[PREMIUM] Country Updates (23 June)

Indonesia

• The seventh Cabinet reshuffle in eight years
• New e-commerce rules to regulate digital competition
• Indonesia plans to export chickens to Singapore

In what was seen as a move to ensure the stability of the existing ruling coalition, President Joko “Jokowi” Widodo has ordered another Cabinet reshuffle. The move welcomed two new ministers: (i) Zulkifli Hasan, head of the Partai Amanat Nasional (PAN), as Minister of Trade; and (ii) Hadi Tjahjanto, as Minister of Agrarian Affairs and Spatial Planning. Hadi was previously Indonesia’s military chief from 2017 to 2021. The replacement of the previous trade minister, Muhammad Lutfi, was likely over the controversy surrounding the palm oil export ban. There were also three new deputy ministers: (i) John Wempi Wetipo as Deputy Minister of Home Affairs; (ii) Afriansyah Noor, as Deputy Minister of Manpower; and (iii) Raja Juli Antoni, as Deputy Minister of Agrarian Affairs and Spatial Planning.

Citing the need to create a level playing field in the domestic market and protect local Micro, Small and Medium Enterprises (MSMEs) from predatory pricing, Indonesia plans to introduce new e-commerce rules to limit access to foreign goods. Under the regulations, there will be a price floor of US$100 imposed on foreign products sold by foreign e-commerce firms operating in Indonesia. These products can still be sold if brought in by domestic importers. Another requirement would be the need for e-commerce companies to provide information on a product’s country of origin. While emphasising the necessity of such regulations, Cooperatives and Small and Medium Enterprises Minister, Teten Masduki, acknowledged that it would be difficult to implement them and would be mindful not to violate free trade provisions.

Following Malaysia’s chicken export ban at the start of June, Indonesia hopes to leverage on the opportunity to export chickens to shortage-hit Singapore. Given that Indonesia has never exported chickens to Singapore, a team from the Singapore Food Agency (SFA) is in Indonesia to carry out inspections “to explore the accreditation of Indonesia as a potential source of chicken import.” Indonesia looks to export chickens to Singapore as it has been facing an oversupply of chicken for the past few years and has an estimated surplus of about 900 million chickens this year.

Sources: CNA, The Diplomat, Reuters, Jakarta Post(1), Jakarta Post(2), The Straits Times

Malaysia

• Labour shortage hampers recovery of hospitality sector
• Malaysia’s economy on track to recovery
• New MEASAT-3d satellite to bridge digital divide

Pent-up demand for travel by both locals and foreigners has intensified the problem of labour shortage in Malaysia’s hospitality sector, hampering its recovery. Many employees have turned to alternative sources of income due to COVID-19 lockdowns, but many did not return to their previous jobs after the reopening of the economy. There has also been a loss of skilled workforce to Singapore due to pay difference and high exchange rate of the Singapore dollar. The manpower crunch is not expected to be resolved by the end of 2022.

Having recorded 5% economic growth in the first quarter of the year, Malaysia’s economic performance is projected to improve further in the next two quarters. Senior Minister of International Trade and Industry, Datuk Seri Mohamed Azmin Ali has attributed this expectation to the successful COVID-19 vaccination programme and government efforts to attract foreign investments. This optimism is mirrored by World Bank Group lead economist for Malaysia, Dr Apurva Sanghi. The World Bank forecasts a 5.5% growth for Malaysia this year, higher than the global growth of 2.9% and regional growth of 4.4%.

Poised to considerably improve internet services and internet connectivity rates, especially in rural areas, the MEASAT-3d satellite will be launched on 23 June 2022. It will help to “bridge the digital divide in areas not covered by 4G or 5G or fiber mobile technology in Malaysia” such as enabling users to stream high-data content such as 4k and 8k video. This will support the government’s aim to achieve the target of 100% internet access by 2025 through the Malaysian Digital Economy Blueprint (MyDIGITAL) and through the National Digital Network Plan (JENDELA) to digitise the country. While MEASAT-3d is owned by MEASAT, a Malaysian company, it has wide service capabilities, covering not only Southeast Asia but also Asia-Pacific, Africa, and Southern Europe.

Sources: CNA, Malay Mail(1), Malay Mail(2), Business Today

Thailand

• Prime Minister Prayut Chan-o-cha faces a vote of no confidence in the lead up to elections
• Taxes to be enacted in land and energy sectors
• Higher costs of living due to rising inflation

Thailand’s Prime Minister Prayut Chan-o-cha faces yet another no-confidence vote in parliament with elections just mere months away. The no-confidence motion was submitted by the opposition on June 15 and also targets 10 senior members of Prayut’s Cabinet, citing a range of issues from economic mismanagement to internal divisions within the ruling coalition. While the opposition does not have enough numbers to topple the government, it hopes to create a ripple effect among the population and within the coalition party before the upcoming election.

The land windfall tax law which has been approved since 2018 is set to be enacted as part of an effort to reform the tax system. This tax will apply to landowners who benefit from inflated land prices following the development of transport infrastructure near their land. This value is capped at 5% of the inflated price and will only be applicable on residential or commercial land worth more than 50 million baht. Similarly, the government is in talks with six major Thai oil refiners to adopt a profit-sharing system to contribute to consumer subsidies amidst high inflation. This has caused the share prices of the companies involved to fall by an equivalent of 66 billion baht as of June 17.

Thais will be facing higher living costs due to rising inflation and uncertainty surrounding the Russia-Ukraine war. Fluctuations in global energy prices have prompted the Energy Regulatory Commission (ERC) to increase the power tariff to a record high of 4.4 baht per kilowatt-hour between September and December. Research houses predict that a policy rate hike is to be expected in the latter half of the year in response to persistent inflation. This is expected to affect businesses which are still recovering from the effects of the pandemic, as well as property developers reliant on pre-financing loans.

Sources: The Straits Times, Nikkei Asia(1), Nikkei Asia(2), Bangkok Post(1), Bangkok Post(2), Bangkok Post(3)

Vietnam

• Lack of infrastructure amidst renewable energy boom
• Persistent rising gas prices
• Exploring potential for central bank digital currencies (CBDCs)

Solar and wind farms in Vietnam are being forced to limit operations as the transmission lines that connect them to the national grid lack the capacity to do so. This follows the government’s 2017 to 2021  bid to encourage renewable energy uptake by offering to buy electricity from new solar and wind projects at high fixed rates. Policymakers had not anticipated the surge of renewable energy investments that followed. Authorities were not able to install transmission lines to keep up with the growth of solar and wind farms.

Gas prices rose again for the sixth time in recent months, hitting a new record of US$1.39 per liter. The Ministry of Finance is evaluating the removal of the environment tax on gasoline in a bid to curb prices. Other reductions are currently being considered on import, excise, and value-added tax. This has especially affected the ride-hailing industry, where drivers from companies like Grab are having difficulty making  profits due to high gas prices which translates into rising fares.

Vietnam is exploring the possibility of government-issued digital currencies amidst an increase in usage of Chinese mobile payment applications like WeChat Pay and Alipay. Vietnam’s Prime Minister Pham Minh Chinh has ordered the nation’s central bank to conduct a feasibility study on issuing CBDCs based on blockchain technology. Southeast Asian policymakers view the utilization of CBDCs as a potential lever to maintain a stable exchange rate against the Chinese yuan, in a time trade and financing flows from China has increased.

Sources: Mekong Eye, VNExpress, Rest of World, Tap Chi Giao Thong, Nikkei Asia