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CARI CAPTURES • ISSUE 166

31 MARCH 2014

CARI

CAPTURES

ASEAN REGIONAL

01 Bumi episode Comes to a Close INDONESIA

Source: eFinancial News

Following years of turmoil and scandals, the Bakrie family has cut all ties with Nat Rothschild’s Bumi Plc in a US$500 million restructuring deal; said deal is expected to yield cash repayments amounting to US$40 million to shareholders. Now known as Asia Resource Minearals (ARMS) instead of Bumi plc, the restructuring deal left Rothschild with a 17% stake in the company, whilst Samin Tan, the company’s chairman, now holds 47.6% of the firm after purchasing the Bakrie’s stake While the restructuring deal has been in the works since October 2012, efforts by the Bakries to cut ties with Rothschild were hampered by

declining share values caused by slumping coal prices as the family sought the required funds to exit The transaction involves the Bakries buying ARMS’ 29.2% stake in PT Bumi Resources, whilst Samin Tan purchases the Bakrie family’s 23.8% stake in ARMS for $223 millio; said transaction has resulted in a 1.3% fall in ARMS stock on the LSE over the course of the following day, reducing company value to US$903 million The deal will, however, will allow for ARMS to move forward unhampered by a divided board of directors, a board whose first order of business will be to complete a US$1.3 billion debt swap with China Investment Corp Bloomberg (25 Mar 2014)


CARI CAPTURES • ISSUE 166

02

31 MARCH 2014

Intermittent search for MH 370

MALAYSIA

ASEAN

Import 04 Strong Numbers Support Filipino Recovery PHILIPPINES

Bad weather suspended the search for any remains of a Malaysian jetliner as China demanded information a day after Malaysia’s leader said the heartbreaking conclusion was that Flight 370 had crashed in the southern Indian Ocean with no survivors. A number of planes and ships which have been crisscrossing a remote area of ocean 2,500 kilometers (1,550 miles) southwest of Australia have been called off late last week due to unsafe weather conditions. The area, one of the most dangerous in the Indian Ocean had waves up to a height of 4 meters (12 feet), high winds and heavy rain It also unleashed a storm of sorrow and anger among the families of the jet’s 239 passengers and crew, 153 of them Chinese nationals Family members of the missing passengers have continuously complained at the lack of clear cut information from the Malaysian authorities about a lack of reliable information and a presumed assumption of the circumstances of the flight ‘ending’ in the Indian Ocean The Chinese government have demanded Malaysia provide them with the exact data findings that led to the conclusion that the flight and all its passengers had perished Some family members of passengers have marched on the Malaysian embassy in Beijing demanding answers, after authorities said they had concluded the missing plane crashed in the remote Indian Ocean with the loss of all 239 people on board Family members have said that they cannot accept the conclusion until they see physical evidence of a crash However, due to the unpredictable and unsafe weather conditions, search efforts by numerous nations have been staggered and an investigation is ongoing into the circumstances of flight MH 370

Filipino Imports rose by 22% in January from a year ago to US$4.7 billion; the increase can largely be attributed to an increase in a growth in electronic products which the Philippines economy exports. Filipino imports surged to three year highs as recovery efforts continue; according to Rosemarie Edillon, director general of the government’s socio-economic planning agency recently declared that this was a clear indication that economic growth is to be spurred by said increase as “a huge chunk of these exports are for production: capital goods and investments for the manufacture of other goods” Imported raw materials drove the bulk of the 22% increase in imports as demand for Filipino electronics and garments fuelled the need for resources; this resulted in a trade deficit of US$1.3 billion in January, which is also a 92% increase in the trade balance from the same period in 2013 It is expected that ASEAN’s fastest growing economy is tied to that of the region’s largest market, with China being the biggest source of imports to Filipino exports, accounting for almost 14.7% of all traded goods Phil Star (26 March 2014)

The Guardian (25 Mar 2014) NST (25 Mar 2014)

03

Singapore’s February 2014 inflation reaches a four-year low

SINGAPORE Singapore’s Consumer Price Index (CPI) rose by 0.4 percent in February as compared to previous years which was mainly caused by a drop in private road transport costs. The 0.4 percent rise in February’s CPI was the slowest since January 2010 when price levels increased by 0.2 percent every year and economists had attributed the slow pace to the high base for private road transport costs and food prices last year; but they have expected that the CPI will increase in the following months as rising wage pressure comes into effect The February’s inflation appeared slower-than-expected as Bloomberg had expected February’s inflation to be around 0.8 percent; the slow pace of inflation largely caused by private road transport costs plunging 7.1 percent in February after dropping 3.5 percent in January 2014 Meanwhile, accommodation costs in February rose gradually by 2.0 percent as compared to 2.4 percent in January and service fees also increased gradually by 8 percent in February as compared to the previous months. By taking everything into account, core inflation for this year is expected to be approximately 2 to 3 percent and the central bank, Monetary Authority of Singapore has retained its monetary policy of a gradual appreciation of the Singapore dollar Source: tradingeconomics Channel News Asia (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.


CARI CAPTURES • ISSUE 166

05

31 MARCH 2014

Malaysia to Remain Resilient Against External Shocks

MALAYSIA

Source: imf.org Moody’s Investors service has declared Malaysia’s economy to be safe from external price shocks in today’s volatile economic climate; giving the nation a A3+ credit rating, which translates to an “upper medium grade” status according to Moody’s rating system. In its most recent revision in ratings, Moody’s declared that Malaysia’s improved prospects for fiscal consolidation and reform, and continued macroeconomic stability in the face of external headwinds, are the two fundamental reasons for its recent rating hike According to Moody’s, Malaysia’s strong external position and large pool of domestic savings has limited the country’s vulnerability

resume 06 Opponents protests as Thai PM risks impeachment THAILAND

towards external financial shocks, going as far as to state that the “net portfolio inflows into Malaysia during 2010 -12 surpassed the accumulated total of the previous decade, representing potential vulnerability to a sudden stop or reversal of these flows,” In a breakdown of ratings, Moody’s also attached a A1 rating to Malaysia’s long term foreign currency bond ceiling, and an A3 rating to its long term foreign currency ceiling; furthermore, Moody’s has also affirmed that the local currency country risk ceiling will remain at A1

Moodys (25 March 2014)

labour union law 07 New to be introduced in Cambodia CAMBODIA

Anti-government demonstrators in Thailand resumed street protests on Monday after lying low for weeks, piling pressure on increasingly beleaguered Prime Minister Yingluck Shinawatra, who is expected to face impeachment within days.

Labour Minister, Mr. Sam Heng said the government was working with officials from the ILO to ensure that the country’s new union law is fully compliant with the existing state of industrial relations in the country.

A Constitutional Court in Thailand approved an application by the Prime Minister’s opponents to nullify last month’s election which has now delayed the formation of a new administration and leaves Prime Minister Shinawatra in charge of a caretaker government with limited powers This ongoing crisis which has forced her opponents to take to the streets from late November. Since then, twenty three people were killed and hundreds wounded in the political violence which only began to subside earlier this month This Court ruling provides substantial legal force for the opponents of the Prime Minister to resort to legal processes to make their point. The protests are the latest instalment of an eight-year political battle broadly pitting the Bangkok middle class and royalist establishment against the mostly rural supporters of Yingluck and her billionaire brother, former premier Thaksin Shinawatra, who was ousted in a 2006 coup The Constitutional Court annulment of the election could offer a way out of the political stalemate if the main opposition Democrat Party, which boycotted the February 2 poll, decides to run in a fresh vote; so far however, the Democrat Party has given no clear indication on what it plans to do Reuters (24 Mar 2014)

Thirty international clothing brands had recently written to the government expressing their concerns over a draft union law which could allow for the arbitrary breakup of unions In their 14 March letter, the brands said they were concerned the law may not comply with International Labour Organization (ILO) conventions that protect rights to unionize and bargain collectively “We are now preparing to establish the union law with technical sponsorship from the ILO and our policy for this law is to do it in accordance with conventions” that Cambodia has signed, the government said The Minister explained that they need to do this according to the context of Cambodia and the various valid regulations. “The union laws will provide guarantees to improve the rights and freedoms of unions as well as to prevent violations of the law when they use their rights in their capacities as unions to do illegal activities”, he said The Minister added that his letter to the brand ambassadors address a long running demand that the government ensure there is a functioning minimum wage setting mechanism in the country Cambodia Daily (26 Mar 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.


CARI CAPTURES • ISSUE 166

08

MYANMAR MONITOR

POLITICS Myanmar is currently conducting the first national census in 30 years. The government has announced that it would not allow respondents to self-identify as Rohingya, backtracking on an earlier commitment to international donors. United Nations secretary-general Ban Ki-Moon has urged Myanmar President Thein Sein to ensure that the census is conducted in a peaceful and credible manner. Myanmar Times (1 April 2014)

Economy Myanmar’s Ministry of Energy announced on 28 March the winners of the muchawaited tender for licences to explore gas and oil in 20 offshore blocks for 30-years. The list includes Royal Dutch Shell, USbased ConocoPhillips and France’s Total, but all the firms had to agree to joint ventures with a local partner as well as to invest at least US$3 billion after production-sharing contracts (PSC) are signed.

Myanmar Times (31 March 2014)

Experts at a KPMG business forum on 25 March said that joint ventures in Myanmar are a complex task for international investors, which are concerned about the local accounting practices, asset management and legal obligations. Expert stressed the benefits of preparing in advance for possible by joint venture deals by “zeroing out uncertainties and restructuring accounting practices” along international standards.

31 MARCH 2014

09

Insurance firms told to improve ahead of single market

INDONESIA Indonesia’s insurance companies need to improve their competitiveness ahead of the implementation of the ASEAN Economic Community (AEC) in 2015. Lack of competition will make it difficult for these companies to win a sufficient market share, according to an Indonesian Chamber of Commerce and Industry (Kadin) official. Kadin’s deputy chairman for banking and finance, Rosan P. Roeslani said that the introduction of the AEC offered not only a challenge but also an opportunity for the country’s insurance industry “This is an opportunity for Indonesian insurance companies to expand to other ASEAN countries, to play in the regional field,” Rosan said during a seminar in Jakarta on Tuesday He also placed great importance on expansion locally before moving to the other countries regionally

Although, generally, Indonesia’s insurance industry has seen growth in terms of assets and premiums, its penetration and density rate is still low compared to other ASEAN countries including Malaysia, Thailand and Singapore The Finance Ministry’s special staff member for finance services and capital market policies and regulations, Isa Rachmatarwata, said the nation’s insurance industry needed to be able to withstand the influx of foreign insurance workers once the AEC was launched “In order to achieve this, there must be a policy that can increase the capabilities among domestic insurance workers,” Isa said. He added that although the government had introduced several programs, such as the OJK’s 1,000 actuaries program, the results had yet to be seen

The Jakarta Post (26 Mar 2014)

Security Summit 10 Nuclear Yields Results ASEAN

Myanmar Times (31 March 2014)

Foreign Affairs The British School Foundation announced on 27 March that it plans to open a British International School in Yangon to meet growing demand for world-class education in Myanmar. The school is scheduled to open in August. The Irrawaddy (28 March 2014)

Myanmar will take part in a joint tourism promotion of the Mekong region organised by the Tourist Authority of Thailand (TAT). TAT said it will work with the Mekong Coordinating Office to develop and promote six land tour routes linking Thailand, Myanmar, Cambodia and Laos. The Irrawaddy (29 March 2014)

Though unable to address the mounting tension regarding nuclear security and Ukraine, the recent Nuclear Security Summit allowed for positive developments in Asia; Japan agreed to transfer part of its nuclear stockpile to the US, whilst Singapore and Malaysia call for further international involvement in the summit. Deputy Prime minister of Malaysia Tan Sri Muhyiddin Yassin declared that “certain nuclear powered countries” needed to be included in the summit’s discussions in order to address global nuclear armament issues in a efficient and cohesive fashion

Prime minister Lee Hsien Loong of Singapore echoed said statement, going on to affirm a need for share goals of nuclear disarmament, nuclear on-proliferation, and the peaceful use of nuclear energy; Prime minister Lee also called for further sharing of peaceful nuclear knowledge in order to expedite the regional development of nuclear energy Meanwhile, Japan pledged to transfer hundreds of kilograms of sensitive nuclear material to the US; following recent pressure from China regarding Japan’s capacity to weaponise said material, the transfer is, however, seen as an international success in nuclear disarmament The Edge Malaysia (19 Mar 2014)

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 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.


CARI Captures 166 (1 apr 2014)