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INDONESIA RECONSIDERS ITS FUEL SUBSIDIES AND HOLDS ITS BREATH Indonesia Indonesia has long been under pressure to reduce its fuel subsidies, which cost US$22 billion and was 54% over budget last year. The fiscal burden of the subsidy, exasperated by growing consumer demand which forced Indonesia to import oil and gas, contributed to the trade deficit of US$ 24.2 billion, or 2.6% of GDP This year, Indonesia is expected to consume between 46 million and 53 million kl (kilolitres)

of subsidized fuel, up from last year’s figure of 46 million kl Economists and businesspeople have intensified pressure to raise the subsidised fuel price, with fears the government is sacrificing long-term development as fuel costs fracture the budget President Susilo Bambang Yudhoyono admitted that the subsidy policy was not sustainable, and that a final policy will be announced on March 28 In the cards is a plan to restrict subsidised fuel use by private vehicles in major cities, although

critics argued that such a program had limited impact on spending in the past Why it matters: Given upcoming elections in 2014 and the experience of protests against raising fuel prices in the past, it is unlikely that Jakarta will withdraw the subsidy. More importantly, the issue highlights how domestic affairs continues to dominate the policymaking process in ASEAN member states Strait Times (14 March 2013) The Jakarta Globe (13 March 2013)



Source: CEIC


Singapore, US Singapore’s Foreign Minister, K. Shanmugam, said the city state will allow US officials to inspect the work of a research institute linked to Huawei Technologies which Washington suspects of espionage, adding that no improper transfer of technology took place between the two organisations. The Institute of Microelectronics (IME) was thrust into the spotlight last month after a report cast doubt on the apparent suicide of one of its former

researchers – US electronics engineer Shane Todd, who was found hanged in his Singapore flat in June last year The murder is suspected to involve a project between the IME and Huawei, but both have said that talks on a joint project did not progress beyond preliminary stages The Singapore Government recently expressed “deep disappointment” with the actions of US senators Max Baucus and Jon Tester who introduced legislation on March 14 to block US funding to the

IME until the US Attorney-General could certify that the FBI had full access to all evidence and records relevant to the probe US and Singapore law enforcement officers met last week to discuss the investigation into Todd’s death, with the embassy reporting “productive and forthright” outcomes consistent with the assurances provided by Washington and in accordance with the legal frameworks of both countries The Sunday Times (14 March 2013) Strait Timese (17 March 2013)



Thailand The Thai Cabinet recently approved a plan to spend 2 trillion baht (US$ 68 billion) on a high-speed railway and other transportation mega projects to drive the nation’s economic development and avoid the “middle income trap”. The project is expected to boost economic growth by one percentage point per annum for the next 7 years and


will be 100% financed by borrowings, subject to parliamentary approval However, former finance minister Thanong Bidaya expressed concern that such a move may raise public debt to more than 70% of GDP from its current level of 45%, ultimately threatening the country’s credit rating A poll conducted by the National Institution of Development Administration found that 75% of

respondents expect there to be corruption on the project, but just over half still approve of the plan Transport Minister Chatchart Sithipan defended the project, adding that “corruption and infrastructure investments are two different issues” and ensured corruption-free bidding for the infrastructure schemes The Malaysian Insider (25 March 2013) Bangkok Post (17 March 2013)


Thailand Funding problems and huge stockpiles threaten a policy that wins votes for the government. In the previous crop year alone, the Yingluck administration spent 336 billion baht (US$ 11.5 billion) to buy 21.6 million tonnes of pledged rice However, the government has failed to sell enough rice to secure funds to finance the subsidy The policy has knocked Thailand off its perch as the top rice exporter in the world and resulted in stockpiles of about 17 million

tons of milled rice – nearly twice what the country normally exports – leaving authorities struggling to find warehouse space Thai rice exporters said that it was only a matter of time before the government would have to sell grain from its stocks and possibly dump it on the world market at a loss Dr Banchob Junhasavasdikul also raised concerns that the stored rice may have become rotten and mouldy, further creating worries for consumers

Widespread hoarding in April 2008


The government responded by banning 18 varieties of paddy grown for less than 110 days from the programme Virabongsa Ramangkura, chairman of the Strategic Committee for Reconstruction and Future Development, recently expressed disagreement with the rice pledging programme, adding that the government should instead shift its focus on promoting high-value crops The New York Times (7 February 2013) Bangkok Post (14 March 2013) Bangkok Post (18 March 2013)

The Thai Flood in July 2011

Election of Prime Minister Yingluck in August 2011

Source: CEIC

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.






Indonesia The US has asked the WTO to strike down import restrictions imposed by Indonesia on horticultural and animal products. US Trade Representative Ron Kirk said Indonesia’s “complex web” of import licensing requirements and quotas have the effect of unfairly restricting US exports, and added that Indonesia is acting inconsistently with several of its WTO obligations The request for dispute settlement comes amid failed direct negotiations between the two countries Western car manufacturers complained


that they are losing out to Japanese firms owing to Indonesia’s higher tariffs and safety standards applied to imported European luxury cars relative to Japanese ones Why it matters: The disputes focuses attention on Indonesia’s trade policies as it prepares to host the APEC leaders summit in October and the ninth ministerial meeting of the WTO in December, and highlights the level of leverage and sway Indonesian trade policies have relative to its neighbours due to its sheer market size The Jakarta Globe (17 March 2013) The Jakarta Globe (15 March 2013)


Philippines Former ASEAN Secretary General Rodolfo Severino said full regional integration in ASEAN is unlikely to happen in 2015 but will be the start of a gradual step towards attaining the goal. Severino said that the 2015 timeline for the ASEAN Economic Community (AEC) is good as a benchmark for the ASEAN countries, but added that change would not happen immediately” He noted that some timelines in the ASEAN agreements have been set by leaders knowing that they cannot be met, and that implementation is ultimately dependent on domestic political climates Having implemented 300 out of a total of 342 measures, Malaysia is second to Singapore in terms of compliance to the AEC Blueprint International Trade and Industry Minister Datuk Seri Mustapa Mohamed described the 88% compliance score as commendable, and that Malaysia remains committed to its obligations He added that the business community will see further liberalisation under the 9th ASEAN Framework Agreement on Services (AFAS) Package, where 24 new sub-sectors will be earmarked for market opening in 2015

More interest rate cuts on special deposit accounts (SDAs) and greater domestic borrowing to temper the peso’s appreciation against the US dollar. Central bank Governor Amando Tetangco , Jr. has not ruled out future cuts as authorities hope to flush funds from the economy in support of consumption and investment Philippine Savings Bank President Pascual M. Garcia III said with lower gains on their SDA deposits, banks will face thinner profit margins and could prove problematic due

to the significant cost of maintaining retail operations A Cabinet official said the government also expects to source nearly all of its borrowing requirements of P150 billion (US$ 3.7 billion) for 2013 from the local debt market to address the peso’s appreciation The Philippines also aims to further cut its dependence on foreign borrowing by pursuing debt buybacks, swaps and global local-currency denominated bonds to better manage its debt load and win its first investment-grade rating Business World (20 March 2012) Business World (21 March 2012)

2011 EXTERNAL DEBT STOCKS (public and publicly guaranteed; current US$ billion)

Manila Buletin (20 March 2013) Business Times (25 March 2013)

Source: World Bank

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.


POLITICS At least 32 people were killed and 1200 people displaced due to sectarian violence in central Myanmar over the weekend. President Thein Sein declared a state of emergency in the area on Friday.

Leaders of Myanmar’s activist group 88 Generation Students said they plan to form a political party to work for democratisation, peace and reconciliation in the country. No clear time frame has been set but the new party is likely to compete in the 2015 national elections. The Irrawaddy (19 March 2013)

The New York Times (23 March 2013)

Myanmar’s parliament agreed on 20 March to set up a commission to review the 2008 constitution, which was made by the previous military government and constitutes a 25% military share of parliamentary seats. The Opposition party NLD is hoping the changes will allow Aung San Suu Kyi to run for president in the next election. However, ruling USDP party members say the changes will be focused on allowing increased self-rule of ethnic minorities. ABC News (20 March 2013)


ECON OMY Lao Airlines will begin direct flights to Myanmar in October after a two-decade absence of air links between Vientiane and Yangon. The new air link is part of plans by Thailand, Laos, Myanmar, Cambodia and Vietnam to build better connections between the Mekong region neighbours. Bangkok Post (21 March 2013)

Google’s executive president Eric Schmidt addressed a forum on the future of the internet in Yangon on Saturday.


The World Bank Board of Directors recently approved the first Economic Management and Competitiveness Credit for Vietnam, EMCC 1, to help the country with economic management reforms for higher productivity and competitiveness EMCC 1, the first of three operations, provides US$ 250 million concessional financing to support reforms in seven key policy areas and is expected to provide a platform for deepening dialogue between development partners and the Vietnamese government with a view on helping Vietnam

Eleven Myanmar (22 March 2013)

F OREIGN AFFAIRS Vietnamese President Truong Tan Sang and Myanmar’s Vice President Nyan Tun pledged to boost bilateral ties when met in Hanoi on 20 March. Vietnam and Myanmar set a trade target of US$500 million by 2015. Xinhua (21 March 2013)

Australian Prime Minister Julia Gillard announced a new US$20.7 million aid commitment to Myanmar during Myanmar President Thein Sein’s visit to Australia last week. Australia also agreed to ease some of the restrictions on defence cooperation between the two countries. Australia Network News (18 March 2013)




Vietnam Vietnam receives support to boost its economic competitiveness and reform its banking sector.

Google opened a sub-domain for Myanmar for this occasion at www.

LITERARY PRIZE transition to a new model of growth Macroeconomic stability is a major priority for competitiveness in Vietnam, and a core objective of EMCC Canadian Foreign Minister John Baird said Canada will help Vietnam modernise and strengthen its banking system through the Banking Regulation and Supervision Support (BRASS) project, an initiative worth US$ 14 million Key areas of focus include improving the central bank’s management and supervision capacity and modernising the country’s banking system and financial regulations in accordance with international standards 4-Traders (17 March 2013) Touitrenews (16 March 2013)

Malaysia Writer Tan Twan Eng became the first Malaysian to claim the Man Asian Literary Prize, one of Asia’s main literature prizes. Tan beat four other authors in what was described as a “far-ranging and intricately layered novel” “The Garden of Evening Mists”, which was shortlisted for the Man Booker Prize in 2012, tells the story of Yun Ling Teoh, the survivor of a Japanese prison camp who in her old age looks back at the early 1950s and her relationship with the mysterious creator of thenMalaya’s only Japanese garden He welcomed the growing recognition for Asian writers in the West seeing how talented Southeast Asian voices were sometimes overlooked This year’s shortlist spanned from Turkey to Japan and included Indian Jeet Thayil whose book was shortlisted for the 2012 Man Booker Prize and Turkish Nobel Laureate Orhan Pamuk Reuters (14 March 2013)

Editorial Team: Manissa van Geyzel, Sóley Ómarsdóttir, Radin Faizal

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 118 (25 Mar 2013)  

Captures is CARI’s weekly news monitoring report, each time presenting the top 10 stories affecting ASEAN

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