CARI Captures 395

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CARI Captures 395

INDONESIA-AUSTRALIA

South Korean President Moon Jae-in kicks off three-nation ASEAN tour in Brunei
(12 March 2019) South Korean President Moon Jae-in’s official visit to Brunei concluded with the inking of three memoranda of understanding (MOU) and commitment from both parties to continue elevating cooperation between the countries. According to a joint statement issued by President Moon and Brunei’s Sultan Hassanal Bolkiah, the three MOUs include agreements to increase South Korea’s investment and business presence in Brunei, maintain infrastructure development cooperation, explore collaboration in the oil and gas sector, re-establish cooperation in the liquefied natural gas value chain, conduct joint capacity building in renewable energy, cooperate on intellectual property rights, and work together to tackle issues related to the Fourth Industrial Revolution. Speaking on behalf of the South Korean delegation, foreign minister Kang Kyung-wha said that Brunei was the republic’s first stop as Brunei is the ASEAN-Korea dialogue coordinator from 2018 to 2021. Both countries are also looking forward to co-chairing the meeting on renewable energy during the East Asia Summit. Brunei is also the country coordinator for the ASEAN-Korea commemorative summit that will be held later this year.

MALAYSIA-ROK

Malaysia and South Korea aim to sign a bilateral FTA by year’s end
(14 March 2019) South Korean President Moon Jae-in and Malaysian Prime Minister Mahathir Mohamad’s meeting in Putrajaya on March 13 culminated in the signing of four memoranda of understanding (MOU) and commitment from both sides to sign a bilateral free trade agreement (FTA) by the end of 2019. Bilateral trade between both countries increased from US$15.76 billion in 2017 to US$17.98 billion in 2018. According to a press release from President Moon’s office, the leaders aim to sign the FTA on the sidelines of the South Korea-ASEAN summit later this year. Further, the four MOUs signed encompassed collaborations in transportation, industrial cooperation, halal food, as well as the development of a “smart city” in Malaysia. For instance, Malaysia will help South Korea comply with halal food requirements in order to attract more Muslim travellers, while South Korea will help train Malaysian students in the fields of engineering, information technology and new technologies. Both sides also expressed their wish to revitalise Malaysia’s Look East Policy and advance South Korea’s New Southern Policy as a means to deepen bilateral cooperation between the two countries.

MALAYSIA-JAPAN

Malaysia’s Samurai bond oversubscribed
(13 March 2019) The Malaysian government declared the issuance of its ¥200 billion (RM7.34 billion, US$1.79 billion) Samurai bond a success, with an oversubscription of over 1.6 times at ¥324.7 billion (RM11.94 billion, US$2.92 billion). According to Malaysian finance minister Lim Guan Eng, the oversubscription is a clear indication of Japanese investor confidence in Malaysia’s economy. The issuance of the 10-year bond marks Malaysia’s return to the Japanese bond market after 30 years as the country looks for ways to restore its economy and fund infrastructure developments. The bond, guaranteed by the state-owned Japan Bank for International Cooperation (JBIC), has been priced at a full cost of 0.63% per annum. Meanwhile, the second Bilateral Coordinating Committee (BCC) meeting on the Look East Policy 2.0 concluded in Tokyo on March 8 with both Malaysia and Japan committing to the revitalisation of the Look East Policy and deepening bilateral cooperation.

THE PHILIPPINES-JAPAN

Amended ASEAN-Japan agreement to be a boon for the Philippines
(11 March 2019) The upcoming amendment of the ASEAN-Japan Comprehensive Economic Partnership (AJCEP) Agreement will provide greater access for the Philippines’ services exports and movement of persons, according to its Department of Trade and Industry (DTI). For instance, Filipinos will be able to obtain short and long-term visas to do business in Japan. This will include visas of up to five years for professionals from selected fields and temporary visas for their dependents. Meanwhile, the Philippines Statistics Authority (PSA) reported that the country’s trade in goods rose 2.9% to reach US$14.3 billion in January 2019, fuelled by a rise in imports. However, the country’s exports saw a 1.7% drop due to lower demand in manufacturing and minerals.

INDONESIA, MALAYSIA

Indonesia and Malaysia cry foul over new EU biofuel criteria
(14 March 2019) The European Commission announced on March 13 that it has adopted new criteria to regulate the use of palm oil in biofuels as part of its efforts to meet the EU’s renewable energy goals. Under the new set of criteria, palm oil is classified as “unsustainable” due to its reputation as a driver of deforestation. As the provider of up to 85% of the world’s palm oil supply, Malaysia and Indonesia see the move as a “discriminatory” and “scientifically flawed” measure that “makes no attempt to include broader environmental concerns” linked to other vegetable oils. As such, both countries will jointly challenge the bill through the World Trade Organization, in addition to delaying the elevation of ASEAN-EU relations from the status of dialogue partner to strategic partner until the issue is settled.

BRUNEI

Brunei prioritises FDI growth and four focus areas to strengthen economy
(10 March 2019) Brunei will focus on boosting its economy by stimulating foreign direct investment (FDI) growth and intensifying activity in four key areas, said second finance and economic minister Hj Mohd Amin Liew. The four key areas are increasing local investments, facilitating ease of doing business, growing a skilled and employable talent pool, and maintaining public well-being. Also high on the government’s agenda is lowering the country’s unemployment rate, which stood at 9.3% or 19,200 individuals in 2017. Separately, Brunei’s Ministry of Finance and Economy (MoFE) tabled a US$814 million budget for its 2019/2020 fiscal year on March 13, which included a US$21 million allocation for the establishment of Brunei’s stock exchange. According to an online report, a timeline for the launch of the exchange has yet to be announced, although the Autoriti Monetari Brunei Darussalam (AMBD) previously stated that the exchange aims to eventually list equities, bonds and sukuk.

INDONESIA

Indonesian economic minister says exports affected by US-China trade war
(12 March 2019) The ongoing US-China trade war has affected and will continue to affect Indonesia’s exports as both countries are Indonesia’s largest export destinations, said coordinating economic minister Darmin Nasution. He added that as long as both economies slow down, so will their imports from Indonesia. Nevertheless, the minister expects the country’s economy to grow by 5.3% this year. Similarly, a recent Reuters poll of analysts projected a continued decline in Indonesia’s exports, thus leading to its narrowest trade deficit in five months in February.

THE PHILIPPINES

The Philippines lowers 2019 GDP growth forecast due to budget impasse
(13 March 2019) The Philippines’ GDP growth could fall to as low as 4.2% this year if the passing of its 2019 budget continues to be delayed, according to its socioeconomic planning secretary Ernesto Pernia. As such, the government announced on March 13 that it has trimmed the country’s GDP growth target for this year to 6-7% from 7-8%, raised its inflation target to 3-4% from 2-4%, and lowered its 2020 growth target to 6.5-7.5% from 7-8%. Speaking on the matter, finance secretary Carlos Dominguez said that aside from the budget impasse, other factors that were taken into account were the ongoing US-China trade war as well as the impact of natural disasters on agricultural output.

SINGAPORE

Private sector economists trim Singapore’s 2019 growth forecast
(13 March 2019) Private sector economists polled in the latest Monetary Authority of Singapore (MAS) quarterly survey published on March 13 have lowered the country’s growth forecast to 2.5% from the 2.6% forecast made in December 2018. The economists attributed the dimmer outlook to the ongoing US-China trade tensions and a slowing Chinese economy. MAS respondents have also lowered their 2020 growth forecast to 2.4%.

SINGAPORE-JAPAN

Singapore invites Japanese firms to establish their “Asian base” on the island country
(13 March 2019) Singapore senior minister of state for law Edwin Tong said Singapore is the ideal one-stop shop for Japanese companies to establish their regional base given the country’s diverse and highly skilled talent pool. Tong, who was in Japan for an official visit, added that Singapore was especially interested to work with Japan in three areas, i.e., serving as their Asian base, partnering in regional infrastructure projects, and leveraging Singapore’s reputation as a “trusted neutral forum” to settle disputes. The minister’s comment is seen as a precursor to the launch of a new United Nations treaty — the Singapore Convention on Mediation — that will be inked on August 7 and is expected to boost Singapore’s position as a dispute resolution hub.

Malaysia: January 2019 industrial production

HIGHLIGHTS

January 2019 industrial production

IPI growth beat expectations at 3.2% yoy in January, as a jump in electricity output and resilient manufacturing production offset declining mining output.
While the downturn in E&E growth was broadly in line with regional trends, the impact was neutralised by a rebound in downstream palm oil activity
Catalysts from the O&G sector and stabilisation of demand from China support our 2019 forecasts for IPI (+3.7%) and real GDP growth (+4.7%).

Steady growth in January industrial activity
The industrial production index (IPI) was broadly stable, rising 3.2% yoy in January (+3.4% yoy in December) and upending our expectations of a weaker reading. A contraction in mining output (-0.9% yoy vs. +1.0% yoy in December) was balanced by a jump in electricity output (+7.8% yoy in January vs. +2.7% yoy in December), the highest increase since Jul 2017. Manufacturing expansion was surprisingly resilient (+4.2% yoy vs. +4.4% yoy in December), given that factory activity in other export-driven economies generally experienced weakness in January. The seasonally-adjusted IPI growth rose 1.2% mom in January after an upward-revised growth of 0.2% mom in December.

Commitment to OPEC cuts took a toll on crude oil production
Crude petroleum output contracted in January (-2.2% yoy vs. +2.5% yoy in December) as a result of high base effect a year ago, which was insufficiently offset by a marginal increase in LNG output (+0.3% yoy in January vs. -0.2% yoy in December).

Slippage in electronics demand neutralised by palm oil rebound
E&E production growth almost halved (+3.9% yoy vs. +7.2% yoy in December) amid weakening global semiconductor sales, while output growth of motor vehicles, chemical, pharmaceutical and rubber products slowed. A rebound in vegetable, animal oil & fats output (+9.9% yoy in January vs. -9.9% yoy in December) single-handedly lifted food production expansion into positive territory. Stronger production growth was also recorded for refined petroleum products (+3.9% yoy in January vs. 1.7% yoy in December), apparel (+7.6% yoy vs. +6.2% yoy in December), textiles (+3.9% yoy vs. +2.2% yoy in December) and wood products (+6.2% yoy vs. +5.5% yoy in December).

Subdued manufacturing outlook tempered by O&G boost
Judging from continued weakness in Malaysia’s manufacturing PMI (47.6 in February vs. 47.9 in January), as well as downtrend in regional factory activity, particularly in the integrated E&E segment, we expect Malaysia’s manufacturing outlook to remain generally challenging in 1H19. However, these headwinds will be partly cushioned by a boost to the O&G sector as operations at the Pengerang Integrated Complex ramp up from late Mar and disruptions in the Sabah-Sarawak Gas Pipeline normalise by mid-2019. Barring unforeseen external shocks, we think clarity over the US and China’s trade deal, as well as the stimulus efforts to rejuvenate economic activity in China, could begin to lift regional trade and manufacturing activity in 2H19. These drivers are expected to lend support to our 2019F forecasts of industrial production of 3.7% (+3.0% in 2018) and real GDP growth of 4.7% in 2019F (+4.7% in 2018).

More positive catalysts in 2H19
While the outlook for export-oriented manufacturers remains muted in 1H19, we expect a cyclical upturn in 2H19, and a recovery in commodity output to underpin gross exports growth of 6.7% in 2019F. Risks include a sharp downturn in major economies and a re-escalation of US-China trade tensions, against current expectations of a rollback in tariffs.

Originally published by CIMB Research and Economics on 14 March 2019.

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

Mekong Monitor

Photo credit: Khmer Times

TRADE, ECONOMY, AND INVESTMENT

CAMBODIA, LAOS, VIETNAM

CLV Development Triangle Area committee discusses ways to boost economic cooperation
(11 March 2019) The 12th Cambodia-Laos-Vietnam Development Triangle Area Joint Coordination Committee (CLV DTA JCC) meeting held on March 7-10 in Cambodia’s Kratie province concluded with the parties involved reportedly making significant headway in the development of the CLV DTA Economic Connectivity Action Plan 2030, according to Cambodian commerce minister Sok Sopheak. The minister added that Cambodia’s priority moving forward will be to ensure the effective implementation of trade activities in the CLV DTA in accordance with existing agreements, such as by allowing more provincial authorities to delegate the issuance of forms needed to obtain certificates of origin. Further, all three parties agreed to review the master plan for socio-economic development in the CLV DTA and elevate cooperation in tourism sector development. Established in 1999, the CLV DTA included Kon Tum, Gia Lai, Dak Lak, and Dak Nong provinces in Vietnam, Sekong, Attapeu and Saravan provinces in Laos, and Stung Treng, Ratanakkiri, and Mondulkiri provinces in Cambodia. In 2009, the three countries agreed to add Vietnam’s Binh Phuoc province, Laos’ Champasak province, and Cambodia’s Kratie province to the CLV DTA. In 2018, Vietnam invested a combined US$983 million in 39 projects in Kratie province, mostly in agriculture and agro-industry.
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VIETNAM, MYANMAR

Vietnam and Myanmar agree to elevate bilateral cooperation
(12 March 2019) The 9th Vietnam-Myanmar Joint Committee for Bilateral Cooperation Meeting held on March 12 in Hanoi concluded with both sides agreeing to continue building on their bilateral relationship. Both sides noted the uptrend in economic cooperation between the countries, including a 5.5% growth y-o-y in bilateral trade reaching US$873.9 million in 2018. Speaking at the meeting, Vietnamese Deputy Prime Minister Pham Binh Minh asked Myanmar to consider shortening the time needed for Vietnamese firms to gain permission to invest in the country as well as the list of goods that require permits to enter Myanmar. Meanwhile, Myanmar’s international cooperation minister U Kyaw Tin stated the country’s support for Vietnam’s 2020 ASEAN Chairmanship.
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MYANMAR, THAILAND

Myanmar, Thailand border trade reaches US$1.4 billion in the first half of FY2018-19
(9 March 2019) Border trade between Myanmar and Thailand reached approximately US$1.4 billion in the first half of the 2018-2019 fiscal year beginning October 2018, according to statistics from Myanmar’s Ministry of Commerce. Of the sum, Myanmar’s exports to Thailand were valued at US$985.8 million while its imports from the same was valued at US$412.9 million. Further, Hteekhee border gate recorded the highest trade activity during the period reaching US$791.6 million. Myanmar exports agricultural and fishery products to Thailand and imports cosmetics, food products, machinery and raw industrial goods such as cement and fertilizers.
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LAOS, THAILAND

Laos, Thailand target US$12 billion in trade by 2021
(11 March 2019) Laos and Thailand are committed to increasing annual trade between the countries by 10-15% in order to reach US$12 billion by 2021, according to Lao deputy minister of industry and commerce Phanthong Phitthoumma. To this end, both governments will intensify trade and investment promotion activities over the next five years, such as through the organisation of trade fairs. Meanwhile, a representative of the Thai embassy in Laos said that such activities would also help elevate Laotian Prime Minister Thongloun Sisoulith ‘three opens’ policy to promote economic integration — open doors, open barriers and open minds.
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THAILAND-CLMV

Thai EXIM Bank zeroes in on CLMV market
(12 March 2019) The Export-Import Bank of Thailand (EXIM Bank Thailand) opened a third overseas representative office in Cambodia as part of its CLMV (Cambodia, Laos, Myanmar, Vietnam) expansion plan. At the opening of the new office, the bank announced a loan facility for companies in the subregion looking to import goods from Thai businesses. According to bank president Pisit Serewiwattan, credit will be provided for up to 85% of the purchase value or US$4 million, for a period of five years. CLMV countries are a key export market for Thailand, accounting for 11.5% of the country’s total goods exports in January 2019.
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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

The Straits Times

Economy, Investment and Trade

China insists BRI benefits countries after Malaysia warns the Philippines
(8 March 2019) Chinese foreign minister Wang Yi reiterated the Belt and Road Initiative (BRI)’s economic benefits and denounced assertions that China was practicing debt-trap diplomacy in order to expand its global influence. The foreign minister pointed to BRI projects such as the development of East Africa’s first highway and ongoing investments in the development of high-speed rail networks in Southeast Asia as examples of China’s commitment to helping boost its partners’ growth. Wang’s statement, which were made in Beijing on the sidelines of China’s annual legislative meetings, comes a day after Malaysian Prime Minister Mahathir Mohamad’s official visit to the Philippines, where the latter cautioned against countries being too beholden to China. “When a person is a borrower, he is under the control of the lender, so we have to be very careful with that,” said Mahathir.
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China-Myanmar Economic Corridor to have nine priority sectors
(7 March 2019) Myanmar will prioritise nine sectors under the China-Myanmar Economic Corridor (CMEC) in accordance with the Myanmar Sustainable Development Plan, said a senior official of the Myanmar Federation of Chamber of Commerce and Industry (UMFCCI). These nine sectors will cover key infrastructure areas, i.e. electricity, roads, bridges, telecommunications, basic construction, agriculture, transportation, research, and technology. The senior official was among a group of private sector representatives present at a recent closed-door CMEC joint committee meeting held in Kunming in late February, where key projects such as the Kyaukpyu special economic zone, the Muse-Mandalay railroad and the Myitsone dam project were discussed. Furthermore, a few agreements will purportedly be signed during a high-level BRI conference to be held in Beijing in April.
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Laos and China to continue cooperating on trade cooperation zone
(8 March 2019) Lao President Bounnhang Vorachith lauded the progress made in the development of the Saysettha Comprehensive Development Zone in Vientiane and said that he looked forward to turning it into a “green, sustainable and prosperous” development zone. According to Xinhua, the Saysettha project is China’s only overseas state-level economic and trade cooperation zone in Laos, and is a state-level cooperative project between China’s Yunnan Construction and Investment Holding (YCIH) and the Vientiane municipal government. Further, according to YCIH chairman Chen Wenshan, the development zone’s combined output will surpass US$1.5 billion and create 10,000 jobs by the end of 2020.
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Malaysia participates in Alibaba’s new economy workshop in Hangzhou
(11 March 2019) A delegation of 30 senior officials from 19 Malaysian ministries and agencies led by Minister of International Trade and Industry Darell Leiking attended Alibaba Business School’s New Economy Workshop (NEW) on March 4-7. The workshop, held at the Alibaba Group’s headquarters in Hangzhou, was aimed at equipping these senior officials with the knowledge and know-how needed to help drive the development of Malaysia’s digital economy. Speaking at the NEW opening ceremony, Leiking said that participants will not only be expected to help elevate the implementation of the National eCommerce Strategic Roadmap (NeSR) 2016-2020 upon returning home, but also become trainers in their respective ministries and agencies.
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China remains a key market for Singapore firms
(6 March 2019) China remains a priority market for Singaporean companies, particularly due to the attractiveness of its consumer market, said Enterprise Singapore assistant chief executive Eunice Koh during a recent Singapore Business Federation (SBF) media briefing. During the briefing, SBF announced plans to lead a delegation of 100 companies to the China International Import Expo (CIIE) in Shanghai in November 2019, up from 80 companies in 2018. Koh also urged Singapore businesses to not only see China as an end-market, but also as potential partners for the co-creation of products and services. According to The Straits Times, this year’s CIIE will focus on five key areas, i.e. equipment, consumption, food, health and services.
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Press Release: Deputy Minister Dr. Ong Kian Ming: Malaysia is committed to multilateral trade pacts and ASEAN must demonstrate the collective political will to pursue shared prosperity through the acceleration of economic integration

Deputy Minister Dr. Ong Kian Ming: Malaysia is committed to multilateral trade pacts and ASEAN must demonstrate the collective political will to pursue shared prosperity through the acceleration of economic integration

(From left) YB Dr. Ong Kian Ming, Deputy Minister, Ministry of International Trade and Industry (MITI) of Malaysia and Tan Sri Dr. Munir Majid, Chairman of CIMB ASEAN Research Institute (CARI) and President of the ASEAN Business Club, during the CARI Briefing entitled “Exclusive Dialogue with YB Dr. Ong Kian Ming, Deputy Minister, Ministry of International Trade and Industry (MITI) of Malaysia: ASEAN Integration Outlook 2019 ”. The roundtable discussion was organised by CARI on 11 March 2019.

Kuala Lumpur, 11 March 2019 – Deputy Minister in the Ministry of International Trade and Industry of Malaysia, Dr. Ong Kian Ming, said that the present administration is committed to expediting the economic integration of ASEAN as laid down in the ASEAN Economic Community (AEC) Blueprint 2025. Despite the fiscal challenges facing the present Malaysian government, Dr. Ong says that Putrajaya remains committed to pursuing the integration agenda as it will deliver net gain for Malaysia and ASEAN.

Dr. Ong made these comments during an exclusive dialogue organised by CIMB ASEAN Research Institute (CARI) on the topic of “ASEAN Integration Outlook 2019”, chaired by Tan Sri Dr. Munir Majid, Chairman of CARI. Dr. Ong believes that despite considerable progress that has been made by ASEAN Member States in promoting integration, many integration gaps remain.

“The AEC is still very much a work-in-progress. ASEAN Member States (AMSs) are working on closing the existing gaps in standards and regulatory harmonisation but it takes strong collective political will to accelerate the effort in order to overcome these hurdles,” he says. “The incentive to lower down these barriers is clear – with increasing integration, ASEAN is set for growth as an economically competitive and attractive base for foreign direct investment (FDI),” said the deputy minister.

The FDI inflows to ASEAN in 2017 reached the highest record since 2000, reflecting both intra- and extra ASEAN countries’ confidence in ASEAN’s economic potential. The main sources of investment are intra-ASEAN investment worth US$26.9 billion or 19.8% of total FDI, surpassing the European Union at US$24.9 billion or 18.4% of total FDI; and Japan at US$13.4 billion or 9.8% of total FDI.

Dr. Ong opined that there is a greater need for economic collaboration among member countries today in view of continuing external uncertainties.

“ASEAN is highly trade-dependent and the ongoing trade war has certainly put pressure on ASEAN trade. Notwithstanding that, the ongoing trade war has also presented the region with potential economic gain due to the relocation of the supply chain from China. However, ASEAN may not fully reap the economic gain due to the lack of concerted effort to harness each AMSs’ comparative advantages to form a mega manufacturing hub” he said.

ASEAN’s total merchandise trade and total services trade in 2017 were valued at US$2.57 trillion and USD703.2 billion respectively.

The moderator for the dialogue session, Tan Sri Dr. Munir Majid agreed with Dr. Ong’s observations by noting that far too many restrictions remain with regards to creating a free and open market within ASEAN, and that as a strong proponent of ASEAN, he was heartened to hear that Malaysia continues to prioritise economic integration within ASEAN.

“Prospects for the ASEAN economies are outstanding. Some business surveys find the region to be the brightest economic spot in the world. Now ASEAN has to deliver its promise on the AEC and remove the many barriers that frustrate businesses in trade, investment and free movement of skilled labour. ASEAN should not be satisfied with being sub-optimal.” said Tan Sri Dr. Munir Majid.

The dialogue was part of the CARI Briefings organised by CARI.

CARI Captures 394

INDONESIA-AUSTRALIA

Economic partnership agreement to bolster trade and investment inked
(4 March 2019) Indonesian trade minister Enggartiasto Lukita and Australian trade minister Simon Birmingham signed the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) in Jakarta on March 4 after over six years of negotiations, paving the way for greater economic cooperation between the two countries. Under the IA-CEPA, both countries will either eliminate or significantly lower duties for virtually all goods traded between them, while providing preferential treatment for investments in various sectors. For instance, the agreement grants Australian investors 67% foreign ownership in the education sector as well in restaurants and cafes, as well as 100% ownership of mid-to-high end hotels and resorts. Moving forward, both governments will work towards ratifying the agreement by year end. Statistics from the Indonesian government noted that the countries recorded US$8.6 billion in bilateral trade in 2018.

MYANMAR-AUSTRALIA

Australia’s wheat exports to gain from Myanmar’s first major grain terminal
(5 March 2019) The Australian wheat industry is set to benefit when Myanmar’s first major grain terminal — the International Bulk Terminal Thilawa (IBTT) located in Yangon — begins operations this year. According to the Australian Export Grain Innovation Centre (AEGIC), Australia exported 400,000 tonnes or US$117 million worth of wheat to Myanmar in 2017 and holds almost 90% of Myanmar’s wheat market. As such, a new terminal will likely lower wheat freight rates and boost Myanmar’s exports of Australian produce to markets in South Asia. Meanwhile, a recent survey by the Australia-Myanmar Chamber of Commerce found that government bureaucracy, access to skilled labour and weak law enforcement were the three top constraints faced by Australian businesses when doing business in Myanmar.

MALAYSIA

Malaysia’s trade grew 2.1% year-on-year reaching US$39 billion in January
(4 March 2019) Malaysia’s trade expanded by 2.1% year-on-year to reach US$39 billion in January, said its Ministry of International Trade and Industry (MITI). Of the sum, the country’s exports grew 3.1% reaching US$85.41 billion, while its imports grew 1% reaching US$2.82 billion. According to MITI, January’s exports growth was driven by higher exports to China, Thailand, South Korea and the US. The key exports which contributed to the growth in exports were electrical and electronic (E&E) products, liquefied natural gas (LNG), timber and timber-based products.

PHILIPPINES, MALAYSIA

Philippines and Malaysia agree to pursue stronger trade and investment ties
(7 March 2019) Malaysian Prime Minister Mahathir Mohamad’s two-day state visit to the Philippines concluded with both countries committing to pursue greater trade and investment cooperation in various areas. Among the highlights were the anticipated signing of a memorandum of understanding to advance bilateral cooperation in the healthcare industry, as well as discussions around developing barter trade in Mindanao, and opportunities presented by the untapped potential of the Philippines’ halal industry. In his keynote address at the Malaysian-Philippines Business Forum, Mahathir also touched on the need for ASEAN countries to explore the adoption of a market sharing concept, where each country selects an industry to capitalise on in order to reap the full benefits of the ASEAN market.

PHILIPPINES

The Philippines expects slower growth in services exports in 2019
(1 March 2019) The Philippines has lowered its forecast for exports of services from double-digit to single-digit growth in 2019 due to stiffer competition in the services sector, announced its Department of Trade and Industry (DTI). As such, the government has set a US$42.6 billion to US$43.7 billion target for services exports this year, while it retains its double-digit growth target of US$51.2 billion to US$52.7 billion for merchandise exports. Nonetheless, the DTI feels that the country is “on track” to hit its goal of US$122 billion to US$130 billion in total exports by 2022.

BRUNEI, MALAYSIA

Brunei and Malaysia look to enhance trade and investment cooperation
(6 March 2019) Malaysian Prime Minister Mahathir Mohamad welcomed the Sultan of Brunei Sultan Hassanal Bolkiah to Putrajaya on March 5 for the 22nd Malaysia-Brunei Annual Leaders Consultation. Topics discussed by the heads of state during the meeting included economic cooperation, as well as cooperation in the transport, information and communications, energy, tourism, agriculture, livestock and fishery industries. The leaders also noted the progress made by state-owned petroleum entities PETRONAS and PetroleumBRUNEI in advancing cooperation under the Commercial Agreement Areas (CAA) and Production Sharing Agreements (PSA). According to Bernama, Malaysia accounted for 90.9% of Brunei’s foreign direct investment from ASEAN countries in 2017 at US$486.74 million. Bilateral trade between the countries reached US$981.2 million in 2018.

THAILAND-HONG KONG

Hong Kong opens ASEAN trade office in Bangkok to boost trade ties
(1 March 2019) Hong Kong chief executive Carrie Lam announced the opening of its first Economic and Trade Office in Thailand to bolster trade and investment between the two countries, as well as the larger ASEAN region and China’s Greater Bay Area (GBA). The move follows the recent finalisation of the Hong Kong-ASEAN Free Trade Agreement, which is expected to come into effect in the second quarter of 2019. Thai Deputy Prime Minister lauded the announcement, saying that Thailand could lead ASEAN and the Greater Mekong Subregion to greater connectivity with Hong Kong and mainland China. Separately, Myanmar’s parliament approved the country’s participation in the ASEAN-Hong Kong Investment Agreement on the same day.

SINGAPORE

Singapore to expand FTAs and prepare local talent to navigate international markets
(4 March 2019) Singapore will focus on expanding its network of free trade agreements (FTAs) and developing a pipeline of local talent who are well-equipped to navigate global markets in preparation for a new phase of growth, said trade and industry minister Chan Chun Sing during his recent parliamentary speech. Furthermore, the ministry will keep a close watch on developments in international taxation in order to position the country as a choice business destination. According to Chan, Singapore’s FTAs helped local companies save around US$730 million on tariffs in 2016, up from US$450 million a decade before.

SINGAPORE-UAE

Singapore, UAE sign agreement to boost trade and tourism cooperation
(1 March 2019) His Highness Sheikh Mohamed bin Zayed Al Nahyan the Crown Prince of Abu Dhabi’s official visit to Singapore culminated in the signing of the Joint Declaration on a Singapore-United Arab Emirates (UAE) Comprehensive Partnership that aims to elevate bilateral ties and intensify cooperation between the two countries. Speaking at the ceremony, Sheikh Mohamed extolled Singapore’s achievements and said that the UAE was especially keen to cooperate with the island country in the areas of “sustainable development and post-oil readiness policies”. Other areas include education, human resource development, defense and security, as well as trade and investment. According to The Straits Times, bilateral trade between the countries is valued at US$18.1 billion. Singapore is the second stop on Sheikh Mohamed’s tour of Asia, with the first being South Korea.

ASEAN

ASEAN urged to work towards single shipping market
(6 March 2019) The 37th ASEAN Maritime Transport Working Group (MTWG) Meeting convened in Singapore on March 5 to discuss the advancement of maritime transport-related initiatives under ASEAN’s 10-year transport master plan — also known as the Kuala Lumpur Transport Strategic Plan 2016-2025 (KLTSP). The meeting opened with remarks by a senior official of Singapore’s Ministry of Transport, who stressed the importance of reducing cross-border barriers and creating a single shipping market in order to enable a “free flow of intra-ASEAN shipping services”. Other matters discussed during the meeting included the promotion of sustainable international shipping, maritime transport safety and the ASEAN Green Ship strategy.

Vietnam: Inflation to tick-up but stay manageable

HIGHLIGHTS

Inflation to tick-up but stay manageable

Decreasing pork prices could temper the pace of food price inflation.
The hike in electricity prices by 8.3% in March 2019 could add 0.3% to headline inflation, according to our estimates.
CPI should stay manageable as the government administered price hikes are offset by anticipated food inflation price moderation.

Sequential tick-up in inflation due to acceleration in food inflation
In February 2019, both yoy headline and core inflation remained unchanged compared to Jan at 2.6% yoy and 1.8% yoy, respectively. On a mom basis, the headline CPI increased 0.8% in February (vs. 0.1% mom in Jan) due to higher food inflation. Food inflation rose 1.7% mom due to the Tet holiday effect, reaching a record-high of 5.5% yoy, not seen since Jun 2012.

First petrol price hike this year
During the first two months of 2019, domestic petrol prices were kept unchanged despite the sharp recovery in oil prices. However, on 2 March, the government raised domestic petrol prices by 5.3-5.8%, owing to a decline in the petrol price stabilisation fund balance. According to Petrolimex, its stabilisation fund balance dropped by 37.3% (~VND720bn) during the first two months of 2019. We estimate that a 5.0% rise in domestic petrol prices could add around 0.2-0.3% to the yoy inflation rate in March 2019.

Decreasing pork prices could offset the impact of higher fuel prices
Vietnamese pork prices have been hammered due to the recent outbreaks of African swine fever (ASF) in Vietnam. In February, the price of pork dropped sharply (-12.6% mom) in the North where ASF has spread to seven provinces. Pork makes up almost 7.0% of the CPI basket. As a result, we think a sharp drop in pork prices could mitigate inflation pressures arising from increasing fuel prices.

Electricity price hike expected
The Ministry of Industry and Trade plans to raise retail electricity prices by 8.3% this month to VND1,864/kWh from VND1,721/kWh. As electricity makes up 3.0% of the CPI basket, we estimate that the electricity price adjustment could add 0.3% to headline inflation. This hike is in line with our expectations. We therefore maintain our average inflation forecast for 2019F at 3.9% as we think the recent acceleration in food inflation is transitory. We expect the State Bank of Vietnam to leave the policy rate unchanged throughout the year.

External risks to ease, inflation risk is still under control
On the FX front, the dong remained relatively stable during the first two months despite a 0.5% depreciation in the central exchange rate. This came on the heels of enormous inflows of capital into Vietnam, the yuan rally thanks to a potential US-China trade deal and the recent announcement of a 3.0% pt cut in the VAT rate to boost economic growth. With the coming adjustment of fuel and electricity prices, there could be a build-up in inflationary pressures. However, we do not yet see cause for alarm as inflation remains under control.

Originally published by CIMB Research and Economics on 6 March 2019.

Mekong Monitor

Photo credit: Bangkok Post

TRADE, ECONOMY, AND INVESTMENT

THAILAND, LAOS

Thailand and Laos aim to link countries by high-speed rail by 2023
(6 March 2019) The Thai government hopes to complete the 608-kilometre Thai-Sino high-speed railway project linking Bangkok to the northeastern Thai province of Nong Khai by 2023 in order to further extend the route to Laos as soon as possible, said Nathporn Chatusripitak, a spokesman for Deputy Prime Minister Somkid Jatusripitak. According to him, the route will connect Nong Khai and Vientiane through the new Thai-Lao friendship bridge which has been engineered to accommodate railways. The Bangkok-Nong Khai rail project consists of two phases. The first phase is a 253km-long section from Bangkok to Nakhon Ratchasima while the second phase is a 355km section that will connect Nakhon Ratchasima to Nong Khai. Once completed, the high-speed railway will operate trains running at the speed of 250km per hour, reducing the travel time from Bangkok to Nong Khai from 11 hours to three hours. The Bangkok-Nong Khai rail project will extend to Vientiane from Na Tha station in Nong Khai’s Muang district.
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VIETNAM, CAMBODIA

Vietnam Airlines and Cambodia sign agreements to boost tourism cooperation
(1 March 2019) Vietnam Airlines and Cambodia’s Ministry of Tourism signed a tourism development agreement on February 26 to boost cooperation between the countries for a three-year period. The agreement was signed in the presence of Vietnamese President Nguyen Phu Trong and Cambodian Prime Minister Hun Sen during the former’s official state visit to Cambodia. Under the agreement, Vietnam Airlines pledged to help promote Cambodian tourism through events and products, offer flight tickets with no baggage fees for Cambodian government servants attending conferences and training programs in Vietnam, as well as provide job opportunities for Cambodian tourism students. The carrier also announced that it will increase the number of flights on its Danang-Siem Reap route in April.
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THAILAND-CLMV

Bangkok Airways to expand CLMV routes this year
(6 March 2019) Bangkok Airways has set route expansion as its priority for 2019, particularly to destinations throughout the CLMV (Cambodia, Laos, Myanmar, Vietnam) region, the airline’s president Puttipong Prasarttong-Osoth announced. To this end, it will add 20 new airplanes to its roster over the next 10 years, as well as invest in airport infrastructure improvements and extensions. The plan follows positive results from a similar CLMV expansion strategy in 2018, which saw Bangkok Airways delivering up to 30 flights per day from Thailand to CLMV countries. According to the airline’s marketing head Prote Setsuwan, the company believes that the airline’s strategy of targeting high potential CLMV markets and bolstering its digital marketing campaigns will help reverse the negative trend seen in the company’s finances in 2018.
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CAMBODIA, VIETNAM

Cambodia lauds Vietnamese rubber companies for contributions to country’s development
(1 March 2019) The Cambodian government expressed its gratitude towards contributions made by Vietnamese rubber companies to the Cambodian economy over the years and for helping the country achieve a 7% annual growth rate. This was conveyed by Cambodian Deputy Prime Minister Yim Chhayly during an industry conference held in Phnom Penh on February 28. At the same conference, a report highlighted the Vietnam Rubber Group (VRG), which has invested in 19 projects in Cambodia since 2007, with a combined value of US$750 million as of the end of 2018. Further, the group has helped develop basic infrastructure in the seven provinces it operates in and created 15,000 jobs with an average monthly income of US$230 per person.
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THAILAND, CAMBODIA

Thai-Cambodia partnership event to boost border trade
(5 March 2019) The Thai Department of Foreign Trade (DFT) announced that it will host a border economic partnership event on March 25-26 to encourage trade and investment between the countries’ public and private sectors. The event comes on the back of the inking of the Thai-Cambodia Growth Strategy of Border Provinces’ Economic Cooperation pact in 2018 which aims to boost bilateral ties at the local level and increase border trade. According to the DFT, high-ranking officials from both countries are expected to join the event, during which meetings will be held to discuss ways to intensify cooperation to boost border trade and investment. Further, the DFT expects the business matching session for four sectors — food and beverage, consumer goods, agriculture machinery, automotive — to generate transactions worth over US$947,507.
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About Greater Mekong Subregion (GMS)

China-ASEAN Monitor

Bangkok Post

Economy, Investment and Trade

Thailand records 49% jump in transit trade with southern China in January
(4 March 2019) Thailand’s transit and border trade saw a year-on-year 1.84% increase, reaching US$3.73 billion in January as increased transit trade with China counterbalanced a slight dip in overall border trade, according to the Thai Foreign Trade Department. Most notably, the country’s transit trade with southern China saw a 49% increase, reaching approximately US$313 million, of which imports-in-transit amounted to US$224 million while exports-in-transit accounted for US$89 million. Meanwhile, Malaysia remains Thailand’s largest border trade partner, while Vietnam and Singapore trailed behind China in terms of transit trade.
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Myanmar and China discuss increase of rice export quota
(27 February 2019) Myanmar and China have discussed increasing the existing rice export quota from the current 100,000 tonnes to 400,000 tonnes. The discussion took place during the Second China Myanmar Economic Corridor Forum in Yunnan, China. Myanmar is looking to boost its rice exports, while China seeks to formalise its trade with neighbouring countries, including Myanmar, under the Belt and Road Initiative (BRI). Currently, Myanmar exports rice and broken rice to China through border trade but the trade is not official. According to Myanmar’s Ministry of Commerce, the country exported 1.7 million tonnes of rice and broken rice between April and December last year, of which 48% was sold via border trade with China.
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Malaysia still committed to advancing economic relationship with China
(28 February 2019) Malaysia’s commitment in advancing its economic relations with China persists despite changes in the country’s administration, said Malaysian deputy trade minister Ong Kian Ming, who cited the recent revival of negotiations for the mammoth East Coast Rail Link (ECRL) project as an example of Malaysia’s commitment to the “very important” relationship. He further stressed that Malaysia is merely seeking greater clarity on the ECRL’s construction and operating costs to ensure that the parties are able to produce a win-win solution. According to Ong, bilateral trade between the countries rose by 8.5% in 2018, outperforming the 6.2% growth in Malaysia’s total international trade.
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Largest Chinese investment project in Brunei to be operational by year end
(1 March 2019) The US$3.4 billion oil refinery and petrochemical plant at Brunei’s Pulau Muara Besar will enter its first phase of operations by the end of 2019, said the country’s energy and industry minister Haji Mat Suny. According to the minister, the joint venture between China’s Zhejiang Hengyi Group and Brunei’s state investment fund subsidiary Damai Holdings is 78% complete and is projected to contribute US$1.33 billion to Brunei’s GDP in its first year. Hengyi Industries chief executive Chen Liancai added that the company plans to kickstart the second phase of the project by 2022, bringing in another US$10 billion in investments.
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Business association says US$1 trillion ASEAN-China trade target achievable by 2025
(2 March 2019) Trade between ASEAN and China could very well reach US$1 trillion by 2025 despite uncertainty in the global economy, said the president of the China-ASEAN Business Association (CABA) at a recent luncheon hosted by the association. However, both sides will have to dig deeper in order to achieve said trade target. For instance, ASEAN should look to penetrate markets in China’s secondary cities, such as the Shandong province which has a larger population than Vietnam and a larger GDP than Indonesia at US$1.2 trillion. In 2018, trade between China and ASEAN grew by 14.1% and was valued at US$587.9 billion. Meanwhile, Chinese ambassador to Malaysia, Bai Tian, said that relations between the countries remain healthy and Malaysia retains its position as China’s second largest trading partner in ASEAN behind Vietnam.
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Malaysia: January 2019 trade

HIGHLIGHTS

January 2019 trade

Malaysia registered a larger trade surplus of RM11.5bn in Jan as the expansion in exports was greater than the growth in imports.
External headwinds took a toll on manufactured exports, a trend that may persist in the near-term based on the latest PMI readings.
Apart from a rebound in LNG, commodity exports trended lower in Jan.

Trade surplus widens to RM11.5bn in January
Malaysia’s trade surplus expanded in January, though broadly in line with our expectations (+RM11.5bn vs. +RM10.7bn in December). Even so, total trade was better than expected (+2.1% yoy vs. +3.2% yoy in December) as the growth in exports (+3.1% yoy vs. +5.1% yoy in January) and imports (+1.0% yoy vs. +1.0% yoy in January) fared better than we had forecast.

External headwinds dent manufactured exports
Slowing external demand took a toll on Malaysia’s exports of manufactured goods (+2.9% yoy in January vs. +8.1% yoy in December), an outcome telegraphed by the consistent slippage in the forward-looking manufacturing PMI for Malaysia (47.6 in Feb vs. 47.9 in January), amid a slippage in new orders from abroad. Export outperformers experienced smaller gains: E&E (+8.2% yoy in January vs. +14.2% yoy in December) and chemical & chemical products (+16.7% yoy in January vs. +36.6% yoy in December). The sharp contraction in exports of optical & scientific equipment persisted for a third straight month in January (-44.7% yoy vs. – 39.5% yoy in December) while shipments of machinery, appliances and parts turned negative (- 1.5% yoy in January vs. +7.4% yoy in December).

First contraction in O&G since Jul 2018
Despite a rebound in demand growth for LNG (+37.5% yoy in January vs. -2.7% yoy in December), other commodities trended lower in January. Crude petroleum exports registered its first contraction in more than a year (-1.1% yoy in January vs. +21.5% yoy in December) and refined petroleum product shipments worsened (-29.9% yoy in January vs. -1.4% yoy in December). Palm oil deliveries remained in the red in January (-16.6% yoy vs. -19.3% yoy in December) as higher volumes were offset by lower export prices versus a year ago.

Import growth remains stable
Import expansion stayed steady in January (+1.0% yoy vs. +1.0% yoy in December) as growth in import volumes improved (+0.8% yoy vs. -0.8% yoy in December). Demand for intermediate goods was modest in January (-0.8% yoy vs. +2.8% yoy in December) as factories turned more cautious on business activity and inventory management. Imports of consumption goods climbed at a slower pace (+3.3% yoy in January vs. +5.7% yoy in December) due to processed F&B, as festive restocking was brought forward due to the Lunar New Year falling earlier in 2019.

Originally published by CIMB Research and Economics on 4 March 2019.

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