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

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

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

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

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

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

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

RCEP Monitor

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

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

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

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

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

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

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

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

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

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

RCEP Monitor

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

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

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

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

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

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

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

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

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

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

RCEP Monitor

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

RCEP Monitor

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

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

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

ASEAN
ASEAN Members seek to broaden partnerships through BRICS and OECD memberships 
(12 August 2024) In July, ASEAN hosted a series of meetings in Lao PDR, which included discussions among ASEAN foreign ministers and top diplomats from Japan, the U.S., China, India, and the EU. The meetings underscored ASEAN’s intent to enhance its global diplomatic role. However, three founding ASEAN members—Indonesia, Thailand, and Malaysia—are pursuing different international affiliations. Malaysia applied for BRICS membership following a meeting with Russian Foreign Minister Sergey Lavrov. Indonesia and Thailand applied for OECD membership, with Thailand also seeking BRICS membership. Indonesia’s choice for OECD over BRICS reflects a desire to bolster its investment appeal and continue economic reforms, while Malaysia’s BRICS pursuit aims to diversify economic ties and reduce reliance on the U.S. dollar. Thailand’s dual application represents a strategy to engage with both established and emerging markets. The differing approaches highlight the countries’ distinct strategic priorities and economic standings, with ASEAN’s collective influence facing challenges amid rising global tensions.

MALAYSIA
Economy likely grew by 5.8% year-on-year in Q2 of 2024 
(14 August 2024) Malaysia’s economy likely grew by 5.8% in the second quarter of 2024, marking its fastest expansion since Q4 2022, driven by a strong rebound in exports and increased household consumption, according to a Reuters poll of 20 economists. Exports rose by 9.1% in April, 7.3% in May, and moderated to 1.7% in June year-on-year, contributing to an overall 3.9% growth in the first half of 2024. The economy’s performance aligns with Bank Negara Malaysia’s growth estimate of 4.0% to 5.0% for the year, with expectations that the downturn in technology and electronics exports has bottomed out. Renewed economic ties with China are anticipated to further boost Malaysian exports, and investment trends, particularly foreign direct investment, are being closely monitored for their potential impact on cyclical growth. Economic growth for 2024 is expected to average 4.4%. 

MALAYSIA, INDIA
Malaysia and India to sign multiple agreements during Malaysian PM visit to New Delhi 
(13 August 2024) India and Malaysia are expected to sign multiple agreements during Prime Minister Anwar Ibrahim’s visit to New Delhi on 19 August, 2024, with a key focus on a memorandum of understanding regarding the recruitment, employment, and repatriation of Indian workers. This agreement has gained importance due to past concerns about the treatment of Indian workers in Malaysia, where around 185,000 Indian nationals currently reside. Ibrahim’s visit, his first as prime minister, aims to reset bilateral relations strained by previous political issues, including disputes over India’s internal policies and the presence of controversial preacher Zakir Naik in Malaysia. The discussions will also cover enhancing trade and investment, with potential agreements on accepting India’s Unified Payments Interface (UPI) system and RuPay payment service, as well as trade settlements in domestic currencies. Malaysia ranks as India’s 13th largest trade partner, with bilateral trade amounting to nearly USD 20 billion in 2022-23.

LAO PDR
Lao PDR reports trade deficit of USD 154 million in July
(14 August 2024) In July, Lao PDR reported a trade deficit of USD 154 million, with total trade valued at over USD 1.2 billion. Exports totalled USD 533 million, while imports amounted to USD 687 million. Key export items from Lao PDR included mixed gold, electric equipment, salt, rubber, paper, wasted wood, sugar, cassava flour, copper ore, and cassava. Major imports comprised diesel, mechanical equipment, finished chemical products, land vehicles, electrical appliances, steel, plastic products, gasoline, vehicle spare parts, and beverages. China, Viet Nam, and Thailand were notable export destinations, and the same countries were primary sources of imports for Lao PDR.

THE PHILIPPINES
BSP lowers target interest rate by 25 basis points to 6.25%, first rate cut in nearly four years  
(15 August 2024) The Bangko Sentral ng Pilipinas (BSP) reduced its target interest rate by 25 basis points to 6.25% on Thursday, marking its first rate cut in nearly four years. This decision aligns with forecasts from 13 of 23 economists surveyed by Bloomberg. The BSP Governor indicated that further rate cuts might follow, potentially an additional 25 basis points in October or December. The BSP had previously implemented 450 basis points of tightening to control inflation. Despite a strong GDP growth, domestic demand has shown stress, prompting the rate cut to support consumption. The BSP raised its inflation projection for 2024 to 3.3% from 3.1%, anticipating a decrease in inflation due to lower import tariffs on rice, despite a recent acceleration in inflation to its highest in nine months.

THAILAND
Thai markets expected to face pressure due to removal of Prime Minister
(15 August 2024) Following the removal of Prime Minister Srettha Thavisin by Thailand’s Constitutional Court for an ethics violation, the country’s markets are expected to face ongoing pressure. Analysts are concerned that the transition in leadership may delay crucial policies aimed at enhancing investor confidence. Issues such as elevated household debt and investment attractiveness are unlikely to be addressed promptly until a new government is in place. Additionally, there are uncertainties regarding the implementation of a USD 14 billion cash handout programme. The SET Index, already struggling this year, fell by 0.4% on Wednesday, and the baht declined against regional currencies in early Asian trading.

INDONESIA
New planned capital city Nusantara attracts increased investor interest
(14 August 2024) Indonesia’s planned new capital, Nusantara, is attracting increased investor interest despite previous delays and concerns about its future under incoming President Prabowo Subianto. On Monday, local companies, including Bank Central Asia (BCA), began major projects in Nusantara, collectively investing over IDR 4 trillion (USD 250 million). BCA’s project includes a IDR 75 billion branch office, while other developments include a IDR 1.2 trillion convention centre by Royal Golden Eagle Group, and a IDR 300 billion hotel by Hotel Papua Internasional. Intiland Development plans to invest at least IDR 2.6 trillion in various facilities. So far, private sector commitments total IDR 56.2 trillion across 55 projects, but this is short of the IDR 466 trillion target by 2045. The government is offering long-term land concessions and tax incentives to attract foreign investors. The Nusantara Capital City Authority (OIKN) is discussing nearly USD 2 billion in public-private partnerships, with interest from 475 companies, including foreign firms from China, Singapore, Japan, and Malaysia.

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JAPAN
Japan’s economy grows annualized 3.1% in Q2 2024, exceeding 2.1% forecast  
(15 August 2024) In the second quarter, Japan’s economy grew an annualised 3.1%, significantly exceeding the 2.1% forecast and rebounding from a revised 2.3% contraction in the first quarter. This growth was driven by a 1.0% increase in private consumption, surpassing the predicted 0.5% rise and marking its first gain in five quarters. The Bank of Japan (BOJ) is considering further interest rate hikes following last month’s increase, supported by robust economic performance and real wage growth. However, the resignation of Prime Minister Fumio Kishida and potential political instability may delay additional rate hikes. Government officials expect continued economic recovery, buoyed by strong wage negotiations and increased tourism spending. Capital spending rose 0.9%, matching market forecasts, while external demand slightly detracted from growth. The Japanese yen showed little change at 147.38 to the dollar, and the Nikkei index gained 1.01% in response to positive Wall Street trends.

CHINA
Industrial production grows by 5.1% year-on-year in July, slowest rate in four months
(15 August 2024) In July, China’s industrial production grew by 5.1% year on year, the slowest rate in four months, slightly below the 5.2% forecast and a decrease from June’s 5.3% growth. Unemployment increased to 5.2% from 5% in June, marking the first rise since February. The property market remains weak, impacting household consumption and investor confidence, with new house prices down 4.2% and secondhand prices falling 8.8%. Retail sales rose 2.7%, outperforming expectations, while fixed asset investment grew 3.6% year-to-date, below forecasts. Analysts anticipate further easing measures from the government to stimulate the economy, including potential relaxations in housing policies and mortgage rates. Despite incremental measures, the property market’s downturn has led to warnings of a severe slump in steel production and cement output, with declines of 4% and 12.4%, respectively. 

SOUTH KOREA
South Korean retail investors purchase USD 9 billion in US stocks in H1 2024
(14 August 2024) South Korean retail investors are increasingly investing in US stocks, continuing a trend despite recent global market downturns. In the first half of 2024, South Korean “ant” investors purchased USD 9 billion in US stocks, driven by dissatisfaction with local market returns and valuations. Notably, they have significantly reduced their holdings in domestic stocks, selling a record KRW 16.3 trillion (USD 11.9 billion) and contributing to a 1.3% drop in the KOSPI index. In contrast, foreign investment in Korean stocks also increased to a record KRW 27 trillion, but still lags behind the retail investment proportion. The disparity in dividend payments and valuations between South Korean and US companies, with the latter offering higher returns and more robust growth, continues to draw South Korean investors abroad. Government efforts to boost the domestic market, including proposed tax incentives and a “Corporate Value-up Programme,” face challenges due to entrenched issues within family-run conglomerates and limited immediate impact. As of late July, South Korean holdings in US stocks totalled USD 13.6 billion in Tesla, USD 12 billion in Nvidia, and USD 5.1 billion in Apple. Despite a planned capital gains tax, retail investors remain optimistic about long-term gains from US investments.

MALAYSIA
Infineon opens largest power chip plant in Malaysia
(08 August 2024) Infineon has begun production at its largest power chip plant in Kulim, Malaysia, which will become the world’s biggest silicon carbide (SiC) factory within five years. This plant is a significant development for Malaysia’s semiconductor industry. The facility is expected to support demand from sectors such as renewable energy, electric vehicles, and AI data centres. The Malaysian government is actively attracting chip investment, as highlighted by Prime Minister Anwar Ibrahim’s attendance at the inauguration. Infineon plans to invest an additional EUR 5 billion for a second phase of the plant, which has already secured EUR 1 billion in prepayments and EUR 5 billion in design win commitments. Infineon forecasts at least EUR 600 million in revenue from SiC-related solutions for fiscal 2024. The wide-bandgap semiconductor market, crucial for high-power applications, is projected to reach USD 13 billion by 2028, though SiC chips remain more expensive and challenging to produce than silicon-based alternatives. Malaysia’s role in the global semiconductor supply chain is expected to grow, but competition for investment remains intense.

MALAYSIA, THAILAND
Thailand and Malaysia agree to expedite construction of second Sungai Golok-Rantau Panjang bridge
(03 August 2024) Malaysia and Thailand have agreed to expedite the construction of the second Sungai Golok-Rantau Panjang bridge, highlighting their commitment to accelerating regional economic growth. Malaysian Prime Minister Datuk Seri Anwar Ibrahim stated that the bridge, which will connect Narathiwat in southern Thailand and northern Kelantan in Malaysia, is a key project aimed at enhancing economic cooperation between the two countries. Construction is set to begin in April 2024 and is expected to take two years, with hopes to complete it by late 2026, ahead of the initial 2027 timeline. Anwar emphasised the importance of initiating development projects around the bridge to boost local businesses in Kelantan. The project tender involves 10 companies from each country. Additionally, the existing bridge, operational since 1971, will be upgraded following the completion of the new bridge. Anwar praised Thai Prime Minister Srettha Thavisin for his practical approach and commitment to the project, noting that both governments will review a progress report within two weeks to ensure the project proceeds efficiently. 

CAMBODIA
Cambodia initiates construction of USD 1.7 billion 180-kilometre Funan Techo canal
(05 August 2024) Cambodia has initiated construction on the USD 1.7 billion, 180-kilometre Funan Techo canal, funded by China, to connect Phnom Penh with Kep province and provide access to the Gulf of Thailand. The canal, intended to reduce shipping costs and decrease reliance on Vietnamese ports, has raised environmental concerns, particularly regarding its impact on the Mekong River, which supports agriculture and fisheries across six countries. Despite Vietnam’s quiet concerns about the canal’s potential effects on its Mekong Delta rice production and shifting trade routes, Cambodia has dismissed these issues. The canal, expected to be controlled by Cambodian companies with a 51% share, will be constructed by the Chinese state-owned China Road and Bridge Corporation. This project underscores China’s significant influence in Cambodia, which includes numerous Chinese-funded infrastructure projects and nearly 40% of Cambodia’s foreign debt owed to China.

VIET NAM, UNITED STATES
US decides to maintain Viet Nam’s classification as non-market economy
(03 August 2024) The United States has decided to maintain Viet Nam’s classification as a non-market economy, a status it has held since 2002, despite Viet Nam’s request for removal of the designation. The US Commerce Department cited extensive government involvement in Viet Nam’s economy, which it says distorts prices and costs, making them unsuitable for calculating anti-dumping duties. The decision means that the US will continue to use market-based prices from countries with similar economic development to calculate these duties. Viet Nam’s Ministry of Industry and Trade expressed regret over the decision, noting that 72 countries, including Australia, Britain, and Japan, recognise Viet Nam as a market economy. The US remains Viet Nam’s largest export market, with a significant increase in export revenue and foreign direct investment from the US in recent years. Concerns about China potentially using Viet Nam for transshipments and pressure on the Biden administration to maintain a strong foreign policy stance were factors influencing the decision.

INDONESIA
Indonesia inaugurates USD 478 million China-built anode plant for EV batteries 
(07 August 2024) Indonesia’s President Joko Widodo inaugurated a new plant by China’s BTR New Material Group and Singapore’s Stellar Investment, which will produce anode materials for electric vehicle (EV) batteries. The plant, located in Kendal, Central Java, represents a USD 478 million investment in its first phase and will have an annual production capacity of 80,000 metric tons. BTR plans to start construction on a second phase in Q4 2024, aiming to double capacity to 160,000 tons annually with an additional USD 299 million investment. This project is part of Indonesia’s broader strategy to build a domestic EV industry by leveraging its rich nickel resources, following the 2020 ban on raw nickel exports. Once completed, the facility will position Indonesia as the second-largest global producer of anode materials, trailing only China. The development has attracted significant investments from major EV and battery manufacturers, including Hyundai Motor Group and LG Energy Solution, who have recently launched the country’s first battery cell production facility.

INDONESIA
Indonesia plans to increase palm oil-based biodiesel blending mandate from 35% to 50%
(07 August 2024) Indonesia is preparing to increase its palm oil-based biodiesel blending mandate from the current 35% to 50% under the incoming administration of President-elect Prabowo Subianto, who takes office in October 2024. The transition government has ordered tests for the B50 mandate, including static tests by the energy ministry and stakeholders, followed by vehicle road tests, which typically take a year. The increase aims to reduce oil imports but raises concerns in the palm oil industry over supply for exports. The Indonesian Biofuel Producers Association (APROBI) noted that B50 would require new processing capacity, while the Indonesian Palm Oil Producers Association (GAPKI) warned that a higher mandate could hurt exports due to stagnating production, which has grown less than 1% annually since 2019. GAPKI’s chairman, Eddy Martono, suggested maintaining the current B35 mandate, given stagnating production rates and the potential impact on domestic cooking oil prices, exports, and government revenues. The B50 mandate is expected to consume 18 million metric tons of crude palm oil annually, compared to 11 million tons under B35. 

THE PHILIPPINES
The Philippines’ GDP grows by 6.3% in Q2 2024, exceeding 6.2% forecast
(08 August 2024) The Philippines’ GDP grew by 6.3% in Q2 2024, exceeding the 6.2% forecast and improving from the 5.8% growth in Q1. Government expenditure, driven by infrastructure projects and defence upgrades, increased by 10.7% year-on-year, contributing to this growth. However, household spending, which makes up a significant portion of GDP, rose by only 4.6%, reflecting weaker consumer demand amid high inflation and interest rates. The Bangko Sentral ng Pilipinas’ key policy rate is at 6.5%, with consumer inflation at 4.4% in July 2024, above the target range. The revised GDP growth for Q1 was 5.8%, slightly up from the initial estimate of 5.7%. Despite an average GDP growth of 6.0% across the first two quarters, concerns remain about sustaining this momentum due to a decelerating quarter-on-quarter growth trend, uneven sector performance, and reliance on government spending.

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NEW ZEALAND
New Zealand experiences significant emigration of its citizens to Australia
(08 August 2024) New Zealand is experiencing a significant emigration of its citizens to Australia, driven by higher wages and lower living costs across the Tasman. In 2023, 44,534 New Zealanders, nearly 1% of the population, relocated to Australia, resulting in a net migration loss of 27,011, an 85% increase from 2022. This trend is attributed to the contrasting economic strategies of the two countries, with New Zealand’s aggressive interest rate hikes leading to a double-dip recession and rising unemployment at 4.6%, compared to Australia’s more moderate 4.1%. Average weekly earnings in Australia are 30% higher than in New Zealand, making it a more attractive destination, especially for young professionals facing job insecurity and high living costs. Meanwhile, inward migration to New Zealand, though at a record 239,000, has not offset the exodus of 25 to 44 year olds, raising concerns about the country’s long-term economic prospects.

JAPAN
Recent rate hike by Bank of Japan triggers substantial market volatility 
(07 August 2024) Japan’s financial landscape has undergone a significant shift following the Bank of Japan’s recent interest rate hike, led by Governor Kazuo Ueda, which marked a departure from its long-standing zero or negative rate policy. This move triggered a sharp appreciation of the yen, substantial market volatility, and forced investors to reassess strategies dependent on a weak yen and stable rates. The Nikkei 225 experienced its most severe decline since 1987, followed by a 10% rebound, highlighting the market’s instability. The yen’s rise also disrupted carry trades, leading to a swift closure of positions. Despite Deputy Governor Shinichi Uchida’s assurance of not raising rates in unstable markets, concerns persist about the potential negative impact on consumer confidence and investment. Analysts are divided on the BOJ’s actions, with some viewing them as necessary given Japan’s macroeconomic conditions, while others suggest political pressure may have influenced the decision, risking tension between the government and the central bank. 

SOUTH KOREA
Korean think tank recommends early interest rate cuts citing weaker economic growth
(08 August 2024) The Korea Development Institute (KDI) has recommended early interest rate cuts, citing weaker economic growth and inflation due to sluggish domestic demand. The KDI revised its 2024 growth forecast to 2.5%, slightly down from 2.6% predicted three months prior, while maintaining a 2025 growth projection of 2.1%. Inflation forecasts were also lowered to 2.4% for 2024 and 2.0% for 2025, compared to previous estimates of 2.6% and 2.1%, respectively. Despite an export-led growth, domestic demand remains weak, hindering economic recovery. KDI’s inflation outlook for the second half of 2024 aligns with the central bank’s target of 2.0%. The think tank’s recommendation for rate cuts follows South Korea’s unexpected economic contraction in Q2 2024 and the Bank of Korea’s recent indication of potential rate cuts after maintaining a 3.50% interest rate for 12 consecutive meetings.

ASEAN
Southeast Asian countries raise barriers against cheap Chinese imports
(31 July 2024) Kurniadi Eka Mulyana, a 26-year-old worker in Bandung, West Java, was laid off in March due to declining sales at his textile factory, attributed to competition from TikTok Shop’s Chinese imports. This year, 49,000 workers in Indonesia’s textile, garment, and footwear sectors have been laid off across Banten, West Java, and Central Java. In response, Indonesian Trade Minister Zulkifli Hasan proposed up to 200% duties on imported fabrics and other goods. Southeast Asian countries, including Malaysia and Thailand, are also raising barriers against cheap Chinese imports. Thailand imposed a 7% VAT on low-value imports, and Malaysia added a 10% sales tax on online purchases under MYR 500. Southeast Asia’s trade deficit with China is widening, with Malaysia’s deficit growing from USD 3.1 billion in 2020 to USD 14.2 billion in 2023, and Thailand’s from USD 20 billion to USD 36.6 billion. Indonesia posted a USD 5 billion non-oil and gas trade deficit with China in the first half of 2024. China is redirecting exports to Southeast Asia due to Western trade tensions, impacting local industries like Thailand’s steel sector, where domestic production fell by 497,000 tonnes last year.

THAILAND
Top stocks in Thailand benefiting from digital wallet rollout
(01 August 2024) Thailand’s digital wallet initiative, worth THB 500 billion (USD 14 billion), is set to benefit major conglomerates and wealthy families. Stocks such as CP All and Muang Thai Capital have risen with each announcement about the program, despite the Stock Exchange of Thailand’s main index falling by 15% over the past year. Approximately 50 million adults earning less than THB 70,000 monthly will receive a one-time THB 10,000 payment via a mobile app, to be spent on necessities within their voting district. Goods making up nearly 60% of CP All’s sales, which totalled THB 921 billion in 2023, will be purchasable under the scheme. The program has also boosted shares in CP Group’s CP Axtra and other retailers like Berli Jucker and Central Retail Corp. However, department stores and hypermarkets are excluded from accepting digital wallet payments. Geographical restrictions may limit the scheme’s success, particularly in cities like Bangkok and Chiang Mai. The initiative is projected to boost GDP by 1.2% to 1.8% in 2025, though the Bank of Thailand predicts a smaller impact. 

THAILAND
Thailand to be second Southeast Asian country to introduce carbon tax
(30 JUly 2024) Thailand will introduce a carbon tax next year, becoming Southeast Asia’s second country to do so after Singapore. The tax will be THB 200 (USD 5.60) per tonne of CO2 on oil products like diesel and gasoline, converted from existing oil product taxes, thus not increasing revenue or consumer costs. This initiative aims to signal a priority for reducing carbon footprints, despite its minimal immediate impact on emissions. The tax will likely expand to more sectors and increase over time, forming part of the Thailand Climate Change Act, which includes mandatory emissions reporting and a potential emissions trading scheme. The Thai government will negotiate with the EU to prevent double penalties on Thai exports under the EU’s Carbon Border Adjustment Mechanism starting in 2026. Experts emphasize the need for regional cooperation within ASEAN for effective carbon pricing and the importance of investing carbon tax revenues in renewable energy and technology to ensure long-term benefits.

THAILAND
Thailand welcomes 20.3 million overseas visitors in first seven months of 2024
(31 July 2024) Between 01 January 1 and 28 July, Thailand welcomed 20,335,107 overseas visitors, generating approximately THB 957.31 billion for local businesses. China was the top source market with 4,065,109 arrivals, followed by Malaysia (2,837,922), India (1,186,288), South Korea (1,073,792), and Russia (996,990). Minister Sermsak Pongpanich reported 716,631 foreign arrivals from 22-28 July, averaging 102,376 daily, a 1.04% increase from the previous week. Short haul markets, including South Korea, Japan, and Taiwan, saw a 0.85% increase due to school holidays, while long haul markets rose by 1.57% with the start of summer holidays in Europe and the Middle East. Sermsak anticipates stable arrival numbers for the following week, influenced by European summer holidays, eased travel measures, and increased flights. The government targets 36.7 million foreign visitors in 2024, compared to nearly 40 million in 2019.

INDONESIA
Indonesian President starts work from presidential palace in Nusantara
(30 July 2024) Indonesian President Joko Widodo has started working from the presidential palace in Nusantara, the new administrative capital planned for East Kalimantan province. The USD 33 billion project, announced in 2019, aims to move the capital from Jakarta but is significantly delayed. Widodo noted the palace is 90% complete, with thousands of workers still on-site. Nusantara is set to host its first Indonesia Independence Day celebration on 17 August, marking the official capital transfer. However, construction delays and missed deadlines have led to the resignation of key officials and adjustments to the relocation timeline for 12,000 civil servants. Widodo expects the city to be 15% complete by Independence Day, with full completion by 2045. The project relies heavily on private investment, with the state covering 20% of costs. A presidential regulation was signed to grant investors land rights up to 190 years. Current infrastructure includes a 10-megawatt solar power plant and a reservoir for drinking water, but an additional 40 megawatts is needed.

MALAYSIA
Malaysian ringgit erases yearly losses to mark eight-day gain streak
(31 July 2024) The Malaysian ringgit has erased its yearly losses, rising 0.6% to 4.5922 against the dollar, marking an eight-day gain streak, the best since November 2019. After hitting a 26-year low in February, it has become Asia’s top performer this year. This recovery is supported by Bank Negara Malaysia’s encouragement for state-linked firms to repatriate and convert foreign income, use of forwards, and a global technology cycle upturn aiding export recovery. Analysts attribute the ringgit’s strength to expectations of a Fed rate cut, foreign inflows into local shares, and a recovering semiconductor cycle. KWAP, Malaysia’s largest state pension fund, paused its foreign investment plans to support the ringgit. With US swaps pricing a quarter-point cut by September, the Fed’s potential rate cut could make ringgit-denominated assets more attractive. Malaysia’s economy, showing growth momentum and a second-quarter GDP exceeding expectations, supports the central bank’s steady borrowing costs, further buoying the ringgit.

CAMBODIA, HONG KONG
Cambodia and Hong Kong pledge to enhance trade and investment cooperation
(31 July 2024) Cambodia and the Hong Kong Special Administrative Region (HKSAR) have pledged to enhance trade and investment cooperation, as stated during a meeting between Cambodian Prime Minister Hun Manet and HKSAR Chief Executive John Lee on 31 July. The discussions, held at the Peace Palace in Phnom Penh, covered potential areas for collaboration including trade, investment, banking, finance, technology, digital economy, tourism, education, and people-to-people connectivity. Both parties also explored increasing direct flights between HKSAR and Siem Reap. The meeting concluded with the signing of two memorandums of understanding focused on trade and investment promotion. Lee’s visit to Cambodia is part of a broader Southeast Asian tour, which includes stops in Laos and Vietnam.

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SOUTH KOREA
South Korea’s CPI rises 2.6% year-on-year in July 2024
(01 August 2024) South Korea’s consumer inflation increased in July, ending a three-month decline, driven by supply-side pressures and surpassing market expectations. The consumer price index (CPI) rose 2.6% year-on-year, compared to June’s 11-month low of 2.4%, while economists had predicted a 2.5% rise. Monthly CPI increased by 0.3%, the fastest rise in five months, against an expected 0.25% increase. Petroleum product prices grew by 3.3%, and agricultural products increased by 0.9%, with vegetable prices surging 6.3%. Core inflation, excluding volatile food and energy items, remained steady at 2.2% for the third consecutive month. Last month, the Bank of Korea indicated potential future rate cuts while maintaining interest rates at a 15-year high of 3.50%.

JAPAN
Japanese authorities spent JPY 5.53 trillion to support the yen in July 2024
(31 July 2024) Japanese authorities spent JPY 5.53 trillion (USD 36.8 billion) to support the yen in July, according to Japan’s Ministry of Finance data covering 27 June to 29 July. This intervention aligns with expectations and follows official warnings about countering volatile currency movements. The action occurred after the yen reached a 38-year low against the U.S. dollar. In response, the Bank of Japan (BOJ) raised its benchmark interest rate to “around 0.25%” from 0% to 0.1%, the highest since 2008. Following the BOJ’s decision, the yen appreciated sharply, trading around 150 per dollar, a significant recovery from its earlier decline to 161.96 per dollar. The yen has faced pressure since the BOJ ended its negative interest rate policy in March. 

JAPAN
Japanese companies see limited impact on fundraising costs after BOJ raises rates
(01 August 2024) Japanese companies foresee limited impact on fundraising costs after the Bank of Japan’s recent monetary policy shift. Marubeni’s CFO stated that the impact would be manageable given the company’s profit levels, while Sumitomo Corp’s CFO highlighted measures to minimise interest rate fluctuation risks. On 31 August, the BOJ raised its policy interest rate to 0.25%, the highest since 2008, suggesting potential future hikes. Although the rate increase may affect fundraising costs and strengthen the yen, most companies do not anticipate significant earnings impacts. Hokkaido Electric Power mentioned that long-term loans with fixed interest rates would not be immediately affected, but future financing could be. The yen’s appreciation reached 148.5 per dollar, which could moderate benefits from a weak yen for trading houses. Japan Airlines’ CEO noted that a stronger yen would positively impact outbound tourism, offsetting fuel cost increases.