CARI Captures 399

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CARI Captures 399

MALAYSIA, SINGAPORE

9th Malaysia-Singapore Leaders’ Retreat held in Putrajaya
(9 April 2019) The 9th leaders’ retreat between the prime ministers of Malaysia and Singapore held in Putrajaya concluded on April 9 with both leaders reaffirming their commitment to preserving and improving their vital bilateral ties, as well as to explore cooperation in new areas. According to the joint leaders’ statement issued after the meeting, this includes agreements to: (i) establish a joint committee within a month to resolve disputes over the Johor Bahru Port Limits off Tanjung Piai and Singapore Port Limits off Tuas; (ii) find new, innovative ways to enhance security and efficiency at the Causeway and Tuas Second Link checkpoint; (iii) explore ways to enhance cross-border connectivity, such as through Malaysia’s proposal for a new ferry route between the countries; (iv) withdraw their respective restrictions over the airspace between southern Johor and Singapore, thus paving the way for aircrafts approaching and departing Seletar Airport to be based on visual approach; (v) finalise the terms of the six-month suspension of the Johor Bahru-Singapore Rapid Transit System (RTS); (vi) explore possible ways to reduce the cost of the Kuala Lumpur-Singapore High Speed Rail (HSR); (vii) seek amicable solutions to the water price dispute, including through arbitration if needed; and (viii) explore potential collaborations in the development of the eSports industry.

MALAYSIA, SINGAPORE

Commuters in Malaysia and Singapore to benefit from dual-currency travel card
(9 April 2019) Singapore’s EZ-Link and Malaysia’s Touch ‘n Go announced on April 9 that plans to roll out a dual-currency “Combi Card” that allows users to pay in both Singapore dollars and Malaysian ringgits is currently underway. The announcement was made by the companies following a mention of the project in Prime Minister Mahathir Mohamad and Prime Minister Lee Hsien Loong’s joint statement at the closing of the Malaysia-Singapore Leaders’ Retreat on the same day, when the leaders spoke of plans to promote bilateral cooperation in the areas of data, cybersecurity and digital economy. The card, which will be introduced in the last quarter of 2019, will allow users to pay for electronic road pricing in Singapore, road tolls in Malaysia and parking charges in both countries — with plans to expand the card’s use for shopping and dining in the future. According to a joint statement by EZ-Link and Touch ‘n Go, the Combi Card is the first card in Southeast Asia which combines e-wallets from two countries. Touch ‘n Go currently has more than 23 million active Touch ‘n Go cards in circulation in Malaysia while EZ-Link has issued about 30 million Cepas ez-link cards in Singapore.

INDONESIA, MALAYSIA

Indonesia, Malaysia send letter protesting EU palm oil curbs
(9 April 2019) Indonesian President Joko Widodo and Malaysian Prime Minister Mahathir Mohamad sent a joint letter of objection to the European Union (EU) on April 5 over its plans to phase out the use of palm oil in renewable transport fuel, according to a Reuters report. Reuters claims to have reviewed a copy of the document and provided the following excerpt: “Both our governments view this as a deliberate, calculated and adverse economic and political strategy to remove palm oil from the EU marketplace… Should this delegated regulation enter into force our governments shall review our relationship with the European Union as a whole, as well as its member states. This may include the reviewing of our partnership negotiations, procurements contracts and key imports from the EU.” Meanwhile, EU ambassador to Malaysia Maria Castillo Fernandez told The Malaysian Reserve that there was no trade war between the parties and neither were keen on starting one. She further emphasised that the bloc has no intention of ever placing an absolute ban on palm oil imports.

ASEAN

Four ASEAN central banks ink agreement to boost local currency transactions
(7 April 2019) The central banks of Indonesia, Malaysia, Thailand and the Philippines signed an agreement for the implementation of a Local Currency Settlement (LCS) framework to encourage the use of local currencies for internal trade transactions within ASEAN countries on April 5 on the sidelines of the ASEAN Finance Ministers and Central Bank Governors’ Meeting held in Chiang Rai, Thailand. Under the agreement, each country will seek to increase the use of local currencies in bilateral trade transactions in order to reduce their dependence on foreign currencies and accelerate financial integration among ASEAN countries. In furtherance of these goals, Bank Indonesia (BI) announced that it has also submitted a draft proposal to expand the use of local currencies in intra-ASEAN transactions to all ASEAN Member States. According to BI international department director Wahyu Pratomo, if all 10 member states agree to the draft after discussions later this year, the proposal could be approved during the next ASEAN central bank governors’ meeting in Vietnam in April 2020.

ASEAN

ASEAN reintroduces online trade consultancy portal ASSIST
(10 April 2019) The ASEAN Secretariat relaunched the ASEAN Solutions for Investments, Services and Trade or ASSIST programme on April 9 — a portal which allows companies registered in ASEAN countries to submit queries and complaints related to intra-regional trade. According to the secretariat’s trade facilitation expert Paolo Vergano, the website had to be relaunched because it received only six cases after launching four years ago. Vergano therefore urged businesses to make use of the service as it is not only free but also a way to relay questions to ASEAN governments without having to engage a lawyer in the country. However, he stressed that ASSIST only provides advice of a consultative nature and is not an avenue for dispute settlement, and that companies may have to wait for a response for up to three months since questions are relayed to local governments.

THAILAND

Thailand aims to be the destination of choice for aircraft MRO in ASEAN
(8 April 2019) Thailand’s Board of Investment (BOI) recently announced that it has approved investment incentives for aerospace companies who choose to set up their ASEAN base in the country. These incentives include eight years of corporate income tax exemption, an additional five years of 50% reduction of said tax after the initial exemption period, and a further two to four years of exemptions for projects based in the Eastern Airport City — Thailand’s planned flagship MRO hub — that works with local partners to develop the workforce. The move comes as part of Thailand’s 15-year aviation development plan to position itself as the ASEAN hub for aircraft maintenance, repair and overhaul (MRO) activity. At the heart of its plan is the Eastern Airport City project under the country’s Eastern Economic Corridor (EEC), which includes plans to expand U-Tapao Airport’s passenger capacity from five million to 54 million in the next three decades.

MYANMAR

Myanmar opens up insurance, wholesale market to foreign companies
(6 April 2019) Myanmar’s Ministry of Planning and Finance announced on April 5 that five foreign insurers — British Prudential, Japanese Dai-ichi Life, Hong Kong AIA, US Chubb and Canadian Manulife — have been granted provisional licences to establish wholly-owned life insurance subsidiaries in the country. They must, however, first meet a set of pre-licensing requirements stipulated by the ministry. The announcement comes two years after the government’s initial pledge to liberalise the insurance market by the first quarter of 2017. So far, only three foreign insurers from Japan — Tokio Marine & Nichido Fire, Sampo Japan and Mitsui Sumitomo — are allowed to provide non-life insurance policies in the Thilawa special economic zone. Meanwhile, Myanmar’s Ministry of Commerce authorised three Japanese companies — Toyota Tsusho trading, Otsuka pharmaceuticals and Mycare Unicharm diapers — to operate wholly-owned wholesale businesses as foreign entities. Swiss trading house DKSH has also been authorised to conduct retail and wholesale activities in the country as a foreign entity.

VIETNAM-NETHERLANDS

Hanoi plays host to Dutch Prime Minister’s official visit to Vietnam
(9 April 2019) Netherlands Prime Minister Mark Rutte’s official visit to Vietnam concluded on April 9 with both parties committing to work together to create new opportunities for Dutch businesses to invest and do business in the country. Furthermore, both sides agreed that the EU-Vietnam Free Trade Agreement (EVFTA) has the potential to give bilateral trade between the countries a significant boost, and they therefore urged all parties involved to support the signing and ratification of the agreement. According to Rutte, the Netherlands is presently Vietnam’s biggest European investor with investments worth over US$9.5 billion and bilateral trade in 2018 recorded at over US$7.84 billion. Separately, Vietnamese industry and trade minister Tran Tuan Anh inked a deal with Germany’s Siemens AG in Berlin that will see the company working with the Vietnamese government to develop “smart infrastructure for sustainable development” in accordance with the industry and energy cooperation framework between both governments.

MALAYSIA-US

Malaysian trade mission to the US eyes over US$1.5 billion in potential investments
(9 April 2019) The six-day Malaysian trade mission to the US led by international trade and industry minister Darell Leiking concluded on April 6 with several potential investments in hand. According to Leiking, the delegation facilitated several discussions during the trip, which could lead to investments worth around US$1.6 billion (RM6.6 billion) primarily in the electrical and electronics, and chemical industry. Most notably, Leiking announced during the trip that Microsoft Corp and MIMOS Berhad (an agency under Malaysia’s Ministry of Trade and Industry) will establish an applied artificial intelligence (AI) centre in the country that aims to equip local players with capacity development for “rapid response government policymaking” and “tools required to increase intelligence and leverage on modern technologies such as AI” in line with Malaysia’s National Policy on Industry 4.0 and the ASEAN Digital Skills Vision 2020. Meanwhile, Malaysian defence minister Mohamad Sabu is slated to visit Moscow on April 20 where he will reportedly negotiate a barter trade of Russian defence assets and Malaysian palm oil.

SINGAPORE-UK

Singapore opens e-Commerce trade office in London to facilitate trade with UK businesses
(10 April 2019) The UK’s trade and export promotion minister Baroness Fairhead announced on April 10 that the Singaporean government has opened a trade and enterprise development agency known as SEED in London that aims to help UK businesses tap the growing ASEAN market through e-commerce. According to a statement by the UK government, SEED was established with the support of Enterprise Singapore in accordance with the Singapore-UK Partnership for the Future roadmap which was launched at the start of the year. The office will provide UK companies with services such as market research, data analytics and e-commerce strategy development with the aim of helping them access the ASEAN market through Singapore.

Malaysia: February 2019 industrial production

HIGHLIGHTS

February 2019 industrial production

IPI growth undershot expectations at 1.7% yoy in February
While slower growth in manufacturing growth tallied with our expectations, the 5% contraction in mining output threw our forecasts off course.

We expect the recovery in agriculture output to cushion 1Q19 GDP growth from disappointments in mining output and weaker manufacturing expansion.

IPI growth missed forecasts in Feb…
The industrial production index (IPI) grew at a slower-than-expected pace of 1.7% yoy in February (+3.2% yoy in January), the weakest pace since June 2018. The fragile reading mirrored the weak export growth (-5.3% yoy in February vs. +3.1% yoy in January) as well as manufacturing PMI (47.2 in March vs. 47.6 in February), which has stayed below the 50-dividing point in the past six months.

… on weaker readings across all segments
At a 5% yoy contraction in February (-0.9% yoy in January), mining production markedly undershot our forecasts. The slowdown in manufacturing output expansion (+3.7% yoy vs. +4.2% yoy in January) and electricity (+4.9% yoy vs. +7.8% yoy in January) depressed IPI growth further. The seasonally-adjusted IPI growth fell 2.0% mom in February (-1.2% mom in January), against an average of 0.5% mom increase in 2014-2018.

Upstream O&G output declined
The underperforming mining activity was dragged by the decline in natural gas production (-5.6% yoy in February vs. +0.3% yoy in January), and decline in crude petroleum output which deepened to 4.3% yoy (-2.2% yoy in January). Weak readings also spilled over to the downstream segment, which saw the production of refined petroleum products rising by only 0.2% yoy (+3.9% yoy in January).

Export-oriented industries trailed manufactured export performance
Trailing manufactured export performance, the output growth rates of export-oriented industries were generally weaker in February, such as E&E (+3.1% yoy in Feb vs. +3.9% yoy in Jan), chemicals & chemical products (+0.5% yoy vs. +2.6% yoy in Jan), and rubber & plastic products (+5.8% yoy vs. +6.3% yoy in January). Resilient food output (+6.3% yoy vs. +2.4% yoy in January) was supported by continued improvements in the output of vegetable, animal oil & fats (+17.6% yoy in February vs. +10.0% yoy in January), while the manufactures of passenger cars rose at a slower pace during the shorter working month (+8.7% yoy vs. +10.3% yoy in January).

Downside to industrial sector cushioned by agriculture recovery
IPI growth in 2M19 (+2.5% yoy) is tracking below 4Q18’s (+3.2% yoy). Unless mining output and factory activity accelerate sharply in March, the segment’s contribution to real GDP growth could weaken in 1Q19. Nonetheless, the downside is cushioned by a recovery in the agriculture sector, particularly palm oil production. We maintain our 2019 forecasts for IPI growth (+3.7%) and GDP growth (+4.7%).

Originally published by CIMB Research and Economics on 11 April 2019.

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

Mekong Monitor

Photo credit: Bangkok Post

TRADE, ECONOMY, AND INVESTMENT

THAILAND, CAMBODIA

Thailand and Cambodia to officiate new rail link connecting both countries
(5 April 2019) Thai transport minister Arkhom Termpittayapaisith announced that Thailand and Cambodia will soon be linked via a new connection between Thai Sa Kaeo’s Aranyaprathet district and Cambodia’s Pot Pet, Sisophon and Battambang districts. According to Arkhom, the new link is expected to boost border trade and tourism between the countries and is part of the country’s plans to enhance economic cooperation between countries in the Greater Mekong Subregion’s Southern Economic Corridor. Furthermore, as a symbolic gesture of cooperation, Thailand will give Cambodia a four-carriage diesel train that will be unveiled during the opening of the new route.
Read more>>

VIETNAM, THAILAND

Vietnam welcomes investments from Thailand in all sectors
(9 April 2019) The Vietnamese government is committed to creating favourable business environment for foreign investors, and welcomes Thai businesses looking to set up shop in Vietnam, said Vietnam Deputy Prime Minister (DPM) Trinh Dinh Dung. The DPM’s remarks were made during a reception for Thailand’s Siam Cement Public Company Limited (SCG) in Vietnam executive director Dhep Vongvanich on April 9, where both sides reaffirmed their commitment to complete the US$5.4 billion Long Son petrochemical complex in Vietnam’s southern province of Ba Ria-Vung Tau as soon as possible. Meanwhile, Thailand’s third largest power company Gulf Energy Development PCL’s share price saw a 50% surge after it announced in August last year its plans to invest in energy ventures in Vietnam. Last month, Gulf Energy submitted a proposal to build a US$7.8 billion liquefied natural gas (LNG) power plant in Vietnam’s Ninh Thuan province and is currently eyeing a 5,000-megawatt (MW) gas power complex in the Dong Nai province.
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CAMBODIA, VIETNAM

Cambodia asks Vietnam for another 50 megawatts of electricity
(10 April 2019) Cambodian mines and energy minister Suy Sem announced on April 9 that his ministry is in discussions with the Vietnamese government to procure another 50 MW of electricity on top of the 170 MW that is currently being supplied. Cambodia’s request comes after it cancelled the leasing of a floating 200-MW Turkish power plant due to technical issues. Cambodia also intends to buy 200 MW from Laos, with an agreement signed to purchase power from 2019 to 2021. The current shortage of electricity supply in Cambodia is caused by its hydropower plants’ inability to generate power due to the recent dry spell. According to the Mines and Energy Ministry, Cambodia’s demand for electricity will grow by 16.12% this year to reach 2,870 MW. However, the country will need to continue relying on electricity imports from neighbouring Thailand, Vietnam and Laos for now as its local power sources have a limited 2,428 MW capacity.
Read more>>

LAOS, THAILAND

Laos and Thailand officiate the Xayaburi dam’s first “fish-friendly” turbine generator
(10 April 2019) Lao energy and mines minister Dr Khammany Inthirath and Thai energy minister Dr Siri Jirapongphan launched the Xayaburi Hydroelectric Power Project’s first turbine generator unit on April 10 — the first of eight “fish-friendly” turbine generators that will eventually power the 1,285 MW project. The Xayaburi project will be the first hydroelectric power plant on the lower Mekong River, situated around 80 kilometres from northern Laos’ Luang Prabang. Furthermore, the project is considered the new benchmark for environmentally-friendly power plants on the Mekong River as it includes fish passage facilities and fish locks to facilitate the natural migration of fish both upstream and downstream. The project, developed by Thailand’s CK Power Public Company, is expected to be fully operational by the end of 2019.
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LAOS-CLMV

Laos expects 12 more power plants to open in 2019
(8 April 2019) The Lao government expects another 12 power plants to start operating this year, bringing the country’s installed energy capacity to around 9,152.9 MW. The dozen new power plants will be in addition to Laos’ existing 57 large power plants with an installed capacity of 7,193 MW, generating approximately 3,145.5 Gigawatt hours (GWh) every year. Laos presently exports electricity to Thailand, Vietnam, Cambodia, Myanmar and Malaysia. The country expects to generate 7,000 MW for Thailand, 1,000 MW for Vietnam, 200 MW for Cambodia and 300 MW for Malaysia by 2020, as well as 100 MW for Myanmar by 2022. With this, Lao government expects to generate US$1.9 billion worth of energy this year, and it hopes to eventually export up to US$1.45 billion worth of electricity.
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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

Photo credit: The Star

Economy, Investment and Trade

Malaysia’s ECRL deal with China could include palm oil buy
(8 April 2019) Ongoing re-negotiations of Malaysia’s Chinese-backed East Coast Rail Link (ECRL) project could see the overall construction cost lowered from the initial US$13.4 billion (RM55.5 billion) to between US$8.4 billion (RM34.4 billion) and US$10.1 billion (RM41.3 billion), according to The Star report quoting unnamed sources. This will be done by lowering the per kilometre construction cost to around US$12.2 million (RM50 million) for tunnelling on normal terrain and US$14.7 million (RM60 million) for tunnelling in critical areas and areas with challenging soil conditions. Additionally, the re-negotiated contract could include a commitment from China to buy more Malaysian palm oil and more direct Chinese investments into Malaysia. CIMB Research estimates that based on current prices, every 5% increase in palm oil exports could help Malaysia increase its current account surplus by US$488.2 million (RM2 billion) or 0.14% of the country’s GDP.
Read more>>

Filipino manufacturers urged to diversify exports to China
(3 April 2019) The Philippines’ trade secretary Ramon M. Lopez urged the country’s producers to diversify their exports to China to help bridge the trade gap between the countries, according to a BusinessMirror report. Lopez was further quoted in saying that he not only wants to increase bilateral trade between the countries, but hopes to do so by elevating the type of products that the country exports to China to higher-value goods such as high-end furniture, automotive parts and electronics. According to Lopez, there is “great demand” for Philippine products and local producers need to step up their production of agricultural and manufactured goods in order to meet this demand. Figures from the Philippine Statistics Authority (PSA) show that the country’s exports to China increased by 8.48% from US$8.01 billion in 2017 to US$8.69 billion in 2018 while its Chinese imports grew by 22.5% from US$17.46 billion in 2017 to US$21.39 billion in 2018. Furthermore, its trade gap with China went up from US$9.45 billion in 2017 to US$12.7 billion in 2018.
Read more>>

Malaysian sugar producer eyes the Chinese market
(8 April 2019) Malaysian sugar heavyweight MSM Malaysia Holdings Berhad is reportedly close to finalising partnerships to export its products to China. The move comes as MSM — the world’s sixth-largest sugar refinery — looks to tap the growing Chinese consumer market to bolster its dwindling performance in recent years. MSM executive director Khairil Anuar Aziz was quoted by Bloomberg in saying that the company hopes to meet the demands of the “new generation” of Chinese consumers by supplying sugar for the manufacturing of popular eatables such as bubble tea, health drinks and baked goods. According to the OECD, China is set to become the world’s largest sugar importer by 2027. Furthermore, Euromonitor International projects the country’s snack consumption will rise by 13% to reach 13.5 million tonnes by 2023.
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Chinese, Singaporean and Lao logistics firms to develop dry port in Vientiane
(8 April 2019) KLN (Singapore) Pte Ltd, a subsidiary of Hong Kong-based Kerry Logistics, has signed a memorandum of understanding (MoU) with Laos’ Sitthi Logistics to establish a joint venture to develop a dry port in the Vientiane Logistics Park in Laos. According to Post and Parcel, Kerry Logistics will contribute its management expertise, while local player Sitthi Logistics will contribute on-the-ground support. The 35-hectare project, to be used for the transfer of cargo at Vientiane, comes as part of the Lao government’s plans to incentivise commercial developments that help the local economy benefit from the Kunming-Bangkok rail project running through Vientiane, in the hopes of establishing the city as a major economic hub under the Belt and Road Initiative. The MoU signing ceremony held on April 5 was attended by Lao Deputy Prime Minister Sonexay Siphandone.
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Singapore, China look to broaden and deepen bilateral cooperation
(8 April 2019) As part of its wider plan to deepen bilateral cooperation with China, Singapore plans to establish the Singapore-Shanghai Comprehensive Cooperation Council. The council will enable the two countries to intensify cooperation in the development of the Yangtze River Delta region. The plan was revealed by Singaporean Deputy Prime Minister Teo Chee Hean in a recent op-ed in China’s Contemporary World Magazine titled “Singapore-China Friendship: Moving Forward Hand-in-Hand from Generation to Generation”. Furthermore, Teo mentioned in the op-ed that Singapore will embark on “new initiatives related to legal and judicial cooperation for commercial transactions.” The op-ed was published ahead of the Singapore-China Forum on Leadership to be held on April 14 and co-chaired by Teo and China’s Minister of the Central Organisation Department, Chen Xi.
Read more>>

Vietnam: 1Q19 GDP – resilient growth

HIGHLIGHTS

Inflation to tick-up but stay manageable

Vietnam registered a trade deficit of US$768m in February due to negative growth of 3.3% in exports.
An upswing in domestic manufacturing compensated for the setback in electronics production.
We keep our 2019 GDP growth forecast unchanged at 6.6%

Robust growth in domestic manufacturing is a timely buffer
Manufacturing activity was still strong, posting a growth of 12.4% yoy in 1Q19. A slowdown in external demand has dented electronic manufacturing activity as electronics output only recorded a slight increase of 2.9% yoy in 1Q19 vs. 29.3% in 1Q18. However, the uplift from other manufacturing sectors (refinery products [+96.1% yoy], metal [+37.3%] and motor vehicle [+20.8%]) helped to offset the impact of the weaker contribution from electronics manufacturing growth. As FDI manufacturing growth trends lower, domestic investment could be the driving force behind the expansion of manufacturing sector in 2019.

GDP growth to ease due to mining and agriculture sector
In 1Q19, the mining sector continued to contract albeit at a slower pace (-2.2% yoy vs. – 3.7% in 4Q18 and 1.0% in 1Q18). Meanwhile, agricultural sector growth eased to 2.7% yoy (vs. 3.9% in 4Q18 and 4.3% in 1Q18) due to lower output and unfavourable prices. In contrast, services activity remained largely steady, rising 6.5% yoy (vs. 6.6% in 1Q18), supported by resilient domestic demand and still robust growth in the banking and real estate sectors. In 1Q19, the banking and real estate sectors grew by 7.7% yoy and 4.8% yoy, respectively (vs. 7.7% and 3.6% in 1Q18).

Price stability remains
As we expected, a sharp drop in pork prices helped to mitigate inflationary pressure arising from increasing fuel prices in March. Specifically, food inflation was down by 1.42% mom while transport inflation was up by 2.22% mom. As weight for food in the CPI basket is higher than that for transport, CPI fell 0.21% mom in Mar 2019, helping inflation stay muted in 1Q19 at an average of 2.63% yoy – the lowest level seen in 1Q of the last three years. The electricity price hike on Mar 20 may exert some inflationary pressure, but is unlikely to result in further inflation risk, in our view.

We maintain our GDP growth forecast at 6.6% for 2019
We expect GDP growth to moderate in subsequent quarters this year as: 1) the effects of the launch of Nghi Son Refinery in May 2018, which boosted refinery production and manufacturing growth in 1Q19, could fade in the upcoming quarters; and 2) it will take time for the impact of a shift in manufacturing capacity into Vietnam, as a result of the US-China trade war, to translate to economic growth. In the meantime, a slowdown in the FDI sector could dampen both exports and economic growth in the near term. As such, we maintain our 2019 GDP growth forecast at 6.6% despite the impressive growth in 1Q.

Originally published by CIMB Research and Economics on 5 April 2019.

CARI Captures 398

ASEAN

5th ASEAN Finance Ministers’ and Central Bank Governors’ Meeting held in Thailand
(5 April 2019) The 23rd ASEAN Finance Ministers’ Meeting and 5th ASEAN Finance Ministers’ and Central Bank Governors’ Meeting (AFMGM) and related meetings were held in Chiang Rai from April 2 to 5 under Thailand’s 2019 Chairmanship theme “Advancing Partnership for Sustainability”. The slew of high-level meetings kicked off with the ASEAN Plus Three Finance Ministers and Central Bank Deputies’ Meeting where the 13 countries in attendance agreed to employ more local currencies when transacting with each other in order to lower their dependence on the US dollar. This was followed by the ministerial meetings the next day as well as a number of major announcements, which includes the inking of: (i) an agreement between Indonesia and Thailand’s central banks to promote greater cooperation in the areas of digital payment systems, cross-border payments and supervision of payment systems; (ii) a memorandum of understanding (MOU) between the Thai and Lao central banks to elevate bilateral collaboration in financial innovation and payment services, particularly through the development of an interoperable QR code that will allow real-time, cross-border retail payments between the countries; and (iii) a MOU between Singapore and Cambodia’s central banks to conduct knowledge sharing between the countries in the area of FinTech innovation with a focus on emerging market trends and regulatory issues in the sector. Furthermore, ASEAN countries also pledged to create a standard QR code to facilitate regional transactions and adopt the national single window system to reduce regional trade barriers this year.

ASEAN

ASEAN, ADB launch US$1 billion facility to fund green infrastructure projects
(4 April 2019) ASEAN, together with the Asian Development Bank (ADB) and other major development financiers launched the ASEAN Catalytic Green Finance Facility on April 4 on the sidelines of the AFMGM meetings held in Chiang Rai this week. The new US$1 billion facility will provide loans and technical assistance to support green infrastructure projects, such as projects that promote sustainable transportation, clean energy and sustainable water systems. Aside from the ADB, the other major contributors to the fund are German state bank KfW, the European Investment Bank, French state bank Agence Francaise de Developpement, and the ASEAN Infrastructure Fund. The Organisation for Economic Co-operation and Development (OECD) and the Global Green Growth Institute will also support knowledge sharing and capacity building on green finance.

ASEAN

ASEAN Digital Agility concept launched to grow the region’s digital economy
(1 April 2019) The ASEAN Digital Ministers’ Retreat was held on March 28 to 29 in Phuket, Thailand, with the aim of discussing and supporting Thailand’s vision for the advancement of the region’s information and communication technology agenda as this year’s chair for ASEAN. According to The Phuket News, the meeting was led by Thai digital economy and society minister Dr Pichet Durongkaveroj, who also unveiled the “ASEAN Digital Agility” concept that aims to transform the region into a robust digital economy through five key areas, i.e., cybersecurity, connectivity and mobility, smart cities, digital economy, and manpower and society development. Meanwhile, a GovInsider interview with Thai Digital Economy Promotion Agency vice president Dr Passakon Prathombutr revealed Thailand’s hopes of leveraging its role as ASEAN chair to position the country as the region’s technological hub. According to Prathombutr, the goal is “to become the first, rather than the best.” As such, the government is moving quickly to develop its technological ecosystem and the laws needed to support the growth of a digital economy. Prathombutr also revealed that the country aims to be a hub for smart cities in ASEAN and that Thailand seeks to zero in on regional connectivity through a tech-focused agenda.

ASEAN

Experts urge ASEAN member countries to step up economic integration efforts
(3 April 2019) There are close to 6,000 non-tariff barriers in ASEAN and not one has been removed via regional processes ever since the ASEAN Economic Community (AEC) was first established in 2015, according to European Union-ASEAN Business Council head Chris Humphrey who was speaking as a panelist at a roundtable discussion hosted by the CIMB ASEAN Research Institute (CARI) on April 2. Fellow panellist Kaewkamol Pitakdumrongkit of the S. Rajaratnam School of International Studies agreed with this sentiment, and added that non-tariff barriers tend to have a larger impact on medium, small and micro enterprises as they have less resources to absorb the additional costs — which subsequently leads to lower participation from small businesses in the regional production network. As such, the panelists made several recommendations to tackle these issues, including the identification and collation of non-tariff measures through an open database, a system to inform member states of new measures, as well as an institution dedicated to reducing non-tariff barriers.

ASEAN-ROK

ASEAN-South Korea summit to be held in Busan in November
(1 April 2019) The South Korean presidential office announced on April 1 that the ASEAN-South Korea summit will be held on November 25 and 26, followed by a one-day summit with countries from the Greater Mekong Subregion. Both events will be held in Busan. According to the presidential office’s press secretary Yoon Do-han, the summit will be the largest international conference ever held during President Moon Jae-in’s time in office as it also serves as a celebration of the 30th anniversary of ASEAN-South Korea relations. Yoon further revealed that the presidential office is currently discussing the possibility of inviting North Korean leader Kim Jong-un to the summits with the Southeast Asian bloc. Separately, South Korean Customs Services commissioner Kim Yung Moon inked a memorandum of understanding with the Indonesian government to allow the bilateral exchange of electronic trade data as part of the countries’ efforts to facilitate better trade flows in accordance with the ASEAN-Korea Free Trade Agreement.

THE PHILIPPINES, INDONESIA

Indonesia and the Philippines agree to elevate bilateral trade and investment
(2 April 2019) Indonesian trade minister Enggartiasto Lukita’s recent bilateral meeting with the Phillippines’ trade and industry minister Ramon M. Lopez and agriculture minister Immanuel Pinol in Manila resulted in several trade and investment agreements between the countries. Most notably, the Indonesian minister announced that they will no longer impose anti-dumping duties on bananas and non-tariff measures on onions from the Philippines — a development that both sides consider to be a “breakthrough” in addressing the existing trade imbalance between the countries. Furthermore, Indonesia agreed to review its current policies on non-agricultural exports such as pharmaceutical products, which currently states that exporters must first invest in Indonesia in order to gain access to the market. Both sides also agreed to a combination of working groups and a business matching event.

THE PHILIPPINES, MALAYSIA, INDONESIA

Tripartite working group to be formed to address palm oil dumping into the Philippines
(29 March 2019) The Philippines’ agriculture secretary Emmanuel Pinol announced on March 28 that a tripartite technical working group will be formed with Malaysia and Indonesia to address the alleged smuggling and dumping of palm oil from the two countries in the Philippines in recent years. The announcement follows a recent recommendation by the Philippines’ Department of Agriculture to impose a temporary ban on palm oil imports from both countries due to said issues. Figures from the Philippine Statistics Authority (PSA) show that the country saw a 169.34% increase in imports from Malaysia by metric tons in 2018 compared to 2017, as well as a 136% increase in imports from Indonesia in the same period. According to Pinol, the crux of the matter lies in how the rise of palm oil imports has affected local palm and coconut oil prices. As such, the Philippines is looking to rationalise palm oil imports from Malaysia and Indonesia moving forward, and hopes that both countries will also consider giving its coconut-based products greater access to their markets.

INDONESIA, THAILAND, MALAYSIA

ITRC members agree to cut rubber exports to stabilise global rubber prices
(1 April 2019) Members of the International Tripartite Rubber Council (ITRC) — Indonesia, Malaysia and Thailand — agreed to reduce their combined natural rubber exports by 240,000 tonnes in hopes of stabilising global rubber prices. To this end, Indonesia and Malaysia will start reducing their rubber exports over the next four months starting April 1 by 98,160 tonnes and 15,600 tonnes respectively, while Thailand will reduce their exports by 126,240 tonnes beginning May 20. According to The Jakarta Post, the Indonesian government will look to offset the decrease in exports by expanding the domestic market for natural rubber, such as by using it in the material mix for the construction of roads or manufacturing of retread tires.

CAMBODIA-EU

Cambodia announces economic reform measures in preparation for the potential withdrawal of EU EBA privileges
(29 March 2019) Cambodian Prime Minister Hun Sen announced a 17-point economic growth strategy that is expected to help exporters save up to US$400 million a year through lower operating costs. The announcement, which was made at the 18th Government-Private Sector Forum on March 29, was made in preparation for the European Union’s (EU) potential revocation of Cambodia’s special tariff privileges under the Everything But Arms (EBA) scheme. The 17 measures include the removal of Cambodia Import-Export Inspection and Fraud Repression (CamControl) units from all land border checkpoints and the Kampuchea Shipping Agency and Brokers (Kamsab) officers from all ports. Furthermore, scanning fees for container exports and imports and other logistical procedures will either be removed or greatly reduced. Additionally, electricity prices for the industrial sector will be reduced and investment laws amended to attract more investments. According to the Prime Minister, these measures are necessary because even if the EU does not go ahead with the rescindment of its EBA privileges by August 2020, Cambodia will still lose such privileges when the country graduates from the least-developed country status.

VIETNAM-FRANCE

Vietnam and France reaffirm their commitment in advancing bilateral cooperation
(2 April 2019) Vietnamese National Assembly Chairwoman Nguyen Thi Kim Ngan’s official visit to France on April 1 concluded with both nations agreeing to strengthen bilateral relations in various areas. Most notably, both sides agreed to expedite the inking and ratification of the EU-Vietnam Free Trade Agreement (EVFTA) and intensify business cooperation. The chairwoman also requested support from France in its request to lift the EU’s yellow card warning to Vietnam as the country has made efforts to implement the EU’s recommendations (such as its law on fisheries). According to Ngan, France is presently Vietnam’s third largest investor with investments worth US$2.8 billion and fourth largest trade partner within Europe with trade valued at US$5.1 billion.

CARI Captures 397

THAILAND

Thailand’s economic challenges expected to persist regardless of election outcome
(27 March 2019) While the preliminary results of Thailand’s national elections released on March 26 may have yielded more questions than answers, there is no doubt that tackling the country’s many economic challenges will be the incoming administration’s top priority — regardless of which party wins the election. According to analysts interviewed by Reuters and Bloomberg, the new administration will first need to move quickly to outline its economic policies in order to maintain economic stability. Secondly, continuity must be seen in key infrastructure commitments such as the Eastern Economic Corridor (EEC) as well as in areas outside key economic hubs in order to maintain investment momentum (Thailand currently lags behind regional peers in terms of investment as a share of GDP). Thirdly, there needs to be greater investment in improving the quality of education and healthcare to improve the Thai people’s quality of life. By addressing these challenges, the government would not only help breathe life into the US$515 billion economy but also encourage greater investments in the country. Thailand’s economic growth in 2018 was the strongest in six years at 4.1% but still lagged behind the Philippines (6.2%), Indonesia (5.2%) and Malaysia (4.7%).

VIETNAM, BRUNEI

Vietnam and Brunei upgrade bilateral ties to a comprehensive partnership
(27 March 2019) The Sultan of Brunei Hassanal Bolkiah’s official visit to Vietnam from March 26-28 culminated in agreements between both parties to elevate bilateral relations to a comprehensive partnership. Furthermore, both sides agreed to aim for US$500 million in bilateral trade by 2025 — up from the US$54 million recorded in 2018. Fortunately, trade between the countries in the first two months of 2019 alone reached US$43 million. Brunei currently has 179 investments in Vietnam with a combined value of over US$1 billion, while Vietnam has two investments in Brunei worth US$3.6 million.

VIETNAM, SINGAPORE

Ho Chi Minh City and Singapore to cooperate on smart city development and digital innovation
(25 March 2019) Singaporean Deputy Prime Minister Teo Chee Hean’s official visit to Vietnam concluded with both sides agreeing to intensify economic cooperation between the countries, according to Vietnam Plus. Most notably, Teo’s visit to Ho Chi Minh City (HCMC) yielded agreements to cooperate on smart city development and digital innovation to help advance HCMC’s plans to develop an Innovation District. According to HCMC party secretary Nguyen Thien Nhan, the city is particularly keen to learn from Singapore’s experience in the development of green cities, urban lighting systems and tourism. Singapore is HCMC’s top foreign investor by end-2018 with investments in over 1,100 projects worth more than US$10 billion. Trade between Singapore and HCMC reached US$3.7 billion in 2018.

INDONESIA, THAILAND

Indonesia and Thailand see decreased dependence on the US dollar for bilateral trade
(25 March 2019) The local currency settlement (LCS) framework for bilateral trade between Indonesia and Thailand is bearing fruit, as evidenced in the fourfold year-on-year increase in the value of transactions made using local currencies in the first two months of 2019. Transactions in the first two months of this year totalled US$8.5 million. According to Bank Indonesia, the LCS was introduced in December 2017 to boost trade between the countries while reducing their dependence on third-party currencies such as the US dollar. In the two months following the launch, the two countries recorded approximately US$2.1 million in LCS transactions. Figures from the Indonesian trade ministry puts bilateral trade between the two countries at US$17.71 billion in 2018.

INDONESIA, MALAYSIA

Indonesia, Malaysia await the European Parliament’s decision on palm oil ban
(25 March 2019) Indonesia and Malaysia continue to make preparations to formally protest against the European Union’s (EU) proposal to impose a cap on palm-oil based biofuels. Last week, Indonesia’s trade ministry said that it was reviewing ongoing negotiations of the Indonesia-European Union Comprehensive Economic Partnership Agreement (IEU-CEPA) and that the parties were struggling to advance discussions on the “trade and sustainable development” chapter. In response, the EU ambassador to Indonesia Vincent Guerend said that the bloc was prepared to help Indonesia’s palm oil products meet the required sustainability standards, and that the directive could still be revised in 2021 or 2023. According to an Indonesian Foreign Ministry representative, the European Parliament adjourned on March 25 and the current session could produce three possible outcomes: (i) it produces a decision on whether to proceed with the directive, (ii) it delays the decision to April 15, or (iii) it awaits the election of a new parliament.

MALAYSIA-PAKISTAN

Pakistan sees Malaysia as entry point to other ASEAN markets
(25 March 2019) Malaysian Prime Minister Mahathir Mohamad’s three-day visit to Pakistan upon the invitation of Prime Minister Imran Khan concluded with the inking of five memoranda of understanding for investments worth around US$900 million and agreements to intensify cooperation between the two countries, according to The Diplomat. Most notably, Malaysian carmaker Proton agreed to establish a power plant near Karachi — its first in South Asia. Furthermore, Malaysia reiterated its interest in purchasing fighter jets from Pakistan and held discussions with Pakistan International Airlines on extending flight operations between the countries. In turn, Pakistan expressed its interest in not only doing business with Malaysia, but also using the country as an entry point to other ASEAN and East Asian markets. Both sides also agreed to convene the next Malaysia-Pakistan Closer Economic Partnership Agreement (MPCEPA) joint committee meeting at the soonest.

THE PHILIPPINES-UK

The Philippines and UK sign joint economic action plan
(23 March 2019) The Philippines and United Kingdom (UK) inked a Statement of Partnership and Joint Action Plan on economic cooperation, trade and investment on March 21 ahead of the UK’s exit from the European Union (EU), according to Manila Bulletin. The signing also marks the first Economic Dialogue held between the two parties, led by the Philippines’ Department of Trade and Industry (DTI) undersecretary Ceferino Rodolfo and British ambassador Daniel Pruce. Under the agreement, both sides agree to enhance current and future economic cooperation across a wide range of sectors in order to boost the current bilateral trade volume which was valued at US$987.4 million in 2017. Back home in the Philippines, trade secretary Ramon M. Lopez told BusinessWorld that the country could very well begin negotiations for a bilateral free trade agreement with the US later this year.

VIETNAM-GERMANY

Vietnam urges Germany to increase investment in infrastructure, energy, and education
(25 March 2019) Vietnamese Prime Minister Nguyen Xuan Phuc urged Germany to increase its investment in the country, especially in the development of infrastructure, energy and education, according to Nhan Dan Online. The premier’s remarks were made during a reception hosted for German economic affairs and energy minister Peter Altmaier in Hanoi on March 25. Furthermore, Phuc expressed his hope that the European Union-Vietnam Free Trade Agreement (EVFTA) will come to fruition. In turn, Altmaier said that Germany is particularly interested in developing artificial intelligence, digitalisation and startups in Vietnam. According to Vietnam Plus, German minister president of Thuringia state Bodo Ramelow is expected to lead a large delegation including representatives of 70 businesses to Vietnam in mid-April. Germany is currently Vietnam’s largest EU trade partner.

THE PHILIPPINES

The Philippines issues guidelines on e-COs to expedite trade with ASEAN countries
(25 March 2019) The Philippines Bureau of Customs (BOC) published new guidelines on the application, submission and processing of electronic Certificates of Origins (e-CO) through the country’s single window portal TradeNet. According to BOC customs commissioner Ray Leonardo Geurrero, the new system will help the country keep up with new global trade rules and trends by serving as the nerve centre of the government’s digital trade data. Furthermore, the new framework was developed in accordance with the ASEAN Single Window and amended ASEAN Trade in Goods Agreement (ATIGA) procedures to help boost the flow of trade between the Philippines and its ASEAN neighbours. TradeNet will go live for a trial phase at the Port of Manila, Manila International Container Port and the Port of NAIA. Separately, trade secretary Ramon M. Lopez announced that a joint administrative order will be issued in the coming weeks to address port congestion and regulate high shipping fees at the country’s ports.

ASEAN

ASEAN still very much dependent on conventional energy sources
(26 March 2019) The energy transition readiness of the ASEAN-6 countries (Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam) were ranked in the World Economic Forum’s Energy Transition Index (ETI) based on evaluations of the countries’ present energy ecosystem as well as their future readiness to adapt to future energy needs. The Index ranks 115 economies on how well they are able to balance energy security and access with environmental sustainability and affordability. Unsurprisingly, Singapore was came in at the top of the ASEAN-6 class backed by a strong governance and a culture of innovation and modern infrastructure which enables energy transition. On the other hand, Indonesia landed in sixth place amongst the ASEAN-6 due to its high solid fuel use and the presence of energy subsidies. Furthermore, the report found that all six countries remained generally dependent on conventional energy sources and the use of renewable energy remained relatively low when benchmarked against global standards. Nevertheless, a recent study by the ASEAN-German Energy Programme found that renewable energy sources in Southeast Asia especially solar power had the potential to be just as — if not more —cost competitive than conventional power sources in the next few years.

Mekong Monitor

Photo credit: Mizzima Myanmar

TRADE, ECONOMY, AND INVESTMENT

THAILAND, MYANMAR

Thai border village calls for faster development to compete with Myanmar’s “new Chinatown”
(2 April 2019) Chinese investment in Myanmar’s Kokko border village sparked concerns among Thai villages in the neighboring Thai province of Tak, located along the Thai-Myanmar border, claiming that the rise in activity on the Myanmar side has led to many lost business opportunities in their district. As such, the mayor of Tak province’s Mae Sot border district Thoetkiat Chinsaranan is leading calls for the government to expedite development projects in the area, especially in the Tak Special Economic Zone (SEZ), which covers three border districts. An advisor to the Tak Chamber of Commerce echoed these concerns, saying that it was also concerning because when the Kokko project in Myanmar is completed in ten years, its population will be four times than that in Mae Sot. According to the Bangkok Post, the Kokko development project may be the “largest mega project in Southeast Asia” that is expected to draw a large Chinese population to Thailand. Kokko is situated 22 kilometres from Myawaddy, a town in southeastern Myanmar’s Kayin state.
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THAILAND, MYANMAR

Thai and Myanmar banks establish cross-border money transfer service
(1 April 2019) Thailand’s state-owned Krungthai Bank and Myanmar’s Shwe Rural & Urban Development Bank announced the establishment of a cross-border money transfer service to enable the three million Myanmar workers working in Thailand to transfer money through an e-wallet with “competitive exchange rates”. The e-wallet will be built on the Everex Wallet, a service that specialises in distributed ledger technology for cross-border money transfers. According to Ledger Insights, remittances in Southeast Asia was projected by the World Bank to reach US$120 billion in 2018.
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THAILAND, VIETNAM

Thai state-owned EXIM Bank finances solar power plants in Vietnam
(2 April 2019) The state-owned Export-Import (EXIM) Bank of Thailand announced its provision of a US$65 million line of credit to local renewable energy company Eastern Power Group and Communication & System Solution Plc to finance the construction of two solar power plants in Vietnam’s Phu Yen province. The combined generating capacity of the two solar power plants is expected to reach 100MW. According to EXIM president Pisit Serewiwattana, the bank’s financial support for the project comes under its larger strategy to help Thai entrepreneurs expand overseas, especially in CLMV (Cambodia, Laos, Myanmar, Vietnam) markets. Moreover, it sees great potential in Vietnam’s renewable energy sector, with solar-power generation expected to leap from 850MW in 2020 to 12,000MW to 2030.
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LAOS, VIETNAM

Laos, Vietnam agree to enhance strategic cooperation in the financial sector
(29 March 2019) The 15th Laos-Vietnam bilateral financial cooperation steering committee meeting held in Vientiane recently concluded with both finance ministries agreeing to continue advancing cooperation in their finance sectors, according to The Phnom Penh Post. This will include assistance from the Vietnamese side in the drafting of several laws in Laos related to taxes and strategic national reserves, as well as in the development of Laos’ financial education infrastructure and human capital. The meeting was co-chaired by the Lao and Vietnamese deputy finance ministers Thipphakone Chanthavongsa and Tran Xuan Ha.
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VIETNAM-CLMV

Vietnamese companies urged to increase trade and investment with CLMV neighbours
(29 March 2019) Vietnamese Chamber of Commerce and Industry (VCCI) head Vo Tan Thanh urged local companies to increase their investments in and trade with their fellow CLMV and ASEAN countries during his speech at the Southeast Asia Outbound Investment Forum held in Ho Chi Minh City on March 28. According to the VCCI, Thailand remained the country’s largest trading partner and ninth largest investor last year with investments in 528 projects worth US$10.5 billion. In comparison, Laos was the 52nd largest investor with US$70 million, Cambodia the 56th with US$64 million and Myanmar the 99th with one US$800,000 project. Meanwhile, Vietnam has invested over US$3 billion in Cambodia, nearly US$2 billion in Myanmar and US$26 million in Thailand.
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About Greater Mekong Subregion (GMS)

China-ASEAN Monitor

Photo credit: The Malaysian Reserve

Economy, Investment and Trade

China’s growing appetite for biodiesel increases demand for Southeast Asian palm oil
(1 April 2019) Southeast Asia saw an increase in exports of a class of palm oil biodiesel known as palm methyl ester (PME) in the first quarter of 2019 — providing a much needed respite for palm oil producers in Indonesia and Malaysia. According to Singaporean consultancy PRIMA, the increase is fueled by a surge in demand for PME from Chinese and European importers due to its low prices — which were, ironically, brought down by the European Union’s (EU) proposal to restrict the use of palm-based biofuel in its member countries. Figures from Chinese customs show that the country’s PME imports rose by almost 50 times to 751,056 tonnes in 2018. Furthermore, PRIMA provides that up to 50,000 tonnes of PME are expected to be shipped to China from March to May alone as the country looks to increase its use of alternative energy. According to palm oil brokerage firm Sprint Exim, Chinese importers are facing difficulties procuring more biodiesel for delivery in May and June as Indonesia’s plants have already reached full capacity.
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The Philippines is still far from closing trade gap with China
(29 March 2019) The trade imbalance between the Philippines and China remains wide in favour of the latter, said the Philippines’ trade secretary Ramon Lopez during an interview on the sidelines of the recent China-Philippines Summit. According to data from the Philippine Statistics Authority (PSA), Chinese exports to the Philippines saw a 24.5% year-on-year increase reaching US$2.01 billion in January 2019, accounting for 22.2% of the Philippines’ total imports in that month. In comparison, the Philippines recorded a mere 2.3% year-on-year increase in exports to China during the same month, reaching only US$640.79 million or 12.1% of the country’s total exports. According to Lopez, the problem mainly lies on the supply side as Filipino manufacturers have been unable to meet the growing demand from China.
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Thailand eyes 12% increase in bilateral trade with China in 2019
(1 April 2019) The Thai Commerce Ministry hopes to increase bilateral trade with China by 12% this year by boosting its exports of agricultural produce and processed products from small and medium enterprises, according to Department of Trade Negotiations (DTN) head Auramon Supthaweethum. To this end, the DTN is looking to increase the level of awareness and usage of privileges provided under the Thai-China free trade agreement as it aims to reach bilateral trade worth US$140 billion by 2021. China is Thailand’s biggest trading partner. Bilateral trade between both countries in 2018 stood at US$80.136 billion, an increase of 8.7% year-on-year. Nonetheless, Auramon said that the 12% target may have to be revised if the US-China trade war is prolonged to a point where it impacts Thai exports.
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Chinese mega investments in the spotlight as Indonesia heads into election
(31 March 2019) Indonesian President Joko Widodo’s election contender Prabowo Subianto has made the legitimacy of Chinese investments in the country a key rallying point ahead of the country’s national elections on April 17. Among the Chinese investments that Prabowo has pledged to review is the US$6 billion Jakarta-Bandung high speed rail project, which Indonesian investment chief Tom Lembong previously claimed was “deeply troubled” and lacked transparency. However, Joko has insisted that the country had to embrace China in order to fund its growing infrastructure needs. Indonesia has recorded a US$18.4 billion trade deficit last year, representing a 40% increase ever since Joko took office in 2014. Nevertheless, Bloomberg quoted Lembong in saying that he expects China to announce a “more green, more transparent and more professional” Belt and Road Initiative (BRI) during the BRI summit to be held in Beijing later this month.
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Sony moves smartphone production base from Beijing to Thailand
(28 March 2019) Japanese electronics giant Sony Corp announced on March 28 that it was shutting down its smartphone production facility in Beijing by the end of the month and moving its smartphone production base to Thailand. The move comes with Sony’s announcement that its handset business recorded a US$863 million loss in the financial year ending March 2019. A company spokesman said that the decision was not related to the US-China trade war, but rather, an effort by the company to turn around the ailing business. As such, Sony will only produce smartphones at a Thailand plant and through other outsourced manufacturers moving forward.
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Press Release: ASEAN lacks effective measures and decisive political determination to address Non-Tariff-Barriers (NTBs) thus hurting the growth of micro, small, and medium enterprises (MSMEs)

ASEAN lacks effective measures and decisive political determination to address Non-Tariff-Barriers (NTBs) thus hurting the growth of micro, small, and medium enterprises (MSMEs)

(From left) Juan Sebastian Cortes-Sanchez, Trade Policy Analyst of Asian Trade Centre; Dr. Kaewkamol Pitakdumrongkit, Deputy Head and Assistant Professor, Centre for Multilateralism Studies, S. Rajaratnam School of International Studies (RSIS) of Nanyang Technological University; Chris Humphrey Executive Director of EU-ASEAN Business Council; Tan Sri Dr. Munir Majid, Chairman of CIMB ASEAN Research Institute (CARI); Tan Sri Datuk Rebecca Fatima Sta Maria, Executive Director of APEC Secretariat; and Alpana Roy, Director, ASEAN (Trade Division), Ministry of Trade and Industry, Singapore during the ASEAN Roundtable Series entitled “Future of ASEAN Trade: Tackling Non-Tariff Barriers in the New Trade Order.”

Singapore, 2 April 2019 – Panellists speaking at the ASEAN Roundtable Series on the topic of “Future of ASEAN Trade: Tackling Non-Tariff-Barriers in the New World Trade Order” organised by CIMB ASEAN Research Institute (CARI) concurred that current measures to address NTBs in ASEAN were underdeveloped and stronger political will among ASEAN member states is critically needed to fully address the issue.

Professor Kaewkamol Pitakdumrongkit, deputy head and assistant professor at the Centre for Multilateralism Studies, S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University pointed out that NTBs tend to hurt MSMEs more compared to large companies as big firms can better absorb costs incurred by Non-Tariff-Measures (NTMs), and thus limiting MSMEs’ participation in transnational production networks.

“On a technical front, capacity training should be provided to ASEAN public officials to equip them to better devise and simplify NTMs, whereas strong political will is required to tackle NTBs in ASEAN. It should be noted that the negative effects of trade on domestic constituencies should be addressed by trade adjustment assistance programmes, not regulations,” said Professor Kaewkamol.

Tan Sri Dr Rebecca Fatima Sta Maria, Executive Director at the Asia-Pacific Economic Cooperation (APEC) Secretariat said Non-Tariff-Measures should be a concern when they are trade distorting. “It is necessary to distinguish the difference between NTMs and NTBs and understand the impact of NTMs and this calls for us to determine the Ad-valorem equivalents (AVE) of the NTMs. Herein lies the challenge for policymakers. This also calls for collaboration between policymakers and researchers/economists for the work on AVE.”

Asian Trade Center (ATC) Trade Policy Analyst, Juan Sebastian Cortes-Sanchez presented the findings of NTB-related research conducted by ATC the past year. According to their research, firms interviewed as part of ATC’s continued research on NTBs in ASEAN note a wide and increasing array of challenges across multiple regional priority sectors such as automotive, healthcare and agri-food.

This suggests that ASEAN’s past efforts to tackle NTMs and NTBs have not been successful. There are two broad reasons for this disconnect between repeated pledges and failure to deliver results on the ground: the commitments have not always addressed the right target; and timely and effective implementation have hamstrung efforts to tackle existing commitments.

ATC research also found that ASEAN has focused much effort on addressing obstacles to trade related to standards. While these clearly matter and should continue to stay in the mix of policies reviewed by ASEAN officials, firm-level interviews conducted by the ATC show that companies face challenges that go beyond just problems with inconsistent product standards. These may include high taxation, discriminatory policies favouring local manufacturers and an underdeveloped intellectual property regime.

Expressing the concerns of EU business operating in ASEAN, Executive Director of the EU-ASEAN Business Council Chris Humphrey warns that ASEAN is at risk of failing to fulfil its potential, unless faster and more proactive action is taken on its own economic integration programme, including the removal of Non-Tariff Barriers.

“Whilst great work has been done on tariff removal in the region, NTBs remain a major issue when coupled with other measures that hinder rather than facilitate trade. ASEAN is still a long way from being the single market and production base that the AEC envisaged. Unfortunately, this means that intra-ASEAN trade remains low, and indeed lower now than it was a few years ago,” said Chris Humphrey.

H.E. Ambassador Ong Keng Yong, executive deputy chairman of the RSIS and director of Institute of Defence and Strategic Studies, Nanyang Technological University, in his opening remarks, offered a more cautious but positive outlook.

“Recent ASEAN Business Outlook survey findings show that US companies remain optimistic about growth prospects and commercial opportunities in ASEAN. Positive assessments like these augur well for ASEAN trade, whether intra- or inter-ASEAN. However, obstacles such as the non-tariffs barriers would obviously put a dampener on growth,” he said.

CARI Chairman Tan Sri Dr Munir Majid cautioned against relying too much on prospect. “ASEAN must understand future prospect is not a current reality. Projected numbers such as size of the combined economy, the young and huge market, and the boost in and through the use of new technologies, will start to run thin, if the ASEAN economy is not really one, if it continues to have cross-border impediments of all sorts, of which NTBs and NTMs are the most pervasive.”

The roundtable discussion was organised by CARI in partnership with the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University of Singapore.

Event update for ASEAN Roundtable Series on Tackling Non-Tariff Barriers in the New Trade Order>>