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16 JULY 2012

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CAPTURES

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ISSUE 85

ASEAN MEETING BREAKS DOWN ASEAN, China

ASEAN failed to reach consensus on 13 July as splits over territorial disputes with China prevented the issuing of a customary joint statement for the first time in the bloc’s history. The Philippines and Vietnam wanted the statement to include a reference to the recent standoff between China and the Philippines at a shoal in the South China Sea claimed by both countries, ASEAN Secretary-General Surin Pitsuwan said The Philippine Department of Foreign Affairs blamed host Cambodia, a close ally of China, for “consistently opposing any mention of the Scarborough Shoal at all” and for announcing that a joint communique cannot be issued

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China warned nations this week to avoid mentioning the territorial spats during the ASEAN meetings and repeated calls for joint development ASEAN had hoped to solidify a code of conduct – outlining protocols for ships’ behaviour within the area – that would then be negotiated with China Meanwhile, Japan plans to host a special summit with ASEAN late next year to strengthen maritime security cooperation at a time when China is rapidly expanding its naval capacity in Asia, government sources said on 11 July Japan and ASEAN are to issue a joint communique to serve as a new guideline for boosting maritime security ties and map out a subsequent action plan Wall Street Journal, AFP, Bloomberg, Kyodo (13 July 2012)

Why it matters: The discord over the South China Sea could adversely affect future ASEANChina negotiations, said analysts. According to the Wall Street Journal, while ASEAN has proved modestly successful at bolstering economic ties among its members, now it purports to aspire to much more, including still closer economic and security integration. A failure to take a firm stand on questions involving the sovereign territory of its members undermines that goal, discredits the organisation, and emboldens Beijing. It may also mark a setback for the US’ agenda in the region, which includes Chile, efforts to bolster ASEAN so that it can more effectively resist China’s expanding influence in the region.

Reaching out to Latin America ASEAN, Latin America

ASEAN is deepening trade and investment ties with Latin America where economic growth remains high despite a global slowdown. Opening the ASEAN-Latin Business Forum in Jakarta on 9 July, Indonesian President Susilo Bambang Yudhoyono pointed out that the two regions shared similar characteristics: large populations, growing economies and major commodity production Susilo also urged the business community

to use existing frameworks of cooperation to boost connectivity such as the Forum for East Asia-Latin America Cooperation and ASEAN-MERCUSOR The Alianza del Pacífico or the Pacific Alliance trade bloc which includes Chile, Colombia, Mexico, and Peru, has officially invited Indonesia and ASEAN to join the group as an observer The combined economies under the bloc amount to the world’s ninth largest economy with total exports representing 55% of Latin America’s overall exports

Continued next page

Indonesia Pledges US$1 Billion to IMF Indonesia confirmed a US$1 billion loan to the International Monetary Fund (IMF). The IMF has said it needs US$430 billion to support countries in financial trouble. The pledged loan from a developing country such as Indonesia is an indication of the changing economic fortunes around the world. With a troubled relationship in the past, the Indonesian government has moved to de-politicise the issue by funding the loan through the central bank. The proposed loan encountered some resistance earlier as critics said the IMF’s conditional loans during the country’s financial crisis in 1998 further crippled Indonesia. Voice of America (10 July 2012)


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The ASEAN-Latin Business Forum will now be an annual event and the next one will be held in South America Meanwhile, Latin America has developed a dangerous dependency on China as a voracious consumer of commodity exports and the region now faces a potential hit as the huge Asian economy cools Why it matters: With the slowdown in the US and European markets, ASEAN has to look for new markets outside its traditional partners Channel News Asia, Jakarta Post, Reuters (11 July 2012)

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Singapore Restricts Foreign Professionals

Starting 1 September foreign workers seeking to sponsor their spouses and children to accompany them in Singapore will need a minimum monthly income of US$3,150 up from the current US$2,206 The average wage of Singapore residents, including non-citizen permanent residents,

growth

in insurance

Singapore Singapore is imposing stricter rules for families of foreigners working in the city-state and tightening its immigration policies after public disquiet over the influx of overseas workers.

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Forecasting

is US$2,560, according to government statistics Residents blame the relatively open immigration policy for high living costs and a widening income gap The government is under pressure to placate voters without disrupting the arrival of talent and labour Why it matters: The issue of foreign workers contributed to the ruling party’s worst performance since independence in last year’s general election Wall Street Journal (10 July 2012)

Singapore Population: Citizens vs Foreigners

industry Malaysia, Indonesia, Thailand ASEAN’s lucrative insurance industry is attracting increasing attention from regional and global players. Gross direct premiums are expected to reach US$4.48 billion in 2012 and rise to US$5.49 billion in 2015, according to the Malaysia Rating Corporation, a full-service ratings agency, which released its forecasts in a research note in June Matt Harris, the CEO of Chartis Malaysia, the local branch of the international insurer, expects the syariah-compliant Islamic insurance segment – known as takaful – to continue to grow strongly Malaysia’s KSK Group plans to boost its insurance businesses in Indonesia and Thailand, both developing markets with large populations and growing middleincome groups Insurance Australia Group plans acquisitions worth around US$102 million in Indonesia, one of its target markets, and to double gross written premium contribution from Asia to 10% by 2016. Earlier this month, Britain’s Prudential and Canada’s Manulife opened offices in Cambodia Oxford Business Group, The Star, Reuters (11 July 2012)

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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MYANMAR MONITOR

Economy US President Barack Obama announced on 11 July that the US is formally easing financial sanctions, issuing two general licenses that authorise new investment in Myanmar and the export of financial services to the country, but they do not however allow any transaction with the military or the defence ministry.

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High Consumer Debts in Malaysia

Malaysia

Wall Street Journal (11 July 2012)

Myanmar officials called for consultants to help organise a telecoms bidding process that would open the new market to foreign businesses. The bidding is seen as a major opportunity for international firms to provide mobile phones to the estimated 96% of the country’s near 60 million people. AFP (10 July 2012)

International Data Corporation’s latest report predicts a 15% year-on-year growth in IT spending this year, with the market reaching US$268.45 million by 2016. The Irrawaddy (29 June 2012)

Myanmar’s central bank is poised to gain independence to set monetary policy, its deputy governor said, in the planned second wave of reforms IDC (9 July 2012)

At least eight foreign airlines have planned to resume flights to Myanmar after several years of suspension. They are Japan’s All Nippon Airways, Qatar Airways, Sri Lankan Airline, Bangladesh’s Biman Airlines, Hong Kong Express Airways, Pakistan International Airlines, Korean Air and Taipei-based EVA Air. Global Times (7 July 2012)

Politics Myanmar’s military nominated the former general U Myint Swe, who has close ties to the country’s previous military junta, to be the country’s new vice president. This is a disappointment to those who had hoped to see a known reformer replacing Tin Aung Myint Oo who resigned last week due to health reasons. Wall Street Journal (10 July 2012)

Myanmar’s President Thein Sein said that the military had no role in the government. He however added that the country has had to rely on the military for a very long time and it was important to not leave them behind entirely. Reuters (11 July 2012)

Financial Times profiles Thein Sein, a son of poor peasants leading his country away from the authoritarian regime Financial Times (11 July 2012)

Malaysians are among the worst credit card re-payers in the AsiaPacific region, according to the Nielsen Global Survey of Investment Attitudes. Less than half of respondents in Malaysia polled online said they repaid their credit cards debts in full every month

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Given this, Malaysia has one of the lowest repayment rates among the developing markets that were surveyed Singapore and Indonesia fared much better with 80% and 59% respectively, while only Vietnam came off worse than Malaysia at 27% The highest repayment rate was in Taiwan, followed by Japan and South Korea The Star (12 July 2012)

All bets on Southeast Asia ASEAN, China, India

Southeast Asia is looking more as safe haven than a risky bet, with foreign investors souring on China and India. Assets managed by offshore mutual and exchange traded funds dedicated to Southeast Asia rose to more than US$26 billion in March, according to an analysis of Lipper data “Today, India and China are the places where people are looking for beta (risk) and Indonesia and Thailand are the places where people are hiding”, said Rajesh Ranganathan, a portfolio manager at Hong Kong-based hedge fund Doric Capital, which has invested in Southeast Asia for over a decade

Southeast Asian companies are also aggressively investing in energy, financial and retail firms worldwide – for example, Petronas’ acquisition of Canada’s Progress Energy Resources and Thai state-owned PTT Exploration & Production’s bid for UKbased Cove Energy Asian banks have been fast to acquire businesses of European banks when they are up for sale and experts expect more of such deals as more European banks are expected to divest their assets to raise capital as the European debt crisis deepens Why it matters: Short-term investors in Southeast Asian stocks and bonds are being overtaken by those with a longerterm horizon, signalling growing confidence in ASEAN Reuters, Wall Street Journal, Today (11 July 2012)

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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Can Asean nations form a community by 2015?

ASEAN With concerns over the eurozone and the future of European Community, many in the region question the viability of the ASEAN Economic Community (AEC). There is the challenge of compliance (doing what we say we will do) and the challenge of impact (getting the outcomes we said we would), according to Rebecca Fatima Sta Maria, secretary-general of Malaysia’s International Trade and Industry Ministry The AEC is now in its third (2012-2013) of its four phases of implementation and to date, close to 70% of the AEC measures under phases one and two have been completed Intra-regional trade continues to grow and now amounts to 25% of ASEAN’s global trade of US$2.1 trillion

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ASEAN has been growing over 5% per annum in recent years More difficult tasks are still ahead as the grouping confronts the liberalisation of the sensitive sectors in trade, investment

and services as well as in economic sectors such as transport, agriculture, tourism and finance The Star (4 July 2012)

ASEAN Connectivity gains traction in Indonesia, Philippines Indonesia, Philippines

Pilot projects to implement ASEAN connectivity for people and goods are underway in Batam, Riau Islands, while the Philippines plans to spend a record US$9.6 billion on infrastructure in 2013. Pilot projects in Batam include the

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Roll-On Roll-Off ferry and flight routes to ASEAN countries There are currently five passenger ferry terminals linking Batam with Malaysia and Singapore, serving about 5,000 passengers per day, according to the Batam Free Trade Zone Management Board chief, Mustofa Wijaya

Mustofa invites other airlines to link Batam to ASEAN states such as the Philippines and Thailand In the Philippines, connectivity is also underway as budget secretary Florencio Abad said it plans to spend 19% more for infrastructure in 2013 Jakarta Post, The Star (10 July 2012)

PromotING Energy Efficiency through Education ASEAN Energy and education experts from US and ASEAN have devised a longterm plan to address regional energy issues through education at higher learning institutions. The US Department of Energy along with 40 other energy and education experts met at a workshop in Phnom Penh to share best practices and latest developments from the US By 2020, the pressure on ASEAN’s energy supply for 650 million people would be

enormous and it would be crucial to begin addressing tomorrow’s regional energy issues today through education, Phyllis Yoshida the US Department of Energy said The US-ASEAN Energy Efficiency Education Workshop was jointly organised by the US Department of Energy, ASEAN-US, the ASEAN Energy Centre, and the Ministry of Industry, Mines and Energy of Cambodia ASEAN Secretariat (10 July 2012)

Editorial Team: Angela Goh, Manissa van Geyzel, Chayut Setboonsarng Consultant Editor: Tunku ‘Abidin Muhriz Designer: Iqbal Hakim 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 85 (16 July 2012)  

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

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