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08 OCTOBER 2012

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CAPTURES

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ISSUE 96

ASEAN needs to resolve key tax issues ASEAN

ASEAN must resolve its tax issues ahead of the ASEAN Economic Community (2015) for successful economic integration. President of the, International Tax and Investment Centre, Daniel A. Witt said that “ASEAN will have to answer fundamental questions and a lot of work remains

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to be done before 2015, but it can be accomplished” Outstanding issues include how to determine the region’s tax base and which goods and services are covered The type of taxes also vary from those based on volume, prices, ad valorem taxes, or a mixture There is no need for a unified tax policy,

Indonesia Re-Arms Itself

Indonesia Indonesia will resume production of its own military hardware to modernise its weaponry. The House of Representatives on 2 October passed the Defence Industry Law, enabling its strategic industries to develop military hardware after more than 20 years of dormancy With this law in place, Indonesia will no longer import military hardware unless purchases are authorised by the House of Representatives The law stipulates that primary defence

industries that produce weaponry and strategic defence equipment shall come under the auspices of the Ministry of Defence while supporting industries shall be under the Ministry of State Enterprises China, Russia, and Germany are planning to supply defence hardware to Indonesia, but those plans are likely to be altered by the new law, analysts said Why it matters: Indonesia aims to develop its domestic defence industry to cater to boost sales to South Korea, the Philippines, Malaysia, Singapore and East Timor Jakarta Globe (3 October 2012)

but administration must be clarified, for example, details of how and who will collect taxes, how revenues are distributed, and how taxation operates cross-borders have to be clarified Witt also emphasised the role of technology that can help offset risks in transactions Business World Online (3 October 2012)


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ASEAN Exchange Link Lures Retail Investors

ASEAN The ASEAN trading link currently between Singapore and Malaysia which started on 18 September needs a strong public relations campaign to inform investors of the differing regulatory regimes of the exchanges. A potential issue is that the broker system means there is no central clearinghouse, and transactions are governed by the

standards compared to other ASEAN jurisdictions Countries may have to adjust their regulations before the link can be implemented – the recent rule change in Thailand whereby Thai security companies can now publicise research reports of foreign securities companies demonstrates this

relevant exchange’s regulator The Stock Exchange of Thailand is expected to join the link in October – collectively the three account for 67% of the total market capitalisation of the ASEAN Exchanges group, which includes Indonesia, the Philippines and Vietnam’s two bourses Singapore, Thailand and Malaysia have the benefit of high corporate governance

IFLR, Bloomberg (27 September 2012)

ASEAN Trading Link

What: A B2B gateway which allows pioneer brokers to trade directly to connected exchanges being licensed in that market. Who: Pioneer Brokers connected on the ASEAN Trading Link: Malaysia 1. AA Anthony Securities 2. Affin Invesment Bank 3. CIMB Investment Bank 4. HwangDBS Investment Bank 5. Kenanga Investment Bank 6. Maybank Investment Bank 7. Mercury Securities 8. OSK Investment Bank 9. RHB Investment Bank

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Singapore 1. CIMB Securities (Singapore) 2. DMG & Partners Securities 3. Lim & Tan Securities 4. Maybank Kim Eng Securities 5. Phillip Securities 6. UOB Kay Hian

When: Bursa Malaysia (BM) and Singapore Exchange (SGX) connected on 18 September 2012. The Stock Exchange of Thailand (SET) will be added in October 2012. Why: 1. Promote the growth of the ASEAN capital market as an asset class 2. Bring more ASEAN investment opportunities to people 3. Enhance liquidity amongst member Exchanges

Click here for media factsheet and information on how the trading link works

Thai agriculture faces the AEC

ASEAN The ASEAN Economic Community will open Thailand’s agriculture sector to ASEAN’s large market and demand, however Thai farmers will also face stiff competition from producers in Vietnam. Thai farmers will have access to larger markets especially for sugar, rice, corn, cassava, palm oil, cocoa, and coffee Myanmar has the most potential for agriculture sector growth within the CLMV (Cambodia, Laos, Myanmar, and Vietnam) countries According to a survey, Thai farmers

lack understanding of the AEC, Thailand is spending 15 times less than Vietnam in agricultural R&D and 80% of Vietnamese arable land is covered by the irrigation system compared to only 25% in Thailand Thai farmers are encouraged to improve management systems and form cooperatives to increase quality control, increase their knowledge of the AEC, and try to find high-value add niches such as halal foods for regional Muslim consumers There will be more competition in palm oil between Malaysia and Indonesia Bangkok Post, My News Hub (1 October 2012)

Source: SCB EIC analysis based on data from World Bank. FAO. and Department of Labor and Employment, Republic of the Philippines 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 Myanmar seeks to cut gas exports to Thailand to meet own needs as domestic power shortages continue to cripple the economy and scare off potential investors. Myanmar is hoping to retain 200 million cubic feet of the 1 billion cubic feet it exports to Thailand per day. Gas exports to Thailand increased from US$2.52 billion in the fiscal year 2010-2011 to US$3.50 billion in 2011-2012.

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Full Foreign Ownership?

Vietnam

Asia One (4 October 2012)

The Asian Development Bank has increased its prediction of economic growth in Myanmar for the next two years at the same time it is scaling back its prediction of growth in the region. ADB now predicts that growth in Myanmar will be 6.3% and 6.5%, while growth in the region is expected to be 6.1% and 6.7%, for 2012 and 2013, respectively. Mizzima (3 October 2012)

Myanmar is planning to set up seven more local industrial zones in addition to the 18 existing zones. Bernama (3 October 2012)

Investment banker Alisher Ali has founded Myanmar’s first investment bank - Mandalay Capital. The business is modelled on Eurasia Capital, a boutique investment bank in Ulan Bator, Mongolia, founded by Ali in 2008. Silk Road Finance is Mandalay Capital’s parent company. The Irrawaddy (2 October 2012)

Felda Global Ventures plans to develop a complete supply chain of its three core businesses – palm oil, sugar cane and rubber - in Myanmar. The group has signed a MoU with local partner, Pho La Min Trading, to explore rubber plantations and processing. New Straits Times (1 October 2012)

Politics President Thein Sein said in an interview he would accept opposition leader Aung San Suu Kyi as president if elected, but added he could not alone amend Myanmar’s constitution which currently bars her from power due to a clause that prohibits those with close foreign relatives from holding high office. The Star (30 September 2012)

Foreign Affairs US President on 5 October signed into law a measure making it easier for the United States to back international financial institutions which support Myanmar’s reform drive. New Straits Times (6 October 2012)

Vietnam is proposing to allow foreigners to take full ownership of some joint-stock companies and set up wholly owned securities firms in an effort to bolster the stock market. Overseas companies can acquire as much as 100% of the registered capital of brokerages, up from the current maximum of 49%, or establish wholly owned securities firms if they have been operating in the banking and insurance industries for two years and posted a profit in the most recent two years, according to a draft measure posted on the State Securities Commission’s website Foreign investors are very interested in buying shares of companies in some industries such as banks or consumer

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goods, according to Giang Trung Kien, head of research at FPT Securities Joint-Stock Company Meanwhile, Moody’s Investors Service cut Vietnam’s credit rating further into junk territory, citing risks the government will have to pump money into the country’s banks and the sector’s limited ability to support the economy Moody’s on 5 October downgraded Vietnam by one notch to B2 with a stable outlook and said risks to the rating were balanced going forward Why it matters: Allowing foreign investors to increase their stakes in publicly listed brokerages and joint-stock companies may boost liquidity in the stock market Bloomberg, Wall Street Journal (2 October 2012)

Gearing up for elections, not AEC Malaysia, Indonesia, Philippines, Cambodia

As election season looms in several ASEAN countries, new policies and campaigns focus on catering to domestic interest groups with no clear emphasis on preparing for the ASEAN Economic Community. Malaysia recently released the national budget geared towards an impending general election, with generous offerings of education subsidies, smartphone rebates for young voters, cash handouts, and raises in public sector salaries Indonesia’s presidential elections are scheduled for 2014 and have had an effect on the mining industry through new policies that restrict foreigners, say experts, citing a new law requiring foreign companies to divest within 10 years

The Philippines is also preparing for general elections next year and is committed to anti-corruption and antipoverty campaigns In Cambodia, two opposition parties have combined forces to face Hun Sen’s 27 year tenure in next year’s elections Why it matters: Despite reduction in subsidies, Malaysia’s budget does not have an ASEAN vision. Indonesia’s economic protectionism in its mining industry is also not promising. While Aquino’s anticorruption drive is admirable, the lack of regional outlook reminds us that ASEAN integration is not on national agendas. CNBC, CSIS, Bangkok Post, Wall Street Journal, The Jakarta Globe (2 October 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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ASEAN boosts ties with UN, GCC ASEAN, UN

ASEAN pledges to continue expanding cooperation with the United Nations (UN) and the Gulf Cooperation Council (GCC) in the fields of trade, investment, education and culture. ASEAN made the commitment on the sidelines of the 67th session of the UN General Assembly (UNGA) held in New York recently

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Going for Gold

At the ASEAN Foreign Ministers’ meeting with the UN Secretary General and the President of the UNGA, the first of its kind since the adoption of the Joint Declaration on Comprehensive Partnership between ASEAN and the UN at the 4th ASEAN-UN Summit in Bali last November, participants reviewed the implementation of the ASEAN-UN Comprehensive Partnership, based on the joint report by the

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Secretariats of ASEAN and the UN. Meanwhile, ASEAN members have pledged to support each other’s bids for seats at the United Nations, including Vietnam’s candidacy for the 2014-16 UN Human Rights Council tenure The bloc’s foreign ministers confirmed the arrangement at the recent Informal ASEAN Foreign Ministers’ Meeting on the sidelines of the UNGA Vietnam Net, Vietnam News (2 October 2012)

Book exchange

Singapore , Indonesia

ASEAN, Thailand

From 1 October, Singapore is scrapping a 7% tax on gold and silver in an effort to turn the city into a precious-metals trading hub to rival London and Zurich, where value-added taxes don’t apply to the investment-grade gold trade. Singapore, touting its image as a safe, stable and few-questions-asked haven for investors, is hoping to store an increasing amount of gold and silver Gold sales in Singapore are expected to jump after the tax change takes hold, in part, because investors have been holding off on purchases awaiting the tax break, according to Singapore’s United Overseas Bank Singapore’s position between India and China, the world’s two biggest gold buyers, also makes it well-placed to benefit from growing Asian demand Meanwhile, Indonesia’s gold production potential may be hampered by illegal mining, politicking between central and regional government and a spate of demonstrations and violent attacks against junior gold miners Indonesia is endowed with the world’s fifth-largest gold reserves estimated at 3,000 tonnes, is the world’s seventh largest gold producer with annual output of 111 tonnes in 2011 and the mining industry now accounts for around 12% of its GDP Wall Street Journal, Reuters (2 October 2012)

The Publishers and Booksellers Association of Thailand (Pubat) is promoting an exchange of literature between ASEAN members before the advent of the Asean Economic Community (AEC) in 2015. Pubat will push for the campaign at next month’s meeting of the Asean Book Publishers Association, where it will suggest a special rate for publication of

literature under the programme. In addition, there can be business matching between publishers, writers and distributors These activities may begin at the Bangkok International Book Fair 2013 next March The multilingual exchange would educate the various countries about other cultures and prepare people for the AEC, Pubat president Worapan Lokitsataporn said Bangkok Post (3 October 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 96 (8 Oct 2012)