as other energy and transport projects.

INDONESIA-CHILE

Indonesia-Chile economic pact to come into effect in August 2019
(14 June 2019) The Indonesia-Chile Comprehensive Economic Partnership Agreement (IC-CEPA) will come into effect on 10 August 2019, Indonesian trade minister Enggartiasto Lukita said. The Indonesian minister’s remarks were made following his meeting with Chilean trade vice minister Rodrigo Yanez Benitez on June 11 during which they exchanged an instrument of ratification for the pact. Trade between Indonesia and Chile fell from US$419.4 million in 2014 to US$274.1 million in 2018, but Enggartiasto expressed his confidence that the countries will be able to double their total trade in the coming few years with the pact in place. The IC-CEPA, which is also Indonesia’s first trade agreement with a Latin American country, is part of the Indonesian government’s efforts to increase trade with non-traditional trade partners.

CAMBODIA-TURKEY

Cambodia, Turkey look to reach US$1 billion in annual bilateral trade
(17 June 2019) Cambodia and Turkey will work towards reaching US$1 billion in bilateral trade, starting with US$500 million by 2020, according to a statement on Prime Minister Hun Sen’s Facebook page following his meeting with Turkish President Recep Tayyip Erdogan on June 15 on the sidelines of a conference in Tajikistan. Erdogan, for his part, said that the two countries should “do business together as much as possible.” Hun Sen also announced that plans to establish a Cambodian embassy in Ankara are in the works. According to the Cambodian Chamber of Commerce, the country’s exports to Turkey include garments, shoes, rice and other agricultural products, while Turkish investments in Cambodia include schools, decorative materials and carpets. Meanwhile according to its tourism and commerce ministries, Cambodia received 2,339 Turkish visitors in the first quarter of 2019 and bilateral trade totalled US$19.6 million in 2017.

THE PHILIPPINES-JAPAN

PH, Japan focus on speedy implementation of infrastructure projects
(18 June 2019) The Philippines and Japan will focus on the speedy implementation of large infrastructure projects moving forward since most of these projects have already secured financing from Japan and will be in the implementation phase till 2022, said the Philippines’ finance undersecretary Mark Dennis Y.C. Joven. These projects include larger ones such as the North-South Commuter Railway (NSCR) and the Metro Manila Subway Project, as well as smaller ones such as the development of roads and rehabilitation of existing rail lines. Meanwhile, the country’s socio-economic planning secretary Ernesto Pernia said that the government is prioritising more expensive projects for Japanese financing since the Philippines will no longer qualify for favourable terms for development assistance from Japan once it is upgraded to upper-middle income status. According to Pernia, the Philippines is set to be upgraded by the end of 2019 or 2020.

Mekong Monitor


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TRADE, ECONOMY, AND INVESTMENT

 

VIETNAM, MYANMAR

Laos and Vietnam to boost cooperation through infrastructure projects
(18 June 2019) Vietnam is now Myanmar’s ninth largest trade partner with two-way trade totalling US$860 million in 2018. This was revealed during Vietnamese deputy prime minister Vuong Dinh Hue’s working visit to Myanmar, where he met Myanmar planning and finance minister Soe Win on June 18. A report from the meeting also revealed that Vietnam is now Myanmar’s seventh largest source of foreign investments, with a total of 18 projects worth almost US$2.2 billion. Speaking during the meeting, the Vietnamese deputy prime minister lauded the Central Bank of Myanmar’s recent announcement allowing foreign credit institutions to establish and expand their presence in Myanmar, and asked that the Myanmar government do more to facilitate investment and trading with Myanmar. According to him, there are presently four Vietnamese financial firms with representative or branch offices in Myanmar.
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MYANMAR, THAILAND

Myanmar, Thailand sign agreement to facilitate overland trade
(12 June 2019) Vehicles transporting goods across the Myanmar-Thailand border will soon have the legal backing to do so as both governments have agreed to allow overland cross-border trade starting at the end of July. Under the agreement, 100 vehicles from each country will be given temporary one-year licences to transport goods along the Yangon (Thilawa)-Myawaddy-Mae Sot-Bangkok (Laem Chabang) route. This will allow Thai vehicles to access Myanmar’s Thilawa Special Economic Zone and Myanmar vehicles to access Thailand’s Laem Chabang deep sea port. According to a Myanmar transport ministry official, Myanmar has already granted international cross border operator (ICBO) licenses to 40 trucks and will issue another 21 licences in the initial phase.
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THAILAND, LAOS

Thailand, Laos, sign agreement on 5th bridge across the Mekong River
(14 June 2019) Thai transport minister Arkhom Termpittayapaisith and Lao public works and transport minister Bounchan Sinthavong witnessed the signing of an agreement for the development of a fifth Thai-Lao friendship bridge linking Thailand’s Bueng Kan province with Laos’ Bolikhamsai province. In his speech during the ceremony, Arkhom expressed his hope for the two provinces to serve as a gateway for bilateral trade between their countries. For instance, he said, the bridge would enable Thai goods to be transported across Laos to southern China, while Lao goods could reach the Laem Chabang deep seaport in eastern Thailand. The bridge will cost an estimated US$126.77 million, a portion of which will be financed by the Lao government by borrowing from Thailand’s Neighbouring Countries Economic Development Cooperation Agency. The 1.35km concrete bridge is estimated to take three years to complete.
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CAMBODIA, VIETNAM

Cambodia plans Da Nang flight to boost tourism with Vietnam
(14 June 2019) The Vietnamese and Cambodian civil aviation authorities announced on June 13 that they have inked an agreement to establish a new route connecting both countries. The route, which will be operated by Cambodia’s national airline Cambodia Angkor Air, will connect its capital Phnom Penh with Vietnam’s Da Nang city. The announcement was well received by players in Cambodia’s travel agents association, with a representative saying that increasing the number of international flights was the best way of fulfilling the government’s goal of attracting 15 million tourists each year by 2030. According to the Cambodian Ministry of Tourism, the country saw a 1.2% year-on-year increase in Vietnamese tourists in the first four months of 2019 reaching 260,000 visitors, making it Cambodia’s second largest tourism market after China during the period. Cambodia aims to attract about 1 million Vietnamese tourists a year by 2020.
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THAILAND

Oil palm farmers, government ask retailers to abstain from lowering prices
(18 June 2019) Thai oil palm farmers are turning to retailers for support in their bid to maintain the prices of fresh palm nut by asking retailers to avoid selling bottled cooking palm oil at a discounted rate. The farmers’ calls follow similar ones made by Thai internal trade department head Whichai Phochanakij, who recently called on retailers to avoid promotional activities for cooking palm oil to avoid price competition between retailers, which would subsequently pressure farmers to lower palm nut prices. According to Whichai, this was crucial since palm oil for consumption accounts for around 40% of overall crude palm oil consumption. As part of the government’s efforts to bolster palm nut prices they have lowered its crude palm oil stocks, bought 160,000 tonnes of crude palm oil for power generation, and is promoting the use of B10 and B20 biodiesel for big trucks and B100 pure biodiesel for agriculture machinery.
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mekong-monitor-map

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

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Bangkok Post

 

Economy, Investment and Trade

 

Guangdong investors to build a digital park in Thailand’s EEC
(12 June 2019) Chinese investors from Guangdong province are actively seeking business opportunities as well as local partners to establish a new digital park facility in Thailand’s Eastern Economic Corridor (EEC), according to Guangdong Development and Reform Commission head Ge Changwei. Their hope, he shared, was that the digital park would eventually serve as an ASEAN innovation and technology hub that works in partnership with China’s Greater Bay Area (GBA). According to Ge, the GBA’s economic value stands at around US$2 trillion and its trading value totalled US$24 billion in 2018 (a 7% rise). Thai deputy prime minister Somkid Jatusripitak, for his part, said that the government looks forward to deeper cooperation between Thailand and Guangdong under the GBA. According to Guangdong governor Li Xi, Guangdong businesses currently have 113 investment projects in Thailand worth US$573 million, while Thailand has 750 projects in Guangdong worth US$650 million.
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Malaysia sees increase in interest from Chinese investors since ECRL revival
(14 June 2019) The reinstatement of the Belt and Road Initiative-related East Coast Rail Link (ECRL) has resulted in a resurge of interest from Chinese investors, according to an announcement made during the 4th joint cooperation council (JCC) meeting on the Malaysia-China Kuantan Industrial Park (MCKIP) and the China-Malaysia Qinzhou Industrial Park (CMQIP) held in Kuala Lumpur on June 14, where leaders from both sides reviewed the development progress made in the twin parks as well as the Kuantan Port and Qinzhou Port. Speaking as the meeting co-chair, Malaysian international trade and industry deputy minister Ong Kian Ming said that Malaysia has seen an uptick in interest from Chinese investors since the revival of the Chinese-backed ECRL and Bandar Malaysia projects, and that Malaysia looks forward to having China as its top investor for the fourth consecutive year this year. The MCKIP currently has investment pledges worth over US$4.3 billion, while the CMQIP has received investments worth US$9.26 billion.
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Five MoUs inked at Malaysia-China manufacturing meeting
(14 June 2019) The Malaysia-China Manufacturing Roundtable Meeting held on June 13 in Malaysia’s Sabah state concluded with the signing of five memoranda of understanding (MoU) cementing cooperation between key industry players from both countries. Among the MoUs inked was an agreement to collaborate on the development of industry policies and business cooperation in areas such as robotics and the internet-of-things, as well as an agreement between Malaysian standards board SIRIM and China’s Huawei to cooperate in fields related to Industry 4.0 and smart manufacturing. Malaysian trade and industry minister Darell Leiking, who was present at the ceremony with Chinese industry and information technology minister Miao Wei and the Chinese consul-general to Kota Kinabalu Ling Caide, touted the event as another milestone for trade relations between the two countries, especially in the advancement of new technologies.
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Chinese companies to build 400MW power plants in Cambodia
(12 June 2019) Cambodian state-owned electricity company Electricite Du Cambodge (EDC) inked an agreement with Chinese firms CGGC-UN Power and China National Heavy Machinery Corporation (CHMC) on June 12 to build a 400-megawatt (MW) power project. According to the companies, the facility will be fuelled by heavy fuel oil and liquefied natural gas (LNG), and be based in Kandal province’s Lvea Em district. The facility, which will comprise two plants powered by generators from Finnish and German companies, is slated for completion within ten months. According to EDC head Keo Ratanak, the project will cost US$380 million, financed largely by a US$300 million loan from the government. The goal, he said, is to ensure that the country has a stable energy supply so as not to face the same energy crisis again as it did this year.
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Vietnam farm exports face barriers when exporting to China
(12 June 2019) Vietnamese agricultural exports to China have been facing increasingly stringent controls at the border which has led to lower demand, the Vietnamese agricultural department said. According to the department, the latest product facing stricter controls was its exports of cassava, which saw a 17.6% dip in export volume year-on-year in the first five months of 2019. The stricter controls imposed were related to the labelling and packaging of products, as well as import procedures at border gates. The development around cassava exports follows similar measures imposed by the Chinese side on Vietnamese sticky rice since the start of 2018, where exports now face a 50% import duty (an increase from 5%). According to Vietnamese authorities, the country has exported 2.83 million tonnes or US$1.21 billion of rice in the first five months of the year, representing a 4% decline in volume and 20.7% decline in year-on-year value.
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Singapore’s non-oil domestic exports contract for third consecutive month in May


HIGHLIGHTS

May 2019 trade

  • NODX slumped 15.9% yoy in May, the slowest since March 2016, dampened by weaknesses in non-electronics and electronics.
  • Singapore’s trade outlook would likely remain bleak as the downturn in electronics cycle and US-China trade tensions persist.
  • We expect MAS to maintain the S$NEER parameters in October.

NODX declines for the third month in a row
Singapore’s non-oil domestic exports (NODX) contracted for the third consecutive month in May (-15.9% yoy vs. -10.0% yoy in April), which was slightly better than expected. The decline was led by severe slippages in electronics (-31.4% yoy vs. -16.3% yoy in April) and non-electronics (-10.8% yoy vs. -8.0% yoy in April). Nonetheless, the seasonallyadjusted NODX picked up by 6.2% mom in May after dipping 0.7% mom in April.

The weakest reading of electronic exports since Jan 2009
Consistent with the fall in SIPMM electronics PMI (49.4 pts in May vs. 49.5 pts in April), exports of the five major electronic products declined sharply (-33.8% in May yoy vs. – 16.4% yoy in April). This was led by the fall in exports of integrated circuits (ICs, -39.8% yoy) which form the bulk of electronics deliveries. Exports of other segments such as PC parts, disk media products, PCs and diodes & transistors deteriorated too. The semiconductor outlook remains poor, reflecting the World Trade Semiconductor Statistics’s (WSTS) recent downgrade of global semiconductor sales for 2019 (-12.1% in May vs. -3.0% previously).

Drugs failed to boost non-electronic NODX
Non-electronic NODX slid further in May due to pronounced contractions in civil engineering equipment parts (-92.4% yoy), non-monetary gold (-72.4% yoy), petrochemicals (-14.7% yoy) and electrical circuit apparatus (-22.9% yoy). An uptick in demand for pharmaceuticals (+28.5% yoy) was insufficient to compensate the drag.

Weakness in deliveries to major destinations except for the US
While shipment to the US remained positive, NODX demand from other top markets slipped: China (-23.3% yoy), Taiwan (-34.7% yoy), Hong Kong (-24.8% yoy), the EU (- 10.0% yoy), Japan (-31.2% yoy), Indonesia (-25.4% yoy), Malaysia (-14.7% yoy), South Korea (-12.1% yoy) and Thailand (-7.5% yoy).

More misery ahead for Singapore
US President Donald Trump has announced that he has no fixed deadline for tariff imposition on another US$325bn of Chinese imports and a fresh round of tariffs will be levied if the officials fail to meet during the G20 summit in Japan. Singapore’s forwardlooking indicators also signal subdued manufacturing activity as the SIPMM manufacturing PMI dipped below the 50 mark for the first time since August 2016 (49.9 pts in May vs. 50.3 pts in April) while Nikkei Singapore PMI dropped to 52.1 pts in May (53.3 pts in April). Amid external uncertainties which are likely to weigh on the growth and inflation outlook, we expect the Monetary Authority of Singapore (MAS) to remain cautious and maintain the current slope, width and centre of the S$ nominal effective exchange rate (NEER) policy band in October.

Originally published by CIMB Research and Economics on 17 June 2019.

This article has been edited to reflect its time-sensitivity.

CARI Captures 408



 

ASEAN

Southeast Asia defies global foreign investment downturn
(12 June 2019) Southeast Asia bucked global foreign direct investment (FDI) trends as FDI inflows to the region reached a record high of US$149 billion in 2018, according to the United Nations Conference on Trade and Development’s (UNCTAD) latest World Investment Report published on June 12. According to the report, global FDI fell by 13% to US$1.3 trillion in 2018 as uncertainties linger in the global economic environment due to the increasingly intense US-China trade war, especially in strategic sectors such as digital and mobile technology. However, the report noted that the “developing Asia” region recorded a 4% rise in FDI reaching US$512 billion, representing 39% of global FDI inflows last year. The report further noted that the ASEAN bloc received US$10 billion more in FDI than mainland China, with Singapore being the top FDI destination among the 10 ASEAN countries. Indonesia, Thailand and Vietnam also recorded significant increases in FDI. According to the report, FDI inflows into Singapore not only accounted for around half of the total received by ASEAN countries in 2018, but was also significantly higher than the FDI attracted by the entire African continent, as well as other Asian countries such as India (US$42 billion) and Indonesia (US$22 billion).

ASEAN

ASEAN outpaces global manufacturing growth in May
(11 June 2019) The ASEAN manufacturing sector improved at a stronger pace despite the general slowdown in global output, according to the Purchasing Managers’ Index (PMI) for May 2019 published by IHS Markit. According to the index, global output slowed to 51.2 in May from 52.1 in April, representing a decline for the second consecutive month and the slowest expansion of global output since June 2016. However, output in the ASEAN region expanded at a stronger pace, with five of the seven ASEAN countries on the index reporting stronger operating conditions: Indonesia’s PMI reached its highest in nine months at 51.6, the Philippines’ PMI expanded for the first time in six months to 51.2, Vietnam’s PMI rode on growing consumer demand to reach 52.0, Myanmar’s PMI reached its highest since April 2018 at 54.2, and Thailand’s PMI continued rising for the fourth consecutive month to reach 50.7. Meanwhile, Singapore’s PMI dipped to 52.1 as it marked its first decline in export orders in three months, while Malaysia’s PMI came in at 48.8 — a figure that analysts say indicate that the Malaysian business environment may be starting to brighten again.

MALAYSIA

Government to cut investment processes to expedite approvals
(12 June 2019) Malaysian Prime Minister Mahathir Mohamad announced on June 11 that the government is looking to reduce the number of processes involved for investors and traders to do business in and with the country. For instance, there are up to 60 processes involved when it came to investing in the industrial and construction sector — a number that the government’s chief secretary has been tasked to reduce. Meanwhile, the Economic Action Council (EAC) secretariat also issued a statement after the meeting, in which they announced their decision to revive the National Productivity Council (NPC) to set and drive the country’s strategic productivity agenda comprehensively. Furthermore, the statement shared the EAC’s deliberations on the need to lower regulatory costs especially in the tourism sector, and said that the Economic Affairs Ministry has started preparing the country’s five-year development plan for the 2021-2025 period.

MALAYSIA

Digital economy agency to bring in US$1.2 billion in investments over coming years
(10 June 2019) The Malaysia Digital Economy Corp (MDEC) is currently in discussion with over 10 global companies who have expressed interest in investing some US$1.2 billion in the country in the coming years, said MDEC head Surina Shukri. According to her, the companies were engaged during investment missions to the US, Britain, China and Japan, and the proposed investments will be in areas such as cloud and data centres, e-commerce, cybersecurity, artificial intelligence (AI) and big data. Aside from these areas, there are also plans to invest in the gaming and animation sectors, as well as in initiatives such as a free school to learn computer coding. The Malaysian government expects the digital economy to contribute to 20% of the country’s gross domestic product (GDP) by 2020, up from 18.3% in 2017.

THE PHILIPPINES

Power, manufacturing propel 40% jump in investment approvals from January to May
(12 June 2019) Investments approved by the Philippines’ Board of Investments (BOI) saw a 40% year-on-year increase reaching US$5.6 billion in the first five months of 2019, up from US$4.0 billion in approvals during the same period last year. Of the sum, domestic investments saw a 11.47% increase reaching US$4.3 billion — representing 77% of total investments approved. Foreign investments also recorded a significant jump as it saw a 871% increase from US$132 million to US$1.3 billion during the period. The sharp rise in investments were largely attributed to the 74.08% increase in the power sector totalling US$3.6 billion and investments in the manufacturing sector which more than doubled to US$857 million. Singapore remained the Philippines’ largest source of foreign capital with investments totalling US$680 million, followed by the Netherlands, Thailand, Japan and the US. Nevertheless, Filipino trade secretary Ramon M. Lopez noted the drop in the country’s FDI inflows in 2018 as per the UNCTAD’s World Investment Report, saying that the government was working on modernising incentives through infrastructure development and the revision of laws such as the Retail Trade Law and the Foreign Investment Negative List in order to attract more foreign investors.

THE PHILIPPINES

Trade ministry wants e-commerce sites regulated to protect consumer rights
(10 June 2019) The Philippines’ trade undersecretary Ruth B. Castelo is calling for the passing of a separate legislation to regulate e-commerce websites operating in the country in order to better protect consumer rights. According to Castelo, the Department of Trade and Industry (DTI) is already working on including provisions related to e-commerce in the proposed revisions to the existing Consumer Act, but said that a separate law to regulate these platforms were necessary. Ideally, the law would require e-commerce platforms to register as a formal entity with the Securities and Exchange Commission and apply for a license from a regulator such as the Department of Information and Communications Technology (DICT) in order to operate. Castelo’s remarks were made in response to recent controversy surrounding e-commerce site Shopee, who allegedly modified the mechanics of a major promotional campaign halfway through the event. According to the Philippines’ E-Commerce Roadmap 2016-2020, e-commerce is expected to contribute to 25% of the country’s GDP by 2020 and produce at least 100,000 micro, small and medium enterprises involved in the digital economy.

THAILAND-ASEAN

ASEAN Chair to seek partners and investors from outside the region for the smart cities initiative
(8 June 2019) Thailand, as this year’s ASEAN chair, is looking to form partnerships with and draw investments from non-ASEAN countries with strong expertise in new technologies such as South Korea, China and Japan for the development of the ASEAN Smart Cities Network (ASCN) initiative, said Thai digital economy and society minister Pichet Durongkaveroj. Pichet’s comment was made during the ASCN Roundtable Meeting held on June 7. Launched in 2018, the ASCN aims to turn 26 pilot cities in ASEAN into sustainable smart cities through the development of innovative technological infrastructure, technological systems and cultures. Back at home, in 2018 the Thai government has identified 10 zones in seven provinces in which to begin rolling out smart city infrastructure. The government has also announced plans to implement smart city infrastructure in 30 zones in 24 provinces in 2019, and 100 zones in 76 provinces plus Bangkok by 2022.

ASEAN-ROK

South Korea pursuing customs deals with ASEAN countries to facilitate bilateral trade
(12 June 2019) The Korea Customs Service is pursuing Authorised Economic Operator (AEO) and Mutual Recognition Arrangement (MRA) agreements with ASEAN countries, according to a statement by the customs agency published on June 12. According to the statement, the agency’s commissioner Kim Yung-moon has thus far held meetings with his counterparts from Indonesia, Vietnam and the Philippines to discuss ways to enhance bilateral trade as part of South Korea’s goal of reaching US$200 billion in trade with the Southeast Asian bloc by 2020. Meanwhile, in speaking at an event promoting Thai-Korea trade, Korea Trade and Investment Promotion Agency (KOTRA) head Kwon Pyung-oh urged the Thai government to step up its deregulation and promotional efforts in order to achieve the targeted 5% growth rate for bilateral trade in 2019. According to the Thai Commerce Ministry, trade between Thailand and South Korea saw a year-on-year decline of 1.14% or US$4.47 billion in the first quarter of 2019, with exports declining by 4.13% to US$1.57 billion.

THAILAND-EU

Thailand seeks to restart FTA negotiations with the EU
(11 June 2019) Thailand hopes to resume its negotiations for a free trade agreement (FTA) with the EU in the second half of 2019 after it has formed a new government, said the Thai Commerce Ministry’s trade negotiations department head Auramon Supthaweethum. To this end, Thai and EU trade representatives have held a meeting to discuss the possibility of reviving said negotiations ever since it was halted in 2014. According to Auramon, an FTA with the EU was important to offset the decline in global trade caused by the ongoing US-China trade war — trade between Thailand and the EU, for instance, grew only 6% in 2018 compared to the 10.8% growth it recorded in 2017. Furthermore, Thai-EU trade recorded a 11% decline in the first quarter of 2019, with two-way trade for the first four months of the year totalling US$13.4 billion, down from US$15.1 billion in the first quarter of last year. According to local analysts, Thailand faces growing competition from Vietnam, who stand to benefit from the Vietnam-EU FTA which is set to become active in the third quarter of this year.

VIETNAM-EAEU

Vietnam ready to act as a bridge to connect ASEAN and the EAEU
(10 June 2019) As the first ASEAN country to sign a free trade agreement (FTA) with the Eurasian Economic Union (EAEU), Vietnam can be a gateway for businesses from the EAEU and Russia who want to enter ASEAN and vice versa, said Vietnamese industry and trade deputy minister Hoang Quoc Vuong during the St. Petersburg International Economic Forum held in Russia recently. According to the deputy minister, trade between Vietnam and the EAEU increased by 103% ever since it came into force in 2016, reaching almost US$6.1 billion last year. Also present at the forum was Cambodia’s commerce ministry secretary Kamrang Tekreth, who told local media that Cambodia hopes to pursue a FTA with the EAEU in order to boost trade and cooperation between the parties.