IN THIS ISSUE In the news Major economic indicators Daily exchange rates Fung Business Intelligence Centre 10/F LiFung Tower, 888 Cheung Sha Wan Road Kowloon, Hong Kong T: (852) 2300 2470 F: (852) 2635 1598 E: [email protected]SEPTEMBER 2014 SOUTHEAS HIGHLIGHTS CAMBODIA » P.2 Political deadlock comes to an end Garment and footwear export performa Better Factory Cambodia releases the 3 2 nd Transparency Database report INDONESIA » P.3 GDP grows by 5.1% yoy in 2Q14 Anti-dumping duties may be imposed o Transportation cost is expected to soar reduced THE PHILIPPINES » P.4 Food prices stoke up inflation EU buyers explore sourcing opportuniti European Commission to endorse GSP THAILAND » P.5 GDP rebounds in 2Q14 Woolworths plans to set up a sourcing GSP privileges no longer granted by EU VIETNAM » P.6 Minimum wage set to rise 15.1% on av Garment exports gain market share in t Leather and footwear industries receive from China HIGHLIGHTS T ASIA | APRIL 2014 | 1 ance varies by market 31 st Synthesis and the on filament yarn r as fuel subsidies are ies from the country P+ application office in Bangkok U starting 2015 verage the US e bulk orders transferred
Transcript
SOUTHEAST ASIA | APRIL 2014 | 1
HIGHLIGHTS
CAMBODIA » P.2
Approved investment triples in 1H13 ILO-Better Factories Cambodia returns to public disclosure of
assessment findings Wage hikes expected in 2014
INDONESIA » P.3
Agreement signed with EU to certify legality of timbers US$28 billion in deals signed with Chinese companies Trade balance improves in August as imports of capital goods
slowed
PHILIPPINES » P.4
Manufacturing output grows by 18.3% yoy in August Daily minimum wage in Metro Manila increases to 466 pesos Philippines set to apply for the EU GSP+ scheme
THAILAND » P.6
Growth forecast trimmed due to sluggish demand Exports contract in September Special Economic Zones along border under consideration
VIETNAM » P.7
National Wage Council proposes minimum wage hike of 15-17%
Exports grow by 17.5% yoy in January-September Five airports to half fees to attract carriers
IN THIS ISSUE
In the newsMajor economic indicatorsDaily exchange rates
Fung Business Intelligence Centre10/F LiFung Tower,888 Cheung Sha Wan RoadKowloon, Hong KongT: (852) 2300 2470F: (852) 2635 1598E: [email protected]
CAMBODIA » P.2 Political deadlock comes to an end Garment and footwear export performance varies by market Better Factory Cambodia releases the 31st Synthesis and the
2nd Transparency Database report
INDONESIA » P.3 GDP grows by 5.1% yoy in 2Q14 Anti-dumping duties may be imposed on filament yarn Transportation cost is expected to soar as fuel subsidies are
reduced
THE PHILIPPINES » P.4 Food prices stoke up inflation EU buyers explore sourcing opportunities from the country European Commission to endorse GSP+ application
THAILAND » P.5 GDP rebounds in 2Q14 Woolworths plans to set up a sourcing office in Bangkok GSP privileges no longer granted by EU starting 2015
VIETNAM » P.6 Minimum wage set to rise 15.1% on average Garment exports gain market share in the US Leather and footwear industries receive bulk orders transferred
from China
SEPTEMBER 2014 HIGHLIGHTS
CAMBODIA » P.2
Approved investment triples in 1H13 ILO-Better Factories Cambodia returns to public disclosure of
assessment findings Wage hikes expected in 2014
INDONESIA » P.3
Agreement signed with EU to certify legality of timbers US$28 billion in deals signed with Chinese companies Trade balance improves in August as imports of capital goods
slowed
PHILIPPINES » P.4
Manufacturing output grows by 18.3% yoy in August Daily minimum wage in Metro Manila increases to 466 pesos Philippines set to apply for the EU GSP+ scheme
THAILAND » P.6
Growth forecast trimmed due to sluggish demand Exports contract in September Special Economic Zones along border under consideration
VIETNAM » P.7
National Wage Council proposes minimum wage hike of 15-17%
Exports grow by 17.5% yoy in January-September Five airports to half fees to attract carriers
SOUTHEAST ASIA | APRIL 2014 | 1
HIGHLIGHTS
CAMBODIA » P.2
Approved investment triples in 1H13 ILO-Better Factories Cambodia returns to public disclosure of
assessment findings Wage hikes expected in 2014
INDONESIA » P.3
Agreement signed with EU to certify legality of timbers US$28 billion in deals signed with Chinese companies Trade balance improves in August as imports of capital goods
slowed
PHILIPPINES » P.4
Manufacturing output grows by 18.3% yoy in August Daily minimum wage in Metro Manila increases to 466 pesos Philippines set to apply for the EU GSP+ scheme
THAILAND » P.6
Growth forecast trimmed due to sluggish demand Exports contract in September Special Economic Zones along border under consideration
VIETNAM » P.7
National Wage Council proposes minimum wage hike of 15-17%
Exports grow by 17.5% yoy in January-September Five airports to half fees to attract carriers
IN THIS ISSUE
In the newsMajor economic indicatorsDaily exchange rates
Fung Business Intelligence Centre10/F LiFung Tower,888 Cheung Sha Wan RoadKowloon, Hong KongT: (852) 2300 2470F: (852) 2635 1598E: [email protected]
CAMBODIA » P.2 Political deadlock comes to an end Garment and footwear export performance varies by market Better Factory Cambodia releases the 31st Synthesis and the
2nd Transparency Database report
INDONESIA » P.3 GDP grows by 5.1% yoy in 2Q14 Anti-dumping duties may be imposed on filament yarn Transportation cost is expected to soar as fuel subsidies are
reduced
THE PHILIPPINES » P.4 Food prices stoke up inflation EU buyers explore sourcing opportunities from the country European Commission to endorse GSP+ application
THAILAND » P.5 GDP rebounds in 2Q14 Woolworths plans to set up a sourcing office in Bangkok GSP privileges no longer granted by EU starting 2015
VIETNAM » P.6 Minimum wage set to rise 15.1% on average Garment exports gain market share in the US Leather and footwear industries receive bulk orders transferred
from China
SEPTEMBER 2014 HIGHLIGHTS
CAMBODIA » P.2
Approved investment triples in 1H13 ILO-Better Factories Cambodia returns to public disclosure of
assessment findings Wage hikes expected in 2014
INDONESIA » P.3
Agreement signed with EU to certify legality of timbers US$28 billion in deals signed with Chinese companies Trade balance improves in August as imports of capital goods
slowed
PHILIPPINES » P.4
Manufacturing output grows by 18.3% yoy in August Daily minimum wage in Metro Manila increases to 466 pesos Philippines set to apply for the EU GSP+ scheme
THAILAND » P.6
Growth forecast trimmed due to sluggish demand Exports contract in September Special Economic Zones along border under consideration
VIETNAM » P.7
National Wage Council proposes minimum wage hike of 15-17%
Exports grow by 17.5% yoy in January-September Five airports to half fees to attract carriers
SOUTHEAST ASIA | APRIL 2014 | 1
HIGHLIGHTS
CAMBODIA » P.2
Approved investment triples in 1H13 ILO-Better Factories Cambodia returns to public disclosure of
assessment findings Wage hikes expected in 2014
INDONESIA » P.3
Agreement signed with EU to certify legality of timbers US$28 billion in deals signed with Chinese companies Trade balance improves in August as imports of capital goods
slowed
PHILIPPINES » P.4
Manufacturing output grows by 18.3% yoy in August Daily minimum wage in Metro Manila increases to 466 pesos Philippines set to apply for the EU GSP+ scheme
THAILAND » P.6
Growth forecast trimmed due to sluggish demand Exports contract in September Special Economic Zones along border under consideration
VIETNAM » P.7
National Wage Council proposes minimum wage hike of 15-17%
Exports grow by 17.5% yoy in January-September Five airports to half fees to attract carriers
IN THIS ISSUE
In the newsMajor economic indicatorsDaily exchange rates
Fung Business Intelligence Centre10/F LiFung Tower,888 Cheung Sha Wan RoadKowloon, Hong KongT: (852) 2300 2470F: (852) 2635 1598E: [email protected]
CAMBODIA » P.2 Political deadlock comes to an end Garment and footwear export performance varies by market Better Factory Cambodia releases the 31st Synthesis and the
2nd Transparency Database report
INDONESIA » P.3 GDP grows by 5.1% yoy in 2Q14 Anti-dumping duties may be imposed on filament yarn Transportation cost is expected to soar as fuel subsidies are
reduced
THE PHILIPPINES » P.4 Food prices stoke up inflation EU buyers explore sourcing opportunities from the country European Commission to endorse GSP+ application
THAILAND » P.5 GDP rebounds in 2Q14 Woolworths plans to set up a sourcing office in Bangkok GSP privileges no longer granted by EU starting 2015
VIETNAM » P.6 Minimum wage set to rise 15.1% on average Garment exports gain market share in the US Leather and footwear industries receive bulk orders transferred
from China
SEPTEMBER 2014 HIGHLIGHTS
CAMBODIA » P.2
Approved investment triples in 1H13 ILO-Better Factories Cambodia returns to public disclosure of
assessment findings Wage hikes expected in 2014
INDONESIA » P.3
Agreement signed with EU to certify legality of timbers US$28 billion in deals signed with Chinese companies Trade balance improves in August as imports of capital goods
slowed
PHILIPPINES » P.4
Manufacturing output grows by 18.3% yoy in August Daily minimum wage in Metro Manila increases to 466 pesos Philippines set to apply for the EU GSP+ scheme
THAILAND » P.6
Growth forecast trimmed due to sluggish demand Exports contract in September Special Economic Zones along border under consideration
VIETNAM » P.7
National Wage Council proposes minimum wage hike of 15-17%
Exports grow by 17.5% yoy in January-September Five airports to half fees to attract carriers
SOUTHEAST ASIA | SEPTEMBER 2014 | 2
POLITICAL DEADLOCK COMES TO AN END
The ruling Cambodian People’s Party (CPP) andthe opposition Cambodia National Rescue Party(CNPR) reached an agreement on 22 July to sharepower in the National Assembly, putting an end tothe nearly one-year-long political deadlock.
After negotiations with the CPP, leaders of theCNPR agreed to accept the disputed electionresults and take their seats in the parliament.Under the terms of the agreement, the CNPR willhave six members in the 13-member permanentcommittee and five chiefs of the ten standingcommissions in the National Assembly. A newcomposition of the nine-member National ElectionCommittee has also come out, which comprisesfour members from each party and one consensuscandidate. And both parties agreed to bring thenext general election forward by several monthsbefore February 2018.
The political resolution is expected to bring politicalstability back to the country and boost investorconfidence. Besides, the strengthening of checksand balances in the legislative body is expected topropel reforms and improve governance.
With 55 seats won in the parliament compared toCPP’s 68 seats in July last year, the oppositionCNPR has alleged election fraud, dismissed theresults of the general election and boycotted theparliament. The deadlock led to a number of anti-government protests in Phnom Penh. Before thepolitical resolution, six opposition members werearrested and accused of leading a violent protest inmid-July that injured eight security guards.
CAMBODIA.
GARMENT AND FOOTWEAR EXPORTPERFORMANCE VARIES BY MARKET
The country’s total exports reached US$3.8 billionin 1H14, up by 20% compared to the same period
last year, according to a report from the Ministry ofCommerce as quoted by the media.
Exports of garments and footwear, whichaccounted for almost 80% of the total exports ofthe country, surged by 16% yoy to reach US$2.9billion in 1H14, but performances varied markedlyby destination. While garment and footwearexports to the EU jumped by 32% yoy to reachUS$1.1 billion in the period, those to the USwitnessed a sudden decline of 2% yoy to less thanUS$1.0 billion. Exports of garments and footwearto other markets rose by 25% yoy to US$0.8 billionin 1H14.
The impressive growth came despite persistentindustrial protests over minimum wage hike,working conditions and unpaid wages at severalfactories. The instability has put the country at riskof losing orders from western brands and retailers,particularly those from the US. Levi’s Strauss andTarget recently announced their intention to reducesourcing from Cambodia.
CAMBODIA.
BETTER FACTORY CAMBODIA RELEASESTHE 31ST SYNTHESIS AND THE 2ND
TRANSPARENCY DATABASE REPORT
The International Labour Organization’s (ILO)Better Factory Cambodia (BFC) programmereleased its 31st Synthesis Report on 30 June. Thereport covers compliance assessments conductedby the BFC on 362 garment factories and ninefootwear factories between May 2013 and April2014.
The report reveals mixed performance incompliance with the Cambodian labour law.Although the report indicates slight improvementsin proper payment of wages/benefits and highlevels of compliance on fundamental rights, non-compliance in areas related to worker’s fainting
SOUTHEAST ASIA | SEPTEMBER 2014 | 2
POLITICAL DEADLOCK COMES TO AN END
The ruling Cambodian People’s Party (CPP) andthe opposition Cambodia National Rescue Party(CNPR) reached an agreement on 22 July to sharepower in the National Assembly, putting an end tothe nearly one-year-long political deadlock.
After negotiations with the CPP, leaders of theCNPR agreed to accept the disputed electionresults and take their seats in the parliament.Under the terms of the agreement, the CNPR willhave six members in the 13-member permanentcommittee and five chiefs of the ten standingcommissions in the National Assembly. A newcomposition of the nine-member National ElectionCommittee has also come out, which comprisesfour members from each party and one consensuscandidate. And both parties agreed to bring thenext general election forward by several monthsbefore February 2018.
The political resolution is expected to bring politicalstability back to the country and boost investorconfidence. Besides, the strengthening of checksand balances in the legislative body is expected topropel reforms and improve governance.
With 55 seats won in the parliament compared toCPP’s 68 seats in July last year, the oppositionCNPR has alleged election fraud, dismissed theresults of the general election and boycotted theparliament. The deadlock led to a number of anti-government protests in Phnom Penh. Before thepolitical resolution, six opposition members werearrested and accused of leading a violent protest inmid-July that injured eight security guards.
CAMBODIA.
GARMENT AND FOOTWEAR EXPORTPERFORMANCE VARIES BY MARKET
The country’s total exports reached US$3.8 billionin 1H14, up by 20% compared to the same period
last year, according to a report from the Ministry ofCommerce as quoted by the media.
Exports of garments and footwear, whichaccounted for almost 80% of the total exports ofthe country, surged by 16% yoy to reach US$2.9billion in 1H14, but performances varied markedlyby destination. While garment and footwearexports to the EU jumped by 32% yoy to reachUS$1.1 billion in the period, those to the USwitnessed a sudden decline of 2% yoy to less thanUS$1.0 billion. Exports of garments and footwearto other markets rose by 25% yoy to US$0.8 billionin 1H14.
The impressive growth came despite persistentindustrial protests over minimum wage hike,working conditions and unpaid wages at severalfactories. The instability has put the country at riskof losing orders from western brands and retailers,particularly those from the US. Levi’s Strauss andTarget recently announced their intention to reducesourcing from Cambodia.
CAMBODIA.
BETTER FACTORY CAMBODIA RELEASESTHE 31ST SYNTHESIS AND THE 2ND
TRANSPARENCY DATABASE REPORT
The International Labour Organization’s (ILO)Better Factory Cambodia (BFC) programmereleased its 31st Synthesis Report on 30 June. Thereport covers compliance assessments conductedby the BFC on 362 garment factories and ninefootwear factories between May 2013 and April2014.
The report reveals mixed performance incompliance with the Cambodian labour law.Although the report indicates slight improvementsin proper payment of wages/benefits and highlevels of compliance on fundamental rights, non-compliance in areas related to worker’s fainting
SOUTHEAST ASIA | SEPTEMBER 2014 | 2
POLITICAL DEADLOCK COMES TO AN END
The ruling Cambodian People’s Party (CPP) andthe opposition Cambodia National Rescue Party(CNPR) reached an agreement on 22 July to sharepower in the National Assembly, putting an end tothe nearly one-year-long political deadlock.
After negotiations with the CPP, leaders of theCNPR agreed to accept the disputed electionresults and take their seats in the parliament.Under the terms of the agreement, the CNPR willhave six members in the 13-member permanentcommittee and five chiefs of the ten standingcommissions in the National Assembly. A newcomposition of the nine-member National ElectionCommittee has also come out, which comprisesfour members from each party and one consensuscandidate. And both parties agreed to bring thenext general election forward by several monthsbefore February 2018.
The political resolution is expected to bring politicalstability back to the country and boost investorconfidence. Besides, the strengthening of checksand balances in the legislative body is expected topropel reforms and improve governance.
With 55 seats won in the parliament compared toCPP’s 68 seats in July last year, the oppositionCNPR has alleged election fraud, dismissed theresults of the general election and boycotted theparliament. The deadlock led to a number of anti-government protests in Phnom Penh. Before thepolitical resolution, six opposition members werearrested and accused of leading a violent protest inmid-July that injured eight security guards.
CAMBODIA.
GARMENT AND FOOTWEAR EXPORTPERFORMANCE VARIES BY MARKET
The country’s total exports reached US$3.8 billionin 1H14, up by 20% compared to the same period
last year, according to a report from the Ministry ofCommerce as quoted by the media.
Exports of garments and footwear, whichaccounted for almost 80% of the total exports ofthe country, surged by 16% yoy to reach US$2.9billion in 1H14, but performances varied markedlyby destination. While garment and footwearexports to the EU jumped by 32% yoy to reachUS$1.1 billion in the period, those to the USwitnessed a sudden decline of 2% yoy to less thanUS$1.0 billion. Exports of garments and footwearto other markets rose by 25% yoy to US$0.8 billionin 1H14.
The impressive growth came despite persistentindustrial protests over minimum wage hike,working conditions and unpaid wages at severalfactories. The instability has put the country at riskof losing orders from western brands and retailers,particularly those from the US. Levi’s Strauss andTarget recently announced their intention to reducesourcing from Cambodia.
CAMBODIA.
BETTER FACTORY CAMBODIA RELEASESTHE 31ST SYNTHESIS AND THE 2ND
TRANSPARENCY DATABASE REPORT
The International Labour Organization’s (ILO)Better Factory Cambodia (BFC) programmereleased its 31st Synthesis Report on 30 June. Thereport covers compliance assessments conductedby the BFC on 362 garment factories and ninefootwear factories between May 2013 and April2014.
The report reveals mixed performance incompliance with the Cambodian labour law.Although the report indicates slight improvementsin proper payment of wages/benefits and highlevels of compliance on fundamental rights, non-compliance in areas related to worker’s fainting
SOUTHEAST ASIA | SEPTEMBER 2014 | 3
problems and workplace health and safety remainsconsiderable. In addition, 4% of factories coveredby the report hired child labour, doubling that of2013. The report also indicates that none of the108 strikes that took place during the reportingperiod complied with all legal requirements, andthe number of strikes has increased three-foldsince 2011. The report concludes with the BFC’srecommended actions and next steps for industrystakeholders including the Cambodian government,the Garment Manufacturer’s Association inCambodia, international buyers, employers andtrade unions to help make positive changes withinthe local garment and footwear industries.
The ILO also announced its second report onfactory-level compliance on 3 July based on BFC’sonline Transparency Database, whose coveragehad been expanded from 51 factories to 151.According to the ILO’s press release, three of the12 factories in the Low Compliance Group havemade 33 improvements and moved off the list.Meanwhile, one-third of the 92 factories on the‘Critical Issues’ list have made improvements on21 basic legal requirements, with the number ofviolations of the group down 35% to 87 betweenApril and June. These notable improvements wereattributable to the reinstatement of the ILO’stransparency reporting process.
(The two reports can be accessed onwww.betterfactories.org)
GDP GROWS BY 5.1% YOY IN 2Q14
The country’s real GDP growth inched down to5.1% yoy in the April-June quarter, slower than the5.2% yoy growth registered in the previous quarter,according to Statistics Indonesia (BPS). Thegrowth also fell short of the earlier projection (5.3%yoy) by the central bank (Bank Indonesia).
The slowdown was mainly caused by a decline inexports, especially in the exports of natural
resource commodities, as the ban on export ofcertain unprocessed mineral ores has reached fullforce. In 2Q14, exports declined by 1.0% yoy.
The main driver of economic growth in the secondquarter was household consumption, as indicatedby the improved sales in the food and beverageindustry and the paper industry, according to BankIndonesia. Consumer sentiment remained highbecause of the general elections. Investment in theconstruction sector also grew steadily.
INDONESIA.
ANTI-DUMPING DUTIES MAY BE IMPOSEDON FILAMENT YARN
Four domestic yarn producers have urged theIndonesian Anti-Dumping Committee (KADI) toplace additional tariffs on foreign yarn companieswho allegedly engaged in dumping practices in theIndonesian market between 2010 and 2012. Theinvestigation reveals that several filament yarncompanies from countries including South Korea,the Chinese Mainland, Taiwan, Malaysia, Thailandand India may be involved in dumping practices.
Before the KADI investigation is concluded, theMinister of Industry has already signaled hissupport for the imposition of anti-dumping dutieson the yarn in question. This indicates that theIndonesian government’s industrial and tradepolicies will continue to be protectionist, as alsowitnessed in the imposition of the export ban onunprocessed mineral ores since the beginning ofthis year.
While the anti-dumping duties, if imposed, willreduce imports of yarn so that the country maymaintain a healthier balance of trade, it may alsoadversely affect downstream textile and garmentmanufacturers as the duties will increaseproduction cost and thereby weaken their exportcompetitiveness. This is especially the case as thedomestic yarn industry is unable to supplyadequate high-quality yarn for export-orientedgarment production.
SOUTHEAST ASIA | SEPTEMBER 2014 | 3
problems and workplace health and safety remainsconsiderable. In addition, 4% of factories coveredby the report hired child labour, doubling that of2013. The report also indicates that none of the108 strikes that took place during the reportingperiod complied with all legal requirements, andthe number of strikes has increased three-foldsince 2011. The report concludes with the BFC’srecommended actions and next steps for industrystakeholders including the Cambodian government,the Garment Manufacturer’s Association inCambodia, international buyers, employers andtrade unions to help make positive changes withinthe local garment and footwear industries.
The ILO also announced its second report onfactory-level compliance on 3 July based on BFC’sonline Transparency Database, whose coveragehad been expanded from 51 factories to 151.According to the ILO’s press release, three of the12 factories in the Low Compliance Group havemade 33 improvements and moved off the list.Meanwhile, one-third of the 92 factories on the‘Critical Issues’ list have made improvements on21 basic legal requirements, with the number ofviolations of the group down 35% to 87 betweenApril and June. These notable improvements wereattributable to the reinstatement of the ILO’stransparency reporting process.
(The two reports can be accessed onwww.betterfactories.org)
GDP GROWS BY 5.1% YOY IN 2Q14
The country’s real GDP growth inched down to5.1% yoy in the April-June quarter, slower than the5.2% yoy growth registered in the previous quarter,according to Statistics Indonesia (BPS). Thegrowth also fell short of the earlier projection (5.3%yoy) by the central bank (Bank Indonesia).
The slowdown was mainly caused by a decline inexports, especially in the exports of natural
resource commodities, as the ban on export ofcertain unprocessed mineral ores has reached fullforce. In 2Q14, exports declined by 1.0% yoy.
The main driver of economic growth in the secondquarter was household consumption, as indicatedby the improved sales in the food and beverageindustry and the paper industry, according to BankIndonesia. Consumer sentiment remained highbecause of the general elections. Investment in theconstruction sector also grew steadily.
INDONESIA.
ANTI-DUMPING DUTIES MAY BE IMPOSEDON FILAMENT YARN
Four domestic yarn producers have urged theIndonesian Anti-Dumping Committee (KADI) toplace additional tariffs on foreign yarn companieswho allegedly engaged in dumping practices in theIndonesian market between 2010 and 2012. Theinvestigation reveals that several filament yarncompanies from countries including South Korea,the Chinese Mainland, Taiwan, Malaysia, Thailandand India may be involved in dumping practices.
Before the KADI investigation is concluded, theMinister of Industry has already signaled hissupport for the imposition of anti-dumping dutieson the yarn in question. This indicates that theIndonesian government’s industrial and tradepolicies will continue to be protectionist, as alsowitnessed in the imposition of the export ban onunprocessed mineral ores since the beginning ofthis year.
While the anti-dumping duties, if imposed, willreduce imports of yarn so that the country maymaintain a healthier balance of trade, it may alsoadversely affect downstream textile and garmentmanufacturers as the duties will increaseproduction cost and thereby weaken their exportcompetitiveness. This is especially the case as thedomestic yarn industry is unable to supplyadequate high-quality yarn for export-orientedgarment production.
SOUTHEAST ASIA | SEPTEMBER 2014 | 3
problems and workplace health and safety remainsconsiderable. In addition, 4% of factories coveredby the report hired child labour, doubling that of2013. The report also indicates that none of the108 strikes that took place during the reportingperiod complied with all legal requirements, andthe number of strikes has increased three-foldsince 2011. The report concludes with the BFC’srecommended actions and next steps for industrystakeholders including the Cambodian government,the Garment Manufacturer’s Association inCambodia, international buyers, employers andtrade unions to help make positive changes withinthe local garment and footwear industries.
The ILO also announced its second report onfactory-level compliance on 3 July based on BFC’sonline Transparency Database, whose coveragehad been expanded from 51 factories to 151.According to the ILO’s press release, three of the12 factories in the Low Compliance Group havemade 33 improvements and moved off the list.Meanwhile, one-third of the 92 factories on the‘Critical Issues’ list have made improvements on21 basic legal requirements, with the number ofviolations of the group down 35% to 87 betweenApril and June. These notable improvements wereattributable to the reinstatement of the ILO’stransparency reporting process.
(The two reports can be accessed onwww.betterfactories.org)
GDP GROWS BY 5.1% YOY IN 2Q14
The country’s real GDP growth inched down to5.1% yoy in the April-June quarter, slower than the5.2% yoy growth registered in the previous quarter,according to Statistics Indonesia (BPS). Thegrowth also fell short of the earlier projection (5.3%yoy) by the central bank (Bank Indonesia).
The slowdown was mainly caused by a decline inexports, especially in the exports of natural
resource commodities, as the ban on export ofcertain unprocessed mineral ores has reached fullforce. In 2Q14, exports declined by 1.0% yoy.
The main driver of economic growth in the secondquarter was household consumption, as indicatedby the improved sales in the food and beverageindustry and the paper industry, according to BankIndonesia. Consumer sentiment remained highbecause of the general elections. Investment in theconstruction sector also grew steadily.
INDONESIA.
ANTI-DUMPING DUTIES MAY BE IMPOSEDON FILAMENT YARN
Four domestic yarn producers have urged theIndonesian Anti-Dumping Committee (KADI) toplace additional tariffs on foreign yarn companieswho allegedly engaged in dumping practices in theIndonesian market between 2010 and 2012. Theinvestigation reveals that several filament yarncompanies from countries including South Korea,the Chinese Mainland, Taiwan, Malaysia, Thailandand India may be involved in dumping practices.
Before the KADI investigation is concluded, theMinister of Industry has already signaled hissupport for the imposition of anti-dumping dutieson the yarn in question. This indicates that theIndonesian government’s industrial and tradepolicies will continue to be protectionist, as alsowitnessed in the imposition of the export ban onunprocessed mineral ores since the beginning ofthis year.
While the anti-dumping duties, if imposed, willreduce imports of yarn so that the country maymaintain a healthier balance of trade, it may alsoadversely affect downstream textile and garmentmanufacturers as the duties will increaseproduction cost and thereby weaken their exportcompetitiveness. This is especially the case as thedomestic yarn industry is unable to supplyadequate high-quality yarn for export-orientedgarment production.
TRANSPORTATION COST IS EXPECTED TOSOAR AS FUEL SUBSIDIES ARE REDUCED
In the revised state budget passed in June, theIndonesian government has reduced the amount ofsubsidies allocated for diesel fuel and gasoline. On31 July, the state-owned oil and natural gascorporation Pertamina announced that 60% ofsubsidized diesel fuel and 58% of subsidizedgasoline allocated for this fiscal year had beenconsumed. The rest of the subsidized diesel fueland gasoline are expected to be used up by 30November and 19 December, respectively.
In response to the foreseen shortage, Pertaminaand the Indonesian Upstream Oil and GasRegulatory Agency (BPH Migas) have decided torestrict the consumption of the two subsidized fuels,so that the existing stock can last until the end ofthe year. Under the new arrangements, sales ofdiesel fuel at subsidized price are forbidden inCentral Jakarta starting on 1 August. Since 4August, sales of subsidized diesel fuel have beenlimited in Java, Bali, Kalimantan and Sumatra from8 am to 6 pm. From 6 August onwards, sales ofgasoline at subsidized price at toll roads were alsobanned.
As subsidized diesel fuel was sold at 5,500 rupiahper liter while non-subsidized diesel fuel is farmore expensive at 12,800 rupiah per liter, logisticscost may increase by as much as 70% after allsubsidies have been used up, according to theOrganization of Land Transportation Owners(Organda). The higher cost will also be passed onto other sectors of the economy. Althoughconsumption of subsidized diesel fuel is relativelysmall in Central Jakarta, and therefore the effect ofthe ban may not be immediately felt there, therestrictions could be applied nationwide in the nearfuture if the government is determined to stick tothe fuel subsidy quota.
FOOD PRICES STOKE UP INFLATION
Inflation in the Philippines, as measured by the yoygrowth rate of the consumer price index (CPI),accelerated to 4.9% in July from 4.4% in theprevious month, hitting the highest level sinceNovember 2011.
Inflation in July was driven mainly by the prices offood and non-alcoholic beverages, which isweighted 39% in the CPI basket. Severe droughtand strong typhoons disrupted the supply of rice,pushing inflation of food and non-alcoholicbeverages up to 8.2% yoy in July from 7.4% yoy inJune. Core inflation, which excludes food andenergy prices, stood at 3.0% yoy in July, slightlyhigher than the 2.8% yoy growth recorded in June.
The acceleration of inflation was also attributableto the implementation of the daytime truck ban inManila since February. The truck ban has causedcongestion in the Manila Port, which handles onethird of the country’s inbound and outbound cargo.It now takes as long as a week to offload cargo inthe Manila Port, and trucking cost has tripled to asmuch as 40,000 pesos (US$920) per trip,according to Alfredo Yao, president of thePhilippine Chamber of Commerce and Industry.
PHILIPPINES.
EU BUYERS EXPLORE SOURCINGOPPORTUNITIES FROM THE COUNTRY
Two German distributors and three Spanishretailers are looking for garments and footwearsuppliers in the country, according to a reportprepared by the Department of Trade and Industry(DTI).
Specifically, large distributors Ariston Nord WestRing (ANWR) and Katag AG are interested insourcing footwear and garments, respectively,from the country. For the Spanish retailers,
SOUTHEAST ASIA | SEPTEMBER 2014 | 4
INDONESIA.
TRANSPORTATION COST IS EXPECTED TOSOAR AS FUEL SUBSIDIES ARE REDUCED
In the revised state budget passed in June, theIndonesian government has reduced the amount ofsubsidies allocated for diesel fuel and gasoline. On31 July, the state-owned oil and natural gascorporation Pertamina announced that 60% ofsubsidized diesel fuel and 58% of subsidizedgasoline allocated for this fiscal year had beenconsumed. The rest of the subsidized diesel fueland gasoline are expected to be used up by 30November and 19 December, respectively.
In response to the foreseen shortage, Pertaminaand the Indonesian Upstream Oil and GasRegulatory Agency (BPH Migas) have decided torestrict the consumption of the two subsidized fuels,so that the existing stock can last until the end ofthe year. Under the new arrangements, sales ofdiesel fuel at subsidized price are forbidden inCentral Jakarta starting on 1 August. Since 4August, sales of subsidized diesel fuel have beenlimited in Java, Bali, Kalimantan and Sumatra from8 am to 6 pm. From 6 August onwards, sales ofgasoline at subsidized price at toll roads were alsobanned.
As subsidized diesel fuel was sold at 5,500 rupiahper liter while non-subsidized diesel fuel is farmore expensive at 12,800 rupiah per liter, logisticscost may increase by as much as 70% after allsubsidies have been used up, according to theOrganization of Land Transportation Owners(Organda). The higher cost will also be passed onto other sectors of the economy. Althoughconsumption of subsidized diesel fuel is relativelysmall in Central Jakarta, and therefore the effect ofthe ban may not be immediately felt there, therestrictions could be applied nationwide in the nearfuture if the government is determined to stick tothe fuel subsidy quota.
FOOD PRICES STOKE UP INFLATION
Inflation in the Philippines, as measured by the yoygrowth rate of the consumer price index (CPI),accelerated to 4.9% in July from 4.4% in theprevious month, hitting the highest level sinceNovember 2011.
Inflation in July was driven mainly by the prices offood and non-alcoholic beverages, which isweighted 39% in the CPI basket. Severe droughtand strong typhoons disrupted the supply of rice,pushing inflation of food and non-alcoholicbeverages up to 8.2% yoy in July from 7.4% yoy inJune. Core inflation, which excludes food andenergy prices, stood at 3.0% yoy in July, slightlyhigher than the 2.8% yoy growth recorded in June.
The acceleration of inflation was also attributableto the implementation of the daytime truck ban inManila since February. The truck ban has causedcongestion in the Manila Port, which handles onethird of the country’s inbound and outbound cargo.It now takes as long as a week to offload cargo inthe Manila Port, and trucking cost has tripled to asmuch as 40,000 pesos (US$920) per trip,according to Alfredo Yao, president of thePhilippine Chamber of Commerce and Industry.
PHILIPPINES.
EU BUYERS EXPLORE SOURCINGOPPORTUNITIES FROM THE COUNTRY
Two German distributors and three Spanishretailers are looking for garments and footwearsuppliers in the country, according to a reportprepared by the Department of Trade and Industry(DTI).
Specifically, large distributors Ariston Nord WestRing (ANWR) and Katag AG are interested insourcing footwear and garments, respectively,from the country. For the Spanish retailers,
SOUTHEAST ASIA | SEPTEMBER 2014 | 4
INDONESIA.
TRANSPORTATION COST IS EXPECTED TOSOAR AS FUEL SUBSIDIES ARE REDUCED
In the revised state budget passed in June, theIndonesian government has reduced the amount ofsubsidies allocated for diesel fuel and gasoline. On31 July, the state-owned oil and natural gascorporation Pertamina announced that 60% ofsubsidized diesel fuel and 58% of subsidizedgasoline allocated for this fiscal year had beenconsumed. The rest of the subsidized diesel fueland gasoline are expected to be used up by 30November and 19 December, respectively.
In response to the foreseen shortage, Pertaminaand the Indonesian Upstream Oil and GasRegulatory Agency (BPH Migas) have decided torestrict the consumption of the two subsidized fuels,so that the existing stock can last until the end ofthe year. Under the new arrangements, sales ofdiesel fuel at subsidized price are forbidden inCentral Jakarta starting on 1 August. Since 4August, sales of subsidized diesel fuel have beenlimited in Java, Bali, Kalimantan and Sumatra from8 am to 6 pm. From 6 August onwards, sales ofgasoline at subsidized price at toll roads were alsobanned.
As subsidized diesel fuel was sold at 5,500 rupiahper liter while non-subsidized diesel fuel is farmore expensive at 12,800 rupiah per liter, logisticscost may increase by as much as 70% after allsubsidies have been used up, according to theOrganization of Land Transportation Owners(Organda). The higher cost will also be passed onto other sectors of the economy. Althoughconsumption of subsidized diesel fuel is relativelysmall in Central Jakarta, and therefore the effect ofthe ban may not be immediately felt there, therestrictions could be applied nationwide in the nearfuture if the government is determined to stick tothe fuel subsidy quota.
FOOD PRICES STOKE UP INFLATION
Inflation in the Philippines, as measured by the yoygrowth rate of the consumer price index (CPI),accelerated to 4.9% in July from 4.4% in theprevious month, hitting the highest level sinceNovember 2011.
Inflation in July was driven mainly by the prices offood and non-alcoholic beverages, which isweighted 39% in the CPI basket. Severe droughtand strong typhoons disrupted the supply of rice,pushing inflation of food and non-alcoholicbeverages up to 8.2% yoy in July from 7.4% yoy inJune. Core inflation, which excludes food andenergy prices, stood at 3.0% yoy in July, slightlyhigher than the 2.8% yoy growth recorded in June.
The acceleration of inflation was also attributableto the implementation of the daytime truck ban inManila since February. The truck ban has causedcongestion in the Manila Port, which handles onethird of the country’s inbound and outbound cargo.It now takes as long as a week to offload cargo inthe Manila Port, and trucking cost has tripled to asmuch as 40,000 pesos (US$920) per trip,according to Alfredo Yao, president of thePhilippine Chamber of Commerce and Industry.
PHILIPPINES.
EU BUYERS EXPLORE SOURCINGOPPORTUNITIES FROM THE COUNTRY
Two German distributors and three Spanishretailers are looking for garments and footwearsuppliers in the country, according to a reportprepared by the Department of Trade and Industry(DTI).
Specifically, large distributors Ariston Nord WestRing (ANWR) and Katag AG are interested insourcing footwear and garments, respectively,from the country. For the Spanish retailers,
SOUTHEAST ASIA | SEPTEMBER 2014 | 5
department store chain El Corte Inglés is eyeingapparel and home textiles, Becara is interested inhandbags and Mango is keen on sourcing appareland fashion accessories from the country.
In June, the DTI led a delegation to Europe,visiting Paris, Frankfurt, Stuttgart, Stockholm andOslo, to promote the Philippines as a sourcingdestination for brands and retailers there. The DTIhas identified a number of products with highpotential in the EU markets, including processedfruits and marine products, organic food, auto parts,high-end garments, giftware, home furnishings andbusiness process outsourcing (BPO) service.
According to the National Statistics Office, thePhilippines exported US$556.5 million worth ofgoods to the EU in June, up by 14.3% yoy.Nevertheless, it is worth noting that during the firstsix months of 2014, exports to the EU fell 1.5% yoy.
PHILIPPINES.
EUROPEAN COMMISSION TO ENDORSEGSP+ APPLICATION
The Philippines was informed in July by theEuropean Commission (EC) that the EC is going toendorse its application for the GSP plus scheme(GSP+), according to Adrian Cristobal Jr,undersecretary of the Department of Trade andIndustry (DTI).
The EC noted that the Philippines is ticking off theGSP+ checklist by ratifying and implementing theinternational conventions required. The DTIexpects that the country will get the final approvalfrom the EU Parliament by the end of this year,allowing Philippine exporters to take advantage ofthe trade preferences by early 2015.
The GSP+ offers duty-free access to 6,274products to the EU market. According topreliminary estimates from the DTI, sectors withthe biggest projected gains include animal orvegetable fats and oils, prepared foodstuffs,textiles and garments, footwear, headwear andumbrellas, and chemical products. The projectedincrease in exports will generate more than
267,000 new jobs in the agriculture andmanufacturing sectors.
In order to be well prepared for the GSP+, the DTIhas convened a task force with industrystakeholders in cooperation with the EU’s TradeRelated Technical Assistance project. Workshopswill be held to provide support to exporters ontopics related to rules of origin, technical issuesand business practice.
GDP REBOUNDS IN 2Q14
Following a contraction of 0.5% yoy in 1Q14,Thailand’s GDP expanded unexpectedly by 0.4%yoy in 2Q14, according to the National Economicand Social Development Board (NESDB).
The expansion in the second quarter wasattributable to the increase in both domestic andexternal demand. Household consumption rose by0.2% yoy in 2Q14, compared to a fall of 3.0% yoyin the previous quarter. Total investment declinedby 6.9% yoy in the period, better than the 9.3% yoycontraction seen in 1Q14. Net exports of goodsand services also witnessed a much faster growthof 50.6% yoy in 2Q14 than the 29.1% yoy growthrecorded in the previous quarter.
The NESDB predicts Thailand’s GDP to grow by1.5-2.0% in 2014. It is expected that the economywill grow at a faster pace in the second half of theyear due to improved confidence and theresumption of relative political stability, whichbrings government administration and budgetdisbursement back to normal.
While several steps have been taken towards areturn to democratic rule, including the formation ofthe National Legislative Assembly and theappointment of the military leader General PrayuthChan-ocha as the prime minister, it will take atleast a year for the new constitution to bepromulgated and a new election to be held.
SOUTHEAST ASIA | SEPTEMBER 2014 | 5
department store chain El Corte Inglés is eyeingapparel and home textiles, Becara is interested inhandbags and Mango is keen on sourcing appareland fashion accessories from the country.
In June, the DTI led a delegation to Europe,visiting Paris, Frankfurt, Stuttgart, Stockholm andOslo, to promote the Philippines as a sourcingdestination for brands and retailers there. The DTIhas identified a number of products with highpotential in the EU markets, including processedfruits and marine products, organic food, auto parts,high-end garments, giftware, home furnishings andbusiness process outsourcing (BPO) service.
According to the National Statistics Office, thePhilippines exported US$556.5 million worth ofgoods to the EU in June, up by 14.3% yoy.Nevertheless, it is worth noting that during the firstsix months of 2014, exports to the EU fell 1.5% yoy.
PHILIPPINES.
EUROPEAN COMMISSION TO ENDORSEGSP+ APPLICATION
The Philippines was informed in July by theEuropean Commission (EC) that the EC is going toendorse its application for the GSP plus scheme(GSP+), according to Adrian Cristobal Jr,undersecretary of the Department of Trade andIndustry (DTI).
The EC noted that the Philippines is ticking off theGSP+ checklist by ratifying and implementing theinternational conventions required. The DTIexpects that the country will get the final approvalfrom the EU Parliament by the end of this year,allowing Philippine exporters to take advantage ofthe trade preferences by early 2015.
The GSP+ offers duty-free access to 6,274products to the EU market. According topreliminary estimates from the DTI, sectors withthe biggest projected gains include animal orvegetable fats and oils, prepared foodstuffs,textiles and garments, footwear, headwear andumbrellas, and chemical products. The projectedincrease in exports will generate more than
267,000 new jobs in the agriculture andmanufacturing sectors.
In order to be well prepared for the GSP+, the DTIhas convened a task force with industrystakeholders in cooperation with the EU’s TradeRelated Technical Assistance project. Workshopswill be held to provide support to exporters ontopics related to rules of origin, technical issuesand business practice.
GDP REBOUNDS IN 2Q14
Following a contraction of 0.5% yoy in 1Q14,Thailand’s GDP expanded unexpectedly by 0.4%yoy in 2Q14, according to the National Economicand Social Development Board (NESDB).
The expansion in the second quarter wasattributable to the increase in both domestic andexternal demand. Household consumption rose by0.2% yoy in 2Q14, compared to a fall of 3.0% yoyin the previous quarter. Total investment declinedby 6.9% yoy in the period, better than the 9.3% yoycontraction seen in 1Q14. Net exports of goodsand services also witnessed a much faster growthof 50.6% yoy in 2Q14 than the 29.1% yoy growthrecorded in the previous quarter.
The NESDB predicts Thailand’s GDP to grow by1.5-2.0% in 2014. It is expected that the economywill grow at a faster pace in the second half of theyear due to improved confidence and theresumption of relative political stability, whichbrings government administration and budgetdisbursement back to normal.
While several steps have been taken towards areturn to democratic rule, including the formation ofthe National Legislative Assembly and theappointment of the military leader General PrayuthChan-ocha as the prime minister, it will take atleast a year for the new constitution to bepromulgated and a new election to be held.
SOUTHEAST ASIA | SEPTEMBER 2014 | 5
department store chain El Corte Inglés is eyeingapparel and home textiles, Becara is interested inhandbags and Mango is keen on sourcing appareland fashion accessories from the country.
In June, the DTI led a delegation to Europe,visiting Paris, Frankfurt, Stuttgart, Stockholm andOslo, to promote the Philippines as a sourcingdestination for brands and retailers there. The DTIhas identified a number of products with highpotential in the EU markets, including processedfruits and marine products, organic food, auto parts,high-end garments, giftware, home furnishings andbusiness process outsourcing (BPO) service.
According to the National Statistics Office, thePhilippines exported US$556.5 million worth ofgoods to the EU in June, up by 14.3% yoy.Nevertheless, it is worth noting that during the firstsix months of 2014, exports to the EU fell 1.5% yoy.
PHILIPPINES.
EUROPEAN COMMISSION TO ENDORSEGSP+ APPLICATION
The Philippines was informed in July by theEuropean Commission (EC) that the EC is going toendorse its application for the GSP plus scheme(GSP+), according to Adrian Cristobal Jr,undersecretary of the Department of Trade andIndustry (DTI).
The EC noted that the Philippines is ticking off theGSP+ checklist by ratifying and implementing theinternational conventions required. The DTIexpects that the country will get the final approvalfrom the EU Parliament by the end of this year,allowing Philippine exporters to take advantage ofthe trade preferences by early 2015.
The GSP+ offers duty-free access to 6,274products to the EU market. According topreliminary estimates from the DTI, sectors withthe biggest projected gains include animal orvegetable fats and oils, prepared foodstuffs,textiles and garments, footwear, headwear andumbrellas, and chemical products. The projectedincrease in exports will generate more than
267,000 new jobs in the agriculture andmanufacturing sectors.
In order to be well prepared for the GSP+, the DTIhas convened a task force with industrystakeholders in cooperation with the EU’s TradeRelated Technical Assistance project. Workshopswill be held to provide support to exporters ontopics related to rules of origin, technical issuesand business practice.
GDP REBOUNDS IN 2Q14
Following a contraction of 0.5% yoy in 1Q14,Thailand’s GDP expanded unexpectedly by 0.4%yoy in 2Q14, according to the National Economicand Social Development Board (NESDB).
The expansion in the second quarter wasattributable to the increase in both domestic andexternal demand. Household consumption rose by0.2% yoy in 2Q14, compared to a fall of 3.0% yoyin the previous quarter. Total investment declinedby 6.9% yoy in the period, better than the 9.3% yoycontraction seen in 1Q14. Net exports of goodsand services also witnessed a much faster growthof 50.6% yoy in 2Q14 than the 29.1% yoy growthrecorded in the previous quarter.
The NESDB predicts Thailand’s GDP to grow by1.5-2.0% in 2014. It is expected that the economywill grow at a faster pace in the second half of theyear due to improved confidence and theresumption of relative political stability, whichbrings government administration and budgetdisbursement back to normal.
While several steps have been taken towards areturn to democratic rule, including the formation ofthe National Legislative Assembly and theappointment of the military leader General PrayuthChan-ocha as the prime minister, it will take atleast a year for the new constitution to bepromulgated and a new election to be held.
SOUTHEAST ASIA | SEPTEMBER 2014 | 6
THAILAND.
WOOLWORTHS PLANS TO SET UP ASOURCING OFFICE IN BANGKOK
Woolworths, the largest supermarket chain inAustralia, plans to source more from Thailand.Organized by the Department of InternationalTrade Promotion, Woolworths’ executives heldbusiness meetings with around 60 Thai companiesin late July to explore sourcing opportunities.According to the local media, about 80% of thosecompanies sell fresh food such as seafood, fruitsand vegetables, and the rest supply generalmerchandise such as furniture, home decorations,electronics, toys, health and beauty products, andclothing. Currently, Woolworths sources generalmerchandise and processed food from Thailand.
The Australian retailer also plans to set up asourcing office of up to 10 people in Bangkok. Ithas opened similar offices in Hong Kong,Shanghai and Dhaka in recent years.
It is reported that Woolworths is planning to sourceprimarily general merchandise from Thailand, assourcing food (particularly fresh food) locally fromAustralia remains a strong commitment from theretailer.
THAILAND.
GSP PRIVILEGES NO LONGER GRANTEDBY EU STARTING 2015
As an upper-middle income country during 2011-2013, as classified by the World Bank, Thailand isno longer a beneficiary under the EU’s newGeneralized Scheme of Preferences (GSP) sinceJanuary this year. Following a one-year transitionalperiod, the country will lose all GSP privileges fromthe EU in January 2015.
According to a study conducted by the EconomicIntelligence Centre of the Siam Commercial Bank,723 products will be subject to higher tariffs to theEU market starting 2015. Among them, frozenshrimp, octopus, motorcycles, apparel, plasticsand refrigerator compressors will be severely
affected due to their heavy reliance on tariffprivileges. For example, exports of deepwater roseshrimp to the EU will face tariffs as high as 12%compare to the current 4.2%, while tariffs on Thaiapparel will increase to 12% from 9.6%. However,the study expects the overall impact on Thailand’sexports to be low, as only 0.5% of the total exportswill be affected.
Exporters are preparing themselves for the realitypost-GSP. Apart from negotiating with EU buyersfor higher prices to compensate for the tariff hike,some exporters are relocating their plants toneighbouring countries, such as Bangladesh,Cambodia, Laos and Myanmar, as those countriesare GSP beneficiaries to the EU market.Meanwhile, they are pinning high hopes on theThailand-EU FTA, although the negotiations couldbe delayed due to the political instability inThailand.
MINIMUM WAGE SET TO RISE 15.1% ONAVERAGE
The National Wage Council, established in July2013 to replace the Ministry of Labour asVietnam’s minimum wage oversight body, hasagreed on a proposal to raise the minimum wagerates for 2015 by an average of 15.1%. If approvedby the government, the change is expected to takeeffect on 1 January, 2015.
The proposed minimum wage hike has taken intoaccount inflation levels, the country’s overalleconomic growth, current wage levels and thecosts of necessities. At present, the regionalminimum wages are only 70% of living wages, agap which is targeted to be closed by 2017,according to Pham Minh Huan, Deputy Minister ofLabour, Invalids and Social Affairs and Chairmanof the National Wage Council.
SOUTHEAST ASIA | SEPTEMBER 2014 | 6
THAILAND.
WOOLWORTHS PLANS TO SET UP ASOURCING OFFICE IN BANGKOK
Woolworths, the largest supermarket chain inAustralia, plans to source more from Thailand.Organized by the Department of InternationalTrade Promotion, Woolworths’ executives heldbusiness meetings with around 60 Thai companiesin late July to explore sourcing opportunities.According to the local media, about 80% of thosecompanies sell fresh food such as seafood, fruitsand vegetables, and the rest supply generalmerchandise such as furniture, home decorations,electronics, toys, health and beauty products, andclothing. Currently, Woolworths sources generalmerchandise and processed food from Thailand.
The Australian retailer also plans to set up asourcing office of up to 10 people in Bangkok. Ithas opened similar offices in Hong Kong,Shanghai and Dhaka in recent years.
It is reported that Woolworths is planning to sourceprimarily general merchandise from Thailand, assourcing food (particularly fresh food) locally fromAustralia remains a strong commitment from theretailer.
THAILAND.
GSP PRIVILEGES NO LONGER GRANTEDBY EU STARTING 2015
As an upper-middle income country during 2011-2013, as classified by the World Bank, Thailand isno longer a beneficiary under the EU’s newGeneralized Scheme of Preferences (GSP) sinceJanuary this year. Following a one-year transitionalperiod, the country will lose all GSP privileges fromthe EU in January 2015.
According to a study conducted by the EconomicIntelligence Centre of the Siam Commercial Bank,723 products will be subject to higher tariffs to theEU market starting 2015. Among them, frozenshrimp, octopus, motorcycles, apparel, plasticsand refrigerator compressors will be severely
affected due to their heavy reliance on tariffprivileges. For example, exports of deepwater roseshrimp to the EU will face tariffs as high as 12%compare to the current 4.2%, while tariffs on Thaiapparel will increase to 12% from 9.6%. However,the study expects the overall impact on Thailand’sexports to be low, as only 0.5% of the total exportswill be affected.
Exporters are preparing themselves for the realitypost-GSP. Apart from negotiating with EU buyersfor higher prices to compensate for the tariff hike,some exporters are relocating their plants toneighbouring countries, such as Bangladesh,Cambodia, Laos and Myanmar, as those countriesare GSP beneficiaries to the EU market.Meanwhile, they are pinning high hopes on theThailand-EU FTA, although the negotiations couldbe delayed due to the political instability inThailand.
MINIMUM WAGE SET TO RISE 15.1% ONAVERAGE
The National Wage Council, established in July2013 to replace the Ministry of Labour asVietnam’s minimum wage oversight body, hasagreed on a proposal to raise the minimum wagerates for 2015 by an average of 15.1%. If approvedby the government, the change is expected to takeeffect on 1 January, 2015.
The proposed minimum wage hike has taken intoaccount inflation levels, the country’s overalleconomic growth, current wage levels and thecosts of necessities. At present, the regionalminimum wages are only 70% of living wages, agap which is targeted to be closed by 2017,according to Pham Minh Huan, Deputy Minister ofLabour, Invalids and Social Affairs and Chairmanof the National Wage Council.
SOUTHEAST ASIA | SEPTEMBER 2014 | 6
THAILAND.
WOOLWORTHS PLANS TO SET UP ASOURCING OFFICE IN BANGKOK
Woolworths, the largest supermarket chain inAustralia, plans to source more from Thailand.Organized by the Department of InternationalTrade Promotion, Woolworths’ executives heldbusiness meetings with around 60 Thai companiesin late July to explore sourcing opportunities.According to the local media, about 80% of thosecompanies sell fresh food such as seafood, fruitsand vegetables, and the rest supply generalmerchandise such as furniture, home decorations,electronics, toys, health and beauty products, andclothing. Currently, Woolworths sources generalmerchandise and processed food from Thailand.
The Australian retailer also plans to set up asourcing office of up to 10 people in Bangkok. Ithas opened similar offices in Hong Kong,Shanghai and Dhaka in recent years.
It is reported that Woolworths is planning to sourceprimarily general merchandise from Thailand, assourcing food (particularly fresh food) locally fromAustralia remains a strong commitment from theretailer.
THAILAND.
GSP PRIVILEGES NO LONGER GRANTEDBY EU STARTING 2015
As an upper-middle income country during 2011-2013, as classified by the World Bank, Thailand isno longer a beneficiary under the EU’s newGeneralized Scheme of Preferences (GSP) sinceJanuary this year. Following a one-year transitionalperiod, the country will lose all GSP privileges fromthe EU in January 2015.
According to a study conducted by the EconomicIntelligence Centre of the Siam Commercial Bank,723 products will be subject to higher tariffs to theEU market starting 2015. Among them, frozenshrimp, octopus, motorcycles, apparel, plasticsand refrigerator compressors will be severely
affected due to their heavy reliance on tariffprivileges. For example, exports of deepwater roseshrimp to the EU will face tariffs as high as 12%compare to the current 4.2%, while tariffs on Thaiapparel will increase to 12% from 9.6%. However,the study expects the overall impact on Thailand’sexports to be low, as only 0.5% of the total exportswill be affected.
Exporters are preparing themselves for the realitypost-GSP. Apart from negotiating with EU buyersfor higher prices to compensate for the tariff hike,some exporters are relocating their plants toneighbouring countries, such as Bangladesh,Cambodia, Laos and Myanmar, as those countriesare GSP beneficiaries to the EU market.Meanwhile, they are pinning high hopes on theThailand-EU FTA, although the negotiations couldbe delayed due to the political instability inThailand.
MINIMUM WAGE SET TO RISE 15.1% ONAVERAGE
The National Wage Council, established in July2013 to replace the Ministry of Labour asVietnam’s minimum wage oversight body, hasagreed on a proposal to raise the minimum wagerates for 2015 by an average of 15.1%. If approvedby the government, the change is expected to takeeffect on 1 January, 2015.
The proposed minimum wage hike has taken intoaccount inflation levels, the country’s overalleconomic growth, current wage levels and thecosts of necessities. At present, the regionalminimum wages are only 70% of living wages, agap which is targeted to be closed by 2017,according to Pham Minh Huan, Deputy Minister ofLabour, Invalids and Social Affairs and Chairmanof the National Wage Council.
SOUTHEAST ASIA | SEPTEMBER 2014 | 7
Exhibit 1 | Proposed monthly minimum wage by region
2015 (proposed) 2014 Increase
Zone 1 3.1 million dong (US$146) 2.7 million dong (US$127) 14.8%
Zone 2 2.75 million dong (US$130) 2.4 million dong (US$113) 14.6%
Zone 3 2.42 million dong (US$114) 2.1 million dong (US$99) 15.2%
Zone 4 2.2 million dong (US$104) 1.9 million dong (US$90) 15.8%Note: Zone 1 covers the urban parts of Hanoi and Ho Chi Minh City; Zone 2 is applicable to the rural areas of Hanoi and Ho Chi MinhCity along with the urban sections of Can Tho City, Da Nang City and Hai Phong City; Zone 3 comprises provincial level cities and thedistricts of Bac Ninh Province, Bac Giang Province, Hai Duong Province and Vinh Phuc Province; and Zone 4 consists of the remaininglocalities.Currency conversions are based on the USD:VND spot rate published by Bloomberg on 18 August
The impact of the minimum wage hike is expectedto be minimal, as it is set much lower than thewages currently being paid. A survey of 2.5 millionworkers conducted by the Ministry of Labour,Invalids and Social Affairs last year revealed thattheir average wage was as high as 5 million donga month. Besides, according to the Japan ExternalTrade Organization (JETRO), the Japanese-affiliated companies in Vietnam were payingmanufacturing workers US$162 per month onaverage, excluding benefits, as of October 2013.
VIETNAM.
GARMENT EXPORTS GAIN MARKET SHAREIN THE US
In 1H14, the US imported US$38.2 billion worth ofknitted and woven garment products from aroundthe world, representing a year-on-year increase of
3.0%, according to data from the US Departmentof Commerce. Our research reveals that garmentexports from Vietnam has been gaining marketshare in the US, to the detriment of garmentexports from Indonesia, Bangladesh andCambodia.
Vietnam’s garment exports to the US witnessed a15.6% yoy growth in 1H14, accounting for 11.1%of the US’s total garment imports, a markedincrease from the 9.9% share in 1H13. In contrast,the market share of Bangladeshi garment exportsin the US dropped to 6.3% from 6.6% a year ago.
The shift from lower-cost production countries toVietnam is attributable to the growing concernsfrom US consumers over social sustainability andcompliance issues such as factory safety andworking conditions.
Exhibit 2 | The US’s imports of knitted and woven garment products
Source: International Trade Administration, US Department of Commerce
SOUTHEAST ASIA | APRIL 2014 | 8
VIETNAM.
LEATHER AND FOOTWEAR INDUSTRIESRECEIVE BULK ORDERS TRANSFERREDFROM CHINA
A number of the world’s leading brands shiftedtheir orders from factories in China andBangladesh to Vietnam in the first half of this year,according to the Vietnam Leather and FootwearAssociation (LEFASO). Brands named by theAssociation as transferring large footwear andleatherwear orders to Vietnam include sportsweargiants Nike, Adidas, Timberland and Puma, as wellas French leatherwear brands Lancaster Paris andSequoia Paris. Major footwear distributors TargetSourcing Services and Dansu Group were alsosaid to be expanding investment in Vietnam.
In addition to the cost advantage, Vietnamesefootwear exports enjoy benefits offered by therevised EU Generalize System of Preferences(GSP) effective from January this year. In thelatest scheme, tariff preferences to Vietnamesefootwear products are resumed after beingsuspended for 5 years, sharpening the sector’scompetitiveness in the EU market. Tariffs imposedon footwear entering the EU are now less than 4%,down from 7.7% before the revision.
The Trans-Pacific Partnership (TPP) now undernegotiation is also expected to provideopportunities for Vietnam’s footwear andleatherwear exporters if and when the agreementis concluded. Under the TPP, these products willbe able to enter key markets such as the US andJapan at preferential tariff rates.
SOUTHEAST ASIA | SEPTEMBER 2014 | 9
Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14Quarterly GDP (real yoy growth %) 5.2(1Q14) 5.1(2Q14)Production index of large and mediummanufacturing (yoy growth %) 3.8 3.7 2.2 4.2 7.3 -
* Starting from January 2014, the base year of consumer price index has changed to 2012. Data prior to 2014 use 2007 as the baseyear.Source: Statistics Indonesia, Bank Indonesia, HSBC PMI reports
Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14Quarterly GDP (real yoy growth %) 5.6(1Q14) 6.4(2Q14)Value of production index, manufacturing(yoy growth %) 6.0 1.3 12.1 12.2 10.1 -
Volume of production index,manufacturing (yoy growth %) 6.9 1.2 12.2 13.4 13.3 -
* Starting from January 2014, the base year of consumer price index has changed to 2012. Data prior to 2014 use 2007 as the baseyear.Source: Statistics Indonesia, Bank Indonesia, HSBC PMI reports
Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14Quarterly GDP (real yoy growth %) 5.6(1Q14) 6.4(2Q14)Value of production index, manufacturing(yoy growth %) 6.0 1.3 12.1 12.2 10.1 -
Volume of production index,manufacturing (yoy growth %) 6.9 1.2 12.2 13.4 13.3 -
* Starting from January 2014, the base year of consumer price index has changed to 2012. Data prior to 2014 use 2007 as the baseyear.Source: Statistics Indonesia, Bank Indonesia, HSBC PMI reports
Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14Quarterly GDP (real yoy growth %) 5.6(1Q14) 6.4(2Q14)Value of production index, manufacturing(yoy growth %) 6.0 1.3 12.1 12.2 10.1 -
Volume of production index,manufacturing (yoy growth %) 6.9 1.2 12.2 13.4 13.3 -
The Fung Group is a privately held multinational group of companies headquartered in Hong Kong whose corebusinesses are trading, logistics, distribution and retailing. The Fung Group employs over 45,000 people across 40economies worldwide, generating total revenue of more than US$22.6 billion in 2013. Fung Holdings (1937) Limited, aprivately held business entity headquartered in Hong Kong, is the major shareholder of the Fung group of companies.
The Fung Business Intelligence Centre , through its unique relationships, collects and analyses market data onChina's economy, with special reference to sourcing, supply chains, distribution and retail. It also produces reports onsourcing and trading in other Asian countries and has recently expanded its research services on the global retailindustry, where unprecedented change is being driven by technological innovation, the advent of multi-sales channelsand greater supply chain efficiency.
Serving as a knowledge bank for the Fung Group, the Centre also makes its market data and analysis available tobusinesses, scholars and governments around the world. It is an impartial thought leader on issues shaping the futureof manufacturing, distribution, logistics and retailing in China, and retailing globally. It regularly provides advice andconsultancy services to internal and external clients.
CONTACT
Fung Business Intelligence Centre10/F LiFung Tower,888 Cheung Sha Wan RoadKowloon, Hong KongT: (852) 2300 2470F: (852) 2635 1598E: [email protected]
