President's Newsletter - July 2015

Greetings from Singapore! I am spending extended time in the region this summer as we continue to strengthen our presence on the ground in ASEAN and implement a tremendous amount of activities throughout the region.

In fact, next week I will be in Vietnam meeting with the Minister of Health on an MOU between her ministry and the Council, celebrating 20 years of US-Vietnam relations and then immediately flying to Jakarta where the Council will be hosting a lunch with the ASEAN TELSOM, Ambassador Daniel Sepulveda (the U.S. Coordinator for International Communications and Information Policy) and U.S. Ambassador to ASEAN Nina Hachigian.  The following week I will be back in Myanmar for our first ever Food & Agriculture Industry Mission and then to Bangkok for our annual Thailand Business Mission.

As you may have heard, Ambassador Michael Michalak will join the Council September 7 to lead our regional efforts as Senior Vice President and Regional Managing Director. You can read the press release on Ambassador Michalak’s hire.

From August 22-25 we will have our 16th annual engagement with the ASEAN Economic Ministers in Kuala Lumpur, which will include a meeting with all 10 Ministers, USTR Ambassador Michael Froman, and AUSTR and chief TPP negotiator Barbara Weisel.

As always, you can check out the calendar at the Council website to get a sense of our many coming events in Southeast Asia and Washington, D.C.

Highlights

Advocacy

Our key advocacy efforts over the past month have included:

1. As a member of the TPA Coalition, the Council joined other US business organizations in signing on to letters to the U.S. Senate supporting final passage of the TPA Bill.
2. We developed an advocacy plan for a Council member to engage the Government of Malaysia on the Ministry of Health’s proposed changes to provisions in a 2009 child nutrition, food industry-accepted Code of Ethics, which would prohibit companies from marketing products and restrict the use of brands and trademarks.
3. We supported the efforts of a Council member during the visit of the General Secretary of the CPV to highlight the contradiction of the Government of Vietnam’s efforts to obtain “market economy” designation by the USG, while also continuing to implement a two-year-old “temporary” policy of imposing price controls on milk products for children.
4. We organized discussions for Council members in Washington and Jakarta with senior Government of Indonesia officials to advocate for changes in approaches to regulatory and trade policy formulation in Indonesia’s energy and ICT sectors.

If you have questions about the Council’s advocacy efforts, please reach out to Marc Mealy at mmealy@usasean.org.

Intelligence

Our Malaysia team examined the fallout from the Wall Street Journal’s reporting on 1MDB, and tracked Malaysia’s attractiveness to FDI in light of the news.

The Council will host a preview of Myanmar’s Elections on July 30 in our D.C. office. Call-in is available for those in the region.  Click here to register.

In response to your requests, we have added a heading in this newsletter track TPP-related intelligence.  Check it out below.

We’ve added the ASEAN Top 5, a twice-monthly refresher on the top business stories in the region, to our website.  Click here to check it out, or search on Twitter under #ASEANTop5

Relationship Building

The Council co-hosted a business roundtable and dinner for the historic first visit of the General Secretary of the Vietnam Communist Party in Washington, D.C., directly following General Secretary Trong’s meeting with President Obama in the White House.  For the joint statement click here.

United Nations General Assembly:  September 21-25 the Council will host a number of ASEAN leader and senior officials around the UNGA in New York.  For further details, please contact Carr Slayton at cslayton@usasean.org.

Business Missions  

Some major Business Missions are coming!

• For more information about the ASEAN Economic Ministers Meeting in Kuala Lumpur August 22-25, contact Anthony Nelson at anelson@usasean.org.
• For the Food & Agriculture Industry Mission to Myanmar August 4, contact Sunita Kapoor at skapoor@usasean.org.
• For the Thailand Business Mission August 6 and 7, contact Carr Slayton at cslayton@usasean.org.
• For the Philippines Business Mission September 1 and 2, contact Carr Slayton at cslayton@usasean.org.

The US-ASEAN Business Alliance for Competitive SMEs is a powerful way to support the growth of small businesses in ASEAN.  The Business Alliance was created at the request of the ASEAN Economic Ministers, and the AEM receives regular updates on its progress.  Please contact Mario Masaya at mmasaya@usasean.org for more information.

Promotion

The Council is organizing a dinner and exhibition in Hanoi in honor of the 20th Anniversary of US-Vietnam relations. Please click here for more information.

The Council’s annual U.S. Ambassadors’ Tour will be held from September 28-October 2.  Confirmed ambassadors include:

• U.S. Ambassador to Indonesia Robert Blake
• U.S. Ambassador to Malaysia Joseph Yun
• U.S. Ambassador to the Philippines Philip Goldberg
• U.S. Ambassador to Vietnam Ted Osius

We are in the process of seeking sponsorship and determining which U.S. cities to visit.  If you or your company are interested in more information, please contact John Corrigan at jcorrigan@usasean.org.

Membership

We are pleased to welcome our newest members:

• Hilton Worldwide
• Zoetis
• DLA Piper

Hilton has joined the Council as a Chairman’s Council member.  Zoetis and DLA Piper have joined as Corporate members.  This brings our current membership to 65 Chairman’s Council and 87 Corporate members, for a total of 152 members.

Hilton Worldwide is one of the world's largest hoteliers with a lodging empire that includes more than 4,000 hotels and resorts in some 90 countries operating under such names as Doubletree, Embassy Suites, and Hampton, as well as its flagship Hilton brand.  Many of its hotels serve the mid-market segment, though its Hilton and Conrad hotels offer full-service, upscale lodging.  In addition, its Homewood Suites chain offers extended-stay services.  The company franchises many of its hotels; it owns the Waldorf-Astoria and the New York Hilton.  Hilton became a public company again in 2013.

Zoetis manufactures and sells veterinary medicines such as parasiticides (for fleas, ticks and worms), anti-infectives, medicated feed additives, vaccines and other pharmaceuticals.  Zoetis boasts more than 300 product lines sold in more than 120 countries around the world, making it one of the world's largest animal health businesses.  In addition to medications and vaccines, Zoetis offers diagnostics, genetics, devices and services such as dairy data management and consulting.  Zoetis went public in early 2013 with an offering worth $2.2 billion.

The DLA Piper Group has a worldwide network of about 8,000 lawyers operating in Asia, Europe, the Middle East and the United States.  DLA Piper serves corporate clients through a broad range of practices divided into about a dozen key groups; specialties include mergers and acquisitions, intellectual property, regulatory and government affairs, and technology and media.  DLA Piper’s clients range from multinational, Global 1000 and Fortune 500 enterprises to emerging companies developing industry-leading technologies.  They include more than half of the Fortune 250 and nearly half of the FTSE 350 or their subsidiaries.  The firm also advises governments and public sector bodies.  The DLA Piper Group was formed in 2005 when Maryland-based Piper Rudnick merged with California-based Gray Cary Ware & Freidenrich and UK firm DLA.

APEC

From late August to early September, the APEC senior officials will meet in Cebu, Philippines for a series of meetings (SOM-III).  There are several events that present different platforms and opportunities for private sector engagement.  To read the Council update of these events please click here.

View the Council's latest APEC updates

ASEAN

The Council will lead its annual mission to the ASEAN Economic Ministers Meeting in Kuala Lumpur from August 22-25. Please contact Anthony Nelson at anelson@usasean.org for more information.

The ASEAN Online SME Academy is a fantastic opportunity to share content with a wide variety of SMEs and contribute to the lasting success of the US-ASEAN Business Alliance for Competitive SMEs.  To contribute to the Academy, please contact Mario Masaya at mmasaya@usasean.org to discuss opportunities.

View the Council's latest ASEAN updates

TPP

Following President Obama’s signing of Trade Promotion Authority (TPA) and the Trade Adjustment Assistance/Preferences Bills into law on June 29, TPP trade ministries announced that ministers will reconvene in Maui July 28 to 31.  Chief negotiators will lay the groundwork for what multiple countries intend to be the final TPP ministerial by meeting from July 24 to 27.  Each of the 12 TPP countries is engaging in multiple bilateral negotiations with partner countries to minimize the number of issues that will need to be addressed in Hawaii.  Those remaining issues are expected to include outstanding market access provisions for sensitive products such as autos, agriculture and apparel, as well as rules pertaining to intellectual property, rules of origin and investment.  Ministers such as Australia’s Andrew Robb have optimistically stated that a deal can be reached at the ministerial and U.S. Trade Representative Michael Froman stated on July 15 in Singapore that the United States is entering the negotiating round with the intent to complete the TPP.  Whenever the deal is completed, President Obama will be required by the TPA law to provide Congress with at least 90 calendar days’ notice of his intention to sign the agreement, and USTR would be required to publish the full text on its website at least 60 days before entering into the agreement.  In addition to the TPA bill, the trade preferences bill signed into law on June 29 restarted the Generalized System of Preferences (GSP) that has greatly benefited U.S. trade with Thailand, Indonesia, the Philippines and Cambodia.  GSP is set to reenter into force on July 29.  USTR is currently considering Myanmar and Laos for participation in the program.  In recent weeks, Ambassador Froman has traveled to Mexico, Malaysia and Singapore as well as met with the General Secretary of Vietnam’s Communist Party and Vietnam’s trade minister to bring the TPP closer to a successful conclusion.

Customs

ASEAN governments have praised the renewal of the U.S. Generalized System of Preferences (GSP) after a two-year hiatus.  Collectively, ASEAN is perhaps the largest beneficiary of the U.S. GSP program.  Thailand is its second largest single user, while Indonesia ranks fourth and the Philippines ranks sixth.  The GSP was renewed alongside Trade Promotion Authority and Trade Adjustment Assistance on June 29.  The tariff discounts will become effective on July 29 and last through 2017.  The reauthorization will also allow importers to apply to U.S. Customs within the next 180 days for refunds on tariffs they have paid on imports since GSP expired in 2013.  USTR will also resume reviewing product coverage and country eligibility.  More information on petitioning USTR for product inclusion can be found here.  Myanmar and Laos have had applications pending since the GSP expired in 2013.  GSP’s renewal will allow their cases to be reviewed.  Thailand will be watching as well to see if it is cut from the U.S. GSP program after losing European GSP benefits in January.

Indonesia’s Ministry of Finance on July 1 installed Heru Pambudi as the new Director General of its Customs and Excise office.  Heru previously served as Director of Income and Regulation.  His move comes as the Customs office faces increasing scrutiny from President Jokowi, who has made improvements to infrastructure and trade central goals of his administration.  Aside from supporting President Jokowi’s logistical reform initiatives, the new Director General faces a daunting challenge with tariff collection.  Under the revised 2015 state budget, the Customs office is expected to meet a revenue target of US$14.6 billion, an increase of about 15 percent over 2014.  Despite concerted efforts at reform, corruption continues to trouble the agency.  Heru has promised to address these various issues and has indicated his priority is to pursue internal reforms to streamline export-import activities for local manufacturers.

View the Council's latest Customs updates

Defense & Security

On July 10, the Indonesian Ministry of Defense and National Development Planning Board held a land reclamation meeting in Jakarta. The topic of discussion was the development of a new military base in the South China Sea.  Since 2014, Indonesia has criticized China’s nine-dash line as an encroachment on its territorial integrity.  There is a growing sense in Indonesia that China’s activities undermine Indonesia’s national interest.  Of particular concern are the Spratly Islands and Parcel Islands.  In response, Indonesia is considering island reclamation in West Kalimantan and Natuna Island. The latter is particularly important for its fish and natural gas reserves.  Commander of the Indonesia Armed Forces General Moeldoko announced that “the Indonesia military has decided to strengthen its forces on Natuna….to meet any eventuality stemming from heightened tensions on one of the world’s key waters.”  President Jokowi has yet to approve the development plans for the military base, but is expected to call on Indonesia to take a balanced approached to the issue.

The Aquino administration has approved plans to significantly increase the Philippines’ defense spending over the next 13 years.  The US$22-billion blueprint divides the Philippines’ military modernization effort into three “horizons” or phases, the first of which (2015-2017) covers procurement of lead-in trainer fighter jets, frigates, helicopters, radars, drones and base upgrades.  Planning is still under way for the second and third phases of the modernization program, but the military is reported to be considering shore-based missile systems as well as diesel-electric submarines.  Funding for the program is provided under the Armed Forces of Philippines (AFP) Modernization Act (RA no. 10349), presidential approval for which had been pending since 2013.  Defense spending has been relatively vigorous under the Aquino administration, but the Philippines is building from a low base.  The AFP still lacks an array of basic capabilities, including logistical support, battlefield domain awareness, and casualty evacuation capacity.  Defense spending on a per capita and per soldier basis remains among the lowest in ASEAN.  

View the Council's latest Defense & Security updates

Energy

On July 23, the US-ASEAN Business Council and the National Bureau of Asian Research (NBR) will co-host the Indonesian Energy Security Workshop in Washington, D.C.  The 2015 Energy Security Workshop will examine the following issues: Indonesia’s energy outlook, critical policy and market challenges, and major developments under the Jokowi administration; key questions for promoting oil supply security; the country’s evolving coal, gas, and electricity nexus, and how stakeholders are seeking to manage the balance between affordability and sustainability; efforts to strengthen environmental policymaking; and implications for the United States and the Asia-Pacific.

On August 3 and 4, the U.S. Department of Energy and the Indonesian Ministry of Energy and Mineral Resources will hold the 4th U.S.-Indonesia Energy Investment Roundtable in Jakarta.  The dialogue will focus on oil and gas as well as renewable energy.  There are opportunities for private sector participation during the roundtable, and interested members should contact Rosabelle Purnama at the U.S. Embassy in Jakarta at PurnamaR@state.gov.

View the Council's latest Energy updates

Financial Services

At June’s Philippine Capital Markets Forum in Hong Kong, the Filipino government presented progress in domestic capital markets development and its expectation of joining the three-country ASEAN Trading Link by 2016.  National Treasurer Roberto Tan noted that the Capital Market Development Plan (CMDP) has been updated to include new financial products such as exchange-traded funds and derivatives as well as new services such as online trading.  The CMDP has been used to enhance and update the exchange in anticipation of regional integration next year.  In addition to touting the progress of its capital markets, Filipino officials have been promoting the overall economic strength of the country.  At the Forum, Finance Secretary Cesar Purisima highlighted the growing local currency corporate bond market, which has more than doubled from $7.6 billion in 2009 to $17 billion at the end of last year.  Secretary Purisima was also recently interviewed by The Wall Street Journal, where he pointed out that external debt, as a percentage of GDP, has been halved from 30 percent to 15 percent since 2005, and the Philippines has reported a current-account surplus for the last 13 years.  He also expects GDP to grow 7 percent this year.  Government and business leaders from the Philippines engaged in a three-city trade and investment mission through the United States in late June to highlight the development of the economy, including a fast-growing IT/BPO sector with increasing investments in infrastructure, and reassure investors of the government’s commitment to reforms despite a change in administration following elections in 2016.  This optimism comes as a recent report issued as part of the Advancing Philippine Competitiveness project warned that the Philippines must continue to enact financial sector reforms, such as easing restrictions on foreign equity for investment houses and increasing domestic access to credit.

View the Council's latest Financial Services updates

Food & Agriculture

In mid-June, Union Minister for Cooperatives in Myanmar U Kyaw San announced that over K160 billion (US$144 million) will be given to regions and states to help farmers grow monsoon crops.  The loans would be distributed with extremely low interest rate of 0.5 percent per year, touted as a vast improvement upon money lenders who may charge as much as 10 percent per year.  The Minister said that the loans are not coming from the government’s budget, but from money borrowed from China and farm machinery bought on credit from South Korea.  The move is apparently motivated by the vulnerability of debt-carrying farmers to unstable weather and unfavorable market conditions, leading them to become stuck in debt cycles.  The initiative is being passed despite strong opposition from other, unnamed quarters.  U Kyaw San stated on 21 June that “It has been difficult to approve the loan.  We struggled with critics and objections in the parliament."  In recognizing the importance of this issue to the Government of Myanmar, the Council will look to involve insurance industry members in future engagements involving our Food & Agriculture committee.

Save the date for Food & Agriculture Industry Mission to Myanmar (Nay Pyi Taw, August 4, 2015).  This mission will provide an opportunity for delegates to demonstrate support for the growth and development of Myanmar's agriculture, food processing and animal health sectors and also learn more about market access and opportunities for U.S. companies to expand business activities.  Please contact the Council’s Food & Agriculture Manager, Sunita Kapoor at skapoor@usasean.org with questions.

View the Council's latest Food & Agriculture updates

Health & Life Sciences

The Council led the inaugural Health & Life Sciences Industry Mission to the Philippines on July 8.  The delegation comprised eight companies and was led by HLS Committee Chair Dr. Leslie Mancuso, President and CEO of Jhpiego.  During the Council's meeting with officials from the Department of Health (DOH), newly-appointed Undersecretary of Health Dr. Kenneth Hartigan-Go emphasized that the "new DOH" would focus on strengthening enforcement against illicit medical products and ensuring regulatory alignment among government agencies.  A mission report will be distributed this week.

The Council has also prepared a draft Memorandum of Understanding (MOU) with the Ministry of Health of Vietnam to formalize partnership that would address health priorities in Vietnam.  This initiative emerged from the Council's annual Vietnam Business Mission March 16-18, when members met with Minister of Health Nguyen Thi Kim Tien.  During the meeting, the minister outlined a number of key priorities, and expressed a desire to collaborate further with U.S. partners through an MOU.  We would like to request all interested members to review the draft and provide any input to Fatimah Alsagoff at falsagoff@usasean.org by July 24.

View the Council's latest Health & Life Sciences updates

ICT

On July 3, Indonesia’s Ministry of Communication and Information Technology (MCIT) signed into law the regulation establishing local content requirements for LTE devices, Technical Requirements of Telecommunication Tools and Equipment Standards-Based Long-Term Evolution Technology.  MCIT is working with the Ministry of Industry, which has developed a draft regulation on the calculations for local content, as well as the Ministry of Trade.  The Council continues advocacy efforts, organizing a number of engagements with U.S. government officials, including the Office of the U.S. Trade Representative (June 2), Department of Commerce on (June 8), and the National Security Council (June 18), to brief them on the issue in advance of President Jokowi’s visit to Washington later this year.  On July 6 in Jakarta, the Council met with I Gusti Putu Suryawirawan, the Director General for Metal, Machinery, Transportation Equipment and Electronic Industry at the Ministry of Industry, regarding the new local content calculations.  According to DG Putu, the new regulation on local content calculation will still mandate 80 percent manufacturing and 20 percent development but it will be more flexible.  DG Putu is open to input from the private sector on how to calculate local content.  The Council is planning more engagement on this issue through the Indonesia ICT Consultative Forum (IICF).

The Council is also monitoring the draft of the Indonesian e-commerce regulation, released by the Indonesian Ministry of Trade on June 17.  Concerns have been expressed about the draft regulation's registration, ownership and data storage provisions.  We are currently planning a policy dialogue within the IICF on this topic.

Malaysia’s Personal Data Protection Commissioner is soliciting feedback on the development and merging of three sets of standards to which data users will need to comply to avoid contravening the Personal Data Protection Act 2010, as stipulated by the Personal Data Protections Regulations 2013.  See the Public Consultation Paper No.1/2015 for more details.  If you are Interested in contributing to comments the Council is preparing, contact Ian Saccomanno at isaccomanno@usasean.org by July 22.

In Vietnam, the Council recently submitted comments on the draft decision on the import of used technology equipment and an issue regarding “same serial number” restriction on re-imports.

The Council is also planning an industry lunch alongside the ASEAN Telecommunications Senior Official Working group meeting (TELSOM).  The July 31 lunch will be co-hosted by the U.S. Mission to ASEAN, with both Ambassador Nina Hachigian and Ambassador Daniel Sepulveda attending.  Contact Shay Wester at swester@usasean.org for more information.

View the Council's latest ICT updates

Infrastructure

On June 24 in Washington, D.C., Philippine Public Works and Highways Secretary Rogelio L. Singson spoke at the Center for International and Strategic Studies (CSIS) Conference, “Dynamic Philippine Economy: Growth, Reform, and Looking Ahead,” highlighting the construction and infrastructure investment opportunities available in the country.  He urged American companies to set up offices in the country and register themselves as contractors, as the creation of a new license category, Quadruple A (AAAA), allows foreign firms to be registered as regular contractors, as opposed to previous regulations permitting foreign firms to work as contractors on a project-by-project basis.  Infrastructure development is seen as essential to the improvement of designated strategic convergence areas, which will help the country to attain sustainable, resilient and inclusive economic growth.  Sectors such as tourism, agriculture, water and transportation have been emphasized as strategic areas of special importance.  Further, the good governance and anti-corruption programs introduced within the Department of Public Works and Highways have saved taxpayers more than US$1 billion in the last year, allowing for a greater focus on infrastructure development.  Opportunities for PPP projects were also emphasized during the conference, as the Executive Director of the Private-Public Partnership Center, Cosette V. Canilao, spoke about the opportunities and policy guidelines needed to facilitate such partnerships.  Creating opportunity for more foreign investment in infrastructure was a running theme throughout the Philippine High-Level Trade and Investment Mission to the United States. The Philippines seeks to be spending 5 percent of its GDP on infrastructure investment by 2016.

View the Council's latest Infrastructure updates

Manufacturing

The International Labour Organization (ILO) recently published a Labour and Social Trends Report for Indonesia, highlighting the need to strengthen labor institutions and invest in skills development.  The report found that labor institutions in Indonesia are underdeveloped, especially when taking into consideration Indonesia’s role as one of the largest economies in the region.  Institutions such as the labor inspection system, collective bargaining and labor courts must be improved and expanded upon.  Since mid-2014, employment has increased, as the number of Indonesians in wage-earning jobs swelled to 38 percent of the employed population.  More than ever, wage-earning employment has become an important part of Indonesia’s labor force.  However, weak institutions have led to a number of problems with the wage-earning population, particularly in terms of low wage growth and employer noncompliance.  Despite Indonesia’s growing economy, one in three Indonesians earn a wage of less than US$71 a month, and many employers pay less than the minimum wage mandated by provincial laws.  Further, low-wage workers are disproportionately female.  With changing economic circumstances in the region and the implementation of the ASEAN Economic Community (AEC) at the end of 2015, Indonesia must innovate and improve its labor sector.  ILO models show that the AEC could create an additional 1.9 million jobs in Indonesia.  Demand for high-skilled labor has increased exponentially, by 55.7 percent, and is needed for Indonesia to effectively use the AEC to benefit the national economy.  Indonesia’s growth has slowed in the past year, and the ADB has revised its growth forecast from 5.5 percent to 5 percent.  As a result, Indonesia needs to find new engines for growth to remain competitive, and the ILO suggests manufacturing as a possible sector to focus on in the future as a growth provider.  At its core, the ILO report emphasizes two areas of focus:  the need to improve labor institutions, and the increasing demand for high-skilled labor.

Cambodia

On July 13, the National Assembly passed the Law on Associations and Non-Governmental Organizations (LANGO).  This law outlines the legal framework by which NGOs may operate in Cambodia.  All 68 MPs from the Cambodian People’s Party (CPP) voted to adopt the bill (a majority in the 123-seat lower house).  The 55 members of the opposition Cambodian National Rescue Party (CNRP) boycotted the vote. Their fierce challenge to the law has been echoed by local civil society groups and international organizations.  Multiple stakeholders feel there was a lack of consultation in the legislative process.  While the legislation did receive some last minute amendments from the CPP, such as a reduction in the minimum membership for an NGO to register, critics remain dissatisfied.  The law requires “political neutrality” from local NGOs.  International NGOs risk being closed if they are deemed to "jeopardize peace, stability and public order or harm the national security, national unity, culture and traditions of the Cambodian national society."  The Cambodian government argues that the law prevents terrorist funding and other criminal activities.

The following pieces of legislation are on the horizon:

• Cybercrime Law - Critics fear this is aimed at criminalizing online communications which criticize the government.
• Telecommunications Law – Opponents fear that this will empower the government with surveillance powers over its critics and mandate information from Internet service providers.
• Trade Union Law – Critics argue this will restrict labor unions to go on strike.

The Cambodia Committee and ICT Committee have solicited input from members with regard to the Cybercrime Law and Telecommunications Law and the Council is considering submitting a letter of comment to the Cambodian government on their behalf.  Please contact Kim Yaeger at kyaeger@usasean.org and Daniel Henderson at dhenderson@usasean.org if you are interested.

• ICT Committee’s July 2015 “Council’s Take” as the NGO legislation was being debated
• Cambodia Committee’s May 2015 “Council’s Take” on the controversy around the NGO law
• Cambodia Committee’s December 2014 “Council’s Take” on the draft NGO law

View the Council's latest Cambodia updates

Indonesia

The World Bank and the Asian Development Bank (ADB) have both lowered growth forecasts for Indonesia in reports released this July.  Due to weakening private consumption, low commodity prices, tight credit conditions, and lower government spending, the World Bank has lowered forecasts in 2015 from 5.2 percent to 4.7 percent.  Similarly, the Asian Development Bank has lowered economic growth forecasts from 5.2 percent to 5.0 percent for 2015 due to slow government spending, weak results of government reform programs, and weak export performance.  Subdued fixed investment and decreasing consumer spending has caused Indonesia’s gross domestic product to slow to a six-year low.  In the first quarter of 2015, growth was recorded at 4.71 percent, the slowest seen since 2009.  The ADB maintains an optimistic medium-term projection.  The World Bank’s July Indonesia Economic Quarterly can be found here.

The Indonesian House of Representatives has initiated a Draft Bill on Oil and Gas to replace the current Oil and Gas Law of 2001 (Law No. 22 of 2001).  The Draft Bill would change or add provisions related to redefining the types of oil and gas industries, creating new management bodies to manage the industry, and further regulating upstream and downstream activities.  It further expands on upstream and downstream activities and introduces an auxiliary activity category, which essentially comprises services and industries.  The Draft Bill also introduces two new state-owned management agencies to regulate upstream and downstream activities.  The upstream industry will be managed by the Upstream Cooperation Organizer (BUMN-K), while the downstream industry will be managed by the Buffering Business Entity.  In contrast to the current managing organizations (SKK Migas and BPH Migas), these organizations will only be allowed to engage in cooperation with companies on behalf of the government.  The Minister of Energy and Mineral Resources will now have the authority to determine the working area for upstream activities, and will give Pertamina preferential access to these working areas.  The Draft Bill is currently being discussed by the Commission VII at the Parliament, and will almost certainly undergo further revision.

View the Council's latest Indonesia updates

Malaysia

On July 2, The Wall Street Journal (WSJ) published an article that purportedly uncovered transfers of nearly US$700 million (RM2.6 billion) from 1MDB to personal accounts of Prime Minister Datuk Seri Najib Tun Razak.  The WSJ reported that they received and published documents from an anonymous source involved in the government probe into 1MDB.  Bank Negara, the Auditor-General, the Malaysian police, and a parliamentary committee are all currently investigating 1MDB’s accounts and management.  Following the publication of the WSJ article, Attorney-General Tan Sri Abdul Gani Patail announced that a special task force had been charged with investigating allegations against Prime Minister Najib.  The Prime Minister quickly responded to the article by denying the allegations.  He also announced plans to sue the WSJ for defamation, and on July 8, he initiated legal action against Dow Jones, the owner of WSJ, requesting confirmation that Dow Jones stands by the WSJ report.  The political flurry since the publication of the WSJ article has not impacted Malaysia’s economic outlook.  Last month, Fitch affirmed Malaysia’s Long Term Foreign Currency (LTFC) rating at A-, and revised Malaysia’s outlook to stable.  On July 6, Moody’s released a statement that the 1MDB developments would not affect Malaysia’s A3 rating as they did not materially affect the trend of fiscal consolidation that supports Moody’s positive outlook.  Moreover, on July 13, Foreign Policy Magazine released its annual Baseline Profitability Index (BPI), which ranks countries by their overall attractiveness as targets for foreign investment.  This year, Malaysia is ranked the sixth most attractive destination for foreign investment out of 110 countries.  Malaysia’s ranking represents a five-rung improvement from its 2014 BPI rating.

View the Council's latest Malaysia updates

Myanmar

The Council will hold its first Food & Agriculture Industry Mission on August 4 in Nay Pyi Taw.  For more information, please contact Sunita Kapoor at skapoor@usasean.org.

The Council held its annual Business Mission to Myanmar June 22-24.  Please click here to read the press release.

The framework for Myanmar’s elections are now set for November 8, 2015, as the Union Election Commission has announced.  Constitutional amendments that would have changed provisions of the constitution, including those which prevent Daw Aung San Suu Kyi from serving as president, were rejected, and further efforts at change must wait for the elections, when Parliament is likely to be significantly reshaped.  One change in the balance has already occurred with the incapacitating illness of USDP MP U Aung Thaung, a hard-liner with close links to the military and, reports indicate, a leader of the faction supporting the military in rejecting constitutional change.  Reports circulated indicating that President U Thein Sein had chosen not to put himself forward as a candidate for a second term, but his office refuted those reports and indicated he would wait for the results of the election before making a decision.  The opposition NLD has affirmed that it will run in the election despite Aung San Suu Kyi’s ineligibility, calming fears of a boycott.  Several key opposition figures, such as 88 Generation stalwart U Ko Ko Gyi, have confirmed they will run for Parliament on the NLD slate.  The NLD has not made public whether they will put forward a candidate for the Presidency from their own ranks or partner with another party.  Some 21 Ethnic Parties have created a bloc, and they have confirmed they will put forward their own candidate for the Presidency.  The Council will continue to watch events as they develop.

View the Council's latest Myanmar updates

Philippines

The Council’s Philippine Business Mission will be held September 1-2 in Manila.  For more information, please contact Carr Slayton at cslayton@usasean.org.

According to the World Economic Forum’s most recent Global Competitiveness Report, the Philippines ranked 98 out of 144 in terms of infrastructure, lagging behind other large ASEAN economies.  The Philippines ranked below Singapore, Malaysia, Thailand and Indonesia, and only surpassed the Vietnamese infrastructure ecosystem by roughly 10 rankings.  These deficiencies have translated into a substantial loss for the country in terms of commercial productivity and efficiency, affecting travel times, pollution, and congestion, and have led to poor access to public utilities.  The Aquino government has come under criticism for the lack of infrastructure improvement in the country.  However, policymakers have taken steps to introduce new projects.  The government’s procurement reforms, combined with more efficient customs procedures, have led to larger fiscal savings, much of which is being funneled into upcoming infrastructure projects.  Additionally, policymakers are working to further smooth out kinks in the country’s public-private partnership (PPP) scheme to implement projects more efficiently.  Ten PPP projects have been awarded to date with a cumulative value of P200 billion (US$4.2 billion), and the contracted private companies are expected to gain significant upsides on their investments.  The Philippine government has expressed its intention for these projects to increasingly involve U.S. infrastructure firms.

The House of Representatives has approved on final reading its version of a bill prohibiting anti-competitive behavior and other unfair business practices.  The Philippine Competition Act (Bill No. 5286), which was principally authored by House Speaker Feliciano Belmonte Jr., will now be presented to President Aquino for his signature.  The bill establishes a National Competition Policy with the aim of ensuring “free and fair competition in trade, industry and all commercial economic activities.”   Among its key provisions, the policy prohibits any form of economic concentration in production, distribution, trade or industry tending to “unduly stifle competition, distort, manipulate or constrict the discipline of free markets.”  Business entities found to be engaging in unfair practices face a fine of up to P100 million for the first offense, and up to P250 million for the second offense.  The bill additionally provides for the creation of a national antitrust commission under the Office of the President to oversee and implement the new rules.  Foreign and local business groups alike have characterized passage of the Philippine Competition Act as a priority for the Aquino administration.

President Aquino will deliver his final State of the Nation address on July 26.  Much speculation is taking place regarding President Aquino’s remarks, which are expected to offer a glimpse into his final wish list for the remainder of his administration.  Some senators are pushing for Aquino to back bills that will revamp tax brackets, a nod to the importance of competitiveness in an increasingly competitive ASEAN.  The Philippines has the second highest income tax rate in the region with 32 percent following Thailand and Vietnam, both with 35 percent. The Philippines also has the highest value-added tax with 12 percent.  The current individual income tax bracket of the country has not changed since 1997 despite the increase in the consumer price index and the recent surge in economic development.

View the Council's latest Philippines updates

Singapore

On June 15 in Washington, D.C., Singaporean Foreign Minister K. Shanmugam stated directly that the credibility of long-term U.S. economic engagement in the Asia-Pacific region relies heavily upon collective passage of the Trans-Pacific Partnership (TPP) agreement.  Singapore is one of 12 countries negotiating the trade and investment agreement and one of four ASEAN participants, along with Brunei, Vietnam and Malaysia.  With further progress and passage of the TPP agreement, Foreign Minister Shanmugan believes that U.S. economic and trade influence as well as leverage within the region can be optimized.  For more information, please click here.

On July 9 the Singapore Committee held a briefing on Trade Promotion Authority (TPA) and the Trans-Pacific Partnership (TPP).  You can find a summary of the call here.  As a supplement to the call, please find a one-pager on the Congressional requirements and timeline for the TPA here.  

View the Council's latest Singapore updates

Thailand

The Thailand Business Mission will be held on August 6-7 in Bangkok.  Confirmed meetings include a meeting with Prime Minister Prayut.  For more information, please contact Carr Slayton at cslayton@usasean.org.

Pending approval from the King, Dr. Veerathai Santiprabhob is slated to become the Bank of Thailand’s 23rd central governor.  The 45-year-old member of the Bank’s Monetary Policy Committee has a doctorate in economics from Harvard and was chosen by the Thai cabinet over Supavud Saicheua, the managing director and head of research at Phatra Securities.  Dr. Veerathai would replace departing Governor Prasarn Trairatvorakul.  Though Dr. Veerathai will become the fourth youngest person to ascend to the position and the youngest among major Asia-Pacific economies, his selection was widely praised by analysts, citing his experience and leadership.  As chief strategy officer at the Stock Exchange of Thailand, he was instrumental in the development of Thailand’s capital markets and efforts toward ASEAN capital market integration.  He was also an economist at the International Monetary Fund and a director at the Siam Commercial Bank before his current duties on the Monetary Policy Committee and the government’s board overseeing state firms.  Dr. Veerathai will inherit a sluggish Thai economy with limited monetary policy options.  The central bank recently downgraded its 2015 economic growth forecast from 3.8 to 3.0 percent after the Thai economy grew only 0.7 percent last year amidst declining exports and rising household debt.  The Thai benchmark interest rate was recently trimmed to 1.5 percent and another cut is expected in August or September before Dr. Veerathai takes office, leaving him with fewer options to stimulate the economy if it continues to stagnate.  A fan of meditation, which he credits as having improved his decision-making skills, Dr. Veerathai had previously voiced his opinion that, “It is a myth that public investment flows alone can stimulate the economy,” and meaningful economic reforms can only come when, “…reforms in the minds of the people in the society, especially in groups that have received big benefits from developing the Thai economy for the past many decades,” occur.  He also mentioned that he would support reducing the interest rate further if there were additional negative shocks to the economy.

View the Council's latest Thailand updates

Vietnam

July 6 marked a milestone in U.S.-Vietnam bilateral relations with the Obama Administration welcoming the General Secretary of the Communist Party of Vietnam Nguyễn Phú Trọng to the United States for the first time.  He is the first ever serving chief of the Communist Party of Vietnam to be received in the United States. President Obama, who had initiated the trip by inviting Trong to visit, met General Secretary Trong at the White House on July 7.  Trong also met with Vice President Biden, Senator John McCain, and other senior U.S. politicians during his three-day tour of Washington.  Trong’s visit celebrated 20 years since the normalization of relations between the two countries, and the two governments signed significant bilateral agreements, including a Joint Vision Statement.  Vietnam and the United States also reached memorandums of understanding (MoUs) on the prevention, early detection and response to dangerous pathogens and agreed to the exchange of visits of defense and military delegations on peacekeeping operations.  Both sides also agreed on a double taxation avoidance agreement and a grant to promote aviation safety.  Vice President Biden announced that the government of Vietnam will grant a license to allow a new Fulbright University of Vietnam to begin the construction and investment process at a 15-hectare site in the Saigon Hi-Tech Park.  On July 8, other commercial deals were signed during a gala dinner hosted by the Council and the U.S. Chamber of Commerce. The successful visit is seen as indicating a mutual commitment to accept differences between the two countries and to cooperate on issues of common cause.  Both Vietnam and the United States are strongly interested in kick-starting the Trans-Pacific Partnership (TPP) and monitoring China’s activities in the South China Sea.  The visit follows other signals of cooperation between the United States and Vietnam including the signing of the Vietnam Comprehensive Partnership in 2013, the easing of U.S. restriction of arms sales, the entry into force of the "123" Agreement for Cooperation Concerning Peaceful Uses of Nuclear Energy, Vietnam's endorsement of the Proliferation Security Initiative's Statement of Interdiction Principles, and the signing of the Joint Vision Statement on Defense Relations.  There are high hopes that President Obama will visit Vietnam later in 2015 when he makes his trip to Manila for the APEC Summit.

Vietnam has reported that 186 state-owned enterprises (SOEs) had been equitized thus far in 2015. This finding, set against the Vietnamese government’s self-assigned targets for this year, was seen as an indicator of relatively slow progress in the government’s campaign to pare down Vietnam’s SOE industry, whose collective asset pool amounts to 80 percent of Vietnamese GDP.  The dominance of state-owned enterprises in key industries across Vietnam is seen by private and foreign investors to inhibit competitiveness, with SOEs seen as driving inefficient outcomes. The government’s efforts to restructure the SOE sector have mounted in past years, culminating in this year’s drive to equitize a total of 432 SOEs and to force SOEs to divest VND19.52 trillion (US$898 million) worth of public capital. However, the government is facing challenges associated with such a large-scale alteration of the Vietnamese economy. Last week, a report revealed that while the government could claim to have successfully privatized 50 percent of all state-owned enterprises, the asset-pool of the remaining SOEs was still very large relative to other countries.  This week’s indication of slow progress on equitization of SOEs can be seen as another indicator of difficulty.  As Dang Quyet Tien, Deputy Director of the Corporate Finance Agency under the Finance Ministry stated on June 5, the Vietnamese government is balancing the desire to privatize SOEs with the impact of privatization on SOEs’ financial health, given that Vietnam is requiring SOEs to undergo an IPO within 12 months of equitization.

View the Council's latest Vietnam updates