ASEAN Country Updates (19 Jan)

Indonesia

• Indonesia’s economy is expected to rebound in 2022, bolstered by rise in commodity prices and strong domestic demand
• Bank Indonesia expected to hold rates till second half of 2022 (Reuters poll)
• Indonesia to name new capital in East Kalimantan “Nusantara”

Indonesia’s economy is expected to rebound in 2022, given the surge in commodity prices such as coal and crude oil, as well as the removal of most movement restrictions. Coordinating Minister for Maritime and Investment Affairs, Luhut Pandjaitan said the government is expecting a growth rate of more than 5%, barring any significant pressures. His outlook is in line with the World Bank’s latest Global Economic Prospects report, which expects a growth of 5.2% in 2022, and 5.1% in 2023. With Indonesia’s inflation rate below the central bank’s target range of 2% to 4%, a Reuters poll expects Bank Indonesia to wait till the second half of 2022 to raise rates. This expectation comes even as the US Fed is likely to raise interest rates this quarter.

Indonesia’s parliament has approved a bill relocating the country’s capital to East Kalimantan. WIth the parliamentary approval, construction can now begin ahead of the relocation from Jakarta from 2024. All members of parliament, except the Prosperous Justice Party, voted for the bill. The new capital city has been named “Nusantara”, which means Archipelago in Javanese. Administrative and state agencies will begin relocating from 2024, within 10 years. The parliamentary bill also states that foreign embassies and international organisations will shift their offices to Nusantara. Jakarta will remain as Indonesia’s financial and commercial hub.

Sources: Straits Times; Nikkei Asia; CNA; CNA(2); Straits Times (2); Jakarta Post

Malaysia

• New political parties formed as millions of new voters join Malaysia’s electoral roll
• Malaysia is expecting a growth rate of 5.5-6.5% this year
• Malaysia’s government sets aside RM680 million for essential goods to counter rising inflation pressures and costs

5.8 million new voters have been added to Malaysia’s electoral roll as of 16 January, when the automatic registration of voters and addition of new voters above the age of 18 was complete. 1.2 million voters are between the ages of 18 and 21. The addition of new voters comes as new parties are formed to fill the leadership vacuum over the government’s handling of the crisis, political in-fighting and resulting public dissatisfaction. Parti Bangsa Malaysia (PBM) is amongst the new parties to be formed, composed of former members from the Pakatan Harapan coalition. The multi-racial party has proposed to join the UMNO-led Barisan Nasional ahead of the next general elections. If PBM’s proposal is accepted, the UMNO-led BN could distance itself from Bersatu’s Perikatan Nasional- the coalition that is currently running the country. PN and BN already competed head-on at the Melaka state election, with BN forming the ruling state government.

Malaysia’s Finance Minister, Tengku Zafrul Aziz said the country is expecting a growth of 5.5 and 6.5% in 2022, supported by positive indicators such as declining unemployment rate, stronger retail trade sales and rising Industrial Production Index (IPP). To support Malaysians, the government is setting aside US$162 million to ensure price stabilisation for essential goods. Consumers have been facing increasing prices ahead of the Chinese New Year holiday, following disruptions in the supply chain partly resulting from the floods and bad weather.

Sources: CNA; Straits Times; Malay Mail

Myanmar

• UN Special Envoy highlights the importance of Thailand’s role in Myanmar’s crisis
• Misgivings surround Cambodia’s crisis diplomacy on Myanmar
• Myanmar issue might have led to postponement of ASEAN foreign ministers’ meeting

The new United Nations Special Envoy (SE) on Myanmar, Noeleen Heyzer, held talks with Thai Prime Minister Prayuth Chan-o-cha in Bangkok on 17 January. She emphasised that Prayuth has an important role in preventing further deterioration of the crisis in Myanmar. Notably, fighting in Karen State’s Myawaddy Township sent thousands fleeing to Thailand. Some are also internally displaced on the Moei River, which forms the border with Thailand. Prayuth said that refugees were returned only on a voluntary basis and added that migrant volunteers and well-wishers have been allowed to cross the border with food donations for the displaced.

Some ASEAN member states have been vocal about their misgivings of Cambodia’s Prime Minister Hun Sen’s recent visit to Myanmar to meet with junta leader Min Aung Hlaing. In a video call with Hun Sen, Singapore’s Prime Minister Lee Hsien Loong said that the ASEAN Chair needs to engage with all parties concerned and unless there are new facts or significant progress on the five-point consensus, ASEAN should stick to its earlier decision to only invite a “non-political representative” from Myanmar. His sentiments have been echoed by several counterparts including Indonesia, Malaysia and the Philippines. Analysts suggest that unresolved differences about engagement with Myanmar’s military rulers is the probable reason why the ASEAN Foreign Ministers’ meeting set for this week has been postponed although Cambodia had cited the reason to be due to travel difficulties of some ministers.

Sources: The Irrawaddy, Reuters (1), Reuters (2), Reuters (3), The Diplomat

Thailand

• Thailand to lower its COVID-19 alert level and consider easing more restrictions
• Quarantine waiver for vaccinated visitors to be reinstated

Thailand’s COVID-19 alert level will be lowered to 3, from 4, on the government’s five-level system. With a slower infection rate, Thailand is considering easing restrictions so as to continue with its endemic strategy for reopening and economic recovery. Authorities are giving consideration to establishing more “sandbox” areas for tourists, including Chiang Mai, Chonburi, Khon Kaen and Samut Prakan provinces. The “sandbox” programme allows tourists to skip quarantine if they stay in specified areas for seven days and undergo two COVID-19 tests.

In the same vein, authorities are also in discussions on whether it should restart its “Test and Go” policy in February. As part of its plans to live with the virus, Thailand introduced this policy in November, which allowed visitors to skip the mandatory quarantine if they test negative on arrival. This was aimed to help rebuild the country’s key economic driver – its tourism industry – which collapsed given the impacts of the pandemic. Thailand’s tourism industry saw about 200,000 arrivals last year, compared to nearly 40 million in 2019. However, the policy was suspended late in December over concerns about the spread of the Omicron variant.

Sources: CNA (1), CNA (2), Bangkok Post

Vietnam

• Analysts expect robust growth for Vietnam in 2022
• Lawmakers in Vietnam approve significant stimulus package worth $15.4 billion
• Vietnam’s agricultural exports affected by China’s zero covid policy

Vietnam’s outlook for 2022 appears robust with the government predicting GDP growth of 6-6.5%. Other organisations also see strong prospects for Vietnam with the World Bank Forecasting 5.5% growth this year and Singapore’s DBS predicting an 8% jump with policy support. As the rate of vaccination in Vietnam has been improving, it paves the way for the government to reopen the economy. International flights are announced to be back online with routes opening to the US, Japan and Singapore.  The government has also approved a stimulus package worth about 347 trillion dong ($15.3 billion) to help revive the economy with a focus on assisting virus-hit businesses, workers and increasing infrastructure spending.

Cross-border trade between Vietnam and China suffered after news of the Omicron variant threatened Beijing’s zero covid policy. Traces of the coronavirus were found on imported dragon fruit at several Chinese provinces leading to more stringent checks and hold ups at the border. However, the two sides have agreed to smooth border restrictions with Chinese Premier Li Keqiang speaking with Vietnamese Prime Minister Pham Minh Chin on 13 Jan. The leaders agreed to improve the customs clearance process for goods and also to take advantage of RCEP coming into force this year.China is Vietnam’s second largest export market and its largest market for fruits and vegetables.

Sources: Vietnam Briefing, World Bank, Business Times, SCMP