CARI Captures 429: ASEAN sees record-high US$155 billion in FDI inflows in 2018


 

ASEAN

ASEAN sees record-high US$155 billion in FDI inflows in 2018
(4 November 2019) Foreign direct investment (FDI) inflows to the Southeast Asian economic bloc grew by 11.5% last year totalling US$155 billion, even as global FDI outflows fell by over 1%. Furthermore, four ASEAN countries — Cambodia, Indonesia, Singapore and Vietnam — also saw record high FDI inflows. According to UNCTAD investment research head Richard Bolwijn, the uptrend in ASEAN was likely due to the “investment divergence” from China. These figures were found in the ASEAN Investment Report 2019 released in conjunction with the 35th ASEAN Summit held in Bangkok, Thailand on November 2-4.

ASEAN

15 countries complete RCEP negotiations, signing expected in 2020
(4 November 2019) All participating countries sans India involved in negotiations for the Regional Comprehensive Economic Partnership (RCEP) have concluded “text-based” negotiations for all 20 chapters of the proposed pact, according to the joint statement published after the 3rd RCEP Summit held on the last day of the ASEAN Summit. Moving forward, the text will undergo legal scrubbing before a formal signing in 2020 in Vietnam. The statement added that the countries remain committed to working together to resolve the “significant outstanding issues” that India has with the pact.

ASEAN-INDIA

India keen to boost cooperation with ASEAN in areas of mutual interest
(4 November 2019) India is ready to elevate its partnership with ASEAN as part of its Act East Policy, especially through greater connectivity via land, sea, air and digital channels, Indian Prime Minister Narendra Modi said during the recent ASEAN-India Summit held on November 3. The premier also welcomed the bloc’s decision to review and improve the existing ASEAN-India Trade in Goods Agreement to further bolster trade between the parties, while his Singaporean counterpart Lee Hsien Loong urged both sides to conclude the ASEAN-India air and maritime transport agreements soon to boost economic cooperation.

ASEAN-EAEU, NEW ZEALAND

EAEU, UK, and New Zealand look to deepen trade ties with ASEAN
(3 November 2019) Representatives from the Eurasian Economic Union (EAEU), the UK and New Zealand were present at the recent ASEAN Summit held in Bangkok. The EAEU, which was represented by Russian Prime Minister Dmitry Medvedev, said that they are in talks to form more free trade agreements with ASEAN countries as they have with Vietnam and Singapore while New Zealand Prime Minister Jacinda Ardern said that the first round of talks to upgrade the ASEAN-Australia-New Zealand FTA will be held in 2020 and that the country hopes for more cooperation opportunities with ASEAN.

ASEAN

Vietnam assumes ASEAN Chairmanship for 2020
(5 November 2019) Vietnam officially assumed the ASEAN Chairmanship for 2020 on November 4 under the theme “Cohesive and Responsive,” its second time since it first became ASEAN chair in 2010. According to local media, the country has also put forth five priorities for its chairmanship: (i) enhance the bloc’s role in maintaining regional peace, (ii) boost regional connectivity, (iii) improve the region’s ability to adapt to and capitalise on the Fourth Industrial Revolution, (iv) promote the ASEAN Community and partnerships for sustainable development, and (v) improve ASEAN institutions to better meet the bloc’s needs.

THAILAND, MALAYSIA

Thailand, Malaysia to push for seamless border trade
(3 November 2019) Thailand and Malaysia’s heads of state Prayut Chan-o-cha and Mahathir Mohamad’s meeting on the sidelines of the 35th ASEAN Summit yielded an agreement to improve infrastructure along the countries’ shared border and work towards the signing of a memorandum of understanding (MoU) to boost cross-border freight transport. Such efforts, they said, will also help improve connectivity between Thailand’s Bangkok; Malaysia’s northern Penang and southern Johor Bahru; and Singapore. Prayut, for his part, also shared his hopes that Malaysia will allow more imports from southern Thai provinces.

MALAYSIA

Malaysia’s exports drop 6.8% in September
(4 November 2019) Malaysian exports saw its biggest drop in three years with a 6.8% year-on-year decline in September to US$18.74 billion. According to government data, the fall was due to lower demand from its major trade partners except the US which rose 6.6% — exports to China fell 3%, while exports to Hong Kong, Japan and other ASEAN countries also fell. Sector-wise, Malaysia’s exports of manufactured goods saw a 5.8% year-on-year dip, while exports of mining goods exports fell 15.2%, and exports of palm oil fell 9.3% on the year.

INDONESIA-EU

Indonesia reviewing EU trade deal draft as palm oil spat drags on
(1 November 2019) The Indonesian government is currently reviewing its draft trade agreement with the European Union (EU) to ensure that palm oil is positioned “fairly” in the text, said vice foreign minister Mahendra Siregar. Mahendra’s comments come as Indonesia prepares to file a complaint against the EU with the World Trade Organization (WTO) over the bloc’s “structured and systematic” campaign to bar the use of palm oil in renewable transport fuel in the EU by using environmental concerns “as a guise for protectionism.”

INDONESIA

Indonesia’s Q3 GDP growth slows to 5.02%
(5 November 2019) Indonesia’s economic growth fell to 5.02% in the third quarter of 2019 — its slowest in over two years. According to government statistics, the fall was due to lower government spending, investments, and commodity prices — on top of the global economic slowdown caused by the prolonged US-China trade war. Indonesia previously recorded a 5.05% growth in the second quarter of this year and 5.17% growth in the third quarter of last year. Year to date, the country’s GDP has grown by 5.04% in 2019.

INDONESIA, MALAYSIA, THE PHILIPPINES

Gojek seeks to enter Malaysia and the Philippines by 2020
(4 November 2019) Indonesian ride-hailing unicorn Gojek will launch its services in Malaysia and the Philippines next year, according to the company’s new co-CEOs Andre Soelistyo and Kevin Aluwi. Furthermore, the company plans to alter its ratio of domestic and international customers to 50:50 in the next five years from the existing 80:20 ratio. The co-CEOs, who were speaking at the company’s ninth anniversary celebrations, also shared their four priorities moving forward: improving customer satisfaction, balancing growth with sustainability, expanding to new foreign markets, and turning Gojek into a world-class workplace.

Mekong Monitor: Thailand’s B. Grimm and Gulf Energy ink Vietnam LNG deals


Photo credit: Bangkok Post

 

TRADE, ECONOMY, AND INVESTMENT

 

THAILAND, VIETNAM

Thailand’s B. Grimm and Gulf Energy ink Vietnam LNG deals
(5 November 2019) Thai energy company B. Grimm inked an agreement with Petrovietnam to study and develop a 3,000 megawatt (MW) integrated liquefied natural gas (LNG) project in Vietnam. The signing was witnessed by Vietnamese premier Nguyen Xuan Phuc and Thai deputy prime minister Anutin Charnvirakul in Bangkok on November 2. If the feasibility study goes well, B.Grimm intends to double its capacity in the subsequent phase. Another Thai energy company, Gulf Energy Development Plc, also inked an agreement with the Vietnamese government on the same day to develop a gas-fired power facility and LNG terminal in Ninh Thuan province.
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VIETNAM, THAILAND

Vietjet launches new flights in Thailand
(2 November 2019) Vietnamese Prime Minister Nguyen Xuan Phuc and Thai deputy prime minister Anutin Charnvirakul witnessed the launch of two new flights operated by the Vietnamese carrier Vietjet’s Thai subsidiary Thai Vietjet Air, which connects Udon Thani with Bangkok and Chiang Rai. The low-cost carrier presently operates five domestic routes in Thailand and 17 international routes connecting Thailand, Vietnam, Taiwan and China. Separately, the Vietnamese premier also launched two new routes by national flag carrier Vietnam Airlines that will connect Bangkok and Da Nang, and Phuket and Ho Chi Minh City.
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THAILAND, MYANMAR, CAMBODIA

Thailand seeks to trade electricity with Cambodia, Myanmar
(5 November 2019) A senior official of the state-owned Electricity Generating Authority of Thailand (EGAT) revealed this week that they have been instructed by energy minister Sontirat Sontijirawong to enter discussions with their Cambodian and Myanmar counterparts on trading up to 500 MW of electricity. According to the official, the three countries will need to enter an agreement for electricity trading, which they expect to begin by 2023. Thailand, Laos and Malaysia also agreed to trade up to 300 MW of electricity back in September under the Laos, Thailand and Malaysia Power Integration Project (LTM-PIP).
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MYANMAR, THAILAND

New bridge expected to facilitate Myanmar-Thailand trade
(4 November 2019) A new bridge linking Myanmar’s Myawaddy border town in Kayin State to Thailand’s Mae Sot border district officially opened on October 30. With this, heavy vehicles — especially those transporting goods — will be able to utilise the bridge for cross-border trade, thus reducing illegal trade activities and smoothing the transportation of goods. According to a Myanmar freight transportation association, around 100 Myanmar drivers hold cross-border licenses, and the new bridge will enable them to transport goods from Yangon’s Thilawa port and Bangkok’s Laem Chabang Port.
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VIETNAM, THAILAND

Thai firm buys stake in northern Vietnam’s largest water plant
(4 November 2019) Thai industrial firm WHA Utilities and Power (WHAUP) announced recently that it has acquired a 34% stake worth US$89.35 million in the Duong River Surface Water Plant JSC as part of its Mekong expansion plans, particularly in Vietnam. The plant in Gia Lam, which is the largest in northern Vietnam, presently treats 300,000 cubic meters of water daily, with plans to quadruple this volume by 2030. Ultimately, the plant is expected to supply clean water for around three million people, including one-third of Hanoi’s residents.
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mekong-monitor-map

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: ASEAN, China to keep pushing for greater regional connectivity


Photo Credit: Reuters

 

Economy, Investment and Trade

 

ASEAN, China to keep pushing for greater regional connectivity
(3 November 2019) ASEAN and China reiterated their commitment to implementing the Master Plan on ASEAN Connectivity 2025 with China’s Belt and Road Initiative (BRI) during the 22nd ASEAN-China Summit held in Bangkok. According to their joint statement, the master plan aims to align the region’s sustainable infrastructure, digital innovation, seamless logistics, regulatory and people mobility with the BRI. Furthermore, the leaders also pledged to mobilise capital to promote innovative infrastructure financing in ASEAN, while working together to enforce such cooperation through bilateral and multilateral engagements.
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China to continue supporting the development of Cambodia’s Preah Sihanouk
(5 November 2019) China is committed to continued investment in the development of Preah Sihanouk province to ensure the continued growth of Cambodia’s economy, Chinese Premier Li Keqiang told Prime Minister Hun Sen on the sidelines of the 35th ASEAN Summit. Preah Sihanouk officials have since touted Li’s remarks as a vote of confidence for Chinese investment in the province. According to the Cambodian finance ministry, China invested US$14.7 billion in Cambodia from 1994 to 2016. Furthermore, between 1993 to 2017, China has signed US$9.6 billion worth of concessional loan agreements with development partners.
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Singapore, Shandong to boost cooperation in professional services
(31 October 2019) Enterprise Singapore and Shandong province’s Qingdao commerce bureau are planning to launch a new platform next year to help Shandong companies grow their markets overseas. The new platform will allow Singaporean companies to offer professional services to Shandong companies seeking to internationalise. According to Shandong vice governor Ren Airong, they will also be looking at ways to boost trade and connectivity, such as through Shandong’s pilot free trade zone which was announced in August. Bilateral trade between Singapore and Shandong rose 3.9% on the year in the first half of 2019 totalling US$1.04 billion, while Singapore invested almost US$11.4 billion in over 1,500 Shandong projects during the same period.
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Thailand expects Chinese investment applications to rise by 30% in 2019
(30 October 2019) Thailand expects investment applications from Chinese companies looking to move their manufacturing base to Thailand to avoid US tariffs to grow by 30% to US$2.37 billion this year and continue on an uptrend next year. According to the Thai Board of Investment, investment applications from China grew 100% year-on-year in the first three quarters of 2019, totalling US$1.49 billion. Most of these applications were from firms in the tyre manufacturing and rubber industry. Chinese companies are reportedly attracted to Thailand’s ease of doing business and its human capital.
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Ride-sharing firm Didi Chuxing eyeing the Philippines
(4 November 2019) China’s leading ride-hailing company Didi Chuxing is looking to enter the Philippines and is currently in talks with local players to do so. Such talks were confirmed by U-Hop Transportation Network Vehicle System Inc— one of 10 local firms licensed to provide such services in the Philippines. Local players hope that Didi’s entry will help break Grab’s virtual monopoly of the country’s ride-hailing industry, especially since it acquired Uber’s Southeast Asian operations in March 2018. Having said that, Didi is also a Grab investor, having joined Japan’s Softbank in a US$2 billion investment round in 2017.
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Loong on China | US-China rivalry: The Hong Kong dimension

Originally published in TheEdge Malaysia, 4 – 10 November 2019 edition.

Whatever the next policy move or interim deal between Washington and Beijing, the days of friendly competition are over. And the massive street protests in Hong Kong, the major international financial centre so important to China, could launch yet another chapter in the already fraught US-China relationship.

Businesses have been scrambling to adjust as hopes fade that this is just a hiccup in bilateral ties. The conflict has gone beyond tariffs and trade. This is now about American perception of China as a strategic threat rather than just a rules-bending commercial competitor – and Chinese perception of an American intent to prevent it from “rising” and reclaiming its rightful place in the global order.

This coming new normal of persistent US-China tension (punctuated by the occasional truce) will force players to re-calibrate risk-and-return assumptions and review business strategies and contingency plans.

Eyes are turning increasingly to ASEAN as a possible oasis in the storm. From manufacturing to asset management, the 10-member bloc offers diversification of risk for operations in the same time zone as China and other Asian markets. It also provides a politically neutral retreat for commercial activities in the event of wholesale decoupling between the American and Chinese economies.

Media headlines have focused on the relocation of factories from China to ASEAN neighbours as exporters seek ways to sell to the American market without incurring “trade war” tariffs. Vietnam, in particular, has been held up as the poster boy of success.

But the months of mayhem that have put Hong Kong on prime time television and the front pages of newspapers worldwide is turning the spotlight on to relocation of a different kind – that of financial services.

Money walks

Money hates uncertainty. And there can be no greater uncertainty than civil unrest over autonomy issues in a territory already on borrowed time. The arrangement that allows Hong Kong to retain its own systems expires in 2047.

Photo credit: EPA-EFE


The investment bank Goldman Sachs estimated that US$3 – 4 billion in Hong Kong dollar deposits had flowed to Singapore as of the end of August, according to its analysis of the month’s numbers. The amount itself is modest given the US$1.5 trillion in Hong Kong dollar and US dollar deposits held in Hong Kong at the time. The question is whether this might be the start of a longer term trend.

Goldman did not attribute the outflow to Hong Kong’s protests but the correlation cannot be far from investors’ minds – especially after news reports that the Singapore authorities warned its bankers against “capitalizing” on the territory’s protests.

But the calculus involved in shifting the operations of a financial institution to another jurisdiction is very different from the considerations behind the relocation of production facilities.

Producing goods outside China – or at least the paperwork making that claim – is about surviving the trade war. And, however the tariffs fight ends, ASEAN can expect a continued flow of bricks-and-mortar investment in the coming years as supplier diversity becomes the new business mantra.

One country, two of everything

Capital, however, dances to a different tune. Any significant movement of capital out of Hong Kong hinges on the key question: Is the One Country Two Systems holding?

Hong Kong’s importance to China cannot be overstated. Arguments that the territory’s GDP has been contributing less and less to the national output miss the point. Hong Kong’s value lies in the trust that the international community places in its separate legal and monetary system, in the sophistication of its world class financial infrastructure, and in the free flow of information that is the lifeblood of markets.

Because of Hong Kong, China is in the enviable position of one country having:

  • Two separate sovereign credit ratings (Hong Kong is rated separately from China)
  • A trusted hard currency, the Hong Kong dollar, alongside the Chinese mainland’s tightly-controlled renminbi that is not fully or freely convertible
  • Two separate customs territories (the “trade war” tariffs on China do not apply to Hong Kong)
  • Two legal systems (socialist law “with Chinese characteristics” in mainland China and English common law in Hong Kong)

In short, Hong Kong allows China to have its cake and eat it. This is well understood at the highest echelons of power in Beijing.

But where the One-Country ends and the Two-Systems begins is not black and white. Would the system be considered intact if the government imposed mainland-style justice for civil society but respected due process in commercial matters? Would self-censorship on social and political issues matter as long as the free flow of commercial information is protected?

Beijing is pushing boundaries – not trying to kill the goose. And it has good reason to believe that the sheer size of its markets is often argument enough in swaying commercial behaviour. Ask Cathay Pacific. Ask the NBA.


Too big to dump

But whatever happens, international institutions will not abandon Hong Kong in the near term. Consequences are too dire. The territory handles 70 percent of mainland China’s overseas IPOs, 60 percent of its overseas bonds, 64 percent of foreign direct investment into China and 65 percent of Chinese outbound investments.

China is too big a market and Hong Kong too important a conduit for Chinese capital flows for anyone to make a move without a war plan on the scale of the invasion of Normandy.

But longer term, Hong Kong does not have to be “abandoned” to lose its lustre. Confidence is fragile. The business community needs to feel comfortable that Hong Kong is not turning into “just another Chinese city” – and that a robust firewall exists between its norms and practices and those on the mainland and that the two will be kept separate.

Otherwise it risks losing its unique position as the financial centre of choice in Asia. And then in time, decisions on where to base operations would increasingly come down to who is paying the piper.

For businesses for whom the China component is negligible, there would few reasons to choose a jurisdiction under the shadow of civil discontent and with a 2048 use-by date.

But even for those for whom China is crucial to the bottom line, Hong Kong would simply be one of a number of Chinese cities to be considered. The London Stock Exchange, in rejecting the buyout offer in September from the Hong Kong Stock Exchange, did not mince words. Shanghai, it said, would be its preferred partner in accessing the China market.

Photo credit: Getty Images


Hong Kong will always have an international role regardless of political developments. But without confidence that its systems are not being subsumed into that vast opacity of mainland practices, its role would increasingly be confined to one of providing China-related services.

Should that happen, the so-called rivalry between Hong Kong and Singapore would end as there would be no direct competition. Businesses targeting Asia ex-China would gravitate to the city state for financial and other services while the former British colony would turn into the financial-centre equivalent of a one-trick pony with eyes glued firmly north.

CARI Captures 428: Singapore, Malaysia continue to lead in ease of doing business


 

ASEAN

Singapore, Malaysia continue to lead the region in ease of doing business
(24 October 2019) Singapore maintained its place as the second best place to do business in the world in this year’s ease of doing business rankings which was included in the World Bank’s Doing Business 2020 report. In ASEAN, the republic was followed by Malaysia which moved up three places from 15 to 12 this year. Notable improvements were made by the Philippines which leapt 29 places, having implemented three major reforms which included removing the minimum capital requirement for domestic enterprises, and Myanmar which moved up six places with five reforms which included a reduction in incorporation fees and the creation of a company registration portal. Globally, New Zealand topped the list, coming in ahead of Singapore, Hong Kong, Denmark and Korea, with the US, Georgia, UK, Norway, and Sweden rounding up the top 10 spots.

ASEAN

US-China tensions spur progress on RCEP trade pact
(29 October 2019) The pace of negotiations for the proposed Regional Comprehensive Economic Partnership (RCEP) trade pact appear to have accelerated this year as the 16 participating countries look to the pact to cushion the impact of the prolonged US-China trade war. The negotiations on 6 of 20 chapters have yet to conclude, but “major progress, if not final agreement” is expected when leaders convene for the 35th ASEAN Summit in Bangkok from October 31 to November 4. When concluded, the RCEP could become the world’s largest free trade zone accounting for a third of global GDP.

ASEAN

ASEAN rail connectivity to be discussed at upcoming summit
(30 October 2019) Leaders attending the upcoming ASEAN Summit will discuss, among other topics, proposals to improve the region’s connectivity via rail infrastructure based on international standards. According to State Railway of Thailand (SRT) acting chief Worawut Mala, this will include discussions on how to promote the respective countries’ national rail system and ways to further develop such systems. Furthermore, a portal on ASEAN railways will also be launched at the summit to provide public information on the rail systems in Indonesia, Thailand, Malaysia, Cambodia, Laos, Myanmar and Vietnam.

THAILAND-US

Thailand, US trade barbs on Thailand’s ban on farm chemicals
(25 October 2019) US agriculture undersecretary Ted Mckinney sent a letter to the Thai government last week protesting the administration’s decision to ban the use of three “hazardous” farming chemicals effective December 1, stating that glyphosate “poses no meaningful risk to human health” and adding that the ban on glyphosate would “severely impact” US agricultural exports, such as soybeans and wheat, to Thailand. In response, Thai health minister argued that while the US was only concerned about trade, the Thai government was concerned about the health of its citizens. US exports of soybean and wheat totalled US$773 million in 2018.

THAILAND-US

Thailand to appeal against US trade benefits suspension
(28 October 2019) US President Donald Trump announced on October 25 that the US will suspend part of Thailand’s access to its Generalised System of Preferences (GSP) programme effective 25 April 2020, on the basis of “worker rights” issues. About one-third or US$1.3 billion of the US$4.5 billion in Thai exports that currently benefit from the GSP will be affected. In response, Thailand says that they intend to discuss the matter with US officials at the upcoming ASEAN Summit in the hopes of resolving the issue before the suspension kicks in.

THAILAND

Government responds to US’ GSP suspension with seven measures
(29 October 2019) Thailand’s international trade promotion department announced this week that it will put in place seven measures to cushion the impact of the US’ planned suspension of Thailand’s Generalised System of Preferences (GSP) trade privileges. The seven measures include increasing exports to the US in the next six months as US importers stockpile goods before the suspension is enforced, growing the market for the seven Thai products which recently had its US trade benefits restored, and seeking new export markets for the 573 types of goods affected by the suspension.

VIETNAM

Vietnam extends anti-dumping duties on steel products from Indonesia, Malaysia
(28 October 2019) Vietnam’s Ministry of Industry and Trade announced last week that it has extended anti-dumping duties on imports of cold-rolled stainless steel products from Indonesia, Malaysia, Taiwan and China for another five years. The extension, which took effect on October 26, was made to continue protecting local steelmakers’ market share which the ministry says has been recovering thanks to anti-dumping duties that were imposed five years ago. Nevertheless, local players held only 42.8% of the market share during the 2018-2019 period, despite production growing by 1% and turnover growing by 4.69%.

BRUNEI

Kandol rice farm to yield up to 8,000 tonnes of paddy by 2025
(28 October 2019) Brunei’s new 500-hectare Kandol rice farm began its first planting season this week with an officiation by Sultan Hassanal Bolkiah. The farm, which is managed by new state-owned company PaddyCo, is expected to produce up to 8,000 tonnes of rice each year by 2025. Ultimately, this would make the rice farm Brunei’s largest, fulfilling 11%-15% of the country’s rice needs. Brunei presently produces around 1,500 tonnes of rice yearly which meets only 5% of its needs, and imports over 30,000 tonnes of rice from other ASEAN countries each year.

INDONESIA

Indonesia’s new industry minister vows to boost exports
(27 October 2019) Newly-minted Indonesian industry minister Agus Gumiwang Kartasasmita told reporters during his inaugural address in office that he will focus on growing exports of manufactured goods, lowering imports of consumer goods, promoting import substitution industrialisation to improve the country’s current account deficit, developing more economic and industrial zones, and cutting red tape by promoting inter-ministerial cooperation. Indonesia’s exports dropped 5.74% year-on-year last month to $14.1 billion, making it the 11th consecutive month of year-on-year declines, according to Statistics Indonesia (Badan Pusat Statistik). Meanwhile, imports were down 2.41% year-on-year in September at $14.2 billion, resulting in a trade deficit of $160 million. Agus added that President Joko Widodo has also instructed him to ensure the immediate implementation of the government’s B100 palm oil biofuel plans.

INDONESIA

Gojek, Tokopedia prepare for dual stock market listings
(26 October 2019) Indonesian unicorns Gojek and Tokopedia announced last week that they are planning to take their companies public with dual stock market listings in the coming few years. Gojek’s announcement was made following the appointment of the company’s new co-CEOs, Andre Sulistyo and Kevin Aluwi, while Tokopedia’s came in the form of a report which revealed that the company is currently in talks for pre-IPO funding. The Indonesian government is known to encourage local unicorns to have more than one listing in order to absorb capital from both domestic and foreign investors.

Mekong Monitor: Amata Group’s Yangon eco city projects gets government approval


Photo credit: The Myanmar Times

 

TRADE, ECONOMY, AND INVESTMENT

 

MYANMAR, THAILAND

Amata Group’s Yangon eco city projects gets government approval
(29 October 2019) The Myanmar Investment Commission (MIC) has given Thai developer Amata Group approval to go ahead with the development of the proposed Yangon Amata Smart Eco City project. The US$270 million project located near Lay Daunk Kan Village in Yangon’s Dagon Township will be developed as a 80/20 joint venture between Amata Group and Myanmar’s Ministry of Construction. The project, which falls under the ministry’s larger plans to develop some 6,500 hectares of land in Yangon, will eventually cover 800 hectares near Lay Daunk Kan Village in Yangon’s Dagon Township.
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VIETNAM, LAOS

Viettel reaches 10-year milestone in Laos
(24 October 2019) Vietnamese telecommunications group Viettel celebrated its tenth year of providing services in Laos through its local subsidiary Unitel — a joint venture between Viettel and Lao Asia Telecom. According to Unitel head Luu Manh Ha, the company has so far developed 8,000 base transceiver stations and installed 30,000 kilometres of fibre-optic cable. He added that Unitel has also contributed almost US$650 million to the country’s state budget, besides creating over 20,000 domestic jobs. Moving forward, Unitel will focus on piloting 5G services in the country.
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CAMBODIA, VIETNAM

Vietnam set to be 9th largest remittance receiver in 2019
(29 October 2019) Cambodia’s national airline Angkor Air took its first flight to Vietnam’s Da Nang this week, marking the first time a flight has flown directly from Phnom Penh to Da Nang without having to transit through Ho Chi Minh City. The new route, which will fly five times a week, is expected to boost tourism between the countries. Cambodia recorded a 4.6% year-on-year increase in visitors from Vietnam in the first seven months of 2019, totalling 470,000 visitors.
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VIETNAM

Vietnam set to be 9th largest remittance receiver in 2019
(24 October 2019) Vietnam is on track to end the year as one of the world’s top remittance receivers, according to a World Bank brief which projects that the country will receive US$16.7 billion in remittances this year. This would make Vietnam the ninth largest remittance receiver globally this year, and second in Southeast Asia behind the Philippines, which ranked 4th globally. According to local analysts, Vietnam’s remittance inflows has been growing steadily in the past two decades — from US$1.3 billion in 2000 to US$16 billion in 2018, accounting for 6.4% of its GDP.
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VIETNAM

Vietnam receives over US$29 billion in foreign investment in ten months
(25 October 2019) Vietnam recorded a 4.3% year-on-year increase in foreign direct investment inflows totalling US$29.11 billion from January to October 2019. According to the Vietnamese Ministry of Planning and Investment, around US$5.47 billion went to existing projects, while US$12.83 billion went to 3,094 new projects — representing a 25.9% increase in the number of projects when compared to the same period in 2018. The remaining US$10.81 billion were capital contributions and share purchases by foreign firms which increased 70.5% year-on-year. Sector-wise, US$18.83 billion or 68.1% of the sum went to the processing and manufacturing sector, while the property sector saw US$2.98 billion or 10.2% of total investments.
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mekong-monitor-map

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: Thailand, Guangdong elevate their cooperation on the EEC


Photo Credit: Bangkok Post

 

Economy, Investment and Trade

 

Thailand, Guangdong elevate their cooperation on the EEC
(22 October 2019) Thai Deputy Prime Minister Somkid Jatusripitak witnessed the signing of a memorandum of understanding (MoU) on economic cooperation between Thailand’s Eastern Economic Corridor (EEC) and Guangdong province that seeks to elevate their pact to a ministerial-level one. With this, a joint high-level committee will be formed to deepen cooperation between the parties, particularly in selected industries, research and development, and human capital development. Ultimately, Somkid expects the enhanced pact to help Thailand better tap the Chinese Greater Bay Area’s US$1.5 trillion economy which spans nine cities in Guangdong.
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Huawei to set up Huawei Academy in Thailand
(23 October 2019) Thailand’s Ministry of Higher Education, Science, Research and Innovation signed a memorandum of understanding (MoU) with Huawei to establish a Huawei Academy to help develop the country’s “digital workforce” and drive its innovation ecosystem. The MoU was signed during Thai Deputy Prime Minister Somkid Jatusripitak’s meeting with Huawei founder Ren Zhengfei during his visit to China, during which both sides also agreed to push for greater cooperation in the development of 5G infrastructure. Such efforts, they said, would also help develop Thailand’s cloud and artificial intelligence infrastructure.
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China Construction Bank opens on Labuan island
(25 October 2019) China Construction Bank Labuan (CCBL) opened its doors in Malaysia last week, making it the first foreign-owned offshore bank licensed to provide digital banking services to operate in Labuan International Business and Financial Centre. The bank also signed 14 memoranda of understanding with various industry players during the ceremony as part of plans to solidify its positioning as a preferred jurisdiction for enterprises looking to do business in Asia, especially those doing businesses under China’s Belt and Road Initiative.
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Chinese firm wins bid to build Yangon power plant
(25 October 2019) Myanmar’s Ministry of Energy and Electricity (MOEE) announced recently that a consortium led by China’s state-owned Energy Engineering Company has been awarded a tender to construct a 150 megawatt (MW) gas-fired power plant in Yangon’s Ahlone Township. Separately, a consortium, which includes VPower Group Holdings and VPower Holding Company, won the tender to develop the Kyun Chaung Power Producing Project, while another consortium of Chinese companies was awarded the tender for the 150 MW Kyaukphyu Electrical Producing Projects, the 350 MW Thanlyin Power Plant, and the 400 MW Tharketa Electricity Production project.
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ASEAN is now Chongqing’s largest trade partner
(22 October 2019) Trade between China’s Chongqing municipality and ASEAN saw a 46.1% year-on-year increase reaching US$11.15 billion in the first three quarters of 2019. With this, ASEAN is now Chongqing’s top trading partner, accounting for 19% of Chongqing’s total trade volume of US$58.5 billion. According to Chinese customs, the New International Land-Sea Trade Corridor passage developed by China and Singapore, and the rapid development of the China (Chongqing)-Europe freight train services contributed to the surge in trade in Chongqing.
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The Road to ASEAN Integration: 7 lessons learned from public policy advocacy and public sector engagement

Originally published in TheEdge Malaysia, 28 October – 3 November 2019 edition.

Policy advocacy is hard work, in that it takes an excruciatingly lengthy engagement process to find common grounds with the rightful policy stakeholders to convince a point. It requires both top-down and bottom-up approaches to move the needle, if at all. Contrary to popular belief – political will – is not the only barrier hindering the process.
 

 

The Before: Guerilla Style

Since 2013, to better reflect private sector’s concerns and identify ASEAN sectoral integration gaps, CARI had published numerous papers/reports/commentaries, organised numerous ASEAN-themed policy roundtable discussions, issued regular public policy calls, led multiple trade delegations to ASEAN countries to engage with policymakers, even all the way to the level of heads of government.

Not until the establishment of the Enterprise and Stakeholder Engagement Division (ESED) at the ASEAN Secretariat in 2016, many of these policy advocacy efforts, although not unique to CARI, were akin to “shots in the dark” or “guerilla-style” in nature. More often than not, the private sector’s recommendations ended up in the blackhole of unknown. Unlike our counterparts from the EU, the US and Japan, ASEAN businesses and entities face resource-scarcity in terms of time, funding, technical capability and suffer significant disadvantages in being referred through the policy channels in ASEAN.

The After: Guided Approach

In recent years, I have been privileged to participate in and present at official ASEAN meetings in my capacity as the Deputy Executive Director of ASEAN Business Advisory Council, facilitated by ESED. This year alone, at the working lunch with ASEAN Finance Ministers and Central Bank Governors in Chiang Rai; working dinner at the 51st ASEAN Economic Ministers in Bangkok, and Dialogue with ASEAN Leaders/Heads of Government, to name a few.

In these meetings, consolidated policy recommendations from various business associations, including those from ASEAN’s dialogue partners, were tabled in the hopes of benefiting ASEAN as a whole, especially the Micro, Small and Medium Enterprises (MSMEs). While these interface meetings were valuable, they are at best “ceremonial”. Follow-ups are often slow to none, and less than effective. The quality of engagement has huge room to improve, to say the least.

From making voluntary policy calls on the sidelines, to finally having a front-row seat at the consultation tables, there are at least seven “simple” observations I wish to have been better informed before.


1) Come as a collective

ASEAN subscribes to the principle of impartiality and strives to avoid being considered biased towards any member states or private entities. To ensure success, policy recommendations representing collective interests are prioritised and should be channelled through business organisations, chambers and councils.

In 2017, in order to better reduce understanding gaps between the public and private sector, ASEAN has released the Rules of Procedures for Private Sector Engagement under the ASEAN Economic Community (AEC). Only those entities “associated with ASEAN and listed in Annex 2 of the ASEAN Charter entities; or as suggested by ASEAN sectoral bodies” are acceptable. Approaching ASEAN as a single private sector entity is likely to be a futile effort.


2) Propose actionable policies

While the private sector criticises the public sector for being slow to respond, ASEAN officials lament that the private sector’s recommendations lack structured details, tend to be broad and vague. The officials regard any recommendations “to promote/to encourage” high-level ideals without action points to be impractical. Proposals such as “promoting paperless customs procedures, modernisation of payment and settlement systems, accelerate migration to electronic payment” are considered less specific.

Applying the S.M.A.R.T. framework to the policy recommendations — specific, measurable, achievable, relevant and time bound — may be a good starting point. Making the proposals with targeted policy stakeholder groups in mind as the audience, as well as researching what ASEAN is already working on makes the engagement more effective.


3) Construct compelling concept notes

Structuring a proposal to be “actionable” may be easy, the private sector would also need to articulate the idea and how the proposal can be executed in the form of “concept notes”.

A meaningful concept note requires the public sector’s input. Yet how to arrive at that is a challenging matter due to the absence of institutionalised and frequent engagements with the relevant ASEAN bodies, even though it is prescribed in the AEC 2025 Blueprint. The invitation to the consultation meetings is at the discretion of the chair of meetings and worse, the meetings are few and far in between, ranging from once a year to probably a few times a year. Thus causing the back-and-forth feedback loop to be a very, very long haul.

To short-circuit this lengthy process, engaging with the ASEAN Secretariat (ASEC) on how best to present the case with a concept note that details practical implementation milestones would go well with ASEAN officials.


4) Demonstrate positive impact

To increase the success rate, the private sector would also need to demonstrate potential positive gain or impact that comes with the proposed recommendation, with empirical evidence or quantitative projections. This serves to provide justification to various policy stakeholders of ASEAN, especially domestic jurisdiction. For example, the private sector was required to demonstrate that fast-tracking customs clearance for the proposed Low-Value Shipment Programme by ASEAN BAC Joint Business Councils would not be revenue negative for customs, as opposed to doing away with the de minimis.

But the requirement to support the recommendation with an in-depth study is clearly beyond the depth of the MSMEs of ASEAN. This reality only means that foreign companies, often larger in size and are better resourced, would stand a better chance of lobbying in favour of the interests of extra-ASEAN companies.


5) Pursue a balanced strategy mix

Top-down or bottom-up?
While the heads of government often offer supportive gestures towards private sector suggestions, they have to cascade policy recommendations downward for further consideration and possible implementation.

However, caught in the internal deliverables, the officials are the least incentivised to advance any private sector policy proposal unless those that are in-line with their KPIs, resulting in bureaucratic inertia. On the other hand, some officials believe their role is to carry out ministerial instructions and therefore wield little policy influence. These conflicting dynamics send very confusing signals to the private sector as to whether a bottom-up or top-down approach would be most effective.

Bilateral or multilateral?
Similarly, while the private sector looks to ASEC to be the central party to connect with ASEAN policy bodies instead of reaching out to ten ASEAN jurisdictions, ASEC is after all not empowered to propose or implement any legislation, unlike the European Commission. Therefore, reaching out to ASEC is just one part of the effort; the private sector also needs to work through the national policy channels so that when the relevant bodies that form a particular ASEAN working group meet, some form of pre-knowledge has already been socialised.

Taking cues from the EU- and US-ASEAN Business Councils, who are extremely effective in all policy channels, the real work starts from various policy pipelines. A combination of top-down endorsement, and bottom-up buy-in; as well as having bilateral and multilateral support would be a good strategy mix for effective public-private engagement.


6) Gather sufficient industry demand

It would be too careless to blame “policy hurdles” alone as the culprit for the slow progress of integration. The private sector sometimes frustrates policy facilitation effort. After all the hard work being carried out, businesses cited “business decision” against utilising certain policy support. That is the very reason policymakers are insisting to have “significant market demand” as a prerequisite to pursuing regulatory or policy facilitation to avoid low utilisation of any new mechanism before launching into negotiations with ASEAN members.

This is a valid consideration as even with seemingly aligned policy direction between the private and public sector does not guarantee successful implementation. Cases in point, the now-defunct ASEAN Trading Link, the new local currency settlement arrangement among Thailand, Malaysia, Indonesia, the Philippines, and the Qualified ASEAN Banks all suffer from some form of low business interest.

The private sector is encouraged to gather reasonable industry demand so that it provides sufficient motivation for the public sector to pursue the necessary policy liberalisation.


7) Build technical capacity

The MSMEs constitute 97-99% of ASEAN businesses in numbers but are unequipped to engage with ASEAN policy bodies for advocacy. Apart from funding, the lack of technical capability is one handicap area that sets these businesses back.

Many of ASEAN businesses also see little value in engaging in policy consultation and are generally less keen to attend consultation meetings due to potential business opportunity cost. On the contrary, the EU and US businesses not only usually turn up in full force when such consultation opportunities arise, but they will also come prepared with effective presentations.

National chambers, business councils in ASEAN will have to begin to see the value in policy advocacy and be willing to invest in improving technical capacity to better represent MSMEs.


Conclusion

The setting up of the Enterprise and Stakeholder Engagement Division (ESED) has demonstrated its effectiveness in connecting the private sector with the ASEAN policy bodies. The process of engagement is increasingly structured and the quality is improving, most noticeable in the trade facilitation track, albeit without concrete results being achieved as yet.

The engagement process, however, must have better clarity and transparency, and most importantly the quality, depth and results of engagement should be the ultimate goals of these exercises than merely ticking the boxes.

CARI Captures 427: The new Indonesian cabinet’s key economic appointments


 

INDONESIA

The new Indonesian cabinet’s key economic appointments
(23 October 2019) President Joko Widodo’s second term at the helm of Southeast Asia’s largest economy will be driven by what he calls his “Onward Indonesia Cabinet” which, aside from incumbent finance minister Sri Mulyani Indrawati and coordinating minister for maritime affairs, natural resources and investment Luhut Pandjaitan, includes a slew of new appointments on the economic front. This includes a new coordinating minister for economic affairs in Airlangga Hartarto, a new trade minister in Agus Suparmanto, a new state-owned enterprises minister in Erick Thohir, and a new investment coordinating board head in Bahlil Lahadalia.

INDONESIA

President Joko Widodo’s envisions developed Indonesia by 2045
(21 October 2019) President Joko Widodo’s started his second term by touting his “dream” to make Indonesia a developed country by 2045. According to a local media outlet, a high-income Indonesia would also make it one of the world’s five largest economies, and President Joko plans to achieve this by (i) avoiding the middle-income trap, (ii) raising GDP per capita by over five times to 320 million rupiah per year, or US$22,700 per year, (iii) grow GDP by seven times to US$7 trillion, and (iv) lower the poverty rate from the current 9.41% to nearly 0%.

BRUNEI

Brunei’s economy rebounds 6.7% in second quarter of 2019
(22 October 2019) Brunei’s GDP grew by 6.7% at US$4.74 billion in the second quarter of the year, an improvement from the 0.5% dip it saw in the previous quarter. The rebound — which also represents its biggest improvement in quarterly growth for the first time since 2016 — was largely due to growth in the oil and gas industry, which expanded by 8.7% to US$2.91 billion. The country’s non-oil and gas sector also grew by 4.1%, fuelled largely by the 21.8% growth in the financial sector.

THAILAND

Thai exports post a 1.39% dip
(22 October 2019) Thailand’s exports continued on a downtrend trend in September with a 1.39% year-on-year dip but recovered from August’s 4.0% plunge, fuelled largely by higher exports of industrial goods such as electrical goods and parts, agricultural products, as well as automobiles and parts. Meanwhile, imports in September also declined by 4.24% on the year. Thailand’s exports in the first nine months of 2019 fell by 2.11% on the year, while its imports also fell by 3.68% on the year during the same period.

THAILAND, MYANMAR

Thailand, Myanmar to use baht, kyat for cross-border transactions
(23 October 2019) The central bank governors of Thailand Veerathai Santiprabhob and his Myanmar counterpart U Kyaw Kyaw Maung inked two memoranda of understanding (MoU) on the sidelines of the IMF-World Bank meeting held in the US on October 18. The first MoU seeks to promote the use of the native currencies of each country when conducting border trade, as opposed to using other currencies such as the US dollar for payments through banks. The second MoU aims to promote bilateral cooperation in the areas of financial innovation and payment services.

CAMBODIA

Construction sector sees US$6.5 billion in investment inflows for the first nine months of 2019
(18 October 2019) Investment in Cambodia’s construction sector saw a 34.7% year-on-year spike from January to September this year totalling US$6.5 billion, according to a recent government report. The report also found that 3,433 construction projects which will span over 13 million square metres were approved during the period, up from the 2,541 projects worth US$4.8 billion that were approved last year. With this, over 46,991 construction projects worth over US$48 billion have been approved since the year 2000, with the most investments coming from China.

INDONESIA

State-owned utility company partners with 20 brands to push electric vehicle adoption
(21 October 2019) Indonesian state-owned utility company PLN announced this week that it has signed MoUs with 20 companies to accelerate the adoption of electric vehicles in the country. According to PLN acting chief Sripeni Inten Cahyani, the 20 companies can be split into three groups: firstly, companies such as Go-Jek, Grab and Pertamina which will help install electric charging stations; secondly, automakers such as Mitsubishi and BMW which will help develop electric vehicles; and thirdly, state-owned electronics manufacturer LEN which will help develop a home-grown charging station.

THAILAND

Thailand to colour palm oil biodiesel to combat smuggling
(22 October 2019) Thailand will combat the issue of palm oil being smuggled from neighbouring countries by colourising its home-grown purified biodiesel before it is blended with diesel oil. According to energy minister Sontirat Sontijirawong, the colourisation will be rolled out in line with the government’s plan to adopt B10 as the main diesel option by early 2020. Once implemented, B10 biodiesel is expected to absorb 2.2 million tonnes of crude palm oil surplus annually or two-thirds of the current supply. The remaining one-third is typically absorbed by the food sector.

MALAYSIA-INDIA

India traders urged not to import Malaysian palm oil
(21 October 2019) A Mumbai-based Indian oilseed extractors trade association called on its members to cease importing palm oil from Malaysia as “a mark of solidarity” with the Indian government who “has not taken kindly” to Malaysian Prime Minister Mahathir Mohamad’s remarks on the Kashmir conflict that were made at the UN General Assembly. India is presently the world’s top vegetable oil buyer, importing primarily from Indonesia and Malaysia. The country’s palm oil imports from Malaysia were worth US$1.65 billion in 2018.

SINGAPORE-US

Singapore, US sign agreement to boost bilateral cooperation
(19 October 2019) Singapore and the US inked an agreement last week on the sidelines of the G20 Finance Ministers’ and Central Bank Governors’ Meeting to bolster cooperation in infrastructure financing. According to a Singapore finance ministry statement, the agreement will help enhance knowledge sharing and promote infrastructure investments in Southeast Asia. According to Singapore second finance minister Indranee Rajah, 60% of infrastructure finance transactions within ASEAN are currently arranged by banks based in Singapore.

Mekong Monitor: Laos to conduct feasibility study on Laos-Vietnam railway line


Photo credit: VNA

 

TRADE, ECONOMY, AND INVESTMENT

 

LAOS, VIETNAM

Laos to conduct feasibility study on Laos-Vietnam railway line
(18 October 2019) Laos’ Ministry of Planning and Investment inked a memorandum of understanding with the Petroleum Trading Lao Public Company last week to conduct a feasibility study on the proposed Laos-Vietnam railway. The 240-270 kilometre rail link would start from Laos’ Khammuan province, run through their shared border, and end in Vietnam’s Ha Tinh province where it will connect with the Vung Ang seaport. The survey and design of the project are expected to take up to 12 months, and if approved, construction is expected to start at the end of 2021 and be completed by 2024.
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CAMBODIA, VIETNAM

Cambodian PM pushes for expressway link with Vietnam
(16 October 2019) Cambodian Prime Minister Hun Sen called on public and private stakeholders from Cambodia and Vietnam to help improve infrastructure connectivity between the countries, especially through the proposed Phnom Penh-Bavet expressway project. According to one media report, the feasibility study on the 160-kilometre expressway — which put the projected cost at US$3.8 billion — was completed in late 2018, but construction has yet to begin. Ultimately, the expressway is expected to be linked to another expressway from Vietnam that stretches from Moc Bai to Ho Chi Minh City. Bilateral trade between both countries reached US$4.7 billion in 2018, a 24% increase y-o-y from 2017.
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MYANMAR, THAILAND

Thailand’s PTT to open first petrol station in Myanmar in 2020
(20 October 2019) Thailand’s PTT Oil and Retail Business (PTTOR) announced recently that it will open the first PTT petrol station in Myanmar by the second quarter of 2020. According to a senior PTTOR executive, the Myanmar government has approved plans put forth by its joint venture with Myanmar’s KBZ Group to construct a liquefied petroleum gas (LPG) and oil reserve facility. When completed, the facility will be the country’s largest oil and gas reserve and refinery, able to store up to one million barrels of oil and 4,500 tonnes of LPG.
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THAILAND, CAMBODIA

Thai Airways mulls transfer of CLMV routes to subsidiary
(21 October 2019) Thai Airways chief Sumeth Damrongchaitham shared in a recent interview that the airline was thinking of canceling six of its existing flight routes to Cambodia, Laos, Vietnam and Myanmar — and transferring these routes to its wholly-owned subsidiary Thai Smile Airways in order to streamline costs. According to him, these routes presently operate out of Bangkok’s Suvarnabhumi Airport, but with low passenger capacity and limited flights. Cambodia saw an 11.2% year-on-year rise in Thai tourists in the first eight months of 2019 totaling 234,451.
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LAOS

Number of factories in Laos grow at 5% annually
(21 October 2019) The number of factories in Laos has been growing at around 5% per year, with around 80% of these being household businesses, according to new data from Laos’ Ministry of Industry and Commerce. More specifically, large factories accounted for only 5.43% of the sum, medium factories account for 5.96%, small factories account for 51.01%, while household workshops represent 37.6% of all factories. The data also found that 354 of these companies were owned by foreign entities, while 2,115 were joint ventures and 10,679 were home-grown businesses. Despite government attempts to attract investors, the growth rate of factories in Laos has been moderate.
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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.