CARI Captures Issue 117 (18 Mar 2013)

CARICAPTURES

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AIRASIA TO START A NEW AIRLINE IN INDIA

ASEAN, India

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AirAsia’s bid to launch a new airline in India, in a joint venture with local companies, was approved by India’s Foreign Investment Promotion Board (FIPB) on 6 March but is now being questioned by the Indian Civil Aviation Ministry. AirAsia announced it was planning a new

With less than two years to go, a survey found that more than half of Thai small and medium-sized enterprises (SMEs) lack sufficient understanding on the effects of the ASEAN Economic Community (AEC) and is unprepared for the challenges of market liberalisation. The survey – conducted by the University of

the Thai Chamber of Commerce’s Centre for

International Trade Studies (CITS) – found

that 56% of SMEs across 13 sectors do not

understand the benefits and challenges of

regional integration, down from 80% in 2010

This is in sharp contrast to large-sized Thai

enterprises, of which 98% of those surveyed

have an understanding of AEC principles, up

from 25% in 2010

CITS director Ath Pisalvanich said over 80%

of farming respondents know nothing about

the coming integration

The majority said they were concerned

about duty-free imports of cheaper goods

from other countries , and nearly all Thai

manufacturers agreed with the decision to

delay the launch of the AEC to the end of 2015

Bangkok Post (18 March 2013)

airline with a 49:30:21 joint venture with the

Indian multinational conglomerate Tatas and

Telstra Tradeplace of Indian investor Arun

Bhatia

The Civil Aviation Ministry sought further

clarification on the FDI policy in aviation and

whether a foreign company could invest in a

new venture

Officials said the FIPB clearance was

granted in accordance with the policy which

allowed up to a 49% FDI contribution by a

foreign carrier in an Indian airline company

The joint venture now has to approach the

aviation regulator, the Directorate General of

Civil Aviation (DGCA) for further clearances

and a scheduled air operator’s permit

The Borneo Post (13 March 2013)

Thailand, ASEAN

THAI SMES STILL NOT READY FOR AEC02

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.

PHILIPPINES PUSHES FOR MORE REFORMS

Philippines

The Norwegian Government Pension Fund Global (GPFG) pulled out of 23 Asian palm oil companies citing concerns about unsustainable palm oil production. Of these, the biggest holding had been in

Singapore-listed Wilmar worth US$ 67.29

million

The companies were quick to deny that

they are a threat to deforestation, with

Wilmar and KL Kepong saying that they

support best practices and standards to

Indonesia, Malaysia, Singapore

NORWAY DROPS ASIAN PALM OIL FIRMS IN SHOW OF

GREEN CREDENTIALS04

03Asian Development Bank (ADB) representatives said the Philippines needs to achieve more reforms in trade to better participate in the

upcoming AEC. Jayant Menon of the ADB said

dismantling non-tariff barriers within the

AEC are critical for the region to function

as one market with seamless cross-border

movements

Proposed reforms include customs

reform, infrastructure development,

reducing red tape and associated rent-

seeking behaviour

Menon said the country should also

reconsider constitutionally enforced

limits on foreign ownership if it wants to

join multilateral trade agreements like

the Trans-Pacific Partnership Agreement

(TPP)

The Aquino administration is conducting a

preliminary study on the possible operations

of a sovereign wealth fund to utilise the

country’s foreign exchange holdings which

hit a record high of US$ 84.248 billion last

year

Source: Compiled from various sources

A recent survey by the Japan External

Trade Organization (Jetro) revealed that

the Philippines surpassed Malaysia and

Singapore in terms of most profitable firms

in ASEAN

President Aquino said the economy

performed “outstandingly” by growing 6.6%

last year, besting expectations including that

of local analysts

Business Mirror (17 March 2013)Business World (18 March 2013)

GMA News (7 March 2013)

protect the environment

However, the fund more than quadrupled

its holdings in Malaysia’s Sime Darby to a

value of US$ 119 million at the end of last year

The Agriculture Ministry of Indonesia

recently said palm oil companies have

until 2014 to obtain a Sustainable Palm Oil

Certificate, or risk being sanctioned

The standard was established in 2011 to

manage deforestation and destruction of

carbon-rich peat lands

JP Morgan Research said the divestment

was played up by EU environmentalist

groups, describing it as a victory against

destructive practices on rainforests

However, Nils Hermann Ranum of The

Rainforest Foundation said Norway should

do more to pull out of other sectors that

cause deforestation, such as logging

companies, oil and gas firms, soya and meat

producers

The Jakarta Globe (11 March 2013)The Star (11 Mavrch 2013)

Redd Monitor (13 March 2013)

Source: Rainforest Foundation Norway

LIST OF MAJOR COMPANIES COMPLETELY DIVESTED FROM GPFG

The Fitch Rating agency restored

Thailand’s credit rating, bringing

the rating back in line with other

rating agencies after being lowered

four years ago due to political

turmoil. Fitch recently upgraded Thailand’s long-

term foreign-currency issuer default ratings

to BBB+ from BBB, Short-Term foreign-

currency issuer default ratings to F2 from F3

and Country Ceiling to A- from BBB+

The improved credit rating signals

confidence in Prime Minister Yingluck

The Energy Market Authority (EMA) will lower the contestability threshold for non-residential consumers from the current 10,000 kWh to 8,000 kWh in April 2014, and then to 4,000 kWh

in October 2013. The lower threshold will allow more

non-residential consumers to be eligible

for retail contestability where electricity

is purchased at market rates from a

licensed retailer of their choice

Non-residential consumers will also

be allowed to combine demand across

multiple electricity accounts at different

locations in Singapore, making it easier

for them to meet the threshold

The government argues that such a

move will better help companies manage

their energy costs and is expected to

benefit 20,000 consumers with 70,000

accounts

As for households, Second Minister for

Trade and Industry S. Iswaran said the

goal is to offer them contestable status

too and several studies are being done to

identify the technologies needed for the

change

He said Singapore is on track to meeting

its unconditional pledge of reducing

greenhouse gas emissions by 7 to 11%

below 2020 levels

Why it matters: The Singapore electricity

model represents a unique departure from

the neoclassical argument of the need to

have a monopoly in the energy sector, a

model that other ASEAN states should at

least consider

Strait Times (18 March 2013) Business Times (18 March 2013)

Channel News Asia (18 March 2013)

Thailand

Singapore

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07Shinawatra’s government and its ability to

maintain social stability

Fitch said the country had been resilient

to repeated shocks, with average growth of

2.9% during the period 2008-2012, higher

than the 2.5% average growth for A-rated

economies

Fitch also upgraded the long-term foreign-

currency issuer default ratings of three

Thai banks, Export-Import Bank of Thailand

(EXIM), Standard Chartered Bank (Thai) and

United Overseas Bank

Reuters (11 March 2012)Bloomberg (11 March 2012)

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: Standard and Poors, Fitch

S&P foreign currency rating

Fitch long term currency rating (IDR)

SINGAPORE

FURTHER

LACK OF INFRASTRUCTURE

LIMITS GROWTH IN INDONESIA

FITCH UPGRADES THAILAND’S

CREDIT RATING

LIBERALISING

RETAIL ELECTRICITY

MARKETIndonesia’s economy has been growing by more than 6% for the last three years with domestic consumption accounting for more than half of the US$850 billion GDP, but lack of infrastructure is limiting growth in many sectors such as aviation. Lack of infrastructure remains a major

obstacle to Indonesia’s aviation sector as

airports are too small to accommodate

demand and several airports are operating at

around 200-300% beyond capacity

Growth in the aviation sector is nearly

doubles that of the national average,

according to national flag carrier Garuda,

causing increased flight delays and waiting

times

Garuda expects its flight traffic to increase

Indonesia

06from the current 400 flights a day to 1200

flights a day in 2015, but the airline needs

adequate infrastructure to ensure smooth

services

Indonesia’s president outlined in 2011 an

economic development master plan that

calls for US$413 billion in infrastructure

investments in roads, ports, bridges, airports,

and manufacturing centres

Infrastructure improvements are believed

to spark an increase in the demand for

medium and heavy duty trucks and would

allow vehicles with larger load capacities

to provide more efficient modes of

transportation for businesses

The Jakarta Globe (11 March 2013)The Jakarta Post (11 March 2013)

SOVEREIGN RATINGS

US$255 million, despite decreasing export of jade. Last year, the Chinese government raised the tax to 34% from 3.3% on Myanmar jade, leading to a decrease in demand. Myanmar rice and rice related exports were the largest in 46 years. The country exported 1.3 million tons of rice, of which 80% were destined for China.

Eleven Myanmar (12 March 2012)Eleven Myanmar (10 March 2012)

Beijing has appointed its first Special Envoy for Asian Affairs, and his top priority will be Myanmar, the Chinese Foreign Ministry announced on 11 March. Chinese experts said that the Ministry established Myanmar as the envoy’s priority because of recent issues such as the Kachin conflict.

Mizzima (12 March 2012)

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

Solidarity and Development Party (USDP), to its current vice chairman and Lower House Speaker Shwe Mann, because the constitution states that the president shall not take part in party activities. “Since the chairman has to engage in party activities, the president will give up the chair at an appropriate time,” a member of the central committee of USDP said.

The Myanmar Times (11 March 2012)

Myanmar’s Central Bank has decided to remove restrictions on bank withdrawals for foreigners, who were previously limited to two withdrawals per week for a maximum of US$10,000. Banks only accept deposits in foreign currencies and foreigners still can’t open savings accounts.

The Irrawaddy (13 March 2013)

Trade volume of this fiscal year was US$17 billion, which is an increase by

Aung San Suu Kyi was re-elected as Myanmar opposition leader in Yangon on 10 March at the party’s first congress, as the party eyes victory in general elections due in 2015. The usually popular opposition leader was met with public anger when she told villagers living near the Latpadaung copper mine that they would need to resettle due to the mine. Suu Kyi led a report on the issue, which was released on 12 March. The report supported honouring the contract with the Chinese mining company and only mildly criticised the police’s use of force during a violent crackdown of protests in November last year.

Bangkok Post (10 March 2012)The Washington Post (13 March 2012)

President Thein Sein has to hand over chairmanship of the Union

08 MYANMAR MONITOR

FORE IGN AFFA IRSECONOMY

POL I T I CS

MALAYSIA TO REAP SIGNIFICANT

BENEFITS FROM TPP

Malaysia

US Ambassador to Malaysia, Paul Jones, said Malaysia will reap among the highest economic benefits in light of a successful Trans-Pacific Partnership (TPP) agreement. Jones said Malaysia’s export gains will

exceed US$ 31 billion annually

Aside from providing relief duties on a

range of Malaysian exports, the TPP will

provide Malaysia with preferential access to

US government procurement market worth

US$50 billion annually

Research from the Peterson Institute for

International Economics found that the

TPP will open a pathway towards broader

economic integration between regional

09 WHERE THE

HECK IS ASEAN?

countries

Jones cautioned that significant policy

shifts are needed to commit to the TPP’s

high standards but remained optimistic that

Malaysia is in the right direction

A statement on the recent negotiations in

Singapore noted “solid progress” to bridge

gaps in a number of areas, particularly in

regulatory issues, telecommunications,

customs and development

Negotiator J. Jayasiri said Malaysia is

concerned about market access and wants

“sufficient flexibilities to accommodate the

kind of difficulties that we face” — especially

for textiles and intellectual property

Business Times (18 March 2013) Bernama (13 March 2013)

Filipinos want ASEAN to intervene in the Sabah crisis which to date has claimed the lives of at least 62 people, including Filipinos, locals and

Malaysian police. As more Filipinos leave Sabah to escape

the violence, many have asked ASEAN to

encourage all parties to avoid further bloodshed,

assist displaced Filipino families, and ensure all

state-enforced measures in Sabah conform to

international human rights standards

However, sceptics opined that it may be wise

to temper expectations about ASEAN’s ability

to intervene in the process, citing ASEAN’s

silence to human rights violations committed

against Rohingya muslims in Myanmar and the

2011 conflict between Thai and Khmer soldiers

along the Thai-Cambodian border

Some observers are instead calling for

intervention by international institutions like

the UN seeing how some of the region’s

border disputes were largely resolved by the

International Court of Justice

Why it matters: ASEAN’s lack of response to

the Sabah crisis – not only has there been no

statement from the ASEAN secretariat on the

matter, there has not been a word on it in its

official website – has inevitably created doubt

on its effectiveness as an institution that aims

to promote regional peace and stability. More

importantly, the crisis has called into question

the “ASEAN Way” of non-interference in the

internal affairs of member states and lowest-

common-denominator decision making

The Malaysian Insider (18 March 2013)

ASEAN