Indonesia

Tax Cuts and other Measures Mooted to Spur Investment and Unicorns (19, 26 Jun)

 Finance Minister Sri Mulyani Indrawati announced on Wednesday, 19 June that the Indonesian government is aiming to cut the corporate tax rate from 25% to 20% to spur investment. Indonesia, which has one of the highest corporate tax rates in Southeast Asia, saw an 11% drop in foreign direct investment between Q1 2018 and Q1 2019. On a related note, President Joko Widodo “Jokowi” also told the Nikkei Asian Review that a “super deductible tax” plan was being deliberated by the finance ministry, and would help Indonesia nurture its next tech unicorns (companies with valuations of over US$1 billion). Other structural reforms that his administration is looking at include the revision of strict labour laws.

 Sources: Jakarta Globe, Nikkei Asian Review

Indonesia Pushes Through ASEAN’s Indo-Pacific Outlook, But Challenges Lie Ahead (23 Jun)

 ASEAN officially revealed its outlook on the Indo-Pacific at the 34^th ASEAN Summit. The document, championed by Indonesia’s foreign ministry, describes a view that enshrines ASEAN’s principles (i.e. consultation and consensus). It also highlights areas for future cooperation, including maritime issues, connectivity, sustainable development and the economy.

Partners such as Japan, South Korea, India and Australia have welcomed the outlook. Yet, commentators have pointed out that the outlook is only a first step in defining ASEAN’s strategic approach. Its synergy with larger initiatives and frameworks such as the Regional Comprehensive Economic Partnership (RCEP) and the Belt and Road Initiative (BRI) remain unclear. Further, operational issues such as the steps it will take to utilise existing ASEAN-led multilateral mechanisms (i.e. the East Asian Summit) must be more clearly defined.

 Sources: The Diplomat, The Straits Times, The Jakarta Post, Jakarta Globe

Jokowi Officially Declared the Winner of the 2019 Presidential Election (27, 30 Jun)

President Jokowi has been confirmed as the winner of the 2019 presidential election following a legal dispute by challenger Prabowo Subianto. The Prabowo camp alleged that Jokowi’s campaign had conducted “structured, systemic and massive” fraud, and that he had also mobilised state institutions to boost his campaign. However, his case was ruled to be “legally groundless” by chief justice Anwar Usman on Thursday, 27 June. Jokowi was declared the official winner of the election by the general election commission (KPU) on Sunday, 30 June.

In the lead-up to the ruling, there were concerns that a second round of riots could occur if Prabowo’s case failed. However, aside from some protests, the day passed without major incident. Prabowo also declared that even though he found the ruling to be “very disappointing”, he would respect it.

 Sources: Channel NewsAsia, The Straits Times, Sydney Morning Herald

Cabinet Rumours Proliferate After Ruling on Election Dispute Case (1 Jul)

After the conclusive ruling on Prabowo Subianto’s election dispute case, the composition of President Jokowi’s new cabinet has been thrust into the limelight. Earlier reports had suggested that Prabowo allies, the National Mandate Party (PAN) and the Democrat Party, had reached out to Jokowi shortly after the results on 21 May. Jokowi had also offered Prabowo’s party, Gerindra, a seat on the new cabinet, even as allies such as the National Awakening Party (PKB) clamoured for seats.

Yet, Gerindra announced on 1 July that it intends to stay in the opposition to provide checks and balances. The National Democratic Party (Nasdem), part of Jokowi’s coalition, also voiced their opposition to working with PAN. The Jakarta Post reports that several names have also been floated as potential new ministers, including:

•  Yusril Ihza Mahendra – Chairman of the Crescent Star Party, and head of the Jokowi camp’s legal team during the election dispute. Formerly justice minister under Presidents Abdurrahman Wahid and Megawati Soekarnoputri, and state secretary under Susilo Bambang Yudhoyono (SBY).
• Erick Thohir – Media tycoon, and chairman of the Jokowi Ma’ruf Amin campaign team.
• Agus Harimurti Yudhoyono – Eldest son of SBY, member of the Democrat Party.

 Sources: Antara News, Jakarta Globe, The Jakarta Post (Premium)

Bank Indonesia Considers Its Next Rate Cut (1 Jul)

 Indonesia’s central bank has signalled that a rate cut is just a matter of timing, and officials are watching economic data closely. After a year in which rates were hiked six times by a total of 175 basis points, Bank Indonesia is treading carefully to avoid scaring off foreign investors. Yet, Finance Minister Sri Mulyani Indrawati has noted there is a “lot of room” for the central bank to manoeuvre in the second half of 2019. Observers such as Nomura Holdings Inc. expect Bank Indonesia to cut its rates at their next meeting on 18 July, followed by more easing.

 Sources: Bloomberg, Reuters

Malaysia

Sex Video Scandal Involving Azmin Continues to Simmer (21 Jun – 3 Jul)

 Coverage of the sex video scandal involving Economic Affairs Minister Azmin Ali has continued over the past fortnight. The Malay Mail discussed how the persecution of Azmin, who was reportedly mentored by Prime Minister Dr Mahathir Mohamad as a potential successor, has sharpened questions about succession plans. The Star’s Joceline Tan reported that even though Dr Mahathir’s support has defended Azmin against calls for his resignation, he is not in the clear yet. Shannon Teoh from The Straits Times also noted that Dr Mahathir’s reaffirmation about his commitment to hand over power to Parti Keadilan Rakyat President Anwar Ibrahim on 24 June has lowered tensions, though uncertainty over issues such as the exact date of the handover persist.

 Sources: Malay Mail, The Star, The Straits Times, CNA

UMNO Vows to Fight Civil Forfeiture Suit Linked to 1MDB in Court (21 Jun)

Malaysian authorities have intensified efforts to recover siphoned funds from the 1Malaysia Development Berhad (1MDB) scandal. The Malaysian Anti-Corruption Commission (MACC) announced on Friday, 21 June that it has begun legal action to recover US$65 million in 1MDB funds disbursed to 41 individuals and entities from former Prime Minister Najib Razak’s personal bank account. Of these, money disbursed to United Malays National Organisation (UMNO) divisions reportedly totalled US$51.3 million (about 78.5%). UMNO is moving to let the court decide on the civil forfeiture suit, with deputy President Mohamad Hasan claiming that the money from 1MDB had “long been utilised”, and the frozen funds are “clean party funds”.

Sources: SCMP, Malaysiakini, The Star

Takeaways from PAS’ 65^th Muktamar (24 Jun)

 Parti Islam Se-Malaysia (PAS) recently held their 65^th Muktamar amid rumblings about the party’s newfound alliance with UMNO. The Malay Mail reported that younger members of PAS were more open to cooperating with UMNO, as compared to older veterans who remember tensions between the two parties in the 1970s and 1980s. The absence of Malaysian Chinese Association (MCA) showed that the party is leagues to go to win the confidence of non-Muslim voters. Nonetheless, UMNO-PAS cooperation is said to be secure for the foreseeable future, with Dewan Ulama Chief Nik Muhammad Zawawi declaring it ‘wahib’ (obligatory) to topple the PH government.

 Sources: Malay Mail, New Straits Times

UMNO Drops Plans to Sack Members with Criminal Convictions (27 Jun)

 Malaysian opposition party UMNO has reportedly dropped several proposed amendments to its Constitutions on 26 June, that would have included revoking the membership of those who had been found guilty of corruption and other criminal offences. Reports about the amendments have circulated since May, with some suggesting that it was a bid to oust leaders such as President Ahmad Zahid Hamidi and block embattled Former President Najib Razak from retaking a top post.

 Sources: The Straits Times

Zahid Returns to Lead UMNO Amid Corruption Investigations, Stirring Concerns (30 Jun)

 Former Deputy Prime Minister and UMNO President Ahmad Zahid Hamidi announced his return to helm UMNO on Sunday night, 30 June. The leader had gone on leave in December 2018 as he became embroiled in a series of corruption investigations. Most recently, he was slapped with another 33 charges on 27 June for allegedly receiving bribes from Ultra Kirana Sdn Bhd to facilitate the company extending its contract in managing the One Stop Centre in China and the Visa Luar Negara system. He now faces a total of 87 charges since he was first brought before the court on 19 October last year.

Commentators have remarked that Zahid’s return is unlikely to boost UMNO’s standing. On the contrary, his association with Najib, along with the number of charges currently levied at him, may reignite a “crisis of trust” among grassroots members. Some have even suggested that Dr Mahathir’s party, Parti Pribumi Bersatu Malaysia (PPBM), might soon receive several membership requests as frustrated UMNO members look to switch parties. The concerns led former Vice-President Hishammuddin Hussein to weigh in on the matter, as he called for UMNO members to focus on restoring the party’s position and unity.

 Sources: The Edge Markets MY, SCMP, Malay Mail, Today Online, Malay Mail

Schools Remain Open in Pasir Gudang Amid Investigations into the Latest Pollution Incident (1 Jul)

 Deputy Prime Minister Wan Azizah Wan Ismail said that there is no need for Pasir Gudang’s schools to be closed for the time being, noting that checks at the 72 factories in the area reported that the air quality is under control. All 111 secondary and primary schools in Pasir Gudang had been closed since Tuesday, 25 June, after students complained of breathing difficulties and vomiting. Yet, 100 students were reported to have similar reactions when schools re-opened on Sunday, 30 June. Malaysian authorities are still investigating the source of the pollution, though they have ruled out the possibility that this round of pollution is from the same source as the one at Sungai Kim Kim in March 2019. Meanwhile, Minister of Energy, Science, Technology, Environment and Climate Change Yeo Bee Yin announced that the government will not approve new applications for the construction of chemical plants in the area.

Sources: The Star, The Straits Times, CNA, The Star

Myanmar

Myanmar to abolish the ‘Other Accounts’ of its ministries and agencies (20 Jun)

Myanmar’s Vice-President U Myint Swe announced that the Union government would be auditing and abolishing the Other Accounts (OAs) of its ministries and agencies. Beginning in FY 2019-2020, entities which previously held OAs will be required to transfer all net income directly to the Union government. OAs are ubiquitous among Myanmar’s many State Owned Enterprises (SOEs), and were intended to allow them to operate more autonomously. These agencies were allowed to deposit up to 55% of all net income in their OAs, to be used for operational expenditures. In practice, their unregulated nature has allowed SOEs to sequester an estimated US$9bn away from government coffers.

Source: Irrawaddy

Myanmar temporarily shuts off internet service in Rakhine State (June 23 – Continuing)

Myanmar’s Ministry of Transport and Communications instructed telcos to temporarily terminate internet service in nine townships in Rakhine and Chin state. The affected townships are Paletwa in Chin State, as well as Maungdaw, Buthidaung, Rathedaung, Ponnagyun, Mrauk-U, Kyauktaw, Minbya and Myebon in northern Rakhine state. Regular telecommunications services including phone calls and SMS continue to function normally. Officials from Myanmar Post and Telecommunications (MPT), which has jurisdiction over this area, have said this will continue until stability in the region is restored. This move, which seems intended to staunch the spread of propaganda, has been questioned both by local journalists and rights groups, as well as international organisations. The United States also issued a statement calling for internet service to be reinstated as soon as possible.

Sources: Myanmar Times, Irrawaddy, Irrawaddy, Frontier Myanmar

Future of US$2.1bn Kanbauk LNG project under negotiation (24 June)

Negotiations are ongoing regarding the viability of a 1230MW Liquefied Natural Gas (LNG) power plant, located in Tanintharyi province and backed by a European consortium including Siemens and Total S.A. While a Notice To Proceed (NTP) was issued in January 2018, development on the project has not moved forward. A primary concern is said to be the prospective plant’s distance from Yangon, which would necessitate the construction of an expensive 450km-long network of power transmission lines. Disagreements on the financial terms of the project, including the rates at which the government would buy LNG, have been cited as another reason for delays. Siemens has since indicated its desire to reduce its involvement in the project. Officials from Myanmar’s Ministry of Electricity and Energy have acknowledged that the project may end up cancelled.

Sources: Frontier Myanmar, Myanmar Times, Frontier Myanmar

Electricity tariffs in Myanmar to rise across all categories (25 June)

Myanmar’s Ministry of Electricity and Energy (MOEE) has announced that electricity tariffs will be raised across the board from July 2019 – the first such increase in five years. Commercial and industrial tariffs will be raised by between 20% and 60%, depending on the units of electricity used. Rates for residential consumers are also due to rise significantly, and users of 100 kWh of electricity, for example, will see their bills rise nearly 70%. This move has been long anticipated, as Myanmar’s heavily subsidised electricity rates have been the lowest in ASEAN – and some of the lowest in the world. Private sector observers have welcomed this change, and speculate that it will make Myanmar’s energy infrastructure market – long regarded as deeply unprofitable – substantially more attractive.

Sources: Frontier Myanmar, Myanmar Times

Open Tender for Five Power Stations in Myanmar (3 Jul)

Myanmar’s Electric Power Generation Enterprise (EPGE) has called for power purchase tenders on five projects, with the aim of producing 1000MW of power by summer 2020. The Ministry of Electricity and Energy (MOEE) plans to purchase 900MW of power from three LNG power plants in Kyaukphyu, Thanlyin and Thaketa, and 140MW from two gas-fired plants in Kyun Chaung and in Ahlone over five years. Five new power stations will be constructed to distribute the purchased electricity, near the power plants. This development comes shortly after State Counsellor Daw Aung San Suu Kyi recently launched the first phase of Myanmar’s first commercial solar power plant. The Minbu Solar Power Plant is located in Magwe Region, and when fully completed, will add 170MW of power to the national grid.

Sources: Myanmar Times, Myanmar Times, Irrawaddy

Ministry of Commerce drafts new law to establish trade authority (1 Jul)

 Myanmar’s Ministry of Commerce (MOC) has drafted legislation which will see the establishment of a trade development body made entirely of cabinet ministers. This legislation will empower the MOC and the new trade commission to issue lists of restricted items and non-tariff regulations. The trade commission will also be authorised to carry out trade negotiations, including on intellectual property rights. The legislation also stipulates that a “one-stop service board” will be established to manage trade-related licensing and approval procedures.

Sources: Myanmar Times

Tatmadaw extends ceasefire a further two months, Rakhine state still excluded (1 July)

The Tatmadaw announced at peace talks held in Mongla in Shan state that it will be extending its unilateral ceasefire with Ethnic Armed Organisations (EAOs) across Kachin and Chin states by a further two months. This extension comes after an earlier extension in May. Tatmadaw officials have indicated that it expects to sign bilateral ceasefires with several EAOs during these two months. Other attendees of the peace talks have indicated that the draft peace deal which the Tatmadaw is pursuing would require EAOs to pull all their forces back to their regional home bases. The Tatmadaw’s unilateral ceasefire does not extend to Rakhine state, where clashes between the Arakan Army and Tatmadaw continue unabated.

Sources: Irrawaddy, Frontier Myanmar, Irrawaddy, Irrawaddy

Thailand

Foreign Investment into Thailand surges in the wake of US-China Trade War (21 Jun)

An official from Thailand’s Ministry of Finance (MOF) has indicated that applications for Foreign Direct Investment (FDI) this quarter rose 253% from the same period last year, to 84.1bn baht (US$3bn). This accompanies similar rises in Malaysia and Vietnam as companies seek new bases for manufacturing and other operations, amid the US-China trade war. Thailand’s long term exports are expected to improve as Chinese investors increasingly flock to Southeast Asia – a trend that had already begun with rising labour and production costs on the mainland. In 2019 thus far, Chinese investment into Thailand has climbed 15%, reaching a total of 164bn baht (US$5.8bn) over 503 projects.

Sources: Bangkok Post

Thailand emphasizes need to complete negotiations on RCEP (22 Jun)

Thai Prime Minister Prayut Chan-o-cha announced at the 2019 ASEAN Summit that Thailand would be moving to expedite negotiations of the Regional Comprehensive Economic Partnership (RCEP), as chair of ASEAN this year.  However, officials at Thailand’s Ministry of Commerce have noted that completing negotiations before Thailand relinquishes its chairmanship later this year was unlikely, especially given the recent elections in several RCEP nations.

Sources: The Nation

Assault on anti-Junta activist results in threats of civil unrest (29 Jun)

 Prominent anti-junta activist Sirawith Seritiwat – also known as Ja New, or ‘Sergeant New’ – was assaulted for the second time in a month, suffering severe injuries to his head and neck. Footage of the assault, which was undertaken by several men wielding baseball bats, went viral, with speculation mounting that the junta had ordered the assault. In response, the relatives of pro-democracy campaigners killed in the ‘Black May’ incident of 1992, have demanded the immediate arrest of Seritiwat’s assailants – threatening consequences if swift action is not taken. Several Senators have reiterated the urgency of locating Seritiwat’s assailants, noting that they would file for a parliamentary investigation into the issue if sufficient progress is not made. Deputy Prime Minister Prawit Wongsuwan has denied that the junta was behind the assault, and ordered police forces to step up efforts to locate and apprehend the perpetrators.

Sources: The Nation, The Nation, The Nation, The Nation

PM Prayut apologises for ongoing power plays within PPRP (1 Jul)

 Prime Minister Prayut Chan-o-chaha has apologised to the public for disorder within his party. This comes after a prominent faction within the Phalang Pracharat Party (PPRP), the Sam Mitr or ‘Three Allies’ faction, demanded that PPRP secretary-general Sontirat Sontijirawong not take up the role of Energy Minister, which he had been offered. Suriya Juangroongrungkit, leader of the Sam Mitr faction, was initially offered the Industry minister portfolio after earlier demanding the Energy portfolio, and threatening to withdraw from PPRP with his 30 allies, if he did not receive it. These difficulties have delayed the finalisation of Thailand’s cabinet, though PM Prayut recently stated that his government will be ready by mid-July.

Sources: The Nation, The Nation, The Nation

US$3bn SCB-FWD Life Insurance deal moves ahead (2 Jul)

Siam Commercial Bank (SCB) has agreed to sell its life insurance business to the Hong Kong-based FWD group in a deal worth 92.7bn Baht (US$3bn). This move is likely to allow FWD to rapidly expand its business in Thailand and the wider region, by relying on SCB’s existing networks. SCB Life Assurance’s market share trails that of Hong Kong-based Thai Life Insurance and Krungthai-AXA Life. The finalisation of this deal marks a further indication of intensifying competition in Southeast Asia’s life insurance markets, which have to date had limited penetration, reflecting substantial room for growth and attracting foreign operators. Major international insurers AIA group, Manulife Financial and Prudential PLC had previously expressed interest in acquiring SCB’s insurance business.

Sources: Nikkei Asian Review