CARICAPTURES

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ON THE ROAD TO RESTRUCTURING

Singapore

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4 M A R C H 2 0 1 3 I S S U E 1 1 5

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Singapore engages in economic restructuring, more social inclusiveness; some tough love and lots of heart; some pleasant surprises for companies, heart-landers and the elderly; less pleasant surprises for multiple property-owners and luxury car enthusiasts.

Finance Minister and Deputy Prime

Minister Tharman Shanmugaratnam

reinforced the government’s push to

restructure the economy through tighter

policies on foreign workers that will

introduce a new “permanent reality of a

tight labour market”

Economists said the Budget will be

structural instead of counter-cyclical and

ultimately attempt to change how the

city-state grows

The Budget also attempts to manage

economic inequality with generous

provisions for the vulnerable and higher

taxes for the wealthy

The policy will be combined with

business offsets and reliefs in attempts to

ease some of the pain of the transition

In the short term, economists expect

higher inflation as businesses pass on the

cost of higher worker levies and wage

increases to consumers

The Monetary Authority of Singapore

(MAS) is expected to keep to its current

inflation–fighting stance and will likely

respond by increasing interest rates —

ultimately leaving the central bank with

little room to ease the presently strong

Singapore dollar

Business Times (26 February 2013) Business Times (25 February 2013) Business Times (28 February 2013)Business Times (25 February 2013)Business Times (25 February 2013)Business Times (25 February 2013)Business Times (25 February 2013)

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

VIETNAM PROVIDES LITTLE

OPPORTUNITY FOR PUBLIC

Vietnam, Cambodia

Clive Cook, a senior consultant at

law firm Baker & McKenzie said the

region’s diversity and uncertain legal

environment remain major challenges

for many multinationals. According to a report based on a survey

of 147 companies, governments change

their minds about important legislation with

little warning, and even when laws remain

unchanged, court decisions and interpretations

of the laws can be highly arbitrary

The survey said multinationals also have to

contend with protectionism in Myanmar and

Indonesia as the two most protected markets,

despite ongoing efforts at integration and

opening up ASEAN’s internal market

Indonesia recently told oil and gas contractors

they will have to stop shipments if they do not

follow central bank rules to channel export

revenues through local banks, despite earlier

protests from Chevron and Total

Jakarta has also been delaying the

implementation of the regional open skies

policy citing the large number of airports as a

constraining factor

Why it matters: The survey highlights the

challenge of translating regional commitments

into reforms on the ground. More interestingly,

Jakarta’s recent stance highlights a trend

almost unique to the country: that the

economy trends to adopt a more protectionist

position when the economy is doing well

Wall Street Journal (19 February)Business Mirror (28 February 2013)

Philippines

Indonesia, ASEAN

LEGAL

ISSUES IN

BSP BRACES FOR LIKELY IMPACT

ASEAN WORRY

INVESTORS

0403

02

Vietnam scored only 19 points on

a 100 point scale in the 2012 Open

Budget Index (OBI). The report highlighted the lack of

transparency in Vietnam’s budget system,

encapsulated in its inability (or resistance)

to reveal the draft State budget to the

public before being passed by the National

Assembly (NA)

Ta Thanh Thuy from the Center for

Development and Integration (CDI)

said Vietnam would further advance

commitments on transparency by strictly

observing the regulations on budget

transparency

A recently held conference attempted to

seek solutions to boost budget transparency,

management efficiency and citizens’

accessibility to the issues regarding the

government budget

International Budget (23 February 2013)

The Bangko Sentral ng Pilipinas (BSP) prepares for reversal of funds. The recent increase in foreign portfolio

investments in major Asian economies have

prompted central banks to implement several

measures to either temper or avoid macro-

wide adverse effects such as the appreciation

of local currencies, accelerated inflation and

asset bubbles

The BSP said it was prepared to implement

measures that will help keep stability in the

country’s financial sector in the event full

recovery of the US and EU leads to capital flight

away from Asia

BSP Governor Amando Tetangco Jr. said

that while the central bank is currently

preoccupied with managing growing

liquidity brought by rising foreign portfolio

investments, it also has in mind the possibility

of a reversal of the on-going trend

Safety measures include prohibiting foreign

funds from investing in special deposit

accounts (SDAs) with the central bank, and

imposing limits and a higher capital charge on

banks’ holdings of non-deliverable forwards

(NDFs)

In the event of capital outflow, he said the

BSP could adjust existing limits on certain

financial transactions involving the outflow

of foreign exchange while being mindful of

timing and market volatility effects

Inquirer Business (26 February 2013)

OPEN BUDGETINDEX 2012 SCORE

Source: Open Budget Survey (2012)

(0 - 100, 100 - best score)

PARTICIPATION IN BUDGET PROCESS

Vietnam has approved a broad plan

to boost its economy by focusing

on restructuring public investment,

banks and state-owned enterprises

while controlling inflation and

maintaining growth. In response to lower consumer demand and

higher non-performing loans, Prime Minister

Nguyen Tan Dung announced a master plan

which focuses on prudent monetary policy

to tame inflation while ensuring “reasonable

growth”

However, implementation of the plan remains

a concern, given entrenched interests and

opaque decision-making

The Prime Minister has also asked the

Observers are concerned that despite

Indonesia’s economic progress, the

country is losing ground in tackling

problems of poverty and a widening

income gap. H.S. Dillon, the presidential special envoy

for poverty alleviation said poverty and

widening inequality have surfaced as issues

at elections and addressing them should be

top priority for local leaders

Currently, 28.6 million Indonesians live on

less than 260,000 Rupiah (US$27) a month,

with many more vulnerable to slipping below

the poverty line

There are also concerns that efforts to

improve the lot of the poor seem increasingly

elusive

President Yudhoyono recently said job

creation was the most effective way to

reduce poverty, but admitted this was

difficult for the extremely poor and hence

the state committed to helping them through

free schooling and health care, subsidised

rice and handouts

Vivi Alatas, senior economist at the World

Bank, said the pace of job creation has not

kept up with the growing workforce looking

for better jobs in the formal and non-

agricultural sectors

Why it matters: The challenge of

translating economic growth into tangible

improvements in quality of life suggests that

growth is a significant but insufficient factor

in addressing poverty and inequality. Arsenio

Balisacan, director-general of the Philippine

National Economic and Development

Authority, argues that the type of growth

and better targeted policies matter more in

alleviating poverty and disparity

Jakarta Globe (19 February 2013)

Vietnam

Indonesia, Philippines

05

07State Bank of Vietnam (SBV) to establish a

national asset management company to assist

burdened credit organisations by purchasing

their bad debts

Moody’s downgraded Vietnam to a B2 rating

in September last year, its lowest yet, citing a

weak banking sector in need of “extraordinary

support”, dealing another blow to a country

once tipped as Southeast Asia’s next emerging

market star even as many of its neighbours

prospered

Analysts said the downgrade does not

signal a full-blown banking crisis, and that the

slowing economy should return to form if the

government takes action

Business Times (14 September 2012)

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

TRANSLATING

ECONOMIC

DOHA NEGOTIATIONS ARE ON THE

RADAR AGAIN AS WTO PREPARES

VIETNAM STEPS UP BANKING

SECTOR REFORMS

WEALTH INTO

SOCIAL PROGRESSIndonesia nominated former trade minister Mari Pangestu for the leadership position of the World Trade Organization (WTO) Her nomination came on the heels of

Indonesia’s successful bid to host the WTO

biennial ministerial conference at the end of this

year

Last Thursday, she met with Nigerian ministers

in attempts to assure Nigeria that she was the

ideal candidate to lead the WTO

Why it matters: If elected, Pangestu faces the

Indonesia

06challenge of completing the much-stalled Doha

negotiations. However, she remains optimistic

that the Doha talks so far have resulted in a

balanced package, and that the challenge

of completing the ‘last mile’ can be met by

adopting an inclusive multilateral trading system

that addresses the interests of both developing

and developed countries; a tall order that is

easier said than done. If successful however, she

will change how countries and regional blocs like

ASEAN operate, trade and interact

Jakarta Post (20 February 2013) Jakarta Globe (21 February 2013)

FOR CHANGE IN LEADERSHIP

PILLARS OF THE VIETNAM PLAN

Act) has been slammed for retaining a series of restrictive provisions. The new draft legislation prohibits the publication of various topics, including material that could “disturb the rule of law”, “incite unrest”, or “violates the constitution and other existing laws”. It also requires all publications to register with the government or risk spending six months in jail and paying a 10 million kyat (US$11,621) fine.

DVB (3 March 2013)

Myanmar President Thein Sein met with members of Norway’s Myanmar community, urging them to return to their native country, while also expressing gratitude to his hosts for supporting his reform efforts. He thanked the Norwegian government for clearing Myanmar of the 3 billion Norwegian krone (US$527 million) debt that it owes the oil-rich Scandinavian country. Sein also invited Norwegian companies to invest in the energy, information and technology sector in Myanmar.

Irrwaddy (26 February 2013)

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

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

The United States authorised US entities to do business with four major Myanmar banks, extending the easing of economic sanctions in Myanmar. The new banking permission supports the July 2012 easing of US economic sanctions on Myanmar that allows for new investment into Myanmar and encourages additional US economic involvement though the financial system.

Mizzima (23 February 2013)

Opposition leader Aung San Suu Kyi has said that Myanmar “must decide for itself” whether or not to grant citizenship to the Muslim minority Rohingya, but added that the government “should listen” to foreign experts and uphold international standards in its citizenship laws. The government of President Thein Sein has given conflicting signals on how it seeks to resolve the Rohingya citizenship issue.

Irrwaddy (23 February 2013)

A new draft law intended to replace one of Myanmar’s most draconian publishing acts (1962 Printers and Publishers Registration

Myanmar emerges as new promised land for oil and gas giants. Major firms have been eyeing the potentially oil-and-gas-rich Myanmar, unperturbed by a lack of data on its proven energy reserves. The CIA estimates that Myanmar is sitting on some 50 million barrels of oil and some 283.2 billion cubic metres of natural gas. The sector currently represents 34% of the country’s exports and is expected to grow.

Mizzima (25February 2013)

The Myanmar government is currently drafting a 30-year master plan to develop the city of Yangon to an international standard with the help of the Japan International Cooperation Agency (JICA). The plan is centred on making Yangon an international level city, and efforts will be made for better supply of electricity, water and transport.

Mizzima (27 February 2013)

08 MYANMAR MONITOR

FORE IGN AFFA IRS

ECONOMY

POL I T I CS

OVERPRICED BEEF WITH

CORRUPTION ON THE SIDE, PLEASE?

Indonesia

Illicit tobacco trade in Vietnam and Cambodia is costing producers millions. Two cigarette brands distributed by two of

Cambodia’s most prominent and connected

tycoons are being smuggled from Cambodia

to Vietnam at an estimated rate of more

than 300 million packs a year, causing losses

of nearly US$ 200 million annually for local

tobacco manufacturers

The Vietnam Tobacco Association (VTA)

said the two brands, Hero and Jet, comprise

a significant portion of the illicit tobacco

trade

Smuggled cigarettes make up between

18% to 22% of the 3.5 billion packs consumed

in Vietnam each year, with Hero and Jet

controlling at least 40% of the market since

2007

In April 2011, the Cambodian Department

of General Customs and Excise signed a

memorandum of understanding with Vietnam

vowing to put in place stronger border

checks

The VTA – fearing that the legitimate

industry cannot compete on a level playing

field with transit bands - has lobbied for

tougher anti-smuggling reforms with the

Vietnamese government including a call

for higher taxes particularly on imported

cigarettes

Bangkok Post (26 February)

Jakarta scrambles to stabilise the price of beef following slashed quotas and all the problems that came with it. In 2011, Indonesia slashed quotas on beef

imports as part of its national meat-sufficiency

target of domestic supplies meeting 90% of

total meat consumption in the country

Since then, the industry has been plagued by

problems of skyrocketing prices, degradation in

meat quality and endemic corruption

Franky Sibarani, deputy secretary-general of

the Indonesian employers association Apindo,

said the big problem is that there are no good

numbers on demand and supply and therefore,

a lack of enforcement of the quota

Critics said the quotas should be reconsidered

as local production remains a long way off from

09 PROFITS UP

IN SMOKE

Cambodia, Vietnam

meeting rising local demand

Coordinating Economic Minister Hatta Rajasa

said that the supply of beef would be sped up to

stabilise skyrocketing prices by taking out beef

cattle and frozen beef stocks available at local

slaughterhouses, transporting beef from areas in

eastern parts of Indonesia via rail and ship, and

developing a cattle husbandry program

Hatta added that public auction was the

mechanism the government would use to carry

out beef importation

West Nusa Tenggara Governor Zainul Majdi

said a balanced distribution of beef can

be achieved by setting up zones for meat

distribution supplies

The Jakarta Globe (19 February 2013) Jakarta Post (25 February 2013)