President's Newsletter - February 2014

Welcome to the second edition of the President’s Newsletter! As we continue to develop this high-level report, we welcome your thoughts on how we can continue to improve it so it is the most useful product possible.

HIGHLIGHTS IN THIS ISSUE

• Thailand’s election took place February 2nd despite the efforts of protestors to block voting, but turnout was low and not enough MPs passed the vote threshold necessary to achieve a quorum. Meanwhile, the National Corruption Commission continues to investigate PM Yingluck and the Puea Thai party on charges of corruption related to the rice subsidy scheme, and the opposition Democrats have charged in court that the election was unconstitutional. The Puea Thai Party in turn has submitted a complaint to the Election Commission that the Democrats violated the constitution by coordinating protests in an effort to disrupt the election process. You can follow the Council’s Thailand updates from our country page here.
• President Obama announced the nomination of Nina Hachigian to serve as the next U.S. Ambassador to ASEAN. You can read the Council’s update with Ambassador-designate Hachigian’s bio here.
• In Indonesia, Gita Wirjawan resigned from his position as Trade Minister to focus on his participation in the Partai Demokrat convention and his bid to win the party's presidential nomination. Vice Minister Bayu Khrisnamurti became responsible for all trade ministerial decisions effective February 1. Click here for more information.
• Council Indonesia expert Alexandra Stuart recently analyzed what a potential presidency of Jakarta Governor Jokowi could look like. To read her analysis of a possible Jokowi Presidency, please click here.
• President Obama will travel to Southeast Asia in April, with visits likely to Malaysia and the Philippines. Though the trip has not been announced or stops confirmed, we believe it is likely to occur after Easter Sunday, April 20. We are looking for examples of Council member projects focused on reconstruction after the recent typhoon and/or earthquake that may be highlighted during the President's visit. Please contact Carr Slayton at cslayton@usasean.org.
• For a second year running, the Council will organize a CEO-level Mission to ASEAN, this year to Vietnam and the Philippines from June 1-4. Please contact Mads Stockwell at mstockwell@usasean.org for additional details.

STRATEGY PAPER

Building on the Chairman’s Policy Paper issued by the Council in 2013, our Board of Directors identified the following areas of focus for the Council’s programs and activities in 2014:

(1) Connect ongoing global campaigns against nationalist/protectionist policy approaches – particularly in areas such as trade and investment policies in the ICT, manufacturing, and energy sectors – to efforts in ASEAN

(2) Elevate U.S. and ASEAN private sector support of G-to-G trade and investment liberalization initiatives like the TPP, E3, and RCEP by raising awareness of their commercial benefits to both American and ASEAN policymakers

(3) Promote policy and regulatory reforms which will increase global market participant and investor interest in ASEAN’s ongoing regional capital markets development and financial integration initiatives

(4) Enhance private sector support for ASEAN and APEC connectivity initiatives (infrastructure, ICT, and SME development) which promote closing development gaps and inclusive growth efforts in ASEAN

(5) Elevate private sector support for 21st century global economy workforce and human capital development efforts in ASEAN.

For questions about the Council’s strategy paper, please contact Marc Mealy at mmealy@usasean.org.

KEY REGIONAL DEVELOPMENTS

ASEAN

President Obama announced the nomination of Nina Hachigian to serve as the next U.S. Ambassador to ASEAN. You can read the Council’s update with Ambassador-designate Hachigian’s bio here.

Energy

The International Energy Agency, in cooperation with the Economic Research Institute for ASEAN and East Asia released a Special Report 2013: Southeast Asia Energy Outlook. Developed in close consultation with ASEAN member governments and leading commentators, industry representatives and international experts, the report explains how the nations that make up ASEAN – along with China and India – are shifting the center of gravity of the global energy system towards Asia.

Financial Services

Capital market development continues across ASEAN, from banking to stock exchanges. This month, the World Bank and International Monetary Fund have begun cooperating with the government of Myanmar to draft regulations permitting the operations of foreign banks in the country. Access to foreign banks’ services from within Myanmar could begin as early as 2014. Just under one year ago the U.S. Treasury Department issued a general license offering four Myanmar banks access to the U.S. financial system.

Stock exchange growth and banking reform go hand in hand in Vietnam. On January 24, the country's second largest bank by assets, Bank for Investment and Development of Vietnam (BVID), was listed on the Ho Chi Minh City Stock Exchange at an initial value of $2.5 billion. This was Vietnam's largest IPO ever and a substantial addition to an exchange valued at $44 billion. Continued foreign investment in Vietnamese stocks and improving macroeconomic indicators have incentivized the Hanoi government to privatize state-owned enterprises, including some banks plagued by non-performing loans, via the domestic stock exchange.

One financial trouble spot in the region is Thailand, which closed its Stock Exchange for a short time in mid-January as protesters edged close to the Exchange’s facilities. Though there has been a moderate sell-off of Thai equities and the baht has experienced downward pressure during the Bangkok protests, a general market feeling of “we have seen this before” has prevented any critical disruption to the Thai economy. Nonetheless, Investors around the world would be wise to continue to watch our Thailand Committee’s updates on developments on the ground as the future of the government becomes clearer.

Cambodia

Cambodia saw more violent crackdowns on opposition protestors at the end of January. Several hundred people gathered outside the Ministry of Information demanding that the government allow the opposition a license for a television channel. The opposition’s most recent application was rejected in late January by the government on the grounds that there was no frequency available for them. A long standing complaint against Prime Minister Hun Sen by his domestic opposition and international watchdogs has been that television licenses (and similarly related media platforms) are only granted to pro-government media. Much of the success of the opposition in the July 2013 election in getting its message out has been accredited to the use of social media and a wider use of smart phone technology by Cambodia citizens. There has been speculation that the Cambodian government will look to check the growing influence of social media and to become increasingly tech-savvy. For the Council’s latest Cambodia update, please click here.

Indonesia

On January 31, Gita Wirjawan resigned from his position as Trade Minister to focus on his participation in the Partai Demokrat convention and his bid to win the party's presidential nomination. President Yudhoyono has not yet announced who will replace Gita as Trade Minister. Vice Minister Bayu Khrisnamurti became responsible for all trade ministerial decisions effective February 1.
Council Indonesia expert Alexandra Stuart recently analyzed what a potential presidency of Jakarta Governor Jokowi could look like. To read her analysis of a possible Jokowi Presidency, please click here.

The House of Representatives passed the Industry Law on December 19, replacing the old Industry Law that was issued in 1984. The new law will provide greater protection and benefits to domestic industries. It contains new provisions on government assistance that was not covered under the previous Industry Law. To read the Council’s full analysis of the Industry Law, please click here.

Indonesia’s House of Representative is set to pass the revised Trade Law on February 7, which would give the government more power to secure its domestic supply of goods, while also limiting its negotiating capacity in international trade agreements. The bill is an attempt to encourage more goods that are consumed domestically to also be produced within the country. The bill also includes clauses that would give the government authority to halt the export and import of goods to protect domestic industries or conflicts against national interests. Indonesia is also set to pass implementing regulation next month that would require foreign companies to establish data centers locally. To read the Council’s full analysis of the revised trade law, please click here.

Indonesia introduced a controversial ore export ban on January 12. The ban is an attempt to boost state revenue by turning Indonesia from an exporter of raw commodities into a manufacturer of higher-value products. The sale of ores that are not processed to the required levels is now illegal. Failure to comply with the ban could result in producer companies losing their licenses to mine. The ban is expected to cut government revenue significantly and will likely benefit miners in the Philippines, which are predicting an increase in sales of nickel. To read the Council’s full analysis of the export ban, please click here.

Malaysia

The Malaysian Embassy in Washington has welcomed a new Charge d'Affaires, Mr. Ikram Mohd Ibrahim. Prior to being posted in the Malaysian Embassy in DC, he was Charge d'Affaires at the Malaysian Embassy in Brussels. Mr. Ikram’s contact details can be accessed through our Members Only website.

On January 20, Malaysia released the much anticipated revised National Automotive Policy (NAP). Contained in the revised NAP are several new policies aimed at increasing competitiveness for foreign investors. Gains made in market access and trade liberalization are likely to be expanded upon following the successful conclusion of the Trans Pacific Partnership. Unfortunately, the NAP’s revisions do not go far enough in liberalizing the auto market for foreign competition. For the Council's overview of Malaysia's 2014 National Automotive Policy and additional readings, please click here.

Myanmar

Myanmar’s long delay in moving forward on telecoms seems to have at last been resolved, as Norway-based Telenor and Qatar-based Ooredoo have received their business licenses. The issuance of these licenses comes after several delays, including failed last-minute efforts by Myanmar’s parliament to amend agreements made with the two companies, amendments which would have required the two firms to partner with Myanmar-based corporations. The final version of the by-laws and licensing rules are now available in English. Please click here for the Licensing Rules, Spectrum Rules, Interconnection and Access rules, Numbering Rules, and Competition Rules.

Myanmar’s Joint Committee for Reviewing the Constitution offered its draft amendments to the 2008 constitution, drawn from a field of 28,000 submissions from various stakeholders. The Committee’s proposed draft amendments which it submitted to Parliament did not include any proposed changes to several key articles, including those related to the share of seats in Parliament allocated to the military, and article 59(f), which if left in place would effectively bar Daw Aung San Suu Kyi from the presidency. To read the Council’s latest Myanmar updates, please click here.

Philippines

Despite suffering a setback from Typhoon Yolanda, the Philippine economy performed well in 2013. Fourth quarter performance, which exceeded expectations, brought overall growth back to pre-typhoon forecasts of 7.2 percent. The Philippine Statistics Authority says that this was driven by trade, real estate and manufacturing. This growth looks set to continue, with Trade Secretary Gregory L. Domingo predicting that the manufacturing sector will grow by 10 percent in the next two years. Manufacturing sector development has been identified as a top priority by the President Aquino’s administration to promote more “inclusive” growth in the Philippines. To read the Council’s latest Philippines updates, please click here.

Singapore

In his first policy speech as U.S. Ambassador to Singapore, Kirk Wagar addressed bilateral Singapore-U.S. relations, TPP, the importance of ASEAN to U.S. foreign relations and the U.S. military posture towards Asia. Ambassador Wagar also cited the US-ASEAN Business Council as a partner in strengthening the bi-lateral relationship between the United States and Singapore. To read the Council’s latest Singapore updates, please click here.

Thailand

Anti-government protests in Bangkok started in November 2013 when the Yingluck Shinawatra administration attempted to pass a controversial amnesty bill through Parliament. The protests led to a dissolution of Parliament in December, and the scheduling of an election on February 2. After much debate whether the official election should be delayed due to the protests, Thailand held its elections over the objections of the election commission, and voter turnout was exceptionally low compared to that of previous elections. The anti-government groups physically blocked some polling stations, particularly in their strongholds of Bangkok and the South, and obstructed the process for those seeking to exercise their right to vote. 

Additional polling will be held on February 23 for voters who were not able to cast ballots on February 2, and other elections will still need to be held in some districts where candidates were not able to register at all. The late February elections will try to meet the constitutionally-mandated 95 percent threshold of seated parliamentary representatives. Meanwhile, the anti-government groups vowed to keep up their campaign against Prime Minister Yingluck Shinawatra. The Democrat party, which boycotted the election and did not put up a candidate, is now challenging the election’s legitimacy in court. 

Also worth watching are cases brought by the National Corruption Commission(NCC) against Prime Minister Yingluck and many Puea Thai MPs. The main investigation surrounds the Prime Minister’s connection to the controversial and unsustainable rice subsidy scheme launched in 2011 which has led to huge stockpiles of rice, drained government coffers and a decrease in Thai rice value on the global market. The government has also been unable to pay the farmers for their recent harvest due to insufficient funds, which could create additional protests from the Puea Thai’s own key constituents. If found guilty by the NCC, Prime Minister Yingluck and the involved MPs could be removed and banned from politics. 

The Puea Thai party has since submitted a complaint to the Election Commission claiming that the Democrats violated the constitution by coordinating protest activities in an attempt to overthrow the government and disrupt the election process. If the complaint was accepted and if upheld, the Democrat party would be dissolved and its executive committee banned from politics for five years.

Please click here for links to the Council’s Thailand updates.

Vietnam

Vietnam is currently negotiating or preparing to negotiate trade agreements with the European Union, South Korea, the Customs Union of Russia, Belarus and Kazakhstan, and the Trans-Pacific Partnership (TPP), and stressed the importance of sustained export growth combined with strategic control of imports. For the Council’s most recent Vietnam update, please click here.