CAPTURES ASEANREGIONAL

CARICARI CAPTURES • ISSUE 165

Despite slowed growth in its major trading partners, tighter financial

conditions around the globe, and increased inflation, the IMF has

forecasted a steady year of growth in the Malaysian economy due

to solid fundamentals.

Two key figures highlighted in the IMF’s recent press release were

Malaysia’s forecasted GDP and inflation numbers; where GDP growth

is expected to reach 5% in 2014 after growing to 4.5% in 2013, and

inflation is to increase to 3.3% in 2014 from 2.1% in 2013

Meanwhile, the Malaysian government is faced with many challenges

in the year ahead; the threat of runaway inflation, where possible

second-round effects from higher costs to prices which may end up

01

24 MARCH 2014

MALAYSIA

The Edge Malaysia (19 Mar 2014)

IMF PRojeCts steADy eConoMIC GRowth In MAlAysIA

being embedded in the wage to price structure; falling trade with

foreign partners; US federal reserve tapering

These positive projections were based on the IMF’s belief that

Malaysia has handled its fiscal responsibilities in a measured manner,

implementing its fuel subsidy cuts, introduction of goods and services

tax, and strengthening their social safety nets in a timely and strategic

manner

In addition to the government’s most recent measures, the creation

of a high level fiscal policy committee which functions in an oversight

committee is said to execute the aforementioned policies in a deliberate

manner which will also help to foster a system of balance and checks

Sources: CEIC; Data provided by the authorities: and IMF staff estimates

CARI CAPTURES • ISSUE 165 24 MARCH 2014

DISCLAIMER: The news articles contained in this report are extracted and republished from various credible news sources. 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.

Channel News Asia (19 March 2014)CNN (19 March 2014)

thAIlAnD lIFts stAte oF eMeRGenCy In BAnGkok04

Thailand made an announcement on 18 March 2014 to end an

approximately two-month long state of emergency in Bangkok and

surrounding areas with hopes to woo foreign visitors back to the

capital.

The state of emergency came into effect on 22 January 2014 in the

run-up to a 2 February 2014 general election held in the midst of

widespread anti-government protests throughout the city. This 60-day

state of emergency had granted authorities to impose curfews, detain

suspects without court permission, censor media and declare parts of

the capital off limits

Several events such as conferences, music concerts and sporting events

including the Thailand Open golf tournament were to be cancelled or

postponed due to this emergency

The state of emergency has been replaced with Internal Security Act

(ISA) that will be in effect until 30 April 2014. The ISA is critical in

maintaining law and order during the coming Senate election on 30

March 2014 and in anticipation of the general election that is expected

to be held in April

The decision to lift the state of emergency made by the caretaker

government led by Prime Minister Yingluck Shinawatra was meant

to reverse the negative impact Thailand’s political crisis has had on

domestic tourism industry and the overall economy; the use of ISA

will help rebuild a positive image of Thailand to foreign businessman,

investors and tourists

Nevertheless, Thailand’s tourism sector will require about three

months before it starts to bounce back to its pre-state of emergency’s

performance said Vice President of Tourism Council of Thailand, Sisdivachr

Cheewarattanaporn. Meanwhile, he also estimated that Thailand has

suffered a decrease of one million tourists during the last two months

with the state of emergency in effect

the missing Malaysia Airlines (MAs) Mh370's last flight position

was identified using the "Doppler effect" by the United kingdom's

Air Accident Investigation Branch (AAIB) and Inmarsat satellite.

Acting Transport Minister of Malaysia, Datuk Seri Hishammuddin Hussein

said Inmarsat had developed a second innovative technique which

traced the last position of the aircraft by considering the velocity of

the aircraft in relation to the satellite

Last week, the Malaysian government together with data received and

verified by AAIB stated that the missing flight MH 370 ‘ended’ in the

southern sector of the Indian Ocean

Based on this relative movement, the frequency received and transmitted

would differ from its normal value - called the Doppler Effect.

The Minister added that the Inmarsat technique analyses the difference

between the frequency expected to be received by the ground station

and one that was actually measured and this difference is known as

the Burst Frequency Offset

"In order to establish confidence in its theory, Inmarsat checked its

predictions using information obtained from six other B777 aircraft flying

on the same day in various directions. There was good agreement.” he

said

He added that at this stage, the location of the aircraft and the satellite

were known, so it was possible to calculate system characteristics for

the aircraft, satellite and ground station. This analysis by Inmarsat

formed the basis for further studies to attempt to determine the final

position of the aircraft

02 Mh 370: “DoPPleR eFFeCt” UseD to DeteRMIne lAst PosItIon

NST Malaysia (15 Mar 2014)

MALAYSIA

03 DBs GRoUP holDInGs ltD to BUy FRenCh leADeR soCIete GeneRAle’s AsIAn PRIvAte BAnkInG BUsIness

singapore’s DBs Bank, southeast Asia’s biggest bank has agreed

to buy societe Generale, Asian private banking business in a deal

worth US$220 million (SGD 280 million).

This agreement includes private-banking operations in Singapore and

Hong Kong and ‘selected parts’ of the French bank’s trust business.

The price quoted represents 1.75 percent of Societe Generale Private

Banking Asia’s US$12.6 billion assets as of 31 December 2013

Under the agreement, DBS could accelerate its strategic priorities to

become a leading wealth manager in Asia, in line with the trend of

growing competition to manage the wealth of Asia’s growing ranks

of millionaires and billionaires. The deal will boost DBS’s growth by

increasing its high-net-worth assets under management by 20 percent,

a year after the sale

On the other hand, the sale is likely to benefit Societe Generale by

looking at its net income and capital ratios as measured by Basel

III standards and Olivier Gougeon, Chief Executive Officer of the

French’s company as a majority of 330 staff members will join DBS

followed after the sale. From the consumer’s point of view, Societe

Generale’s Asia clients will get access to DBS’s banking services and

in turn DBS customers will able to tap into private banking and other

services in EuropeChannel News Asia (17 March 2014)

Bloomberg Businessweek (17 March 2014)

THAILAND

SINGAPOREASEAN

CARI CAPTURES • ISSUE 165 24 MARCH 2014

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

PHILIPPINES

According to a recently released report by Frost & sullivan, companies

operating in Indonesia are projected to spend approximately US$160

billion in 2014 on the transportation of goods, materials, and

merchandise.

The projected 2014 figures would mean a 14.7% increase from last

years reported US$139 billion spent on commercial logistics; growth

is said to be fuelled largely by strong growth Southeast Asia’s largest

economy, as well as a growing middle class

Growth has largely been attributed to efforts towards regional

integration, where the removal of trade barriers coupled with the

the rise in key drivers such as consumer demand, economic growth,

05 InDonesIA’s BooMInG loGIstICs InDUstRy

The Jakarta Globe (18 March 2014)

INDONESIA

06 InClUsIve GRowth CAn Be enhAnCeD thRoUGh sUstAInABle ReConstRUCtIon AnD joB CReAtIon

the Philippines expects to maintain strong growth rates in the

next three years despite the difficult global environment and the

devastation unleashed by typhoon yolanda.

Addressing the jobs challenge while ensuring timely and sustainable

reconstruction in affected areas will help disaster survivors get back

on their feet as well as mitigate future risks from calamities

World Bank Country Director Mooto Konishi said that the government’s

recent US$8 billion reconstruction will help those who have suffered

from Typhoon Yolanda

These are among the key findings of the Philippine Economic Update

(PEU) released today by the World Bank

This programme, he said, will enable the country to build better

homes, schools, health facilities, utilities, infrastructure, and livelihoods

destroyed by the super typhoon

“Over the coming years, a comprehensive agenda to support the

revival of agriculture and manufacturing will further strengthen the

country’s resilience to calamities. Reforms to secure property rights,

enhance competition, simplify regulations, and increase investments

in health, education, and infrastructure will make this happen,” said

Mr. Konishi

World Bank’s pre-Yolanda forecast puts the Philippines’ GDP growth

at 6.7 percent in 2014 and 6.8 percent in 2015

worldbank (17 Mar 2014)

PHILIPPINES

07 PhIlIPPInes ConsIDeRs FIRst soveReIGn Peso BonD swAP

the Philippines is considering offering new longer-dated peso

bonds for existing shorter-tenor notes for the first time since 2011.

This is a continuing part of our liability management to reduce

borrowing costs”, Treasurer Rosalia de Leon said in Manila today

after an auction in which the government sold seven-year debt at

the highest yield in more than a year

The Philippines government will review the maturity profile of their

debt and the current market conditions before making this move.

The Treasury will hold another sale of securities due March 2021 which

has an average yield of 3.426 percent on the seven-year bonds, the

highest since January 2013

The Philippines last conducted a peso-denominated bond exchange

in July 2011. It agreed to pay US$1.08 billion to buy back foreign-

currency notes in January

The Bangko Sentral ng Pilipinas is closely monitoring the exchange

rate and will keep a strategic presence to curb excessive volatility,

Governor Amando Tetangco said. The peso is supported by robust

economic growth, he said. Gross domestic product has increased by

more than 6 percent in each of the last eight quarters

Bloomberg (18 Mar 2014)

0

200

400

600

800

1000

1200

F R E I G H T T R A F F I C ( 2 0 0 8 - 2 0 1 3 )

314,981

To

ns

(Mil

lio

ns)

Years

Sea Fright

20

08

20

09

20

10

20

11

20

12(e

)

20

13(f

)

Rail Fright

0

200

400

600

800

1000

1200

1400

1800

T R A N S P O R T A T I O N & L O G I S T I C S M A R K E T S I Z E ( 2 0 0 7 - 2 0 1 2 )

27.8Growth % -5.8 -5.8 -5.8 -5.8ID

R (

Tri

llio

ns)

Years

HiddenLogistics Cost

T&LMarketSize

20

08

20

09

20

10

20

11

20

12(e

)

20

13(f

)

Transport,Storage &Courier

F R E I G H T M O V E M E N T I N I N D O N E S I A

and demographic shifts, have lead to strong Indonesian economic

growth in the previous through years

Past trends have continued to translate towards present projections,

as the volume of sea-borne freight is estimated to rise 4.3% to a total

of 1.04 billion tons, whilst rail transportation and air freight will grow

8.5% to 25.5 million tons and 15.3% to 1.34 million tons respectively

Whilst growth in logistics is highly promising, the lack of proper

sustainable infrastructure has impaired the full potential of Indonesia;

this is as demonstrated by rail transportations relatively weak 2013

figures

Source: Frost & Sullivan Report

CARI CAPTURES • ISSUE 165 24 MARCH 2014

DISCLAIMER: The news articles contained in this report are extracted and republished from various credible news sources. 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: Sóley Ómarsdóttir, Gokul Radhakrishnan, Yee Ken Li and Tan Lay Yan Designer: Christina Chin and in collaboration with Tan Zheng Joo Consultant Editor: Tunku ‘Abidin Muhriz

MyAnMARMonItoR08

INDONESIA

AseAn InteGRAtIon Poses thReAt to InDonesIAn ConstRUCtIon InDUstRy09

loAn GRowth to slow To 8%-9% In 2014

loan growth in Malaysia is expected to moderate to around 8% to 9% this year, from 11% in 2013.

This is due to the pace of retail loan growth

– particularly residential mortgages which

is envisaged to ease amid weaker consumer

sentiment on the heels of further subsidy

rationalization and Bank Negara Malaysia’s

macro-prudential measures.

According to RAM Rating Service Bhd,

sustained business loan growth underscored

10

The Edge Malaysia (19 Mar 2014)

PolItICs

Myanmar will hold its second by-election in September or October this year to fill at least 30 vacant seats in the Union and state-level parliaments. The seat vacancies are primarily the result of their former holders’ moves to ministerial posts or departmental positions within government.

The Irrawaddy (20 March 2014)

According to a recently released Shan Human Rights Foundation report (SHRF), two thousand villagers were forced to flee when over a thousand government troops attacked their villages in Nawng Khio township earlier this month. SHRF speculated that the authorities want to clear out any armed groups that are in the vicinity of the China’s oil and gas pipeline.

The Irrawaddy (12 March 2014)

eConoMy

Myanmar’s economic transformation is ineffective because it lacks a specific focus and is being implemented too quickly, the head of the presidential economic advisory team Dr U Myint said on March 19. U Myint said the government needed to pay more attention to the pace of economic reform but had been distracted by holding the ASEAN chair this year and the election due next year.

The Irrawaddy (22 March 2014)

About 100 Japanese firms have expressed interest in investing in Thilawa Special Economic Zone on the outskirts of Yangon after infrastructure work is completed, Japanese government trade promotion agency JETRO said. Investors are however concerned about adequate electricity supply and sufficient skilled labour. The first phase of the SEZ is scheduled to be completed by 2015.

The Irrawaddy (22 March 2014)

The Myanmar government has agreed to seek a concessional loan worth as much as US$750 million to go toward the cost of a new airport to serve Yangon, officials said on 24 March. Talks with the initial consortium chosen to develop the Hathawaddy International Airport broke down due to problems relating to finding funding for the project, which is estimated will cost in total between US$1.4 billion and US$1.5 billion.

The Irrawaddy (24 March 2014)

FoReIGn AFFAIRs

V ietnam, Thai land and Cambodia participated in discussion at the ASEAN People’s Forum on 22 March which focused on terminating six hydropower projects to be implemented on Thanlwin River. The planned dam projects are expected to generate 15,460 megawatts of electric power, of which 90% is expected to go to China and Thailand. Activists believe the projects lack transparency and will threaten livelihoods of local people as well as biodiversity in the area.

Eleven Myanmar (24 March 2014)

by a rebound in exports and the roll-out of

various government pump-priming projects

will end up driving expansion.

The co-head of financial institution ratings of

the agency, Wong Yin Ching said that Islamic

banks are also expected to maintain their

double-digit growth given their smaller bases.

The RAM Rating is projecting a gross domestic

product (GDP) growth of 5.1% this year.

whilst the single-market AseAn vision would

see the region become a global powerhouse

with a combined GDP of US$2.1 trillion, certain

industries such as Indonesia’s construction

industry may become casualties in face of

a brighter future.

Though the Indonesian construction firms

are comparative in terms of both available

labour force and the availability of building

related technology, a combination of higher

domestic lending costs and taxes mean

that the founding of an ASEAN Economic

Community in 2015 will be detrimental to

local firms

Whilst Indonesian construction firms pay

approximately 13.5% in interest, companies

based out of Singapore, Malaysia, and Thailand

only pay 3% to 4% in interest, making project

gearing in Indonesia’s neighbouring countries

cheaper and easier to obtain; according to

the Indonesian Contractors Association (AKI), The Jakarta Post (17 Mar 2014)

this key statistic exemplifies the constraints

local contraction firms face which prevent

regional expansion

Furthermore, whilst most regional firms

are faced with a progressive tax based on

project profit, Indonesian firms are subject

to a fixed domestic tax of 3% based off total

project value; a policy not conducive to SME

growth in the construction industry which

also impairs the scalability of Indonesian

firms

Meanwhile, Indonesia has signed bilateral

double treaties with 57 countries, which

include all ASEAN member nations except for

Cambodia, Laos, and Myanmar; said treaties

are expected to reduce barriers to regional

integration by preventing construction firms

from paying similar taxes already paid to

host nations

MALAYSIA

0

1

2

3

4

5

6

7

Construction Industry Growth Rates (Percent)

IND

ON

ES

IA

MA

LA

YS

IA

PH

ILIP

PIN

ES

SIN

GA

PO

RE

TH

AIL

AN

D

VIE

TN

AM

Residential P R O J E C T E D G R O W T H : 2 0 1 3 - 2 0 1 8 Infrastructure Non-Residential

Source: IHS Global Insight (2012)