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CARI CAPTURES 28 JANUARY 2013

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ISSUE 110

DAVOS MESSAGE CLEAR, SAYS KPMG CHIEF

ASEAN KPMG global chairman Michael Andrew believes that after three years of crisis management, investors are now challenging global corporations to present growth strategies with an increasing focus on the ASEAN region. The recent World Economic Forum at Davos saw a focus for growth that had previously been on BRIC nations (Brazil, Russia, India and China) switch to MINT (Mexico, Indonesia, Nigeria and Turkey) although there was an

equally strong focus on ASEAN, according to Andrew Andrew said that Malaysians were actively marketing a liberalised ASEAN Economic Community by 2015 ASEAN’s attractiveness to investors stem from critical advantages such as a 60% working population by the year 2030, low dependency ratio, growing middle class in a combined population of 600 million people, and political will by member nations to

achieve an economic community by 2015 The Oxford Business Group (OBG) said that Malaysia could also be a ‘welcoming gateway’ to the wider ASEAN marketplace for foreign investors, enabling them to leverage on its solid fundamentals, location and sound infrastructure to become an indispensable part of the ASEAN supply chain The Australian (29 January 2013) Inquirer (29 January 2013)

LAOS FINALLY CALLED OUT OVER XAYABURI DAM

Laos, Vietnam, Cambodia Ministers from Vietnam and Cambodia spoke against Laos’s Xayaburi dam at the Mekong River Commission (MRC) meeting in northern Laos on 23 January. Laos had proceeded with construction of the dam, despite an agreement made last year between Vietnam, Cambodia and Thailand, to wait until an independent environmental study was completed At last weeks MRC meeting, Cambodia demanded that all construction be immediately halted and Vietnam insisted that Laos must wait for the independent study to be completed Laos has Thai support as Thai company CH. Karnchang — through its subsidiary Xayaburi Power — has a 29 year concession to operate the dam’s 1,285 MW power plant and Thailand plans to purchase 95% of the electricity generated by the dam The livelihood of about 60 million people from Laos, Thailand, Vietnam, and Cambodia depend on the 4,000km Mekong river The Diplomat (23 January 2013) Reuters (18 January 2013)


NEW JAPANESE GOVERNMENT TO STRENGTHEN ASEAN ECONOMIC TIES Japan, ASEAN The newly elected Japanese government has clearly made engagement with ASEAN a priority, with most of the cabinet’s first visits being to countries in the region, while common economic interest between the two parties has possibly never been greater. Japan is seeking new markets amid its recession and souring relations with China, while many ASEAN countries rely on Japan’s help in funding infrastructure projects in preparation for the ASEAN Economic Community (AEC) in 2015 The newly re-elected Japanese Prime

Minister Shinzo Abe has reportedly set his eyes on the growing potential of ASEAN, and has said that the AEC could provide significant opportunities for Japan to boost its growth Japan has been very involved with Myanmar’s economic opening and has waived part of the country’s debt to Japan and pledged further funds for development projects, including in the mainly Japanese-backed Thilawa Special Economic Zone outside of Yangon Some analysts believe ASEAN countries will benefit the most from a potential economic rebound expected in Japan this year The Japanese government’s plans to reflate the economy could lead to a structurally

COMPANIES DENIED ACCESS TO GAS RESERVES WHILE THE PHILIPPINES AND CHINA DISPUTE OVER OWNERSHIP

Thailand is the coordinator of ASEAN-China relations under ASEAN and as such the Thai Foreign Ministry is planning to help resolve the conflict by organising bilateral talks The Thai Foreign Ministry’s permanent secretary Sihasak Phuangketkeow said that while the Philippines has the right to make such a request, it should not be considered an action undertaken by ASEAN, adding that he hoped the situation will not affect the wider relationship between ASEAN and China While the years-long dispute has deterred

most oil and gas companies from the region, the Filipino majority-owned but British-based company Forum Energy is eyeing a partnership with the state-owned China National Offshore Oil Corporation (CNOOC) to start drilling in the area Forum Energy has assessed the area’s potential reserves of being 3.4 trillion cubic feet of gas and possibly 10 trillion more, but the company has not received government approval to start drilling China’s ambassador to Manila said it would be better for Forum Energy and CNOOC to get to work instead of letting the reserves sit while the two countries resolve their disputes Bangkok Post (25 January 2013) Voice of America (24 January 2013)

LOCATION OF SOUTH CHINA SEA OIL AND GAS RESERVES

Source: Wordpress

Global Times (23 January 2013) The Diplomat (22 January 2013) The Star (19 January 2013)

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ASEAN

REGULATORS SEIZE OPPORTUNITIES FROM AEC

Philippines, China, ASEAN The Philippines has reported China to the United Nations under the UN Convention on the Law of the Sea, asking the UN to declare China’s claim to most of the South China Sea as invalid and illegal.

weaker yen and stronger domestic demand, according to Credit Suisse economists Some ASEAN economies’ exports may benefit from a weaker yen because of cheaper intermediate goods imports from Japan, while ASEAN countries that export end-user products to Japan, like Indonesia and Malaysia, will benefit from the stronger Japanese demand More exchanges and ceremonies between Japan and ASEAN can be expected this year as 2013 makes the 40th anniversary of ASEAN-Japan relations

ASEAN ASEAN regulators are working together to create consistency, address industry challenges in the region, and explore cooperation in the Islamic capital market. Audit regulators from Singapore, Thailand and Malaysia shared best practices and insights at the 2nd ASEAN Audit Regulators Group Forum held in Malaysia recently Issues identified include the need for professional scepticism, setting the right tone in a corporate culture, retaining talent, sharing information and setting up similar oversight bodies Nik Hasyudeen Yusoff, executive chairman of Malaysia’s Audit Oversight Board said there must be consistency and streamlining of standards to facilitate businesses, once the ASEAN Economic Community is formed in 2015 The Securities Commission (SC) also organised a workshop in collaboration with the Asian Development Bank to discuss issues and challenges relating to regulatory, operational and Shariah matters Zainal Izlan, Executive Director at the SC encouraged ASEAN to combine its resources and capabilities to leverage opportunities in Islamic capital markets, and enhance its competitiveness by achieving greater economies of scale The Star (21 January 2013)

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


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ASEAN

COUNTRIES PURSUE SUSTAINABLE GROWTH Vietnam, Thailand

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ASEAN IRON AND STEEL ASSOCIATIONS SEEK REVIEW OF FTA WITH CHINA

ASEAN Six regional iron and steel associations from Malaysia, Indonesia, Singapore, Thailand, the Philippines, and Vietnam are pushing for a review of the China ASEAN Free Trade Agreement (CAFTA) because the high influx of steel from China to ASEAN is competing directly with steel produced in ASEAN. The six members of the ASEAN Iron and Steel Council (AISC) submitted a proposal to the ASEAN Secretariat to take up the matter with China, and will also contact their respective governments — some are in the midst of taking trade actions against China’s steel products

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Chow Chong Long, president of AISC said CAFTA benefitted China instead of ASEAN, as the influx of steel products resulted in many ASEAN steel producers cutting production, causing injury to the industry ASEAN does not produce sufficient highend steel hence is a significant net importer of these products, but China’s steel are mainly commercial grades, unlike the high-end imports from Japan and Korea A point of concern for Chow is the rising increase in steel imports from China over the years, from 10% in 2009 to 23% in the first half of 2012 The Star (21 January 2013)

POPULATION ADVANTAGE SHIFTS TOWARDS ASEAN China, Philippines, ASEAN

Vietnam and Thailand announced cautious approaches to growth in order to avoid risks, including creation of asset bubbles. According to Vietnamese President Truong Tan Sang, Vietnam must accept low economic growth while it restructures its economy and should aim for annual expansion of at least 5% Growth less than 5% would be

Philippines’s demographic window is set to open as China struggles to reform their one child policy initially enacted to counter overpopulation. A government think tank is urging Chinese leaders to repeal the one-child policy act and allow two children per family by 2015 The one-child policy has resulted in social conflict, high administrative costs

and indirectly led to a sustained gender imbalance at birth The Philippines on the other hand placed top three in the population ratio rankings In terms of the elderly dependency ratio, the proportion of the population aged 65 older against the working population, the Philippines notched a healthy rate of 6% New Straits Times (1 November 2012) Business World (22 January 2013)

“dangerous,” and spur high unemployment The country should try to gradually boost growth to 7% to 8% but most importantly focus on stabilizing the macro-economy The Governor of the Bank of Thailand, Prasarn Trairatvorakul said monetary policy

CHINA-ASEAN AGE DISTRIBUTION

in 2013 would focus on balancing the goal of nurturing sustainable economic growth and reducing risk of an asset bubble If interest rates are low for too long, it may result in excessive debt creation by the private sector, or cause depositors to invest more in high risk assets that may lead to financial instability or an asset bubble in the future Trairatvorakul also said inflationary pressure was a signal that the central bank might not recommend the Monetary Policy Committee to increase the interest rate Bloomberg (22 January 2013) Bangkok Post (23 January 2013) Source: PECC, MISH Global Trend Analysis

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


09 MYANMAR MONITOR

E CO N O M Y The Central Bank of Myanmar has allowed the privately owned Asia Green Development bank to start selling shares to the public, which will allow it to prepare for listing on the stock market, expected to debut in 2015. The bank still needs approval from the Directorate of Investment and Company Administration (DICA) before it can sell shares to the public. State-owned Myanmar Agriculture Development Bank has also announced plans to become a public bank ahead of the planned stock market’s opening. Myanmar has 23 banks in total, 19 of which are privately owned. Eleven Myanmar (23 January 2013)

The Thai government is planning to develop the Mae Sot district in Tak province into a special economic zone on the Thai-Myanmar border. Mae Sot’s border trade value with Myanmar was recorded at 30 billion baht (US$1 billion) last year, the highest in northern Thailand. The government is also planning to build a second bridge between the borders to ease congestion on the existing bridge.

The exchange rates gap between official and black market exchange rates has narrowed to less than 1% since the Central Bank of Myanmar began a managed float of the kyat in April last year. When the first exchange counters were opened the difference was sometime 20-30 kyat per dollar, according to a Central Bank official. The exchange rate is now between 855862 kyat per US dollar. The Myanmar Times (21 january 2013)

Deloitte, the largest of the Big Four professional services firms, has announced that it is planning to enter the Myanmar financial market. The firm established an Independent Correspondent Firm (ICF) through leading local Myanmar professional service firm, Myanmar Vigour. Deloitte will offer tax, consulting and financial advisory, as well as accounting services. The Nation (18 January 2013)

The Ministry of Energy has announced the second round of bidding for 18 onshore oil and gas blocks. The state owned Myanma Oil and Gas Enterprise (MOGE) will serve as a partner along with at least one locally owned company. The tender was delayed in September last year due to international concerns regarding transparency and compliance with international standards.

Bangkok Post (22 January 2013)

The Myanmar Times (17 January 2013)

F OREIGN AFFAIRS Myanmar will start clearing its arrears owed to the World Bank and the Asian Development Bank (ADB) on 28 January with a bridge loan from the Japan Bank for International Cooperation. Myanmar owes the World Bank US$440 million, and the ADB a US$512 million. Myanmar has also requested a one-year IMF-monitored program to help it pursue economic reforms and clear its debt arrears. The Wlass Street Journal (27 January 2013)

The International Financial Corporation (IFC) said on 23 January it would provide US$2 million for a new microfinance bank that aims to help small businesses in Myanmar. The micro-lender, named ACLEDA MFI Myanmar, will begin operations this year. The Strait Times (23 January 2013)

India’s Defence minister A. K. Antony met with President Thein Sein on 22 January to discuss bilateral ties, especially in defence cooperation. He expressed the desire of the Indian government to strengthen ties between the two countries. News Track India (22 January 2013)

F&N BIDDING WAR ENDS

Thailand, Indonesia, Singapore The flurry of events which transpired over the last couple of months regarding the F&N takeover has finally come to a conclusion with the dropout by Overseas Union Enterprise (OUE). Securities Industry Council, Singapore’s security watchdog, intervened last week by calling an unprecedented auction on Monday to bring an end to the prolonged takeover bid

The auction was triggered because neither party declared a final bid by the council’s deadline The week started with the Thai billionaire Charoen Sirivadhanabhakni raising his bid for conglomerate Fraser & Neave (F&N) from S$8.88 per share to S$9.55 apiece Companies linked to Charoen claimed that they now hold about 40.45% of F&N after purchasing an additional 6.3% stake OUE then said it decided not to revise

its offer of S$9.08 a share as it would have had to pay a significant premium to gain control of more than 50% of F&N Overseas Union’s dropout was unexpected by many as F&N shares rose 1.7% to close at S$9.74 in Singapore trading on Monday, showing that a counterbid was expected by retail investors The Star (22 January 2013) Straits Times (19 January 2013)

F&N TAKEOVER TIMELINE

Source: Channel News Asia, BizDaily Editorial Team: Manissa van Geyzel, Sóley Ómarsdóttir, Paul Leong

Consultant Editor: Tunku ‘Abidin Muhriz

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


CARI Captures Issue 110 (28 Jan 2013)