[PREMIUM] Country Updates (21 July 2022)

Indonesia

• Tech giants meet deadline to comply with regulations on online content
• Removal of export levies on palm oil products until 31 August
• Indonesia temporarily suspends the sending of migrant workers to Malaysia

Ahead of a 20 July deadline, Indonesia’s government urged companies to register for its new licensing rules or risk being blocked if they did not comply. Introduced in November 2020, the new set of rules allows authorities to order platforms to take down content deemed unlawful, or that “disturbs public order” within four hours if considered urgent, and 24 hours if not. The regulations also allow for the government to tax digital sales. Following the announcement, tech giants such as Alphabet Inc.’s Google and Meta Platforms Inc.’s Facebook submitted their official business registrations.

Indonesia continues to struggle to reduce palm oil inventories following the controversial export ban which ended in May. The national stock of crude palm oil remains in the threshold of overstock, reaching 7.1 million tons as of early July. In a bid to further ease high domestic inventories, Indonesia has removed export levies for all palm oil products until 31 August. Analysts have commented that the temporary abolition of export levies can provide positive sentiment for CPO companies by encouraging exports, at least in the short term. However, it could further depress prices of palm oil, which have fallen by about 50% since late April to their lowest in over a year.

As of 13 July, Indonesia has temporarily stopped sending its citizens to work in Malaysia, citing a violation of the Memorandum of Understanding (MoU) on manpower signed between the two countries in April. Malaysia’s immigration authorities have reportedly continued to use an online recruitment system for domestic workers that had been linked to allegations of trafficking and forced labour. Other issues, such as unpaid labour wages, were also taken into consideration for the suspension. Workers recruited before the decision was made would still be sent to Malaysia.

Sources: Straits Times(1), Bloomberg(1), Jakarta Post, Jakarta Globe, Straits Times(2), Bloomberg(2), Benar News

Malaysia

• Anti-hopping bill tabled in parliament from 18 July
• Egg prices set to rise amidst reduction in output
• Malaysia’s June exports rise 38.8% year-on-year

After several delays, the anti-hopping Bill has been tabled at the second meeting of the fifth term of Malaysia’s Lower House from 18 July. The Bill is meant to prevent party defections, which have been a huge source of political instability in previous administrations. The bill requires support from a two-thirds majority, or 147 Members of Parliament (MPs), in the 222-seat Lower House to be passed. With only 116 MPs in his government, Prime Minister Ismail Sabri Yaakob would need the backing of opposition MPs to pass the amended Bill. If passed, the legislation could come into force as early as September.

Due to increasing costs, limited subsidies, and adherence to the existing ceiling price, poultry farms in Malaysia have decided to cut output, which could lead to a rise in egg prices. About 40% of poultry farms in Malaysia have also closed. Despite government subsidies, farmers still lose five sen per egg. At the current daily production of 28 million tonnes, the total loss is RM1.04 million daily and RM42 million monthly. While the ceiling price per egg was increased by two sen to seven sen for July and August, there were no announcements on updates to the subsidy. Farmers are demanding a subsidy of eight sen per egg so that they can break even.

Boosted by strong demand for electrical and electronic products, oil and gas, and palm oil, Malaysia’s exports in June rose 38.8% on a year-on-year basis. This was above the 20.1% rise forecast by analysts, and an increase from the 30.5% growth posted in May. Imports also grew 49.3%, above the expected 30.4% growth. Malaysia’s trade surplus for June widened to reach RM21.9 billion, exceeding the forecasted RM18.1 billion figure.

Sources: Straits Times(1), Straits Times(2), CNA

Thailand

• Thailand to offer land ownership to lure wealthy foreigners
• Censure debate begins, with Thai Prime Minister Prayut grilled
• Thailand faces labour crunch in manufacturing and services sectors

Thailand will allow foreigners to fully own land for residential use in hopes of attracting new big-spending residents from overseas to boost its economy. While still subject to Cabinet approval, this law will allow foreign nationals to own up to 1 rai (17,000 sq ft) from September, providing they can invest 40 million baht in Thai property, securities or funds over three years. This is also to attract more skilled workers and retirees, as the proposal includes some tax benefits and a 10-year visa. The scheme will be reviewed after five years and aims to add 1 trillion baht to the Thai economy, and boost investments by 800 billion baht.

The censure debate against Thai Prime Minister Prayut Chan-o-cha’s government began on 19 July and will run until 22 July, with a no-confidence vote scheduled for 23 July. During the session, Prayut fended off accusations of corruption and economic mismanagement. Analysts have highlighted that his parliamentary majority of 253 seats versus the oppositions’ 208 should ensure his survival despite polls showing a decline in popularity. However, the Group of 16, made up of Members of Parliament (MPs) from micro-parties and several members of the Palang Pracharat Party (PPRP), is split on backing the Prime Minister. Prayut also faces the challenges from 16 lawmakers who were expelled from the PPRP earlier this year and have vowed to vote with the opposition.

Despite the lifting of COVID-19-related travel and business restrictions, fewer-than-expected people have sought work in Thailand, resulting in a shortage of about 500 000 foreign workers in its manufacturing and services sectors. Meanwhile, there is a growing demand for staff in tourism-related sectors and labour-intensive industries, where Thais reject jobs because of low wages and difficult working conditions. In response to the manpower crunch, the Thai government has recently changed rules to attract more workers. The Department of Employment has estimated that the number of people from neighbouring countries crossing borders to seek work in the country will increase from the current 500 to 2000 per day.

Sources: CNA, Strait Times(1), Straits Times(2), Bangkok Post

Vietnam

• Manufacturing and export sectors face labour shortages
• Central bank says to stick to monetary policy to support economic growth
• Vietnam added to U.S. human trafficking blacklist

Export focused companies in Vietnam are unable to find enough workers for goods production. Ho Chi Minh City has been facing a shortage of manpower in clothing and footwear factories. Factory owners are reportedly struggling to recruit new workers. The Vice-President of the Vietnam Textile Apparel Union said companies have been losing 10% of their staff on average each year. Apparel manufacturers may also be losing appeal with the low wages amid long working hours.

As inflationary pressures affect more economies world-wide, Vietnam’s central bank has said it will continue to stick to monetary policy in a way that is supportive for economic growth. This comes after major central banks around the globe have started raising policy interest rates to contain inflation. Vietnam is targetting a cap of 4% inflation this year. In June, consumer prices rose 3.37% compared to the previous year.

On 19 July, Vietnam was added to the U.S. human trafficking blacklist that alleges weak efforts to stop forced sex work or assist migrant labourers. Cambodia, Brunei and Macao were also added to the list that already contained Malaysia. U.S. Secretary of State Anthony Blinken presented the annual report and said there was a “mixed picture of progress”. Countries on the list are subject to U.S. sanctions although this can be avoided if there are signals that there are efforts to improve.

Sources: Tuoi Tre News, VNExpress,  Vietnam Insider, SCMP

Myanmar

• Myanmar generals invest in Russia relationship amid criticism from rest of world
• Myanmar orders companies, banks to suspend foreign loan repayments
• Myanmar central bank orders firms with up to 35% foreign ownership to convert forex

As the regimes in Myanmar and Russia become increasingly isolated on the world stage, Myanmar’s top general, Min Aung Hlaing, recently visited Moscow to meet senior officials from Russia’s defence ministry. The meeting resulted in pledges for deeper military ties and cooperation on nuclear energy. Both regimes held a different view of the visit. Whilst Myanmar played up the visit to Russia, Russia described it as a “private visit.” Min Aung Hlaing was also not granted an audience with Russian President Vladimir Putin.

In a directive issued by the Central Bank of Myanmar on 13 July, borrowers have been ordered to suspend the repayment of foreign loans and rearrange their repayment schedule. This is one of the latest efforts to conserve foreign exchange reserves. In another announcement on 18 July, the Central Bank of Myanmar has ordered companies with up to 35% foreign ownership to convert foreign exchange into the local currency, kyat. Aimed at relieving pressure on the kyat, companies had until 6pm on the same day to convert currencies and submit the amount. A state media report said that unspecified action would be taken against those who do not comply. This comes after the mandate in April for businesses to convert all foreign currency earnings to kyat within a day which later exempted approved investments.

Sources: Al Jazeera, Nikkei Asia,  CNA(1), Straits Times, CNA(2)