Sun. Jan 20th, 2019

Asean Investor

The slow struggle to economic integration

The 10-member ASEAN bloc is still in its early stages, and bears some resemblance to the United States – in 1776 – according to David Carden, partner in charge of Asia at legal firm Jones Day and former US ambassador to ASEAN. Like post-independence America, ASEAN is a place with border disputes, no common currency, and weaknesses in education, infrastructure and environmental protection. Yet with strong leadership and focus on improvements in the right areas, the bloc has a huge amount of potential to grow in the years to come. “If ASEAN is going to find the future, it is going to find it together,” said Mr Carden. “The challenges are too great, productivity is too low, the demand for infrastructure is too high. So much needs to be done that there’s no way it can be accomplished unless the people are brought together.” Mr Carden was one of six panellists speaking on Inclusive Connectivity at the ASEAN Business and Investment Summit 2014, which ran parallel to the ASEAN Summit from November 11 to 13 in Nay Pyi Taw. Myanmar has been chair of the ASEAN bloc this year, which has launched an ambitious series of proposals to grow regional business links. ASEAN is set to enact an Economic Community at the end of 2015, aiming to ease restrictions in trade of goods, flows of services and capital throughout the region. Yet it is increasingly clear that ASEAN member countries will struggle to meet all of their commitments on easing a host of restrictions by the deadline of the last minute of 2015. Much of the reluctance to drop barriers stems from a desire to protect local businesses from foreign competition, a force powerful enough to lead some to question whether an integrated Economic Community will indeed take form at all. Simon Tay, chair of the Singapore Institute of International Affairs, said it will take at least five more years before the region starts operating as an integrated market. “There is no big bang [coming in 2015], but it’s opening the door, and after a while people will start going through,” he said. The ASEAN region is quite diverse. Southeast Asia may be united by multiple threads of history, culture and common geopolitical concerns, but differences abound, according to McKinsey Global Institute’s November 2014 report Southeast Asia at the crossroads: Three paths to prosperity. The report highlighted the significant differences in the region’s political systems, culture, language and religion. “Indonesia is almost 90pc Muslim, while the Philippines is more than 80pc Roman Catholic and Thailand is more than 95pc Buddhist,” it said. There are hundreds of languages spoken across the region. While English is ASEAN’s official working language, countries such as Singapore and Philippines have proportionately far more fluent speakers than others such as Thailand. Despite the differences, the collective opportunities for the bloc are evident. Already ASEAN has a larger economy than India, Brazil or Russia, and boasts real GDP growth of 5.1pc between 2000 and 2013 – behind only India and China among major economies, the report said. Southeast Asian countries have generally enjoyed significant growth, and if viewed as a single entity would represent the seventh-largest economy in the world – larger than India, Brazil or Russia. The 10 nations boasted average real GDP growth of 5.1pc between 2000 and 2013 – behind only India and China among major economies, the report said. The region also has a large, young population of 600 million people, and generally low government debt, it added. However, restrictions still abound between neighbours in areas like trade, investment and labour flows. Experts say these restrictions need to be tackled if the goal of an integrated Economic Community is to be achieved. While tariffs on trade have generally been lowered across the bloc, for instance, non-tariff barriers remain a serious issue. “There is still a high degree of protectionism in the countries within ASEAN, and this is not helping,” said Richard Owens, DHL executive vice president and regional head of customer relations and innovation. “This is not helping trade.” Among the more bizarre examples of protectionism are the restrictions against foreign trucks entering Myanmar – requiring shipments to be changed to a local driver and truck when entering int the country. Each member country has its own concerns it seeks to protect. For instance Thailand and Indonesia have up to half their populations working on farms, yet the sector contributes a relateively small portion of the countries’ total GDP, said Mr Carden. “One of the greatest challenges that presents itself to ASEAN is rising nationalism and protectionism,” he said. Often these measures are put in place to protect vested interests from the worst impacts of globalisation – and it will require strong leadership to overcome such concerns. The concept of a collective ASEAN having a joint identity is also relatively weak, making it difficult to galvanise countries behind the concept. “ASEAN is like a mini-Disneyland with all the political systems in the world put into one [body],” said Kavi Chongkittacorn, assistant group editor for Nation Media in Thailand. While he said he advocated for strengthened symbols to pull the region closer together, other experts disagree. “I’m not sure anyone here can sing the ASEAN anthem,” said Mr Tay. “The symbols will come later. They will come naturally, rather than trying to rush them.” A more pressing concern than flags or songs is the significant disagreement on what role the ASEAN Secretariat – its permanent administration – should take. Mr Carden said often the bureaucracy of the European Union is brought up as something ASEAN must avoid – but the organisation’s Jakarta headquarters are a long way off from becoming Brussels. “The EU headquarters has 33,000 people; the ASEAN secretariat has 300. We don’t have to worry about this,” he said. While Mr Carden said he would like to see more spent on the secretariat, others say it shouldn’t be handed a blank cheque. Mr Tay said he would like to see a better monitoring system for government action. “The governments have promised to have an AEC, but the tracking of it, the non-tariff barriers, all these complaints need to go somewhere. They can’t just go to each government,” he said. Despite the disagreements, experts say an integrated ASEAN economic community will still arrive – eventually. By Jeremy MullinsThe post The slow struggle to economic integration appeared first on Asean Investment | Marc Djandji Blog.

Vietnam seeks Indian investment in infrastructure, IT and education sectors

NEW DELHI: While Vietnam has been cynosure of all eyes following its dispute with China over the latter’s claim in the South China Sea region, few would have noticed its recent economic growth and market opportunities that it present. This growth has been based on Foreign Direct Investment and Hanoi is keen to invite Indian investors in large as enunciated by Vietnam’s PM during his trip to Delhi last month. Vietnam’s GDP grew 5.62 per cent in the first nine months of 2014. The performance of the economy is also supported by investment in the manufacturing sector, which remains the most significant sector for foreign investment, accounting for almost 70 per cent of total FDI. Textile and garments, chemicals, agriculture and fishery are the sectors where Vietnam has sought India’s investments, Indian government sources informed ET. Vietnam is also looking forward to Indian investment in new business sectors where India has advantages — infrastructure and power generation and distribution, IT, education and pharmaceutical research, according to official sources. The present two way trade was $8.0 billion in 2013-14 and the two countries have targeted 15.0 billion before 2020. The two countries are contemplating to conclude the Preferential Trade Agreement (PTA) to reduce more custom tariff South Korea has overtaken Japan as the biggest foreign investor. Samsung has invested nearly $8 billion in Vietnam while Lotte Mart plans to double its current number of stores to 2020. Besides manufacturing, the real estate sector is ranked second in FDI, accounting for 11 per cent, equivalent to $1.2 billion. Currently there are several large real estate projects, including Smart Complex by Lotte in HCM City’s Thu Thiem Area (2 billion USD) and Amata City Long Thanh from Amata in Dong Nai province ($530 million) being undertaken in Vietnam where Indian investors can explore to invest, sources in Vietnamese government said. Vietnam’s stock market is among five markets with the strongest growth in the world. Vietnam also quickly recovered from the impacts of the financial crisis in 2008-09 and over the last four years, the Vietnamese government successfully made use of macroeconomic stabilisation policy, thus keeping a high economic growth at 5-6 per cent per year, attracting $23 billion in foreign direct investment (FDI) in 2013, contributing to promoting the national economic development. .. Vietnam is now one of the leading investment destinations in ASEAN. It is now one of the top three ASEAN exporters to the US, ahead of Thailand and Malaysia. Vietnam accounts for 20 per cent of ASEAN exports to the US, and if present trends continue, it will have a market share of more than 30 per cent by 2020. Vietnamese economy has gradually stabilized, with macro-economic indicators improving as against that in 2013. This positive outcome is attributed to the proper formulation of macro-economic policies by the Government of Vietnam. In the first nine months of 2014, the number of households living below the poverty line has reduced by 21.7% compared to the same period of previous year. The US Chamber of Commerce in Singapore has claimed that Vietnam is the second most popular destination for US business expansion among the member states of the Association of Southeast Asian Nations (ASEAN), stating that Vietnam’s participation into negotiations to become RCEP and TPP membership will have a positive impact on investment activities by U.S enterprises in Vietnam. Vietnam accounts for 20 per cent of ASEAN exports to the US and if present trends continue, it will have a market share of more than 30 per cent by 2020. The country can achieve a growth rate of 6% in 2015 and then gain up to 6-7% in the period 2016-2017. Its inflation rate has dropped from over 20 per cent in 2010 and 2011 to only 6 per cent in 2013. By ET Bureau – economictimes.indiatimes.comThe post Vietnam seeks Indian investment in infrastructure, IT and education sectors appeared first on Asean Investment | Marc Djandji Blog.

S’pore well positioned to gain from regional market integration: MAS

SINGAPORE — The Republic is poised to tap a myriad of opportunities arising from greater integration among capital markets in Asia, where strong economic growth and an expanding middle class are driving demand for financial services, said the Monetary Authority of Singapore’s (MAS) deputy managing director Jacqueline Loh yesterday. Singapore’s edge lies in an established market structure and talent pool that can help facilitate market-integration initiatives that industry players undertake, Ms Loh added in her keynote speech at an annual conference by the Asia Securities Industryand Financial Markets Association (ASIFMA). “Singapore is well positioned to offer integrated capital market solutions, given that many parts of the value chain — trading, clearing, settlement and reporting — are already being offered in Singapore across a spectrum of asset classes, including equities, bonds, foreign exchange and derivatives,” she said. “With technology transforming activity across financial markets, the profile of jobs in finance will change in the years to come. Through the Institute of Banking and Finance, the MAS is working with the industry on an enhanced set of desired competency standards to grow the pipeline of skilled talent ready to serve the growth in capital markets in Asia.” Demand for financial services is expected to increase in the region alongside the growth in income, as economies here expand. The Asian Development Bank has projected that the sum of gross domestic product of China, India and the Association of Southeast Asian Nations (ASEAN) in purchasing power parity terms could quadruple by 2030 to exceed that of the United States and Europe combined. An integrated capital market will offer more choices for investors and more sources of financing for companies. It will also allow for better mobilisation of funds from surplus countries to those that need capital and improve the efficiency of investment allocation needed for economies to grow further. “An integrated capital market (will lead to) generally deeper and more liquid markets, thus improving pricing through competitive spreads. Over time, greater scale and integration within and across asset classes can create greater opportunities in Asia,” Ms Loh said. Several integration initiatives have emerged in the region over the years, such as the ASEAN collective investment scheme framework that allows investors in Singapore, Thailand and Malaysia access to products such as unit trust funds outside their home markets. A recent closely watched development is the bourse link between Hong Kong and Shanghai that would allow mainland investors to buy Hong Kong shares and give foreigners unprecedented access to China’s US$4.2 trillion (S$5.44 trillion) stock market. The eagerly anticipated landmark scheme has been delayed, with no indication of when it might start. Mr Ashley Alder, chief executive of Hong Kong regulator Securities and Futures Commission, said: “As far as our organisation (is concerned), our job is done — we’ve approved all the rules necessary for the programme to move ahead. I hope it launches sooner rather than later.” By LEE YEN NEEThe post S’pore well positioned to gain from regional market integration: MAS appeared first on Asean Investment | Marc Djandji Blog.

KBank joins in Asean initiative of tie-up with 35 banks from 9 nations

Kasikornbank is joining with 35 banks from nine countries to launch the Asean+3 Banking Initiative, aimed at enhancing services for customers conducting cross-border transactions. The collaboration on banking products and services, as well as financial human resources development, will be through the Taksila Asean Banking Forum – a platform for expert bankers to develop training courses and share their experience. The move aims to reinforce cooperation on financial transactions and to offer international standard banking services prior to the Asean Economic Community (AEC). Banthoon Lamsam, chairman of KBank, said the regional integration by the end of next year under the AEC will allow for freer movement of capital, goods and services. This will stimulate economic activities within the Asean+3 bloc and increase trade and investment. Banks in the region have to rapidly adjust to customers’ ever-changing needs in order to provide cross-border trade advice with in-depth information and innovative banking products through efficient channels. The nine countries are Thailand, China, Japan, South Korea, Indonesia, the Philippines, Cambodia, Vietnam and Laos. The effort to share expertise in banking business development is the first cooperation of its kind that will bring Asean banking to the international level with the Asean+3 Banking Alliance under the Bangkok Declaration, which will see expert bankers exchange knowledge and share experiences and contribute their expertise that will lead to many financial innovations. Service provision boundaries will be expanded through cooperation with local partners in introducing products and services for local customers. KBank, as the initiator of the Bangkok Declaration, has designed two unique programmes under the Taksila Asean Banking Forum – a leadership programme for top executives and future leaders with potential and a banking expertise programme for banking product specialists and top managers who lead product development and service deliveries. To materialise the objectives of the Bangkok Declaration, Asean banks need to cooperate on developing quality and enhancing cross-border transaction services to reach out to regional customers in all corners, he added. By nationmultimedia.comThe post KBank joins in Asean initiative of tie-up with 35 banks from 9 nations appeared first on Asean Investment | Marc Djandji Blog.

Exporters expect 2015 growth in range of 0-5%

Uncertain outlook in major markets cited Thai garment exporters expect relatively flat growth next year, due largely to the uncertain economic outlook in some major markets, and in the European Union and the United States in particular. Export growth will likely be in a range of zero to 5 per cent, against expansion of 2-3 per cent this year, according to the industry. Besides deflation in EU countries and concern over the pace of recovery in the US, the forecast also takes into account the loss of EU import-duty privileges for Thai garments early next year. However, there are still some positive factors, including upcoming regional integration under the Asean Economic Community and rising demand for Thai products in Japan under its policy to rely less on goods imported from China and more on the benefits of the Japan-Thailand Economic Partnership Agreement, under which tariffs are waived on goods from the Kingdom. Thavorn Kanokvaleewong, president of the Thai Garment Manufacturers Association (TGMA), said yesterday that clothing exports would face many challenging factors next year, and that growth could range between zero and 5 per cent. Three-per-cent expansion would be considered moderate growth. While there were negative factors, mainly concerning the unclear pace of global economic recovery, demand for shipments to Japan and Asean should continue to increase next year, he said. The association projects that shipments of garments will grow by at least 2 per cent to almost US$3 billion (Bt97.2 billion) this year. Thai exporters are accelerating shipments of clothing to the EU this quarter, out of concern over rising import tariffs after the termination of GSP (Generalised System of Preferences) privileges at the end of the year. In the first eight months of the year, overall clothing exports increased by just 0.86 per cent, or $1.95 billion in value, year on year. Exports to the Japanese, EU and Hong Kong markets rose, while shipments to the US declined slightly. The loss of GSP privileges should not, however, have a huge impact on Thai garment-makers, as the EU currently waives only 2.4 per cent of the tariff for Thai clothing, against a normal import-duty rate of 12 per cent, said Thavorn.  Regional investment Moreover, exporters have already prepared for the GSP loss by expanding their investment in neighbouring countries in Asean, which have lower labour costs, are not losing their EU GSP status, and will offer better prospects for exporting to the EU and US – the Kingdom’s two major export markets for garments – he explained. One of the target countries for investment is Vietnam, as it not only benefits from continued GSP status, but will also have a free-trade agreement with the EU and become a member state under the US’s Trans-Pacific Partnership Agreement. Myanmar and Cambodia are also targets for investment by Thai clothing-makers, as both countries have lower labour costs and still benefit from developed countries’ tariff privileges, said the association chief. Vallop Vitanakorn, adviser and committee member of the TGMA, said more than 30 Thai garment manufacturers had already set up secondary plants in neighbouring countries, mainly in Vietnam and Cambodia, during the past few years. More companies will also expand their business outside Thailand, especially in neighbouring countries, he added. According to a survey by the association, another 30-50 medium- and large-sized apparel manufacturers plan to expand their operations into neighbouring countries and elsewhere in Asean in the next few years, in a mix of both medium-and large-scale production. A medium-sized factory in a neighbouring country will entail an investment of about Bt100 million, cover about 3,000 square metres and employ 500-1,000 workers. Large-scale production, meanwhile, will require about Bt300 million in investment capital for a plant covering 1,000 square metres, and will employ around 2,000 workers, the survey found. Vallop said the expansion of Thai garment manufacturing in other Asean countries meant shipments from Thailand would not grow as significantly as in the past, as the manufacturers would instead expand their export business from neighbouring countries. While the manufacturing of garments in neighbouring countries is largely undertaken on an OEM (original-equipment manufacturing) basis, garment-makers would however maintain their brand-name goods production in the Kingdom, he said. Thai production will focus on serving customers by offering good service and creating new designs, he added. Duangkamol Jiambutr, deputy director-general of the Commerce Ministry’s International Trade Promotion Department, said Thai garment and textile exports were now projected to grow by 3 per cent this year. By Petchanet Pratruangkrai – The Nation(nationmultimedia.com)The post Exporters expect 2015 growth in range of 0-5% appeared first on Asean Investment | Marc Djandji Blog.