February 27, 2018

THAILAND is focussing on higher education and smart farming to entice more Australian investors . . .

BANGKOK — The Thai Government has moved to strengthen the teaching capacities of it education system ­— especially in the area of emerging technologies — by encouraging the involvement of foreign higher learning institutions in twinning of courses and curricula, joint co-operative arrangements, and through direct foreign investment.

January 31, 2018

IN THE near term, Thailand’s economic prospects at the close of 2017 are significantly brighter than at any time during the past several years . . .

BANGKOK ­— In terms of its economy, Thailand clearly turned a corner in 2017. What remains murkier, however, is whether Thailand as a society has succeeded in turning the page.
With the year coming to a close, the Thai economy was nearing 4.0 per cent growth as exports, the main pillar, came roaring back to life, approaching a record US$236 billion in value.
While that gross domestic product (GDP) rate does not compare to the soaring figures Thailand posted in earlier decades, it is also a far cry from the gloomy forecasts of critics who claimed the unelected Government was not capable of managing the economy.
With fourth quarter GDP coming in at 4.3 per cent – the highest quarterly rate since the first quarter of 2013 – the National Social and Economic Development Board (NESDB), Thailand’s chief planning agency, raised its growth forecast for the year to 3.9 per cent.
Exports and tourism have been driving most of the gains. But investment has also been key.

January 31, 2018

IT NOW seems clear that Abenomics has many more years to run. One should be wary of Japan sceptics  . . .

TOKYO — In a note on the implications of Prime Minister Abe’s re-election, the Chief Global Strategist of Nikko Asset Management, John Vail, along with NAM’s Chief Investment Officer — Japan, Hiroki Tsujimura, and Head of Japan Equity Fund Management, Jiro Nakano, say there is little doubt that Abe wants a rising stock market.
“Now that his term seems very likely to extend to 2021, Abe will likely work on a constitutional amendment to legitimise Japan’s military forces, and hike the VAT by 2.0 per cent in October 2019, but he will also continue to push for economic reforms and monetary accommodation,” they say.
“Since he is now the most powerful Prime Minister in modern Japanese history, he should be able to achieve all of these goals, especially now that the main Opposition party has been fractured by Yuriko Koike (who) will almost certainly push her Coalition (and all her supporters nationwide, most especially women voters) to vote for the Constitutional amendment.
“Rising stock markets encourage consumer spending via the “wealth effect”, at least among the wealthy segment that accounts for the majority of any country’s personal consumption. The capital gains associated with such are also a major factor in the future reduction of fiscal deficits.”

January 24, 2018

HANOI — Vietnam, buoyed by a revived Trans Pacific Partnership (TPP) trade pact and a regional trade agreement dominated by China, is in the box seat in an  outlook driven by investment and growth .  . . .

THE Trans-Pacific Partnership (TPP) — feared to have floundered after President Donald Trump withdrew U.S. support earlier — gained a second wind at November’s Asian Pacific Economic Co-operation (APEC) meeting in Da Nang. The remaining 11 nations agreed to press on with expanded trade and investment programmes.
“Vietnam is in the box seat right here. It desperately wanted the TPP,” Carl Thayer, a defence analyst with Australia’s University of New South Wales, told ATI.
The revived TPP, now termed the Comprehensive and Progressive TPP after intervention by Canada, is undergoing fresh talks towards a final agreement. The TTP’s 11 nation members would include Australia, Chile, Japan, Malaysia, Mexico, New Zealand, Peru and Singapore.
Vietnam was considered a winner under the earlier TPP pact, with World Bank forecasts that, by 2030, economic benefits would add about 8.0 per cent to its GDP.
The key industries to gain from TPP were textiles and garments and global supply chain operators, as in telecommunications, taking advantage of Vietnam’s close proximity to regional economic giant China.
Vietnam is also a member of the China-dominated Regional Comprehensive Economic Partnership (RCEP), which is centred on the 10 ASEAN nations and  countries with free trade pacts with ASEAN — Australia, China, India, Japan, South Korea and New Zealand.
“Vietnam can follow (the TPP) path and it can follow RCEP, which China is espousing, at the same time — it is not mutually exclusive,” Thayer said.
But Pavida Pananond, a Professor of International Business Studies at Thailand’s Thammasat University, says that, without the U.S. role in TPP, China influence over Vietnam’s trade profile has risen.
Pavida, told ATI said while the “size of potential gains from trade and investment may be reduced for Vietnam, [in the absence of the U.S.] it remains attractive as the only member in Asia with relatively low costs and a large growing market”.
She said that, despite the revised TPP agreement, Vietnam would remain “significant” in its overall standing in intra-regional trade and investment in Asia.
Vietnam’s economic outlook has risen in recent years. “The near-term outlook is positive,” the United Nations reported in its annual economic and social survey for Asia and the Pacific (UNESCAP). The UN has projected Vietnam’s growth at 6.5-6.7 per cent over 2017 and 2018.

January 17, 2018

HONG KONG, Macau and nine cities in Guangdong are set to form China’s Greater Bay Area as the concept of 70 million people integrating to become China’s technology, innovation and financial services hub moves towards reality . . .

TO understand the thinking behind China’s Greater Bay Area (GBA) concept for the Pearl River Delta, one has only to look to the Greater Tokyo Area, Greater New York or the San Francisco Bay Area.
China’s vision would see a closer economic cluster of 11 cities, including Hong Kong, Macau, and nine in Guangdong’s Pearl River Delta create an economy as vibrant as those of Tokyo, New York and San Francisco.
The GBA already has a collective economy of US$1.4 trillion — equivalent to 12 per cent of Mainland GDP.  It would have a greater population mass of around 70 million, but a lower combined GDP than Greater New York (US$1.61 trillion) or Greater Tokyo (US$1.78 trillion).
Hong Kong’s Chief Executive, Carrie Lam, said in November that the Governments of the Special Administrative Regions of Hong Kong and Macau, together with a number of cities in Guangdong, are working with China’s Central Government to map out a development plan for the Greater Bay Area.
Lam says the plan is due to be completed next year, and China’s State Council will then need to approve it. Following that, a lot of work will need to be done to turn the concept into reality.  
In terms of physical connectivity in the GBA, three important projects will be commissioned next year.
One of these is commissioning of the Hong Kong-Macau-Zhuhai bridge, which will cut the journey between Hong Kong and Zhuhai from four hours to 45 minutes.

January 17, 2018

Xi Jinping wants China to be a global leader in 10 chosen industries, including the Internet, big data, electric vehicles, semiconductors, robotics, pharmaceuticals
and artificial intelligence, by 2025 . . .

THE Pearl River Delta is morphing into what some now dub Silicon Delta, China’s answer to Silicon Valley in California.
China is home to some of the world’s most valuable ‘unicorns’ — private companies valued at US$1 billion or more — while its top tech companies now rank among the world’s tech leaders.
Such is the optimism surrounding China’s growing innovation potential that some believe the “next big thing” could well come out of Silicon Delta.
Addressing the HSBC Australia China Conference in Sydney in November, Frederic Neumann, HSBC‘s Co-Head Asian Economics, said China is making great advances in high-tech industries.
“One thing I really want to stress is that China is no longer a copycat market. Some of the most exciting innovations are happening in China,” he said.
Helen Wong, HSBC’s Chief Executive, Greater China, concurs: There was a time — not so long ago, actually — when Chinese tech companies were dismissed as mere copycats,” she says. “But not any more. China is now punching above its weight on innovation.

December 21, 2017

JAPAN, Hong Kong, South Korea, Taiwan and Singapore have embraced INDUSTRY 4.0, the Fourth Industrial Revolution.
China, too, but under a different name, Made in China 2025.
At the heart of INDUSTRY 4.0 is digitisation and artificial intelligence. Success will breed tomorrow’s global economic leaders.
The wild card is the United States. An early adopter of INDUSTRY 4.0, it has the financial muscle, academic skills and consumer resources essential for rapid growth in a new frontier.
Perhaps Donald Trump saw INDUSTRY 4.0 coming when he coined his key campaign slogan, Make America Great Again . . . 

THE decade ahead will reshape global manufacturing as demand grows, technology unlocks productivity gains, and companies find growth in new parts of the value chain.
Manufacturing is being reshaped by three major trends: rising demand, the convergence of multiple new technologies, and shifting global value chains.
It could also be a decade in which the United States re-emerges as the manufacturing powerhouse of the future, according to a new paper on manufacturing in the U.S. produced by a McKinsey Global Institute research team.
Although China claimed the mantle as the world’s top manufacturing country in 2010, the United States still ranks second when measured by the dollar value of its annual output and global market share.

In 2015, U.S. value-added in manufacturing reached US$2.2 trillion – more than 2.5 times more than the total recorded by Japan and three times more than that of Germany.
MGI says that, after combining demand projections with an analysis of specific industry trends and historic performance, it finds that the United States could boost annual manufacturing value-added by up to US$530 billion (20 per cent) over current trends by 2025.
MGI estimates the U.S. manufacturing sector would add 2.4 million jobs on top of current trends.  Furthermore, it says, the positive effects would ripple into services, resources and other industries that produce upstream inputs for the manufacturing sector.
“We estimate the direct impact of these purchases at US$170 billion in direct value-added and almost one million jobs. Adding together the manufacturing and upstream effects, the total potential benefit to the economy could be US$700 billion and roughly 3.3 million new jobs.”
McKinsey says there is no denying that U.S. manufacturing has been through two rocky decades, absorbing losses that have taken a toll on workers, communities and the nation’s optimism.

December 13, 2017

FOLLOWING up a  GST with its new Insolvency and Bankruptcy Code, an amended Arbitration Act requiring faster settlement of commercial disputes, and recapitalisation of the banks  has allowed the Modi Government to present a more enticing offering to international investors. The rules of the game have changed . . .

INDIA’S Modi Government has introduced game-changing corporate and taxation reform that could trigger far-reaching implications for its economy.It now has a goods and services tax (GST), an up-to-date Insolvency and Bankruptcy Code (IBC) and an amended Arbitration Act which requires the hearing and settlement of commercial disputes to be completed within a maximum of 18 months.According to key executives of one of India’s top legal firms, compared with three years ago, the investment climate is “100 per cent” better.
Pallavi Shroff, a Managing Partner of the Delhi-based Shardul Amarchand Mangaldas & Co (SAM), says the States are actually competing with each other for investment.
“They are trying to facilitate investment,” she says. “Approvals still take a bit of time, but the whole process is much simpler today.”
The impact of the changes is freeing up distressed assets, including manufacturing plants, for ownership transfer to new investors.
Until now, banks have been hamstrung by archaic legislation which protected the sponsors of companies. As a result, banks, particularly public sector entities, were weighed down by non-performing loans.
The changes have rekindled investor interest in India, a destination that was once difficult and unpredictable ­— in large part because of unhelpful Government policies.
The Modi Government, it seems, has done what its predecessors were unable to deliver — a single simplified taxation system — and has taken over the powers of the States to collect taxes. It has also reduced bureaucratic red tape.
It is early days yet with these reforms, but the first signs are promising. Investors are reassessing India. In just one sector alone – real estate – an estimated US$10 billion in new investment has flowed in.
Shardul Shroff, Executive Chairman of SAM, regards the GST legislation as India’s most far-reaching change yet.
“The Government has made Constitutional amendments giving it power to take over taxation from the States,” he told ATI. “In doing so it has reduced State authority and vested the Centre with the right to collect and distribute taxes between manufacturing States and consuming States.”

December 13, 2017

CHINA is one of four major factors that will reshape the global energy market over the next two decades, says the International Energy Agency. The others are the U.S., which is set to become the undisputed global oil and gas leader, development of renewables, and a growing share of electricity in the energy mix . . .

CHINA and its new industrial policy will play a key role in helping the world transit to a cleaner energy environment over the next two decades, according to the Paris-based International Energy Agency (IEA).
In 2017 World Energy Outlook, its flagship publication, the IEA says China is increasingly switching from coal to solar, other forms of renewable energy and natural gas.
It says China is entering a new phase in its development.
China’s President, Xi Jinping, has called for an ”energy revolution” in the “fight against pollution” as he aims to guide the Chinese economy to one based on services, leaving behind low-end manufacturing.
The publication notes that Xi’s policies are moving China’s – and, in turn, the world’s — energy sector in a new direction, with the emphasis in energy policy now firmly on electricity, natural gas and cleaner, high-efficiency and digital technologies.
It says China’s previous orientation towards heavy industry, infrastructure development and the export of manufactured goods has left it with an energy system dominated by coal, and a legacy of serious environmental problems. Almost two million premature deaths occur each year because of poor air quality.
Under Xi’s new industrial policy, the agency says China’s energy usage is moving in a new direction.
Demand growth has slowed markedly from an average of 8.0 per cent per year from 2000 to 2012 to less than 2.0 per cent per year since 2012. The IEA expects this to slow further to 1.0 per cent a year to 2040.
“Energy efficiency regulation explains a large part of this slowdown,” the report says. “Without new efficiency measures, end-use consumption in 2040 would be 40 per cent higher. Nonetheless, by 2040, per-capita energy consumption in China will exceed that of the EU.”

December 13, 2017

Liem Sioe Liong and Suharto had a classic patron-client relationship – the payback was funds channelled the President’s way . . .

IN Julius Caesar, Shakespeare wrote: “There is a tide in the affairs of men, which, taken at the flood, leads on to fortune.”
Such was the luck of Chinese business entrepreneur Liem Sioe Liong, who landed in Java in 1938 as a dirt-poor migrant from Fujian province, in China.
He not only caught the tide, he became the chief financier and cukong (crony) of President Suharto.
In post-Sukarno Indonesia, Liem surfed on a tsunami of wealth and political power, and soon became recognised as Southeast Asia’s wealthiest tycoon.
Suharto hungered for power, Liem for money. Together, “they made a potent team that kept them on top in Indonesian politics and business respectively for three decades”.
Liem’s gutter-to-glitter journey is splendidly captured in Liem Sioe Liong’s Salim Group  by Richard Borsuk and Nancy Ching [ISEAS Publishing], a frank and revealing business biography which explores Liem’s life and times with painstaking care and in exhaustive detail (573 pages).
It also doubles as a primer on how to do – or not to do – business in Indonesia.

ANALISYS - Khoon Goh
December 12, 2017

Bank of Korea and Bank Negara Malaysia have turned hawkish in recent statements, laying the groundwork for interest rate increases . . .

AFTER FOUR YEARS of depreciation, Asian currencies put in a much stronger performance in 2017. Our Asian currency index shows a gain of 4.6% year-to-date against the U.S. dollar. 

How Asian currencies fare in 2018 will depend on which of two contrasting forces dominates: (i) the effect of policy normalisation in the major advanced economies on capital flows to emerging markets; or (ii) a strengthening and broadening of Asian economic growth with export recovery spilling over into domestic demand.

November 24, 2017

HSBC has taken digital trade a step further with the introduction of its Trade Transaction Tracker - an app providing instant access to trade transactions 24/7.

Trade Tracker is available to HSBC trade customers through the HSBCnet Mobile app facility for either Apple or android phones. The solution has been built to provide the customers with easy self-onboarding processes using their details registered with HSBC.

It also provides –

  • An overview of documentary credits, collections and payments;
  • Access to export and import documentary credits and collection transactions status; and
  • Real-time trade transaction status detail.

October 25, 2017

AGRICULTURE, aviation, marine, defence, e-commerce, cybersecurity, fintech, vocational education and training, future cities and health are among emerging growth sectors in Indonesia . . .

INDONESIA’s economy, currently the world’s 16th largest, is forecast to be the world’s fourth largest individual economy by 2050 – a compelling reason why Australian businesses should enhance engagement, says by Sally-Ann Watts, Austrade’s Jakarta-based Senior Trade Commissioner for Indonesia.

Addressing a series of seminars in Australia, she said three main changes have occurred in the Indonesian market - digital transformation of the economy; the emerging middle class; and opportunity for Australia to help improve living standards and close the skills gap.

The seminars outlined opportunities for Australia in key areas of agriculture (including goods, technology and services), aviation, marine, defence, e-commerce, cybersecurity and fintech, education (transnational vocational education and training), future cities and health.

Watts said Indonesia is now Australia’s 13th largest trading partner, and that, economically, it represents almost 40 per cent of the ASEAN region’s output. It is home to 255 million people.

Along with her team of in-market Trade Commissioners, Watts presented the following summary of industry sectors in Indonesia -  

Agrifood and agtech

Indonesia is an important market for Australia, taking agricultural exports valued at AUD3.2 billion in 2016.

Indonesia’s agricultural sector is undergoing a transformation as the next generation of farmers look to new technologies to increase productivity. Farm and processing enterprises are seeking new technologies to maximise acreage usage and reduce waste.

October 4, 2017

ONE of Germany’s largest real estate asset managers is making a bid to attract Asian investors into the real estate market of Germany’s regional cities . . .
German manufacturers of trusted brands, whether cars or sophisticated machinery and equipment, need little or no introduction to their products.
 Asian consumers know them well.
 But when it comes to real estate investment, Germany is off the radar - because Asians are not familiar with, or often even aware of the opportunities that exist there.
 The Asian predilection for luxury brands is second only to a partiality for real estate, and when it comes to investing in offshore real estate, London traditionally has been the city of choice.
 Stefan Kalmund, managing director of Accom, one of Germany’s largest real estate asset managers, says Asian investment in the UK obviously comes from familiarity with that country.
 Now launching Accom’s first real estate fund targetting Asian capital, Kalmund has made several trips to Asia, hoping to raise the awareness of institutional investors to opportunities outside the three German entry cities of Berlin, Munich and Frankfurt.
 These cities offer trophy assets, he says, but it is the regional cities that are the hidden champions of German real estate.

October 18, 2017

Governments led by those in Singapore and Hong Kong are helping drive widespread support for a global move towards digital trade . . . 

In May this year, Singapore-based fintech company CCRManager Pte Ltd, launched an innovative new electronic platform developed for the distribution of trade finance, supply chain finance and working capital assets.

Bank of China, DBS Bank, ICICI Bank, Swiss Re Corporate Solutions, and UniCredit have signed up as pioneer members of the platform to support their trade risk distribution business globally.
In addition, ANZ Bank, Bank of America Merrill Lynch, BBVA, Bank of East Asia, BNP Paribas, HSBC, Industrial and Commercial Bank of China, Mitsubishi UFJ Financial Group, Mizuho Bank, Standard Chartered Bank and Sumitomo Mitsui Banking Corporation have signed a Letter of Intent to become members of CCRManager within the next few months.
The platform has been developed with the support of the Monetary Authority of Singapore (MAS) and major global financial institutions.
CCRManager will provide the global financial sector with infrastructure designed to enhance capital, credit, and liquidity management.
In launching the platform, Tan Kah Chye, Chairman of CCRManager, described it as “truly a collaborative effort” which had taken more than 1,000 man hours to help design and refine the platform. “This is our contribution to development of the global financial ecosystem as a group,” Tan said.
The platform is web-based, and will enable banks to manage the entire process of distributing trade finance internationally to other banks, credit insurers, and fund managers.
Users of CCRManager will be able to list assets for distribution, negotiate deals, and manage supporting documentation in a secure environment. They will also have access to tools for data analytics, market benchmarking, and pricing indices.
Man Ka Kit, CEO of CCRManager, said: “We estimate the secondary market for trade finance assets, at approximately US$1.7 trillion, is roughly 10% of global cross-border trade. As an infrastructure platform, we believe CCRManager will address this entire market, help unlock more capital and increase the supply of trade finance globally.”

October 13, 2017

SUCCESSFUL Chinese investors in Australia retain Australian management – and strive for meaningful engagement with their local community, says a new report on the angst that can be caused by wrong decisions  . . .

SOCIAL LICENCE, or the lack of, is the reason that Chinese investments in Australia, especially in agriculture, a sector keenly sought-after by Chinese investors, fail.
 Quite apart from needing official approvals, says a report jointly produced jointly by Powell Tate’s Sydney office and Weber Shandwick’s Beijing office, Chinese investors must have social licence — meaning engagement with the Australian community — from the grassroots level upwards, together with respect for the rules and regulations in Australia, including local industrial laws.
 To have a social licence is therefore to have acceptance of the local community, including local businesses, says the report, The Licence That Matters: Beyond Foreign Investment Review Board Approval.
 The report points to successful Chinese investments in Australia, all of which retain Australian management, engage Australian employees and contract local suppliers.
 The biggest mistake made by the Chinese investor is a belief that FIRB approval translates to having a licence to do as they wish with their investment.
 The report cites the celebrated failure of Ningbo Dairy in Gippsland, Victoria, a tale of naivety, ignorance, or, at worse, arrogance on the part of the Chinese investor.
 Ningbo Dairy acquired five farms in Gippsland, and planned major expansion —without first doing its homework.