CARI Captures 404



US-China trade war takes its toll on trade in ASEAN’s largest economies
(15 May 2019) Indonesia posted its widest monthly trade deficit in history in April at US$2.5 billion as exports saw a year-on-year decrease of 13.1% — far higher than the projected 7.15% drop, according to the latest figures published by the Indonesian statistics bureau. Furthermore, the month’s imports also failed to meet projections as it only saw a 6.58% year-on-year decrease, as opposed to the projected 12.1% drop. In commenting on the matter, Indonesian statistics bureau chief Suhariyanto said that the economy faced “extraordinary” challenges this year due to the weakening global economy and increased uncertainty caused by the prolonged US-China trade war, while finance minister Sri Mulyani Indrawati said that the country “cannot rely on export as an engine of growth” due to the trade war. Meanwhile, Thailand’s exports reached a four-year low due to both the trade war and the impending EU-Vietnam Free Trade Agreement (EVFTA) that comes into effect on June 1. According to the Thai Commerce Ministry, the country stands to lose between US$5.6 billion to US$6.7 billion in exports this year, equivalent to between 2.2% to 2.6% of last year’s exports. These announcements come on the back of the US announcement on May 10 that it would double duties on US$200 billion worth of Chinese goods, which China responded to by announcing on May 13 that it would raise tariffs on US$60 billion of US exports effective June 1.


Bilateral trade sees 16.5% increase in Q1 2019
(14 May 2019) Trade between Cambodia and Japan saw a 16.5% increase in the first quarter of 2019 as compared to the same period last year, reaching US$558 million, according to the Japan External Trade Organization (JETRO), Of the sum, Cambodian exports to Japan saw a 16% increase reaching US$454 million, while Japanese exports to Cambodia saw a 20% increase totalling US$104 million. The upward trend follows the 27.3% increase in bilateral trade between the countries in 2018, during which Cambodia exported US$1.6 billion worth of goods to Japan. A Cambodian commerce ministry spokesman noted that they have also seen more Japanese investments in light manufacturing and industries that require skilled labour. Meanwhile, Malaysia is reportedly in talks to send blue-collar workers to Japan under a new visa programme launched in April aimed at bringing in more skilled manpower as Japan faces a growing ageing population and dwindling birth rates. Malaysian Prime Minister Mahathir Mohamad will visit Japan later this month to discuss the matter. Separately, the Philippines’ President Rodrigo Duterte’s spokesperson confirmed that Duterte will visit Japan from May 29 to 31 where he is “hoping” to ink agreements with the Japanese government.


Germany will not ban palm oil from Malaysia
(14 May 2019) German ambassador to Malaysia Nikolaus Graf Lambsdorff said in an interview that Germany will not ban palm oil from countries such as Malaysia, as the commodity is cheap, environmentally-friendly and sustainable. However, he urged Malaysia to reduce its dependency on palm oil and consider halting its use in the coming years in line with other European countries. Lambsdorff’s remarks follows Malaysian state news agency Bernama’s report quoting French ambassador to Malaysia Frederic Laplanche saying that the EU and France were not the enemies of palm oil, and that there was, in fact, no ban on palm oil imports, and that the bloc was merely phasing out existing incentives for palm oil to be added into the diesel mix. Meanwhile, Malaysian primary industries minister Teresa Kok, who is on a palm oil promotion tour in Europe, told European media that unless the palm oil issue is settled, there will be no strategic partnership between the EU and ASEAN.


Amnesty for Reuters reporters may not be enough to resolve trade tensions with EU
(12 May 2019) Myanmar’s foreign business community welcomed President U Win Myint pardoning of Reuters journalists Wa Lone and Kyaw Soe Oo on May 7, but expressed doubts that the partial amnesty was enough to convince the EU to roll back its threat to lift Myanmar’s Generalised Scheme of Preferences (GSP) tariff privileges, also known as the Everything But Arms (EBA) scheme. According to members of Myanmar’s foreign business community, the amnesty “removes one high profile issue” which will “certainly send better signals” to international investors, but “the elephant in the room of northern Rakhine still remains”, as well as other concerns over labour rights and freedom of expression. An EU spokesperson quoted by the media responded to the reporters’ release by saying that it was a welcome development but declined to comment on whether it would affect the EU’s pending decision to lift trade privileges.


Singapore surpasses China as Myanmar’s biggest investor
(13 May 2019) Singapore has surpassed China as Myanmar’s largest investor since the start of 2019, according to Myanmar’s Ministry of Investment and Foreign Economic Relations permanent secretary U Aung Naing Oo. However, he noted that some of these investors may not be Singaporean per se but were multinational companies based in Singapore. The secretary also noted that the country has seen an increase in investments from the UK, despite the UK’s ongoing criticisms of Myanmar’s human rights issues. Furthermore, the Myanmar Investment Commission has so far approved a total of US$2.5 billion worth of foreign investments in the 2018-2019 fiscal year which started in October 2018 and ended in April 2019. Nevertheless, U Aung Naing Oo admitted that the foreign investments in the country have slumped in the last four years as investors opt to invest in countries such as neighbouring Thailand, Vietnam and Cambodia where the investment climate and regulations were considered more stable.


Cambodia, Nepal sign agreements to boost bilateral trade and investment
(14 May 2019) Nepali Prime Minister Khadga Prasad Sharma Oli’s three-day official visit to Cambodia concluded with the signing of two agreements with Cambodian Prime Minister Hun Sen to boost cooperation between the countries. The first document signed was a framework agreement on trade and investment, while the second was a memorandum of understanding (MoU) on bilateral cooperation between Cambodia and Nepal’s national chambers of commerce. According to the Cambodian Chamber of Commerce, Nepali investors were particularly interested in the country’s agriculture and tourism industry. Current trade and investment between the countries are relatively small — bilateral trade amounted to only US$210,000 in 2017, even less than the US$250,000 recorded in 2016. The countries mostly traded garments, wood, agricultural products, fabric and machines.


Vietnam, Nepal look to improve trade and investment ties
(12 May 2019) Nepali Prime Minister Khadga Prasad Sharma Oli kicked off his two-country Southeast Asian tour on May 8 with a five-day official visit to Vietnam, where several agreements were signed to develop cooperation mechanisms between the countries. According to a joint statement released after Oli’s talks with Vietnamese Prime Minister Nguyen Xuan Phuc, the documents signed include an MoU on the establishment of bilateral consultation mechanisms between both foreign affairs ministries, negotiating a framework agreement on trade and investment cooperation, and an agreement on visa exemption for diplomatic and official passport holders. Furthermore, both leaders agreed to explore the establishment of a direct air route between the countries and explore new areas of cooperation such as in the areas of energy, renewable energy, high-tech agriculture and tourism. The Vietnamese premier also pledged to support Visit Nepal Year 2020 as well as Nepal’s efforts to graduate from least developed country status as soon as possible.


The Philippines to launch US$70.6 million project to boost export commodities
(11 May 2019) The Philippines’ trade secretary Ramon M. Lopez recently announced that his ministry will soon launch a new programme that aims to accelerate the development of agro enterprises and help them meet global market demands. According to Lopez, the new Rural Agro-Enterprise Partnership for Inclusive Development and Growth (RAPID Growth) project will be led by the Department of Trade and Industry (DTI) and funded by the United Nations’ International Fund for Agriculture Development (IFAD). The project will focus on boosting four primary agricultural value chains — cocoa, coffee, processed fruits and nuts, and coconut — which were selected based on their “lucrative markets, social features and potential to provide sustained economic benefits to small farmers and enterprises.” The project will be implemented in six regions and target unemployed and underemployed rural women and men, with a special focus on women, youth and indigenous people.


New association mulled to help Brunei, Malaysia businesses
(14 May 2019) Malaysia and Brunei are exploring the possibility of establishing a “friendship association” to boost cooperation between businesses in both countries, said Brunei’s high commissioner to Malaysia Data Hj Alaihuddin during a recent Malaysia Healthcare Travel Council (MHTC) event in Kuala Lumpur. According to Alaihuddin, the association’s primary purpose would be to facilitate engagements between businesses, as well as to provide a space for public-private partnerships to blossom. He added that the underlying goal was also to encourage collaboration instead of competition between the countries, and hopes the association will eventually serve as a platform for businesses to “help each other succeed” both within and beyond the region.


Lazada extends e-commerce edge in Southeast Asia despite lull in overall visits
(13 May 2019) Alibaba-backed e-commerce platform Lazada extended its reign as the most popular e-commerce site in Southeast Asia despite a drop in visits to the site in the first quarter of 2019, according to a report by analytics firm App Annie. According to the report, Lazada maintained the highest average monthly active users in Malaysia, Thailand, Singapore and the Philippines during this period, but fell behind Tokopedia and Shopee in Vietnam and Indonesia. Furthermore, the report found that Tencent-backed Shopee saw a 5% increase in visitors in the first three months of 2019, making it the only e-commerce platform in the region to post an increase in quarterly visitors. The report also noted that the region’s homegrown e-commerce giants continue to face competition from native Chinese and American platforms such as Amazon, eBay, AliExpress, and Taobao.

Mekong Monitor

Photo credit: VNA





Vietnam and Myanmar strive to reach US$1 billion in trade turnover
(12 May 2019) Myanmar President Win Myint’s visit to Hanoi on May 11 concluded with leaders from both countries agreeing to aim for US$1 billion in bilateral trade turnover in the near future, up from the US$860 million turnover reached in 2018. To reach the target, Vietnamese Prime Minister Nguyen Xuan Phuc suggested increased cooperation in the agricultural and seafood industry, as well as in the development of land and maritime transport infrastructure. On the same day, Win Myint also met with Vietnamese parliamentary chair Nguyen Thi Kim Ngan, who expressed her country’s hope for continued support from Myanmar as Vietnam assumes the role of ASEAN Chair and President of the ASEAN Inter-Parliamentary Assembly (AIPA) in 2020.
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EXIM Thailand plans to finance more investments into Myanmar
(10 May 2019) The Export-Import (EXIM) Bank of Thailand will soon offer more loans to Thai companies venturing into Myanmar as part of its plan to capitalise on what the bank sees as Myanmar’s inevitable economic boom, said EXIM Bank president Pisit Serewiwattana. According to him, the bank has loaned almost US$650 million for projects in Myanmar over the past two decades, primarily for infrastructure projects such as power plants, airports, roads and transmission lines. Moving forward, the bank intends to provide more loans to businesses engaged in bilateral trade, especially those that plan to use “a wide range of Thai products in their commercial operations in Myanmar.” He added that the opening of a representative office in Yangon in 2017 has so far led to business volumes increasing by over 30%.
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Thailand invests US$3 billion in bid to become Mekong subregion transportation hub
(13 May 2019) Thai transport minister Arkhom Termpittayapaisith revealed to reporters on May 10 the government’s plan to position Thailand as a major transportation hub for the Greater Mekong Subregion (GMS). To that end, the Thai government has invested over US$3 billion to develop infrastructure in border provinces in order to create economic corridors that will allow the country to be a major transit country in the GMS. This includes investments in a US$2.6 billion double-track railway at the Chiang Khong border checkpoint in the northern Chiang Rai province and a US$43 million goods transport hub. Furthermore, the Thai government is building a bridge on its eastern border with Cambodia, a US$31 million bridge in the Nong Khai province bordering Laos, and a US$34 million bridge to link Mae Sot with Yangon in Myanmar.
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Myanmar to get new international port container terminal in Yangon
(9 May 2019) The Myanmar Investment Commission (MIC) has approved the development of the new Ahlone International Port Terminal 2 (AIPT) in the Ahlone township on the Yangon River. The terminal will be developed by Adani Myanmar, which will also operate and maintain the 54-acre project and 630-metre jetty for the initial concession period of 50 years. The project will likely be developed in two phases, with a total cost of US$290 million. According to the Myanmar Port Authority, Yangon already has 12 port terminals, but the decision to build another terminal was made since port traffic has increased by almost 13% in the past four years, and the government expects this number to grow in the coming years. Myanmar’s overseas trade reached US$19.9 billion for the 2018-2019 fiscal year, an increase of US$700 million over the same period last year.
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Rubber exports from Myanmar expected to rise on the back of improved production
(13 May 2019) Myanmar will likely export approximately 300,000 tonnes of rubber this year as output by local plantations continue to rise, according to the Myanmar Rubber Planters and Producers Association (MRPPA). The MRPPA’s forecast is slightly higher than the government’s, which stands at 260,000 tonnes. The association’s projections were made based on the rise in rubber exports in recent years and the local industry’s hope for Myanmar to become a major rubber exporter in time to come. The MRPPA said the country exported 140,000 tonnes of rubber in 2017, up 56% from 2016. Only 8% of locally-produced rubber is used for domestic consumption, and of the 92% exported, 70% is sold to China. According to the Myanmar Times, Thailand is presently the world’s leading rubber producer with an annual yield of 4.6 million tonnes, followed by Indonesia with 2.4 million tonnes, and Malaysia with 2.2 million tonnes.
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About Greater Mekong Subregion (GMS)

The Greater Mekong Subregion (GMS) Economic Programme was launched by the Asian Development Bank in 1992 connecting five developing ASEAN countries, namely Cambodia, Laos, Myanmar, Vietnam and Thailand, and Chinese provinces of Yunnan and Guangxi Zhuang Autonomous region. The region has some of the most robust economies sharing the Mekong River Basin thanks to its reform and liberalisation. The subregion is growing at a faster pace than the whole of East Asia and the Asia Pacific as the GDP growth rate for 2017 was at 6.4 percent, according to the World Bank. The population at the subregion as of 2016 is at 340 million while the GDP at PPP is at US$3.1 trillion in 2016. In 2015, trading within the region was at US$444 billion.

China-ASEAN Monitor

Photo credit: Getty Images


Economy, Investment and Trade


FTA between Hong Kong and three ASEAN countries to take effect in June
(9 May 2019) The Hong Kong Special Administrative Region (SAR) government announced on May 9 that the ASEAN-Hong Kong free trade agreement (FTA) will come into force in June, starting with three ASEAN countries. More specifically, the FTA will come into force on June 11 for Myanmar, Singapore and Thailand. Under the agreement, Singapore will eliminate all tariffs, while Myanmar and Thailand will gradually reduce and eliminate tariffs on Hong Kong exports. This includes tariff reductions and eliminations on Hong Kong goods such as jewellery, apparel, clothing accessories, watches, clocks and toys. Furthermore, Hong Kong service providers will enjoy better market access in a range of service sectors. According to the SAR spokesperson, the FTA’s effective dates for the other seven ASEAN countries will be announced later because these countries are still in the process of ratifying the agreement.
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China, Singapore renew currency swap agreement
(13 May 2019) The Monetary Authority of Singapore (MAS) and People’s Bank of China (PBC) announced on May 13 that the two countries have renewed their US$59.8 billion Bilateral Currency Swap Agreement (BCSA) for a three-year period. According to MAS, the agreement will help stabilise financial markets while giving both central banks access to foreign currency liquidity for trade and investment financing needs, including projects under China’s Belt and Road Initiative (BRI). Separately, MAS also announced that it has inked a cooperation agreement with the China-based Asia Pacific Future Financial Research Institute (AFF) to boost research cooperation and information sharing related to fintech between the countries.
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Cambodia exports first cargo of bananas to China
(9 May 2019) Cambodia announced that it has made its first direct export of bananas to China as part of the countries’ plans for greater bilateral trade under the Belt and Road Initiative (BRI). The five-container shipment of 100 tonnes of bananas was exported from Sihanoukville Autonomous Port to Shanghai, making it the fourth agricultural produce from Cambodia to be exported to China. Speaking at a ceremony marking the inaugural shipment, Cambodian agriculture minister Veng Sakhon said that the country will be exporting around 130,000 tonnes of yellow bananas to China in 2019. According to Cambodia’s General Directorate of Agriculture head Ngin Chhay, the shipment follows the signing of agreements in August last year, after which Chinese customs finally approved exports from five Cambodian banana plantations and their packing factories.
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Vietnamese firms advised to study Chinese trade regulations
(8 May 2019) Vietnamese firms doing business with Chinese firms should study China’s trade regulations and ensure that all transactions made are done through written contracts as per international trade practice, said the Vietnamese commercial counsellor in China Dao Viet Anh during a conference on Vietnam-China trade. Anh also urged local companies to enhance the quality and packaging of their products, develop their brand, gain a better understanding of local preferences, and increase promotion activities in order to establish themselves in the Chinese market. According to the Vietnamese trade office in China, Vietnamese farm and seafood exports face strong competition from other ASEAN countries, and that it was evident that exporters lacked an understanding of the Chinese market. Vietnam’s exports to China grew by 27% in 2018, reaching US$63.9 billion.
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Indonesian firms cautioned over dealings with Chinese investors
(11 May 2019) Indonesian state-owned enterprises (SOEs) need to practice caution when bringing in Chinese investments because “good corporate governance is not a well-known concept among them,” said the Indonesian Corruption Eradication Commission deputy head Laode M. Syarif. He added that this was because Chinese investments are not as well regulated as those from Western Europe and the US. As such, he urged local SOEs to ensure that their Chinese investors follow local regulations and anti-bribery measures, especially since Indonesia’s Supreme Court now has laws in place to prosecute not only the individuals but also the corporations involved.
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Weaker than expected improvement in Indonesia’s 1Q19 current account deficit


1Q19 balance of payments

  • The 1Q19 current account deficit (CAD) improved to US$7.0bn/2.6% of GDP, the smallest since 2Q18, though it fell short of our expectation.
  • We raise our CAD forecast to US$29.6bn/2.7% of GDP for 2019, taking into account weaker trade activity and lower average tourist spending.
  • We expect Bank Indonesia (BI) to remain cautious regarding a reversal in policy rate, unless 2Q19 CAD remains under control.

A weaker-than-expected improvement in 1Q19 CAD
At US$7.0bn/2.6% of GDP, the 1Q19 current account deficit (CAD) missed our and market expectations while still reflecting a significant improvement from US$9.2bn/3.6% of GDP in 4Q18. Nonetheless, the CAD was sufficiently financed by net inflows of US$10.1bn/3.8% of GDP in the financial account (FA), keeping the balance of payment in surplus (US$2.4bn/0.9% of GDP in 1Q19 vs. US$5.4bn/2.1% of GDP in 4Q18).

CA: Goods account rebounded on improvements in trade balance
A smaller travel surplus, due to lower average spending per tourist arrival, and lower income receipts on direct investment abroad threw our forecasts off. As expected, steeper declines in imports relative to exports resulted in the goods account rebounding to a surplus of US$1.1bn (US$2.6bn deficit in 4Q18) as well as a smaller deficit in freight services. Downside risks on CAD remain on the table amid rising external uncertainty due to the overhang of recent wedge in US-China trade negotiations as well as lower commodity prices, such as coal and palm oil.

FA: net inflows in direct investments and portfolio investments
Higher net direct investment inflows (+US$5.2bn in 1Q19 vs. +US$2.0bn in 4Q18) were sufficient to finance 74% of the CAD (vs. 22% in 4Q18), resulting in a smaller negative basic balance (-0.7% of GDP vs. -2.8% of GDP in 4Q18). The net direct investment inflows were supported by M&A activity in the banking sector while realised foreign investments (excluding banking and O&G) in US$ terms continued to decline, although we expect FDI to pick up in the coming quarters following Jokowi’s re-election for a second term, based on unofficial results. Net foreign portfolio inflows nearly halved (+US$5.4bn vs. +US$10.5bn in 4Q18) on the maturity of a global government bond in March 2019.

2019F CAD forecast raised to US$29.6bn/2.7% of GDP
We revise our 2019 CAD upwards to US$29.6bn/2.7% of GDP (vs. US$27.3bn/2.5% of GDP previously) to take into account weaker trade activity and lower average tourist spending. Given that the improvement in 1Q19 CAD fell short of Bank Indonesia’s (BI) 2.5% of GDP target, we expect BI to remain cautious regarding a reversal in its monetary policy rate, unless 2Q19 CAD remains under control. Historically, the CAD tends to be higher in 2Q due to seasonal factors, which coincides with dividend payment schedules.


The current account deficit improved by US$2.3bn qoq to US$7.0bn/2.6% of GDP in 1Q19, the smallest deficit since 2Q18. Due to steeper declines in imports relative to exports in both O&G and non-O&G segments, the goods account balance returned to a surplus of US$1.1bn in 1Q19 after recording a deficit for two quarters. Weaker imports resulted in a smaller deficit in freight services but were outweighed by a smaller travel surplus and a higher deficit in other business services. The deficit in the services account rose slightly to US$1.8bn. The primary income deficit was higher at US$8.1bn due to seasonal interest payment on government debt as well as smaller income receipts on direct investment abroad as a result of narrower returns on overseas property investment.


The US$10.1bn surplus in the financial account was supported by net inflows in direct investments and portfolio investments. Net direct investment inflows increased to US$5.2bn, driven by the acquisition of a local bank by a Japanese investor. Following more conducive global financial conditions, net foreign portfolio purchases of Indonesian equities and Rp-denominated government bonds were higher in 1Q19. However, net portfolio investment inflows were smaller at US$5.4bn as a result of government payments on global bonds that were due in Mar 2019 and lower issuances of global bonds by corporates in Indonesia. Other investments posted a net outflow of US$0.6bn on higher placement of private deposits at overseas banks and private lending to non-residents.



Originally published by CIMB Research and Economics on 13 May 2019.

Malaysia March 2019 industrial production growth exceeds expectations


March 2019 industrial production

  • PI growth rebounded to 3.1% yoy in March as the drag on mining diminished.
  • Seasonal demand and illicit tobacco crackdown helped offset weakness in the construction and electrical & electronics (E&E) segments.
  • A setback in construction activity likely nudged GDP growth lower to +4.4% yoy in 1Q19F, reinforcing BNM’s decision to ease monetary policy on 7 May.

Uptick in March industrial activity emulates trade outperformance
The 3.1% yoy growth in industrial production index (IPI) in March (+1.7% yoy in February) exceeded our and market expectations, due to stronger manufacturing production (+4.1% yoy in March vs. +3.7% yoy in February) and milder mining contraction (-0.2% yoy vs. -5.0% yoy in February). Electricity output growth was steady (+4.8% yoy vs. +4.9% yoy in February). The seasonally-adjusted IPI growth rose 1.2% mom in March (-2.0% mom in February), outperforming the historical March average of -0.5% mom in 2014-2018.

O&G output growth fuelled by export demand
O&G production mirrored the sector’s strong export performance, particularly in natural gas (+1.4% yoy in March vs. -5.6% yoy in February) and refined petroleum products (+4.3% yoy vs. +0.2% yoy in February), making up for the weakness in crude petroleum output (-2.0% yoy vs. -4.3% yoy in February). However, we are monitoring potential disruptions ahead, stemming from maintenance work at the Gumusut-Kakap oilfield in July, as well as repercussions from an investigation into a fire in the Pengerang Integrated Complex (PIC).

Mixed bag for manufacturing sector
Manufacturing activity was boosted by seasonal demand post-Chinese New Year and ahead of Ramadan, lifting output of food (+7.0% yoy vs. +6.6% yoy in February) and textiles, apparels, leather products & footwear (+4.9% yoy vs. +3.6% yoy in February). Tobacco output surged 10.9% yoy (+6.8% yoy in February) from favourable base effects and more stringent enforcement on the illicit cigarettes trade. However metallic and non-metallic building materials growth faltered to a 2-year low (+3.5% yoy in March vs. +4.6% yoy in February) due to subdued construction activity. E&E output rose at the weakest pace since Oct 2014 (+2.7% yoy in March vs. +3.1% yoy in February), and the US’s import tariff hike on US$200bn of China goods could weigh on Malaysia’s export-oriented segments.

1Q19 GDP growth forecast at 4.4% yoy as construction disappoints
While the outturn in the manufacturing, mining and electricity sectors were broadly in line with our projections and agriculture output rebounded in 1Q19, construction activity disappointed as the value of work done stagnated (+0.7% yoy in 1Q19 vs. +4.1% yoy in 4Q18). Uncertain market conditions, reworked project scopes and delayed tenders may have contributed to the weaker growth in civil engineering works and public sector nonresidential construction. We estimate these factors, alongside the rebasing exercise to 2015 constant prices, nudged 1Q19F GDP lower to +4.4% yoy (+4.7% yoy in 4Q18), and in the face of heightened downside risks, reinforce Bank Negara Malaysia’s (BNM) decision to cut the overnight policy rate (OPR) by 25bp to 3.00% on 7 May. We retain our full-year GDP forecast at 4.7% for 2019F.

Originally published by CIMB Research and Economics on 10 May 2019.

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

ASEAN Roundtable Series: Tackling Non-Tariff Barriers in the new trade order

Published on 13 May 2019


His Excellency Dag Juhlin-Dannfelt

H.E. Ong Keng Yong

Executive Deputy Chairman, S. Rajaratnam School of International Studies

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Ambassador Ong Keng Yong is Executive Deputy Chairman of the S. Rajaratnam School of International Studies at the Nanyang Technological University in Singapore since November 2014. Concurrently, he is Ambassador-at-Large in the Singapore Ministry of Foreign Affairs and Singapore’s non-resident High Commissioner to Pakistan and non-resident Ambassador to Iran. He was High Commissioner of Singapore to Malaysia from July 2011 to October 2014. Mr Ong was Secretary-General of ASEAN (Association of Southeast Asian Nations), based in Jakarta, Indonesia from January 2003 to January 2008.

Alpana Roy

Alpana Roy

Director, ASEAN (Trade Division), Ministry of Trade and Industry, Singapore

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Ms Alpana Roy oversees the ASEAN Division in the Ministry of Trade and Industry (MTI) and is Singapore’s Senior Economic Official to ASEAN. Prior to her appointment as Director (ASEAN), Alpana was Deputy Director for ASEAN, Southeast Asia, and Counsellor (Economic) at the Embassy of Singapore in Washington D C. She has been responsible for advancing Singapore’s economic relations with the Americas, Southeast Asia, ASEAN and the Asia Pacific Economic Cooperation (APEC). Alpana has also been involved in the negotiation, implementation and review of Singapore’s Free Trade Agreement (FTAs) with the United States, Panama, Peru, Costa Rica and the TransPacific Strategic Economic Partnership (P4). In ASEAN, she oversees internal integration issues, ASEAN’s ties with external partners and was the Chief Negotiator for ASEAN’s FTAs with Hong Kong and Japan, as well as the upgrade of the ASEAN-China FTA. Alpana is also the Deputy Chief Negotiator for the Regional Comprehensive Economic Partnership Alpana’s past work experience includes heading the Emerging Markets team in Singapore’s national trade promotion agency (International Enterprise Singapore, now known as Enterprise Singapore). She also served as a Foreign Service official at the Ministry of Foreign Affairs.

Alpana was awarded the Public Administration Medal (Bronze) National Day Award in 2018.

Alpana obtained her degree in Political Science (Honours) from the National University of Singapore in 1995 and her Masters in International Public Policy from the Johns Hopkins University Paul H Nitze School of Advanced International Studies in 2013. She is married with one child.

Tan Sri Dr. Rebecca Fatima Sta Maria

Tan Sri Dr. Rebecca Fatima Sta Maria

Executive Director, APEC Secretariat

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Tan Sri Datuk Rebecca Fatima Sta Maria is the executive director of the APEC Secretariat based in Singapore, which serves as advisory body, implementation arm and custodian of institutional memory for the 21 member economies that make up the APEC forum. Dr Sta Maria was a top-level Malaysian civil servant, trade negotiator and academic.

She was the Secretary-General of the Malaysian Ministry of International Trade and Investment from 2012 to 2016, where she oversaw the formulation of Malaysia’s international trade policies and positions and often took the lead in their implementation as chief negotiator for bilateral and regional free trade agreements such as the Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership.

Dr Sta Maria played an integral role in Malaysia’s participation in multilateral forums such as APEC, where she often represented her economy during the APEC Ministers’ Responsible for Trade Meetings and the Small and Medium Enterprises Ministerial Meetings. In the Association of Southeast Asian Nations (ASEAN), Dr Sta Maria chaired the body that drafted the ASEAN Economic Community 2015 Blueprint as well as the ASEAN Economic Community 2025 Blueprint. An accomplished academic and writer, Dr Sta Maria’s scholarship has been recognized through awards from the American Academy of Human Resource Development and from the University of Georgia. In 2017, she authored a book about her personal slice of Malaysian heritage and cuisine, called The Smell of Home.

Before 2010, the position of executive director of the APEC Secretariat rotated yearly among officials assigned by the incumbent host economy. Starting in 2010, the appointment was opened to applications from highly qualified professionals who will when appointed, lead the Secretariat in fixed three-year terms with an option to renew.

Dr Sta Maria is the first woman executive director of the APEC Secretariat.

Chris Humphrey

Chris Humphrey

Executive Director, EU-ASEAN Business Council

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Chris Humphrey is the executive director of Singapore-based EU-ASEAN Business Council; a key business association that advocates for the interests of EU businesses operating in ASEAN. It is endorsed by the European Commission and recognised by the ASEAN Secretariat.

Chris began his varied professional career as a UK civil servant where, amongst other things, he was Assistant Private Secretary to a Minister and an Air Services Trade Negotiator covering the Asia Pacific region. After leaving the civil service, Chris moved to the private sector working initially in the government and external relations teams at two British airlines in the UK, before moving to Shanghai, China with Virgin Atlantic where he headed up the airline’s China operation and oversaw the rapid expansion of their business in China. Whilst in Shanghai, Chris also sat on the Executive Committee of the British Chamber of Commerce. Chris then joined a UK based security and defence group where he led their Asia Pacific team for over five years and was instrumental in them getting contracts with the Japanese and Singapore governments and also with SOEs in China.

More recently Chris has been acting as a consultant assisting start-ups in Asia with their business and corporate development before joining the EU-ASEAN Business Council in June 2014.

With over 20 years of experience of either working for or dealing with governments and regulatory authorities, Chris is available to provide key insights, lead discussions or comment on topics including ASEAN integration, European business presence in SEA, Infrastructure financing, EU-ASEAN trade relations and EU economic and political developments.

Chris is a regular on the ASEAN conference circuit regularly appearing at conferences and seminars covering ASEAN’s integration agenda and trade and investment issues. He has also appeared on the BBC’s Asia Business Report; CNBC’s Asia Street Times; Channel News Asia’s Conversation With; 938Live Radio News; and Channel News Asia news reports.

Dr. Kaewkamol Pitakdumrongkit

Dr. Kaewkamol Pitakdumrongkit

Deputy Head and Assistant Professor, Centre for Multilateralism Studies, S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University

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Dr. Kaewkamol “Karen” Pitakdumrongkit is a Deputy Head and Assistant Professor at the Centre for Multilateralism Studies, at S. Rajaratnam School of International Studies (RSIS) of Nanyang Technological University, Singapore. She completed her MA and PhD in Political Science at the University of California, Santa Barbara, U.S.A. Her research interests include international economic negotiation, Indo-Pacific governance and integration, regional-global economic governance dynamics, ASEAN Economic Community, and ASEAN’s external relations (ASEAN-Plus frameworks). She has published in various outlets such as Asia-Pacific Bulletin, Australian Journal of International Affairs, Australian Outlook, The Diplomat, East Asia Forum, Eurasia Review, Global Asia, The International Relations of the Asia-Pacific, The Pacific Review, and The Singapore Economic Review. Her media interviews include Bangkok Post, Bloomberg, Business Times, Channel News Asia, CNBC Asia-Pacific, New Straits Times, The Nation, The Strait Times, South China Morning Post, and Xinhua.

Juan Sebastian Cortes-Sanchez

Juan Sebastian Cortes-Sanchez

Trade Policy Analyst, Asian Trade Centre

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Juan Sebastian Cortes-Sanchez is working as a Trade Policy Analyst at the Asian Trade Centre. His areas of focus include the ASEAN Economic Community (AEC), Trans Pacific Partnership (TPP)—focus on Latin American members—the Regional Comprehensive Economic Partnership (RCEP), the Pacific Alliance (PA) and the development of regulatory frameworks within Next Generation Trade issues such as Cybersecurity and Data Privacy. Sebastian obtained a Honours Bachelors Degree in Philosophy, Politics and Economics from Yale-NUS College – Singapore. Prior to ATC, Sebastian had experience conducting due diligence and investigative research assignments at BlackPeak Group and supporting business development efforts at the Latin American Chamber of Commerce. He is fluent in English and Spanish.


Tan Sri Dr. Munir Majid

Tan Sri Dr. Munir Majid

Chairman, CIMB ASEAN Research Institute President, ASEAN Business Club

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Tan Sri Dr. Munir is currently Chairman of CIMB ASEAN Research Institute, of Bank Muamalat Malaysia Berhad, of the Financial Services Professional Board, of ASEAN Business Advisory Council, Malaysia, as well as President of the ASEAN Business Club. He is a member of the Economic Action Council chaired by the Prime Minister of Malaysia. He also sits on the board of the Institute of Strategic and International Studies (ISIS) Malaysia. He is an active advocate of deeper ASEAN economic integration.

He has an extensive experience and is well known in the Malaysian corporate world. He had been the Group Editor of the New Straits Times, first executive chairman of CIMB and founding chairman of the Malaysian Securities Commission. After stepping down from the Securities Commission, he became Independent Non-Executive Director of Telekom Malaysia Berhad, Chairman of Celcom (Malaysia) Berhad and Non-Executive Chairman of Malaysian Airline System Berhad. He was Founder President of the Kuala Lumpur Business Club, established in 2003 and is a member of the Court of Fellows of the Malaysian Institute of Management.

Tan Sri Dr. Munir obtained a B.Sc (Econ) and Ph.D in International Relations from the London School of Economic and Political Science (LSE) in 1971 and 1978. He is an Honorary Fellow of LSE and continues the long association with his alma mater as Visiting Senior Fellow at the Centre of International Affairs, Diplomacy and Strategy. Tan Sri Dr. Munir is an associate of Southeast Asia Centre (SEAC) at LSE.


Lack of political will and structured approach impede removal of Non-Tariff Barriers in ASEAN

CARI’s ASEAN Roundtable Series on 2 April 2019 brought together a panel of speakers who discussed their views and concerns on Non-Tariff Barriers and its impact on ASEAN trade. Titled “Future of ASEAN Trade: Tackling Non-Tariff Barriers in the New Trade Order,” the speakers concurred that Non-Tariff Barriers pose an obstacle to ASEAN growth and strong political will is needed to fully address NTBs.



The challenges to remove Non-Tariff-Barriers (NTBs) in ASEAN are both technical and political. Despite having committed to the full removal of NTBs by 2015, ASEAN missed the target and is still struggling to tackle the various trade barriers which are on the rise.

In order to provide deeper insight into this issue, the ASEAN Roundtable Series brought together a group of expert speakers, namely, Tan Sri Datuk Rebecca Fatima Sta Maria, Executive Director, APEC Secretariat; Chris Humphrey, Executive Director, EU-ASEAN Business Council; and Dr. Kaewkamol Pitakdumrongkit, Deputy Head and Assistant Professor, Centre for Multilateralism Studies, S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University of Singapore. The session was moderated by Tan Sri Dr. Munir Majid, Chairman of CIMB ASEAN Research Institute (CARI), President of the ASEAN Business Club, and a member of Malaysia’s Economic Action Council chaired by the Prime Minister. Prior to the roundtable, Alpana Roy, Director, ASEAN (Trade Division) of the Ministry of Trade and Industry, Singapore presented a policy update on ASEAN trade and Juan Sebastian Cortes-Sanchez, Asian Trade Centre (ATC) Policy Analyst presented on ATC’s research on NTBs in ASEAN.

Dr. Munir opened the session by stating the importance of effective NTB removal because ASEAN’s collective growth upside is greatly dependent on the success of the ASEAN Economic Community (AEC) implementation. He cited a 2014 study on ASEAN economic integration where it was projected that successful implementation of AEC will lead to GDP growth by 7% in 2025 based on three assumptions: i) the removal of the remaining intra-regional tariffs; ii) the cost of doing trade to go down by 20%; and iii) the phasing out of intra-regional NTBs by 50%.

Yet, ASEAN is far from fulfilling the three assumptions.



1. ASEAN is at risk of not fulfilling its potential due to NTMs/NTBs

  • Business outlooks such as the European Union-ASEAN report projects a positive outlook of the region. According to the findings of the EU-ASEAN Business Sentiment Survey 2018 as presented by Chris Humphrey, 99% of the respondents expected to either expand or maintain their levels of trade and investment in the region in the next 5 years while 51% viewed the region as having the best economic opportunity.
  • However, 73% of the respondents opined that they are at a disadvantaged position without an EU-Free Trade Agreement (FTA) and only 12% believed that ASEAN has achieved its aim of a single market and production base.
  • While the region has done a good job in reducing tariffs, NTBs remain one of the issues that hinder, rather than facilitate trade. Intra-ASEAN trade has moderated since 2008 and is lower now than it was a few years ago. Unless ASEAN acts in a faster and more proactive way with regards to its economic integration programme, including the removal of Non-Tariff Barriers, it is at risk of not being able to fulfil its potential.
  • In his opening remarks, H.E. Ambassador Ong Keng Yong, executive deputy chairman of RSIS and director of the Institute of Defence and Strategic Studies, Nanyang Technological University, conveyed similar sentiments. He said although positive assessments like the American Chamber of Commerce in Singapore’s (AmCham Singapore) ASEAN Business Outlook survey augur well for ASEAN trade (whether intra or inter-ASEAN), obstacles such as NTBs would naturally dampen growth.


2. NTBs hurt cross-border trade of MSMEs

  • An equally important consequence of NTBs is that it impacts micro, small and medium enterprises (MSMEs) more than large corporations. According to Professor Kaewkamol Pitakdumrongkit, smaller firms are less able to absorb the costs incurred by Non-Tariff Measures (NTMs) and as a result, will have to pass the cost to consumers by raising prices. This price increase could then lead to them losing market share.
  • An example of the compliance costs associated with NTMs can be seen through product standardisation requirements. To meet the standards as imposed by an NTM, a company would need to set up a testing facility to ensure it adheres to the product standards. The cost of building this testing facility may not necessarily be something MSMEs can easily afford, said Prof Kaewkamol.
  • This impact on MSMEs poses a significant challenge as MSMEs make up a majority share of companies in ASEAN. Depending on the country, MSMEs can account for more than 90% of all enterprises, employ between 52% to 95% of the labour force, and contribute between 30% to 53% of the GDP, she explained. To a less quantifiable aspect, NTMs and NTBs affect markets through inflation and limiting access to affordable quality products.


3. ASEAN NTMs increased as tariffs declined

  • While there has been a reduction in tariffs over time, the increase in the number of NTMs have been observed over the same period, said Humphrey.
  • Based on the ASEAN-ERIA-UNCTAD database, non-tariff measures in ASEAN have steadily increased from 1,634 in 2000 to 5,975 measures in 2015. Of the total, 43.1% were technical barriers to trade (TBT), 33.2% were in the form of sanitary and phytosanitary (SPS), 12.8% were export measures and the rest were in the form of various measures.

  • Humphrey brought to attention the almost 6,000 NTMs in existence in ASEAN, many of which have the potential of being barriers to trade. The number of NTMs continue to grow and to his knowledge, not a single NTB has been removed through the ASEAN process. In a related vein, he noted that it has been 10 years since the ASEAN Trade in Goods Agreement (ATIGA) was signed but not all the provisions under ATIGA have been implemented.
  • Based on the research on NTBs in ASEAN conducted by the Asian Trade Centre (ATC) in 2018, ATC Trade Policy Analyst Juan Sebastian Cortes-Sanchez provided examples of NTBs and the respective impact in selected priority sectors.


4. Differentiating NTMs from NTBs and assessing the cost of NTMs

  • Tan Sri Dr Rebecca Fatima Sta Maria said NTMs should be a concern when they are trade distorting. Therefore, it is necessary to distinguish between NTMs and NTBs.
  • Findings from the ATC study reveal that ASEAN has struggled to identify NTMs and NTBs in spite of the many attempts it has undertaken to eliminate NTBs. Attempts at establishing a common definition have been hampered by conflicting perceptions of an NTM’s justification and enforcement across the member countries.
  • One aspect of assessing the impact of NTMs would be to determine the ad-valorem equivalents of the NTMs, said Dr. Rebecca. Ad valorem equivalent (AVE) is a tariff presented as a percentage of the value of goods passed through customs; AVEs have been used by researchers to quantify the compliance costs of NTMs. Dr. Rebecca said there is a lot of work to be done in this area and policymakers should collaborate with researchers and economists to work on AVEs to enhance their understanding of NTMs.


5. What has ASEAN done?

  • In her ASEAN Policy update presentation, Alpana Roy shared that more than 90% of ASEAN countries’ tariff lines have a preference margin of zero and over 70% of intra-ASEAN trade is conducted at the zero rate. This means ASEAN rarely uses preferences because there are hardly any preferences to use. The multilateralisation of these preferences accounts for one of the reasons intra-ASEAN trade has remained at around the same level.

Source: Malaysian Ministry of International Trade and Industry, Malaysia’s Free Trade Agreements
Note: ASEAN-6 includes Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore, and Thailand. CLMV includes Cambodia, Lao, Myanmar, and Vietnam.

  • Alpana spoke about the ASEAN Trade Repository (ATR) which includes a database on NTMs. The ASEAN NTM database is being updated and undergoing re-classification based on international standards. She added that a set of NTM guidelines were recently developed under the ambit of the ASEAN Trade Facilitation Joint Consultative Committee (ATF-JCC) to better manage NTMs and reduce the trade-distorting effects of NTMs.
  • According to Alpana, since most NTMs are imposed unilaterally, initiatives to tackle NTMs or NTBs requires solving it at the national level and therefore, requires national will. Nevertheless, Alpana added that ASEAN should not confine itself to intra-ASEAN solutions only but should also engage with its dialogue partners. She cited ASEAN’s plan to conclude the Regional Comprehensive Economic Partnership (RCEP) negotiations by the end of 2019 as one among many other efforts. On the back of securing an upgrade of the ASEAN-China Free Trade Agreement (FTA) in 2015, the regional bloc is looking to upgrade its trade agreements with its other dialogue partners.
  • The ASEAN Single Window (ASW) has started its live-operation with five ASEAN member countries (Indonesia, Malaysia, Singapore, Thailand and Vietnam) in January 2018 while the remaining ASEAN member states are scheduled to join by the end of 2019. The ASEAN Self-Certification Scheme, once implemented, will allow certified exporters to make their own declarations in order to qualify for preferential tariffs, she said.


6. Recommendations for addressing NTBs

  • Past efforts by ASEAN to eliminate NTBs have not been successful due to broad reasons, including past measures that have not always addressed the right target, said Cortes-Sanchez. The findings from ATC’s research suggest addressing NTBs at the national and regional institutional level.
  • At the sectoral level, ASEAN needs to develop institutional capacity to ensure the harmonisation of standards and certification procedures and related commitments are implemented. In addition, there should be an institutional mechanism or body tasked with dealing with NTBs that are not related to technical and conformity assessment standards. At the regional institutional level, it is important for ASEAN to identify and collect information on both NTMs and NTBs. Once this has been achieved, ASEAN needs to effectively manage the identified NTMs; and reduce and eliminate the identified NTBs. To realise the measures recommended at the regional institutional level, there needs to be clear procedures and institutional frameworks for tackling the elimination of NTBs, said Cortes-Sanchez.
  • Dr Rebecca cited the ASEAN Solutions for Investments, Services and Trade (ASSIST) initiative as a good regional programme that could help reduce the barriers to trade such as NTBs. The ASSIST initiative is supported by ARISE (ASEAN Regional Integration Support by the EU) Plus. The online solution helps ASEAN-based entities with operational cross-border issues (including NTBs) associated with the implementation of the ASEAN economic agreements.


7. Political will a must to address NTBs

  • While there have been measures to address Non-Tariff Barriers through ASEAN processes, Humphrey said that this often meant that the discussions were taken offline and become bilateral discussions between ASEAN member states. As a result, there is no complete removal of NTBs.
  • In trade, winners and losers are inevitable. The losers in trade will tend to lobby their governments for the implementation of protectionist measures that includes NTBs, said Prof Kaewkamol. ASEAN members need to understand that the downside of trade on domestic constituencies should be addressed through trade adjustment assistance programmes and not regulations.
  • Non-Tariff Barriers tend to be political and as such, will take some time to address the issue, Dr Rebecca opined. She gave an example of Malaysia’s approved permits (APs) in the automotive sector as an example of a trade measure tied to politically driven policies. Once the political will is there, the sharing of information between ASEAN member states will be essential in tackling NTBs.



      Cooperation among the member states is required since NTBs need to be addressed at the regional institutional level, national level and sectoral level. ASEAN may have bright prospects but having a rosy outlook is not the same as reality. The future prospect should not overwhelm the current reality, Dr Munir said. Together with the uncertainty caused by the new trade order, NTBs could hold back ASEAN from fulfilling its potential. Therefore, it is in the interest of every ASEAN member state to work together in eliminating NTBs.

      ASEAN Roundtable Series

      ASEAN Roundtable Series

      ASEAN Roundtable Series

CARI Captures 403



Malaysia’s Axiata and Norway’s Telenor plan one of Asia’s largest cross-border mergers
(6 May 2019) Malaysia’s Axiata Group and Norway’s Telenor Group announced on May 6 that the companies were in talks to merge their South and Southeast Asian operations. According to a Reuters source, the merged entity would be worth US$40 billion, making it one of the largest cross-border mergers Asia has seen. According to Axiata Group head Jamaludin Ibrahim, the deal would combine the scale and capabilities of both companies to drive growth in the highly competitive South and Southeast Asian markets. If merged, the joint entity will have almost 300 million existing customers with operations in nine countries, including Thailand, Malaysia, Indonesia, Pakistan and Bangladesh. Telenor will own 56.5% of the entity and Axiata will own 43.5%. The proposed deal is seen as beneficial to Malaysia, not least because the merged entity would be headquartered in Kuala Lumpur, be listed on the Malaysian stock exchange and come with a proposed regional innovation centre. According to the head of Axiata’s largest shareholder, Khazanah National Shahril Ridza Ridzuan, the innovation centre would create over 100 jobs and generate US$24.1 million in investments annually. The establishment of the merged entity, MergedCo, will reportedly happen by the third quarter of 2020.


UK assures Cambodia of continued trade privileges post-Brexit
(8 May 2019) Trade between Cambodia and the UK has grown over the years as both countries enjoy ‘thriving’ trade relations, said Cambodian acting commerce minister Kem Sithan during his meeting with the UK’s air vice-marshal John Philliban on May 7. According to the acting minister, trade between the countries rose from US$500 million in 2012 to over US$1 billion in 2018. Of the sum, Cambodia exported US$500 million worth of goods to the UK in the first half of last year, and imported US$22 million worth of goods during the same period. Additionally, ministry spokesman Seang Thay said that once the UK leaves the EU, Cambodia will automatically lose its Everything But Arms (EBA) privileges that it enjoys when trading with the EU. However, he said, Cambodia will likely continue to enjoy preferential access to the UK based on World Trade Organization (WTO) regulations.


Cambodia’s exports to the EU could fall by US$654 million annually if EBA suspended
(6 May 2019) Cambodia’s exports to Europe could decline by US$654 million per year if the European Union (EU) goes ahead with lifting the country’s tariff privileges under the bloc’s Everything But Arms (EBA) scheme, according to a World Bank report. The report further projects that if the privileges are withdrawn, tariffs on garment exports would increase by 12%, footwear exports by 16% and bicycle exports by 10%. This would, it notes, come in addition to the EU’s rice tariffs on Cambodian rice which came into force in January. Meanwhile, a group of European garment producers — which includes Nike, Adidas and Levi Strauss — sent a letter to Cambodian Prime Minister Hun Sen on May 2 urging him to take heed of the EU’s concerns and work with them to protect labour rights in the country.


Leading palm oil producers take steps to boost palm oil consumption
(4 May 2019) Malaysian primary industries minister Teresa Kok is currently in the EU with representatives from key Malaysian palm oil agencies on a “palm oil economic and promotion mission” from May 3 to 13, according to a statement by her ministry. During the mission, Kok will visit key EU member states (UK, Belgium, Germany and Italy) to promote palm oil and palm-based products, address anti-palm oil sentiments, as well as engage key European palm oil stakeholders. Closer to home, the Indonesian Biodiesel Producers Association (APROBI) head M.P. Tumanggor told Reuters that the association hopes to expedite road tests for B30 biodiesel in order to increase domestic consumption of the product as soon as possible. According to APROBI, the B30 implementation could boost domestic consumption by up to 10 million kilolitres. Current regulations state that road vehicles will have to start using B30 fuel from 2020. Meanwhile, Thailand’s Energy Ministry has directed the state-owned Electricity Generating Authority of Thailand (EGAT) to purchase 200,000 tonnes of crude palm oil as part of its plan to increase domestic prices of fresh palm nuts and crude palm oil. According to energy minister Siri Jirapongphan, the first batch of 100,000 tonnes should be purchased by May 23.


Thailand aims to revive slumping exports caused by the prolonged trade war
(7 May 2019) Thailand’s Trade and Policy Strategy Office (TPSO) is currently developing plans to boost exports through different methods such as trade promotion activities, plans for market penetration by province/cities, and promotion of border activities, said TPSO head Pimchanok Vonkorpon. They also hope to finalise negotiations on the Regional Comprehensive Economic Partnership (RCEP) by the end of the year. According to Vonkorpon, the TPSO was greatly concerned by the recent drop in exports caused by the prolonged US-China trade war. Thai exports saw a 1.6% decline in the first quarter of 2019, led by a 9.2% drop in exports to China. Thai products that were directly impacted by the trade war include vehicles, computer parts, electrical appliances, tools and office supplies. However, Thai exports to the US saw a 32.2% increase during the same period, and Vonkorpon is optimistic that exports to the US will continue to grow as producers look to substitute Chinese goods.


Trade deficit expands to US$9.8 billion in Q1 as exports slump
(9 May 2019) The Philippines’ trade-in-goods deficit expanded to US$9.8 billion in the first quarter of 2019, up 21% from US$8.1 billion in the same period last year, based on the latest data published by the Philippine Statistics Authority (PSA). According to the data, the widening deficit was caused by a decline in exports and increase in imports — exports in the first quarter saw a year-on-year 3.13% decline from US$16.9 billion to US$16.36 billion, while imports in the first quarter saw a year-on-year 4.68% increase from US$25 billion to US$26.17 billion. Commenting on the matter, president of the Philippine Exporters Confederation (Philexport), Sergio R. Ortiz-Luis Jr. said he does not see things improving for the export sector this year due to the ongoing US-China trade war, as well as other global and local economic factors. Trade secretary Ramon M. Lopez concurred with Ortiz-Luis, saying that the decline in exports can be attributed to supply-driven issues influenced by the trade war.


Government-approved investments rose 46.5% in the first four months of 2019
(6 May 2019) Investment projects registered with the Philippines’ Board of Investments (BOI) saw a 46.49% jump reaching US$5.49 billion in the first four months of 2019, up from US$3.75 billion in the same period in 2018. Energy projects accounted for 64.66% of the total at US$3.55 billion, up 77.75% from US$2 billion in the first four months of 2018. According to trade undersecretary and BOI head Ceferino S. Rodolfo, the rise in green energy investment approvals was in line with the government’s commitment to developing “clean and green” infrastructure systems. He added that while green projects benefit from tax incentives, the companies had to apply for endorsements from the Department of Energy, Environment and Natural Resources before the projects were approved by the BOI. Meanwhile, investment pledges from local companies grew by almost 14% reaching US$4.2 billion, while foreign investment pledges reached US$1.28 billion.


Singapore manufacturing affected by skill shortages and labour curbs
(5 May 2019) Singapore is struggling to meet the country’s growing demands for highly skilled labour despite its ability to attract high-tech manufacturing investments, according to an AFP report. The report cited statistics from the Ministry of Manpower, which provides that one in three job openings in the country in 2018 was left unfilled for at least six months, with employers citing a “lack of candidates with the necessary specialised skills” as one of the key reasons for the slow filling of openings. Previously, the government responded to the public’s unease of the growing number of foreign workers by making it harder to hire in selected sectors and prioritising local recruitment. Furthermore, local education institutions may face an uphill challenge in adjusting their curricula to meet changing industry demands. Nevertheless, according to a Singaporean Institute of Policy Studies analyst, it would appear that, at least for now, Singaporeans have “accepted a trade-off of lower economic growth for a restrictive foreign labour policy, in favour of social considerations.”


ASEAN+3 finance officials agree to promote infrastructure finance and green bonds
(3 May 2019) The ASEAN+3 (China, Japan and South Korea) finance ministers and central bank governors shared their commitment to promote green bonds under a new initiative that they have dubbed the ASEAN Bond Market Initiatives (ABMI) Midterm Roadmap 2019-2022. According to the officials, the roadmap outlines the direction and key activities of the ABMI, aimed at advancing regional financial stability and integration. The ABMI will include the development of the ASEAN+3 Multi-Currency Bond Issuance Framework (AMBIF), as well as contributions to the capital increase proposal of the credit guarantee and investment facility. These initiatives come in addition to an earlier agreement between the officials to promote the use of local currencies in the region to lower financing costs and lessen the countries’ dependence on currencies from outside the region.


Swedish Crown Princess co-chairs bilateral business summit with Vietnamese Deputy Prime Minister
(7 May 2019) This is a “golden” era for bilateral economic, trade and investment cooperation between Sweden and Vietnam, said Vietnamese Deputy Prime Minister Pham Binh Minh during the Vietnam-Sweden Business Summit on May 7. The summit was held in conjunction with the Crown Princess of Sweden Victoria Ingrid Alice Desiree’s official visit to Vietnam on May 6 to 8 in celebration of the 50th anniversary of the countries’ bilateral ties. According to Pham, bilateral trade between Sweden and Vietnam reached US$1.5 billion in 2018. Sweden currently has 67 projects in Vietnam worth US$364 million. Crown Princess Victoria, for her part, expressed support for Vietnam’s continued commitment to the United Nations Sustainable Development Goals (SDGs) and looked forward to greater cooperation between firms in both countries.

Indonesia’s 1Q19 GDP growth of 5.1% slightly disappoints


1Q19 GDP growth

  • 1Q19 real GDP growth came in slightly below expectation at 5.1% yoy on slowing investment activity and the drag from inventory contribution.
  • We raise our 2019 GDP growth forecast by 0.1% pt to 5.2% to account for stronger domestic demand.

Weaker-than-expected expansion at 5.1% yoy
1Q19 real GDP growth of 5.1% yoy slightly disappointed compared to our and market expectations of 5.2% yoy (+5.2% yoy in 4Q18). The key reason for the deviation from our forecast was a smaller-than-expected recovery in net export contribution (+1.2% pts in 1Q19 vs. -0.6% pt in 4Q18), which was offset by falling inventory (-0.3% pt in 1Q19 vs. +1.5% pts in 4Q18). Domestic demand growth eased to 5.2% yoy (+5.4% yoy in 4Q18) as investment activity lagged behind consumption.

Snag in capital outlays…
Investment growth eased to a two-year low of 5.0% yoy in 1Q19 (+6.0% yoy in 4Q18), weighed down by high base effects in machineries, vehicles and other equipment. Firms may have taken a wait-and-see approach ahead of the election. Ongoing infrastructure projects lifted spending in building and structures (+5.5% yoy in 1Q19 vs. +5.0% yoy in 4Q18), as reflected in the construction sector (+5.9% yoy in 1Q19 vs. +5.6% yoy in 4Q18).

… offset consumption boost
Higher personal and social spending and regional transfers lifted public consumption (+5.2% yoy vs. +4.6% yoy in 4Q18). Low-income households’ purchasing power was boosted by pre-election cash handouts, leading to strong consumption of staples, such as F&B and clothing, as well as healthcare and education. Nonetheless, household consumption growth eased slightly (+5.0% yoy vs. +5.1% yoy in 4Q18) as spending on transport took a backseat (see Fig 2). Faster demand growth of non-profit institutions serving households (+16.9% yoy vs +10.8% yoy in 4Q18) was led by election campaign spending.

Stronger services and construction activity
The consumption boost lifted performance in the services sector, in particular wholesale & retail trade (+5.3% yoy vs. +4.4% yoy in 4Q18), business services (+10.4% yoy vs. +8.9% yoy in 4Q18), and information & communication (+9.0% yoy vs. +7.2% yoy in 4Q18), while compensating for weaker growth in other sectors: agriculture (+1.8% yoy in 1Q19 vs. +3.8% yoy in 4Q18) and manufacturing (+3.9% yoy vs. +4.2% yoy in 4Q18).

Policy continuity post elections to support economic expansion
Despite missing expectations, 1Q19 GDP growth was the strongest compared to the same quarter in the past four years. We expect investment growth to pick up in the upcoming quarters, supported by stronger investor confidence with Jokowi likely to be reelected. Policies promoting consumer price stability, civil servants’ salary hikes and social assistance for low-income households should support consumption growth, leading us to tweak our 2019 GDP growth forecast up from 5.1% to 5.2%.


Stronger public consumption (+5.2% yoy in 1Q19 vs. +4.6% yoy in 4Q18) reflected elevated social spending, which, among other things, included a higher quantum of cash handouts for the low-income household group, contributing to stronger household consumption in F&B, clothing, health & education. Election campaign spending boosted consumption growth of non-profit institutions serving households (+16.9% yoy in 1Q19 vs. +10.8% yoy in 4Q18).


1Q19 investment growth of 5% yoy was the lowest in two years, partly due to high base effects in machineries, vehicles and other equipment, in tandem with falling imports of capital goods. National strategic projects continued to support building & structures spending (+5.5% yoy in 1Q19 vs. +5.0% yoy in 4Q18).


Agriculture GDP growth was at a three-year low of 1.8% yoy in 1Q19 amid lower production of farm food crops. Steady growth in the mining sector was supported by continued expansion in coal mining and a smaller decline in O&G mining.
Manufacturing GDP growth eased to 3.9% yoy (+4.2% yoy in 4Q18) as activity declined in the manufacture of transport equipment as well as the downstream commodity segment, i.e. O&G, coal, rubber, wood, non-metallic quarrying.
Construction activity (+5.9% yoy vs. +5.6% yoy in 4Q18) was stronger amid a pick-up in buildings & structure investment.
The services sector was supported by wholesale & retail trade, information & communication, finance & insurance, real estate, business services and education.


Originally published by CIMB Research and Economics on 7 May 2019.

Malaysia cuts OPR rate to 3.00% against expectations


May Monetary Policy Committee – Overnight Policy Rate cut by 25bp

  • OPR cut by 25bp to 3.00% against our expectations of a hold in May.
  • Tightening domestic financial conditions and concerns over downside risks to the global economy prompted the pre-emptive monetary easing.
  • Having deployed policy buffers against downside risks to the economy, we expect BNM to stand pat on the OPR at 3.00% for the rest of 2019.

BNM cuts OPR rate by 25bp to 3.00%…
Bank Negara Malaysia’s (BNM) Monetary Policy Committee (MPC) has cut the Overnight Policy Rate (OPR) by 25bp to 3.00%, the first policy change in eight meetings, against our expectations of a hold. Forecasters were split ahead of the decision, with the Bloomberg consensus marginally skewed towards an OPR cut. The ceiling and floor rates of the OPR corridor were correspondingly reduced to 3.25% and 2.75%, respectively.

Despite acknowledging the resilience of domestic financial markets to bouts of volatility, the MPC statement pointed out BNM’s discomfort with signs of tightening in domestic financial conditions. Inflation undershot expectations again in March, keeping real interest rates at elevated levels. Commercial bank lending rates had been creeping higher (+10bp between September 2018 and March 2019) while loan growth slipped to a 10-month low of 4.9% yoy in March. The OPR cut was intended to maintain monetary accommodativeness in line with its price stability mandate, in light of the risks posed to BNM’s baseline GDP growth forecast of 4.3-4.8% in 2019 (CIMB: +4.7%).

… and “considerable downside risks” in the global economy
While BNM noted that the external environment turned out better-than-expected in 1Q19 and the squeeze in global financial conditions eased, the central bank placed emphasis on “considerable downside risks” to global growth arising from the trade spats and country-specific weakness. The negative turn of events in the US-China trade negotiations and re-escalation of tariff threats over the weekend may have also nudged policymakers in the direction of easing, as BNM had estimated that the US’s imposition of 25% tariffs on its remaining imports from China and blanket auto tariffs could shave 1% pt off Malaysia’s projected GDP growth.

One and done
Today’s interest rate cut should not be interpreted as the start of an extended cycle of policy easing. Since 2011, BNM has engaged in minor one-step tweaks in monetary policy, and this time should not be any different. We retain our year-end OPR forecast of 3.00%, implying no further policy rate changes in the second half of 2019. A developing risk to our call is the abrupt breakdown in the US-China trade talks and potential intensification of a tariff tit-for-tat.

IPI growth in 2M19 (+2.5% yoy) is tracking below 4Q18’s (+3.2% yoy). Unless mining output and factory activity accelerate sharply in March, the segment’s contribution to real GDP growth could weaken in 1Q19. Nonetheless, the downside is cushioned by a recovery in the agriculture sector, particularly palm oil production. We maintain our 2019 forecasts for IPI growth (+3.7%) and GDP growth (+4.7%).

Light emerging at the end of the tunnel
Malaysia’s manufacturing PMI rebounded from 47.2 in March to 49.4 in April after new export orders increased for the first time in five months. While exports contracted 1.5% yoy in 1Q19, we think progress on a US-China trade agreement and green shoots emerging in regional industrial indicators could presage a turnaround for manufactured goods exports in 2H19.

Originally published by CIMB Research and Economics on 7 May 2019.

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

Mekong Monitor

Photo credit: The Nation





EXIM Thailand to continue supporting Thai SME expansion to CLMV markets
(3 May 2019) Export-Import Bank of Thailand (EXIM Thailand) president Pisit Serewiwattana reiterated the state-owned institution’s commitment to supporting Thai SME (small and medium enterprises) exports to neighbouring CLMV (Cambodia, Laos, Myanmar, Vietnam) markets, even if the bank has to continue shouldering a portion of the funding costs. Serewiwattana said that the bank was willing to do so as they were “optimistic” about the CLMV subregion’s economic outlook. Furthermore, Thailand’s exports to CLMV markets are projected to rise by double digits in 2019, building on its 16.6% growth momentum in 2018. According to Serewiwattana, capital goods such as mechanical devices and parts, agricultural machines and construction materials, and consumer goods such as garments, fruits and goods were earmarked as high-potential export goods to the CLMV region.
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Thailand’s Q1 cross-border trade records 1.86% growth
(3 May 2019) Thai cross-border trade recorded an overall 1.86% increase in the first quarter of 2019, reaching US$10.76 billion, according to the country’s Department of Foreign Trade director-general Adul Chotinisakorn. Of the sum, its exports saw a 0.49% increase reaching US$6.04 billion, while its imports recorded a 3.66% increase amounting to US$4.72 billion. Furthermore, Thai border trade with Myanmar reached US$1.59 billion, US$1.51 billion with Laos, US$1.32 billion with Cambodia and US$588 million with Vietnam. Myanmar was Thailand’s second largest trading partner, behind Malaysia, which had a border trade value of US$4.39 billion. According to Chotinisakorn, the rise in border trade can be attributed to recent trade promotion activities such as the Four Border Regions Trade Expo to promote border and special economic zone trade, as well as SME business matching events in provinces along the Thai-Myanmar border.
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Cambodia launches new version of trade strategy to strengthen its competitiveness
(5 May 2019) Cambodia’s Ministry of Commerce launched the fourth Cambodia Trade Integration Strategy (CTIS) for the 2019-2023 period recently. According to commerce minister Pan Sorasak, the new strategy aims to address all major issues in the trade sector, facilitate the country’s transition into a developed economy by strengthening the country’s competitiveness, and prepare the country for growth opportunities presented by the Fourth Industrial Revolution. Furthermore, all ministries are expected to participate in the new strategy in order to boost the country’s competitiveness, diversify its markets to increase exports, and help realise the government’s rectangular growth strategy.
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Laos posts US$5.41 billion in export earnings in 2019, with Thailand as largest trading partner
(6 May 2019) Laos’ overall export revenue totalled US$5.41 billion in 2018, according to the latest statistics published by the Laotian Ministry of Industry and Trade. Of the sum, US$1.31 billion were derived from exports traded under preferential trade frameworks such as the Generalised Scheme of Preferences (GSP) and other free trade agreements. According to the ministry’s statistics, Laos’ top export destinations in the Mekong subregion were Thailand (US$425.86 million) and Vietnam (US$332.85 million). Furthermore, Thailand was also the country’s top Mekong import source with US$329.04 million worth of goods imported last year, followed by China (US$79.58 million) and Vietnam (US$76.39 million). The country’s top exports were industrial goods, agricultural products, and minerals, while its imports were mainly machinery and parts, construction materials, and garments and home utensils.
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Myanmar’s overseas trade reaches US$19.9 billion in seven months of the 2018/2019 fiscal year
(4 May 2019) Myanmar’s overseas trade amounted to US$19.9 billion in the first seven months of the 2018/2019 fiscal year, an increase of almost US$700 million from the same period in the previous fiscal year, according to the latest figures published by its Commerce Ministry. Of the sum, exports accounted for US$9.6 billion while imports exceeded US$10.3 billion, resulting in a US$700 million trade deficit. More specifically, the country’s maritime trade accounted for US$13.9 billion of total trade, with exports transported over the sea reaching US$5.3 billion and imports amounting to US$8.65 billion. Myanmar’s border trade measured at US$5.99 billion in the same period. According to the ministry, the country’s key exports were agricultural, animal, fisheries, minerals and forest products, while its key imports were capital goods, intermediate goods and consumer goods.
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About Greater Mekong Subregion (GMS)

The Greater Mekong Subregion (GMS) Economic Programme was launched by the Asian Development Bank in 1992 connecting five developing ASEAN countries, namely Cambodia, Laos, Myanmar, Vietnam and Thailand, and Chinese provinces of Yunnan and Guangxi Zhuang Autonomous region. The region has some of the most robust economies sharing the Mekong River Basin thanks to its reform and liberalisation. The subregion is growing at a faster pace than the whole of East Asia and the Asia Pacific as the GDP growth rate for 2017 was at 6.4 percent, according to the World Bank. The population at the subregion as of 2016 is at 340 million while the GDP at PPP is at US$3.1 trillion in 2016. In 2015, trading within the region was at US$444 billion.