CARI Captures Issue 116 (11 Mar 2013)

CARICAPTURES

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EU-ASEAN DISCUSS TRADE AND INVESTMENT

EU, ASEAN

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EU Trade Commissioner Karel De Gucht met with trade ministers from ASEAN to discuss strengthening trade relations between the regions at the ASEAN-EU Summit 2013. The EU has concluded a free trade deal with

Singapore, is currently negotiating one with

Despite its mineral resources potential, a survey from the Fraser Institute found that Indonesia placed last out of 96 jurisdictions surveyed, dropping 11 places from 2012. The loss in confidence was driven by

political instability and uncertainty concerning

environmental regulations, administration,

and interpretation or enforcement of existing

regulations

Indonesia fared the worst in terms of policy

potential in the industry

Given current regulations and land use restrictions

in place, Indonesia ranked 81st in terms of mineral

potential, dropping 8 spots from 2012

In the best case scenario where Indonesia adopts

industry “best practices”, the country would be

the third most attractive place to set up a mining

business

The survey found that recent policy changes

have resulted in the marginalisation of foreign

investors despite foreign capital accounting for

70% of investment in the sector

The survey was done to assess the attractiveness

of doing business in certain jurisdictions,

considering mineral potential and institutional

constraintsThe Jakarta Globe (2 March 2013)

Fraser Institute (28 February 2013)

Malaysia, and hopes to start negotiations with

other partners from the region

Meanwhile ASEAN and Germany agreed to

stronger cooperation in projects at an ASEAN-

Germany cooperation review last week

ASEAN-Germany cooperation projects

cover environment and climate change,

regional economic integration, and capacity

development

To date, Germany has contributed

approximately US$91.6 million to ASEAN

projects and activities

Philippine Information Agency (5 March 2013) New Europe (6 March 2013)

Indonesia

INDONESIA: THE WORLD’S LEAST ATTRACTIVE PLACE

TO DO BUSINESS IN THE MINING SECTOR02

DISCLAIMER: The news articles contained in this report are extracted and republished from various credible news sources. As such, CIMB ASEAN Research Institute (CARI) does not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information and opinion contained in this report. Should any information be doubtful, readers are advised to make their own independent evaluation of such information.

FROM LAOS TO BRUNEI WITH LOVE

Laos, Brunei

A Philippine clan leader’s attempt to revive the territorial claims of a defunct Islamic sultanate in Sabah appears to be falling apart. After launching airstrikes and mortar shells

in a remote part of the island of Borneo amid

failed negotiations, Malaysian security forces

combed the conflict zone in attempts to

flush out the gunmen who call themselves

the Royal Army of the Sultanate of Sulu

With his followers engaged in a deadly

game of cat and mouse with Malaysian

Malaysia, Philippines

MALAYSIA UPS ANTE ON SABAH STANDOFF04

03Laos is optimistic on more trade

with Brunei and concluding the

Code of Conduct (CoC). Laos is looking into setting up a barter

trade agreement with Brunei where both

countries exchange their locally produced

goods, particularly oil and gas (from Brunei)

and agricultural products (from Laos)

The Brunei monarch recently said the

firm friendship between Brunei and Laos

is hallmarked by practical cooperation in

education and defence

The Brunei-Laos Business Forum was held

earlier this month to encourage business

exchanges and strengthen economic ties

between the two countries through their

respective Chambers of Commerce and

Industry

Laos Vice-Minister for Foreign Affairs

Bounkeut Songsamsak said as chair of the

10-nation bloc, Brunei has a responsibility

of maintaining regional peace and stability,

TIMELINE OFSABAH STORY

Source: Compiled from various sources

and expressed confidence that Brunei can

conclude a CoC on the South China Sea

Brunei’s Second Minister of Foreign Affairs

and Trade said Brunei is keen to have

“something concrete to sign” by the main

ASEAN summit in October; a feat which

could prove a diplomatic coup for ASEAN’s

smallest member

The Brunei Times (2 March 2013)The Brunei Times (3 March 2013) The Brunei Times (3 March 2013)

security forces in the villages and palm oil

plantations of Sabah, the self-proclaimed

Sultan of Sulu called for a cease-fire after the

UN urged for an end to the violence

Malaysia promptly rejected the proposal

and instead called for an unconditional

surrender

The situation intensified following reports

that other Filipino fighters, sympathetic to

the sultanate’s cause, are joining the group

in Sabah despite efforts by Malaysia and the

Philippines to tighten sea patrols in the area

Manila asked Malaysia to ensure humane

treatment of the Filipinos while instructing

the National Bureau of Investigation (NBI)

to prepare “airtight” cases against the royal

family

Opposition leaders criticised the Najib

administration for its weak response to the

crisis and called for the convening of an

emergency Parliament sitting

The Malaysian Insider (5 March 2013)The Malaysian Insider (6 Mavrch 2013)

CNN (8 March 2013)

Industry experts call for greater

competitiveness as crude palm oil

(CPO) prices dip. CPO prices have been decreasing since

the third quarter of last year following global

economic slowdown, including lower demand

from China

Palm Oil Refiners Association of Malaysia

(Poram) CEO Mohammad Jaaffar Ahmad said

Indonesia’s move to lower export duties on

refined oils and fats in 2011 had further eroded

Malaysia’s export competitiveness in palm oil

The industry as a whole is also facing strong

competition from the world’s other 16 edible

oils and fats

While government initiatives to enhance

the competitiveness of the palm oil industry

were done – including a restructuring of the

export duty on CPO and providing replanting

The rise of Indonesia’s middle class can turn the archipelagic state into

Asia’s next big opportunity. Boston Consulting Group (BCG) said

Indonesia’s middle class may reach 141 million

people in 2020, almost double its current

amount of 74 million

The increase would be the biggest boom

anywhere in the world outside of China and

India, with more than 8 million Indonesians

entering the consumer class each year

Purchasing power is expected to rise

rapidly to IDR 2 million (US$ 206) for monthly

household needs as consumption trends shift

from essentials to products that offer facilities

and comforts, such as longer lasting household

appliances, electronics, cars and financial

services

BCG estimates that 52 cities or regions will

be home to more than 500,000 middle and

affluent middle class by 2020, up from the

current amount of 25

Eddy Tamboto, BCG Jakarta partner

and managing director, said that the rising

Indonesian middle class needs to be balanced

with a more equitable spread of enterprises in

the region

Indonesia’s middle class is also one of the world’s

most optimistic, with just over 90% of Indonesians

surveyed saying they felt financially secure – well

above those surveyed in India and the US

Nomura was even more bullish on the rise of

Indonesia’s middle class

The Jakarta Globe (6 March 2013) Wall Street Journal (5 March 2013)

Malaysia

Indonesia

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07incentives earlier this year – downstream

palm oil players have called for greater reform

measures, including a call to abolish the duty

free quota on crude palm kernel oil (CPKO)

and waive the 5% duty on refined, bleached

and deodorised palm kernel oil (RBD PKO)

Jaafar said the move would benefit

downstream oleochemical and specialty fats

manufacturers who will be able to procure

CPKO from the market at 10% cheaper pricing

With tracts of palm oil plantation land in

Sabah cordoned off in the stand-off between

Malaysian armed forces and armed insurgents,

concerns have surfaced that planters could

suffer a disruption in earnings if the month-

long siege continues

Live Trading News (28 February 2013)Business Times (4 March 2013)Business Times (5 March 2013)Business Times (6 March 2013)

SIZE OF MIDDLECLASS BY US$3,000 CRITERIA

DISCLAIMER: The news articles contained in this report are extracted and republished from various credible news sources. As such, CIMB ASEAN Research Institute (CARI) does not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information and opinion contained in this report. Should any information be doubtful, readers are advised to make their own independent evaluation of such information.

Source: CEIC

Stock

Production

Tonnes (millions)

Source: Nomura Global Economics, CEIC, World Bank

INDONESIA

BULLISH ON

MALAYSIAN INVESTMENT SOARS

BUT FDI FALLS

MALAYSIA TO GET OUT OF PALM

OIL BLUES

MIDDLE CLASS

Of Malaysia’s RM162.4 billion in investment in 2012, the split between foreign and domestic investment was 22:78, prompting concern about the sharp drop of FDI in the country, said Alliance Research Economist, Manokaran Mottain Of the 22%, Japan led at RM2.8 billion,

followed by Saudi Arabia at RM2.6 billion,

Singapore at RM2.2 billion, China at RM2 billion

and Korea at RM1.6 billion

Investment approved was in 6,442 projects,

expected to generate 365,682 jobs in the

Malaysia

06services (56.4%), manufacturing (41.9%) and

primary (1.7%) sectors

Mottain said most of the investments were in

new technologies, particularly within aerospace,

semiconductors, solar, machinery and

equipment, petroleum products and medical

devices

Many believe that Malaysia’s growth, which

Mottain expects to remain at 5% in 2013, will

continue to be driven by domestic demand as

global uncertainties from the US and EU persist

Borneo Post (4 March 2013)

PALM OIL PRODUCTIONIN MALAYSIA

integration and regional solutions for global resilience.

Irrwaddy (2 March 2013)

Parliamentarians have given support to the government’s plan to apply for membership of the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards that could help settle international business disputes arising in the country. They said joining the agreement would boost foreign investment in Myanmar. Until now, Myanmar’s courts do not recognise or enforce decisions reached through international arbitration.

Irrwaddy (6 March 2013)

The Ministry of Defence’s budget provision of more than US$2.6 billion for the fiscal year of 2013-14, or almost 21% of the national budget, was approved at Parliament on 1 March. The military received around 25% of the national budget last fiscal year.

Mizzima (4 March 2013)

DISCLAIMER: The news articles contained in this report are extracted and republished from various credible news sources. As such, CIMB ASEAN Research Institute (CARI) does not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information and opinion contained in this report. Should any information be doubtful, readers are advised to make their own independent evaluation of such information.

Editorial Team: Manissa van Geyzel, Sóley Ómarsdóttir, Radin Faizal Consultant Editor: Tunku ‘Abidin Muhriz

Thailand’s Mae Sot authorities met a Chinese delegation last week to discuss plans for the proposed special economic zone on the Thai-Myanmar border. The visit followed the government’s recent decision to develop the district into a special economic zone ahead of the ASEAN Economic Community (AEC) in 2015.

Mizzima (4 March 2013)

Trade between Malaysia and Myanmar in 2013 is forecast to top US$1 billion for the first time. This follows a 27% jump in exports to Myanmar by Malaysian firms in 2012, which totalled US$700 million. Overall trade between the two countries last year totalled US$884 million. Malaysian firms invested over US$1 billion in Myanmar in 2012.

Irrwaddy (2 March 2013)

The World Economic Forum (WEF) on East Asia will centre on Myanmar’s reforms. The main theme of the forum is “Courageous Transformation for Inclusion and Integration” and its sub-themes are inclusive transformation, regional

Myanmar’s inflation rate is 1.95%, while the country has some US$77 billion in circulation, according to official data announced by Minister of Finance in parliament on 4 March. Budget deficit for the 2012-2013 fiscal year was about US$3 billion. Total revenue was around US$14 billion but total expenditure was around US$17 billion. GDP in Myanmar is currently US$59 billion.

Mizzima (7 March 2013)

The nearly century-old Burma Companies Act will be revamped and an online system for registering companies will be installed with assistance from the Asian Development Bank, the director-general of the Investment and Companies Registration Department said. The ADB will contribute US$150,000 to the online system.

Eleven Myanmar (5 March 2013)

08 MYANMAR MONITOR

ECONOMY

POL I T I CS

Source: World Bank

CAMBODIA EXPECTED TO

BECOME LOWER-MIDDLE-INCOME

Cambodia

Cambodia expects its GDP per capita to increase to US$1,080 from US$1,000 by December 2013, moving it to the lower-middle-income bracket, according to Prime Minister Hun Sen. Cambodia is currently classed as a low-

income nation

09 THAILAND

BRACES FOR

The world bank’s lower-middle-income

bracket is between US$1,006 to US$3,975

President of the National Assembly,

Heng Samrin, pointed out that Cambodia’s

economy is projected to grow 7% while

poverty rates should decline by 1%, in 2013

Global Times (4 March 2013)

NATURAL GAS

DISRUPTION

Three Thai utilities managed to boost electricity reserves by 68% to 1,291 megawatts, easing concerns over possible electricity outages during a scheduled disruption to natural gas

supplies from Myanmar next month. The increase is attributed to private sector

efforts to lower electricity use

For example, The Siam Cement Group said

it plans to cut power consumption by 100

megawatts by rescheduling production at its

factories

If shortages do occur, Energy Minister Pongsak

Raktapongpaisal said all sectors will be able

to cut power usage more drastically, boosting

reserves by a further 45% to 1874 megawatts

Authorities have also reached an agreement

to buy 200 megawatts from Malaysia’s Tenaga

Nasional Bhd. (TNB)

Piyasvasti Amranand, a former energy

minister, said gas accounts for 45% of total

energy consumption and 70% of power

generation, and its share is expected to increase

in the transport and industrial sectors

He added that Thailand needs to diversify its

sources of fuel in power generation to avoid

the impact of higher cost of natural gas and

strengthen energy security

Bangkok Post (6 March 2013) Bangkok Post (5 March 2013)Bangkok Post (5 March 2013)

Thailand

NATION BY END OF 2013

ECONOMIC MILESTONES OF ASEAN COUNTRIES