September 2018

President’s Newsletter – SEPTEMBER 2018

Dear Members,

Greetings from Washington, DC after a very busy month of September.   

Before I begin, I want to offer my deepest condolences to the government and people of Vietnam on the sudden passing of Vietnamese President Tran Dai Quang. We were looking forward to hosting President Quang for a dinner this past week on the sidelines of the UN General Assembly meetings in New York to discuss ways to strengthen the U.S.-Vietnam Comprehensive Partnership. Vietnam has made much progress and the Vietnamese economy prospered under the leadership of President Quang and Prime Minister Phuc. President Quang’s passing at this critical juncture will be felt and the Council stands with our friends in Vietnam at this time.

Earlier this month, Ambassador Michalak and I had the opportunity to travel to Hanoi to attend the World Economic Forum’s ASEAN conference.  WEF ASEAN featured addresses by leaders of Indonesia, Laos, Cambodia, Singapore and Vietnam as well as the participation of ASEAN’s Secretary General.  Most of the economic cabinet members from both Indonesia and Vietnam were in attendance with their leaders.

We took the opportunity of being in Hanoi to advance our members’ interests with Minister-level side meetings on the digital economy with Indonesia and Vietnam.   We followed our engagements in Vietnam by co-hosting a dinner during Singapore’s Cyber Security Week. Our dinner featured participation by Singapore’s Minister for Communications and Information, S. Iswaran, the Head of Singapore’s Cyber Security Agency CEO David Koh, as well as Cyber Security officials from around ASEAN.

We spent much of this past week in New York during the United Nations General Assembly annual meetings.  On Tuesday, I was honored to share the podium with Indian Minister of Health and Family Welfare, Jagat Prakash Nadia, and Norway’s Minister of International Development, Nikolai Astrid, and announced that the Council would join the Every Woman, Every Child movement of the UN.  The Council will work with our members and Health Ministers across ASEAN over the next 15 months to advance healthcare for mothers, children and adolescents across Southeast Asia.  We are very excited to enter into this important partnership and look forward to helping to meet the movement’s goals of saving lives of mothers and children across ASEAN.

On Thursday evening, we were honored to host the 4th and 7th Prime Minister of Malaysia, Tun Dr. Mahathir bin Mohamad.  This is the first time we have engaged Prime Minister Mahathir since he was elected as Malaysia’s 7th Prime Minister as Chairman the Pakatan Harapan coalition in May of this year.  The Prime Minister spent an hour in a business roundtable before joining the main dinner, where he took questions after his address including quests around CPTPP, RCEP and the possibility of a second pass at a bilateral Free Trade Agreement with the United States.  He acknowledged in his answers that Malaysia was a trading nation and that access to markets is important but did not commit himself or Malaysia beyond that.  We are looking forward to having another opportunity to see Dr. Mahathir during our 2018 Business Mission from October 16-18.  We hope you will consider joining us on what will be a great opportunity to engage the new Malaysian Government.

I also had the opportunity to engage Prime Minister Hun Sen of Cambodia and Laos Foreign Minister Salermxay Kommasith in private meetings on the sidelines of the UN General Assembly.  Prime Minister Hun Sen and I discussed our upcoming business mission next week as well as my hope that relations between the U.S. and Cambodia can improve, as well as ways we can help Cambodian SMEs and entrepreneurs in the digital economy.  My discussions with Minister Kommasith focused around how we might best follow-up on our business mission to Laos last month and how we could continue to work together to improve healthcare in Laos.

Past Events

• On September 27, we hosted a successful dinner in honor of Prime Minister Mahathir of Malaysia in New York City, alongside UN General Assembly meetings. Prime Minister Mahathir is visiting the U.S. for the first time since returning to leadership in Malaysia.
• On September 27, the Council was pleased to have supported the Royal Thai Embassy of Washington, D.C.’s event to celebrate 200 years of U.S.-Thai friendship and 185 years of diplomatic relations.  The event took place in the beautiful Library of Congress, and consisted of several special elements, including: a beautiful display of traditional Thai musical instruments that were specially crafted and gifted to the Library of Congress by His Majesty King Bhumibol Adulyadej of Thailand in 1960; remarks from H.E. Virasakdi Futrakul, the Deputy Minister of Foreign Affairs of Thailand, who is leading the Thai delegation to the U.N. General Assembly; and a very special performance of His Majesty King Bhumibol Adulyadej’s musical compositions by the renowned John Di Martino Quartet. The Council is pleased to be the Royal Thai Embassy’s exclusive partner, along with the Library of Congress, for this timely event to celebrate the important, longstanding relationship between the U.S. and Thailand, which will become even more important as Thailand takes on the ASEAN Chairmanship in 2019.
• AEM business Mission: From August 30-September 1, the Council conducted its business mission to the 50th ASEAN Economic Ministers (AEM) Meeting, where 17 U.S. companies engaged key economic officials on regional and bilateral trade and investment issues.  This year marked the Council’s 19th annual meeting with all ten ASEAN Economic Ministers.  Driven by the key ASEAN 2018 deliverable of fostering innovation and the digital economy, the Council presented its annual AEM White Paper on “Building a Strong and Integrated Digital Economy in ASEAN:  Recommendations and Perspectives of U.S. Business,” which highlighted key challenges and recommendations in various sectors. These recommendations were presented at the Council’s annual AEM-U.S. Trade Representative (USTR) consultation, which was led by Deputy U.S. Trade Representative Ambassador Jeffrey Gerrish.

Looking Ahead

• October 2-3: Cambodia Business Mission: The mission will serve as an opportunity for the Council to identify key decision makers in the post-election environment, and support the Cambodian government on its economic reform and development agenda.
• October 10:  Indonesia- the Journey Forward, a U.S.- Indonesia Gala Business Dinner in Bali, Indonesia: The Council will co-host a dinner in Bali on the eve of the World Bank/IMF Fall Meeting celebrating the U.S.- Indonesia relationship. We expect Indonesia's President Joko Widodo to be our Guest of Honor and keynote speaker.  Several of his Cabinet ministers are confirmed, including: Coordinating Minister for Maritime Affairs, Luhut Pandjaitan; Minister of Finance, Sri Mulyani Indrawati; as well as Bank Indonesia Governor, Perry Warjiyo.  US Ambassador Joseph Donovan will also attend along with US Treasury officials attending the World Bank/IMF meetings.  Sponsorship opportunities and individual tickets are still available.  Contact Artha Sirait at asirait@usasean.org for more information.
• October 16-18: Malaysia Business Mission: The mission will be an opportunity to engage the new administration under Prime Minister Mahathir and gain a better understanding of the new government’s priorities and plans.  The deadline to register is October 2.  To register please click here.  Contact Kim Yaeger at kyaeger@usasean.org for more information.

Highlights

Advocacy

• The Council’s advocacy efforts, along with those of other industry groups and individual corporations, were successful in delaying the implementation of the Central Bank of Malaysia’s regulation on foreign equity ownership limits on domestic insurance companies.  Bank Negara’s new Governor announced that the deadline for foreign insurers to comply (via divesting ownership stakes) would be extended indefinitely to allow for foreign insurers to submit new equity ownership structure proposals to Bank Negara.  This issue was also included in our discussions with Malaysian Prime Minister Mahathir before our dinner in New York City last week and will be included in our 2018 Senior Executives Business Mission to Malaysia from October 16-18.
• The Council’s ongoing advocacy efforts with the Government of Vietnam (GOV) regarding the implementation of its new Law on Cybersecurity (LOC) were recently intensified.  The Council joined nine other business associations in transmitting a letter to the GOV advocating for the adoption of internationally recognized standards which are risk-based, outcome-focused, technology-neutral, flexible and adaptable to respond to changing threats and market bases.  The implementation of the LOC was also an agenda item in my discussions with GOV officials on the sidelines of the World Economic Forum (WEF) in Hanoi.  
• The Council initiated an advocacy effort with the Government of Malaysia regarding the establishment of a data breach notification framework for all Malaysian consumer data stored off shore.  The Council worked with interested members and transmitted a joint submission letter in partnership with the Business Software Alliance in response to a public consultation letter issued by Malaysia’s Personal Data Protection Commission. The letter advocated that any framework be based on the following principles: Notification standards should be risk-based, users should be encouraged to investigate and restore the integrity of systems, and data subjects should receive notifcations from the entity with which they have a relationship.  The submission also included operationally related recommendations for a data breach notification framework.

Intelligence

• Indonesia issued Ministry of Finance Regulation No. 110/2018 to raise import taxes on more than 1,000 consumer goods.  The regulation is an amendment to the tariff guidelines of Minister of Finance Regulation No. 34/2017 on Income Tax for Imported Goods (PPh 22).  Responses raised from the local business community were cautious or even negative.  The Government’s decision was motivated by the latest foreign selloff of Indonesian assets that followed reports showing that the current account deficit had widened in the second quarter, putting further pressure on interest rates and the rupiah.  As of September 12, Indonesia’s rupiah dropped to its weakest level since the 1998 Asian financial crisis, closing at IDR14,930 per dollar.  The current account deficit was US$ 8 billion in the second quarter, twice the total value of consumer goods imported in the same period.  Because the tariffs are so small and on such a narrow range of products, mostly in the relatively small consumer sector, it is unlikely they will have a significant shortterm effect on the deficit.  Ordinarily, Indonesia’s current account deficit and reliance on foreign portfolio investment to finance it is not a significant challenge.  However, it did leave the country particularly exposed to last quarter’s instability in developing markets, which the government fears will continue.  At the same time, foreign direct investment, which is much steadier during periods of turbulence, has been falling as election season begins.
• On September 6, the Cambodian Parliament voted in new parliamentary and executive leadership. With all key ministers firmly placed in their former positions, the operating environment in Cambodia is very likely to remain businessas-usual.  To view the full Cabinet list, please click here.  With the election now over and the Cambodian People’s Party’s (CPP) firm grip on the country’s political system once again secured following the widelycriticized July 29 general election, the government is likely to go back to focusing on its development priorities and economic reform initiatives.  While the year in the runup to the election was characterized by the CPP’s sharp criticism of the United States, the government now appears to be softening its rhetoric, hoping to build up the international goodwill that it lost in the run-up to the polls and show that Cambodia is not internationally isolated.  Prime Minister Hun Sen’s spoke to the United Nations General Assembly yesterday which is one of the first steps the longtime leader is taking to help rebuild his government’s international legitimacy post-election.

Regional Highlights

APEC

Looking Ahead

On behalf of the U.S. APEC Business Coalition, the Council is pleased to invite members to the annual APEC CEO Summit taking place in Port Moresby, Papua New Guinea from November 15-17, 2018.  The CEO Summit provides an unparalleled opportunity for business executives to engage with world leaders and high-level government officials.  To request an invitation, please click here.  CEO Summit sponsors do not need to request an invitation.  Please click here to view the tentative summit program and list of sponsors.  If you have any questions, please contact Hai Pham at hpham@usasean.org.

View the Council's latest APEC updates

ASEAN

Major Developments

• After attending France’s July 14 National Day Parade, Prime Minister of Singapore Lee Hsien Loong announced that the European Union and ASEAN have restarted the process to negotiate a Free Trade Agreement (FTA).  The first step is to agree on a framework for the negotiations, and Singapore plans to take the lead in this process.  Negotiations have been on hold since 2009, and the EU has instead focused on bilateral FTAs with ASEAN members that could eventually be merged into a regional deal.  The EU has successfully negotiated FTAs with Vietnam and Singapore, while negotiations are ongoing with the Philippines, Thailand, Malaysia and Indonesia.  Talks with Malaysia and Indonesia have moved slowly due to efforts in Europe to apply potentially discriminatory rules against Southeast Asian palm oil.  The issue is also likely to appear in the ASEAN-EU negotiations.

Advocacy

• From August 30-September 1, the Council conducted its business mission to the 50th ASEAN Economic Ministers (AEM) Meeting, where 17 U.S. companies engaged key economic officials on regional and bilateral trade and investment issues.  This year marked the Council’s 19th annual meeting with all ten ASEAN Economic Ministers.  Driven by the key ASEAN 2018 deliverable of fostering innovation and the digital economy, the Council presented its annual AEM White Paper on “Building a Strong and Integrated Digital Economy in ASEAN:  Recommendations and Perspectives of U.S. Business,” which highlighted key challenges and recommendations in various sectors. These recommendations were presented at the Council’s annual AEM-U.S. Trade Representative (USTR) consultation, which was led by Deputy U.S. Trade Representative Ambassador Jeffrey Gerrish.

View the Council's latest ASEAN updates

TPP

Major Developments

During a recent interview in Thailand, Malaysia’s Prime Minister Dr. Mahathir was quoted as saying that Malaysia would ratify the CPTPP.  While no timetable was given, his comments referred to the fact that it would be important for Malaysia’s credibility to ratify an agreement which it had signed.  With Vietnam’s National Assembly scheduled to ratify the CPTPP by the end of 2018, and the Government of Brunei likely to do the same, Malaysia could be the sixth member of the CPTPP to ratify the agreement and thus bring it into force.

Advocacy

Advocating for the ratification of the CPTPP will be included as an agenda item in upcoming programs with the Government of Malaysia in both New York and Malaysia.

View the Council's latest TPP updates

Industry Highlights

Customs

Major Developments

• The meeting of the ASEAN Economic Ministers on August 29 endorsed several programs that will be important to customs integration as part of the AEC’s Blueprint 2025:

1. The endorsement of the ASEAN Agreement on Electronic Commerce, which includes some provisions on cross-border logistics and is expected to be signed at the 33rd ASEAN Summit this November.
2. The amendment of the ASEAN Trade in Goods Agreement (ATIGA) which allows for operationalization of the ASEAN-wide Self-Certification (AWSC).  The AWSC will allow certified exporters to self-certify the origins of their exports and ship them within the region at preferential tariff rates.  The AWSC will also reduce administrative hassle and compliance costs.
3. A call to continue the implementation of the ASEAN Single Window (ASW) noting significant progress in certain member states and the lack of it in others.  The Ministers hope that the technical and operational issues of ASW implementation can be addressed during this early stage of implementation. 
4. The encouragement of ASEAN member states to integrate the ASEAN Customs Declaration Document (ACDD) and the electronic Phytosanitary (e-Phyto) Certificate into the ASW.

The ministers also recognized progress in tariff reduction, called for more work on trade facilitation, welcomed recent work on customs integration, and recognized the importance of addressing technical trade barriers.  The full text of the AEM joint media statement can be found here.

• Malaysia launched the new Sales and Services Tax (SST) on September 1, replacing the Goods and Services Tax (GST) following Parliament’s passage of five bills on August 20. The new system implements a range of sales taxes on goods, generally 5 or 10 percent. These taxes will be applied to both goods sold in Malaysia and to taxable goods imported into the country.  For imports, the value of the tax will be applied to is the sum of the value of the goods (as defined under the Customs Act of 1967), the customs duty, and any applicable excise duties.  Importers will be able to apply for advance valuation rulings and duty drawback, should their purchased goods be re-exported within six months.  The SST establi,s a separate tax on services at 6 percent, though a majority of services will actually be exempted. Customs agents, domestic flights, and couriers are, however, included as taxable services.  The service tax is only domestic and does not apply to imports or exports of services.

View the Council's latest Customs updates

Defense & Security

Major Developments

On August 27, the United States and South and Southeast Asian states kicked off this year’s iteration of the Southeast Asia Cooperation and Training (SEACAT) exercises.  The drills highlight ongoing efforts by the United States and allies and partner countries in Southeast Asia to boost collaboration as part of the U.S.’s larger Indo-Pacific strategy.  SEACAT is one of the key multilateral exercises that the United States carries out that involves largely Southeast Asian states.  It serves to promote multilateral cooperation and information-sharing among navies and coast guards in South and Southeast Asia, bringing together personnel to execute maritime responses to scenarios to better tackle maritime security challenges such as smuggling, piracy, human trafficking and illegal fishing.  On August 27, the United States kicked off the 17th iteration of the SEACAT exercises.  This year’s exercise features nine countries, seven of which are ASEAN nations – Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam.

Looking Ahead

ASEAN Defense Minister Plus Meeting (ADMM-Plus): U.S. Secretary of Defense James Mattis and Assistant Secretary of Defense for Asia Randy Schriver will lead the U.S. Delegation to the ASEAN Defense Ministers Meeting in Singapore from October 18-20.  

View the Council's latest Defense & Security updates

Energy

Major Developments

• As part of its attempt to bolster the weakening rupiah by reducing imports, the Government of Indonesia recently issued a regulation (Energy and Mineral Resources Minister Regulation No. 42/2018) requiring private oil companies, including local subsidiaries of foreign parent companies, to offer all crude oil to Pertamina, the state energy holding company.  All sales and purchase negotiations with Pertamina are required to be held under a business-to-business scheme, and, after negotiations are finished, Pertamina has the option to enter into a 12-month contract with oil companies.  The regulation projects that Pertamina will purchase approximately 225,000 barrels of oil on a daily basis.
• As part of the same program to reduce imports, the Government of Indonesia also announced on September 11 that it would postpone the construction of more than 15 GW of electricity projects between 2021 and 2026.  Minister for Energy and Mineral Resources Ignasius Jonan said that the postponement was necessary due to the need to import the majority of the components that would be needed for the projects.  While the postponement will slow down the implementation of the Government’s 35 GW electricity program, Jonan said that it would not significantly affect the electrification program, which he claimed was 97.3 percent.
• Negotiations between the Philippines and China to share oil and natural-gas resources in the disputed waters of the South China Sea are reportedly progressing.  According to Philippine officials, the two governments are working on a legal framework for joint exploration and development, with the aim of potentially making an announcement on the issue during an expected visit by Chinese President Xi Jinping in November.  Legal experts and critics of Philippine President Rodrigo Duterte say such joint activities would undermine a 2016 international tribunal ruling that invalidated China's claims that it has historic rights over most of the South China Sea.  A joint development agreement between China and the Philippines would also likely encourage China to push for similar arrangements with other Southeast Asian countries that dispute Beijing's South China Sea claims, while also potentially blocking Western oil companies from operating in the resource-rich region.  The Philippine Government is pressing ahead with negotiations in an attempt to find an alternative to the Malampaya gas field, which is expected to be depleted within the decade.  Gas from the Malampaya field supplies a third of the electricity for the island of Luzon, where Manila is located.  To ensure that new projects are up and running by the time Malampaya is depleted, experts say that exploration for a replacement needs to start now.

Looking Ahead

• Please save the date for the Council's 2018 Business Mission to the 36th ASEAN Ministers on Energy Meeting (AMEM) in Singapore from October 25-30.  This is the eighth year that the Council has taken a business mission to AMEM, overlapping this year with Singapore International Energy Week, October 29-November 2, at the Marina Bay Sands.

View the Council's latest Energy updates

Financial Services

Major Developments

• The Royal Malaysian Customs Department released the full text of the Service Tax regulation three days ahead of the September 1 implementation of the tax (full text of the regulation can be found here).  Though the majority of services are actually exempt, the schedule covers nine types of services which will be taxed at 6 percent.  Several major parts of the financial services industry have been included in the taxable services:

1. Insurance firms – General insurance policies except for medical insurance policies and life insurance policies.
2. Professional services firms – Professional services such as, but not limited to, accounting, auditing, consulting and management will be taxable
3. Credit card or charge card providers – Provision of credit or charge card services, whether principal or supplementary, will be taxable
4. The Bangko Sentral ng Pilipinas (BSP) established the Financial Technology Sub-Sector (FTSS) in June as a response to the need for more specialized oversight created by the growing FinTech sector in the Philippines.  The FTSS is now led by Vincente De Villa III and is split into two divisions.  The Payment System Oversight Department is responsible for the implementation of the National Retail Payment System (NRPS) and promoting payments fintech more generally.  BSP is keen on embracing new payments fintech companies and has targeted raising the share of e-payments from 10 percent to 20 percent of total transactions by 2020.  The second division, the Core Information Technology Specialist Group, is tasked with conducting information technology supervision and monitoring issues regarding cybersecurity.  This would include examinations of non-bank financial institutions and payment systems.  Such a move is in line with BSP’s recent emphasis on tightening cybersecurity.  When discussing the creation of the FTSS, Mr. De Villa also noted that increased monitoring of digital outsourcing services would be part of the mandate of the new agencies.

Advocacy

The Council held its second consultation with the ASEAN Working Committee on Payment and Settlement Systems (WC-PSS) on September 13 in Siem Reap, Cambodia, firmly establishing a new avenue of engagement on electronic payments policy.  The delegation presented private sector recommendations on payment system management during a formal consultation session with the WC-PSS.  After working on harmonizing basic domestic standards in the past, the WC-PSS is now determining a framework for a deal on interoperability of retail payment systems in ASEAN.  The September 13 meeting also marks the first time the U.S. Treasury has attended a WC-PSS meeting.  

View the Council's latest Financial Services updates

Food & Agriculture

Major Developments

In late August, Thailand Deputy Minister of Agriculture and Cooperatives Wiwat Salyakamthorn announced his stance against the use of three herbicides in Thailand – paraquat, glyphosate and chlorpyrifos – calling for an immediate ban.  The Deputy Minister also set up a special committee in July to study the impact of these herbicides on people’s health and the environment – a direct result of the public response to the Government’s decision in May to allow the use of these herbicides (with tighter regulations).  Previous to this, the Royal Thai Government has had long review processes of these three crop protection chemicals since 2017.  The committee’s results are expected to be submitted to the office of the Prime Minister by October this year.

Advocacy

On October 11-12, the Council will be hosting its fourth consecutive Business Mission to the ASEAN Ministerial Meeting on Agriculture and Forestry (AMAF) in Hanoi, Vietnam.  As part of the mission agenda, the Council will be conducting a 30-minute presentation addressed to the ten ASEAN Ministers, senior agriculture officials and the ASEAN Secretariat.  The Council has received input for content to be integrated into this presentation from industry sectors such as animal health, agricultural trading, food & beverage, pet care and plant science.  We will also be seeking bilateral meetings with heads of delegation from priority ASEAN countries as well as China, Japan and South Korea.  For more information, please contact Sunita Kapoor at skapoor@usasean.org.

View the Council's latest Food & Agriculture updates

Health & Life Sciences

Major Developments

In late August, Malaysia Prime Minister Dr. Mahathir Mohamad announced that the new Malaysian government will consider a tax on soda, following in the footsteps of many of its neighbors in ASEAN.  With the purpose of reducing sugar consumption and promoting health in Malaysia, Prime Minister Mahathir raised this soda tax consideration on concerns over Malaysia’s high diabetes rate.  Earlier in September, Member of Parliament Tony Pua also hinted at the idea of a soda tax to increase government revenues – a timely move following the removal of the country’s Goods and Services Tax (GST).  Elsewhere in ASEAN, the Philippines has taxed sugar-sweetened beverages (SSBs) since the start of the year through the first package of its Tax Reform for Acceleration and Inclusion (TRAIN), while the Government of Vietnam is considering a special consumption tax on SSBs of 10 to 20 percent.  The effect of a tax in Malaysia would depend on the structure of the tax itself – the Council will continue to track the development of this tax.

Advocacy

During the Council's Health & Life Sciences Industry Mission to the Philippines in January, the delegation discussed with Secretary of Health Francisco Duque III the idea of establishing a Memorandum of Understanding (MoU) between the Council and the Philippine Department of Health (DOH) on partnerships to strengthen healthcare in the Philippines, following the successful model of the Council's MoU with the Vietnam Ministry of Health signed in 2015. During the Council's meeting last month with Secretary Duque, he affirmed his vision and support for the establishment of this MoU, allowing for a way forward.  Following this meeting, a draft of the MoU between the Council and the Philippine’s DOH has been finalized.  The Council has reached out to the HLS committee members for input on this MoU and will finalize and submit it to DOH by the end of September.

View the Council's latest Health & Life Sciences updates

ICT

Major Developments

• At the 50th ASEAN Economic Ministers Meeting, ASEAN Ministers endorsed an Agreement on E-Commerce and adopted a Digital Integration Framework.  For more information, see our ICT Update here.
• From August 31-September 15, the Thai Revenue Department opened a public hearing on a second draft bill on e-commerce taxation, as part of the Thai National e-Payment Master Plan.  For more information, see our ICT Update here.
• On August 6, the Philippines government signed a law putting the Philippines national ID system into effect.  For more information, see our ICT Update here.
• On August 17, the Philippines government signed a memorandum of agreement to provide internet services to rural areas by tapping the existing infrastructure of electric cooperatives, and help the government fulfill its commitments under the National Broadband Plan.  For more information, see our recent ICT Update here.
• On July 31, the Bangkok Post reported that Thailand is looking to open six more service businesses to ASEAN members next year, under the 10th package of commitments under the ASEAN Framework Agreement on Services.  For more information, see our recent ICT Update here.

Advocacy

• On September 19, the Council, in partnership with BSA | The Software Alliance and the U.S. Chamber of Commerce, hosted a dinner dialogue in Singapore with Ministers at the ASEAN Ministerial Conference on Cybersecurity (AMCC).  The dialogue focused on two themed sessions focused on the cyberthreat and cybersecurity landscape, and opportunities for public and private partnerships in building capabilities.  For more information and follow up opportunities, please contact Shay Wester (swester@usasean.org) and Mario Masaya (mmasaya@usasean.org).
• On September 7, the Council, in partnership with BSA | The Software Alliance, submitted joint industry comments on Malaysia's Department for Data Protection's (JDJP) Public Consultation Paper No. 1/2018 on the Implementation of Data Breach Notification.  We will look to follow up on this issue  during our annual Malaysia Business Mission from October 16-18.  For any questions, please contact Kim Yaeger (kyaeger@usasean.org) and Emma Tabatabai (emma@usasean.org).
• On September 12, the Council, in partnership with 10 other industry associations, submitted joint industry comments on the Implementing Decrees of the Vietnamese Law on Cybersecurity.  The Council raised industry viewpoints on the LOCS during meetings with relevant Vietnamese government stakeholders during the World Economic Forum on ASEAN in Hanoi in mid-September and the ASEAN Ministerial Conference on Cybersecurity earlier this week.  Please contact Vu Tu Thanh (vtu@usasean.org), Ella Duangkaew (eduangkaew@usasean.org) and Hai Pham (hpham@usasean.org) with any questions.

View the Council's latest ICT updates

Infrastructure

Major Developments

ASEAN is gearing up for a “Smart City” boom, with several ASEAN cities establishing agreements with business leaders at the inaugural ASEAN Smart Cities Network (ASCN) Meeting in August.   The ASCN is a new initiative spearheaded by Singapore, keeping with its chairmanship’s themes of resilience and innovation.  The initiative has three primary goals:  promoting cooperation on “Smart Cities” in the region, catalyzing bankable projects through partnership with the private sector in 26 ASEAN cities, and ensuring that the selected cities have adequate funding and support for their respective projects.  Singapore Foreign Minister Dr. Vivian Balakrishnan reiterated these objectives at the meeting and emphasized the potential of technology in mitigating many of the challenges ASEAN countries face.  With 90 million more people expected to urbanize by 2030, ASEAN is expected to face more acute problems like city congestion, water and air quality, security, and safety and infrastructural burdens.

A McKinsey Global Institute Report on Smart Cities in Southeast Asia echoes Minister Balakrishnan’s message, and details how smart solutions can improve the overall urban quality of life in the region.  According to the research, smart solutions could substantially reduce greenhouse gas emissions, lessen the number of casualties in accidents, fires and homicides, save a great deal of travel time, increase life expectancies across the region, and add numerous jobs to the labor market, albeit to varying degrees in the different ASEAN countries.  While many of the ASEAN countries do have the basic building blocks for establishing Smart Cities at hand, such as infrastructure, political will, investment and manpower, their future progress is dependent on the level of infrastructure, type of physical layout, and other factors such as crime rates and travel times.

The report also recommended that private businesses keen to be involved in Smart City projects should pay close attention to each ASEAN city’s context, understand each country’s public-sector workings, commit to small and scalable projects that can be realized, and actively partner with players from other industries to attain tangible success.  Private businesses should also note that smart cities could potentially address seven main domains of urban life: (1) Economy; (2) Mobility; (3) Utilities; (4) Community; (5) Built Environment; (6) Social Infrastructure; (7) Security, and they can support ASEAN cities by being solution providers, real estate developers, mobility developers and operators, contractors, infra investors, and principal investors within the respective domains.  To learn more about McKinsey’s predictions about ASEAN Smart Cities, recommendations for interested businesses, and a list of “smart” applications that will be especially relevant for cities through 2025, you can access the original report here.

View the Council's latest Infrastructure updates

Country Highlights

Brunei

Major Developments

The Bruneian government continues to diversify its economy and improve the country’s investment climate to make it attractive to investors.  The positive impact of the government’s efforts is noted in the World Bank’s Ease of Doing Business 2018 index where Brunei significantly improved its rankings from 72 in 2017 to 56 in 2018.  The World Bank’s Ease of Doing Business 2018 ranking places Brunei at number 56, the fourth highest ranked ASEAN member after Singapore, Malaysia and Thailand.  Brunei is also implementing policies to encourage greater local Bruneian enterprise development through the implementation of the 2016 Darussalam Enterprise (DARe).  In the same spirit, Bruneian businesses are encouraged to participate in the upcoming China-ASEAN Expo (CAEXPO) this month, with a particular focus on the development of Brunei’s halal food industry.  Last year, Brunei’s local halal industry alone contributed more than BND88 million to the country.  Brunei’s stable political environment, relatively low corporate tax rates and regulatory reforms all combine for an attractive business environment for investors.  While further reforms are needed, Brunei does have growth opportunities and should continue leveraging its pro-business environment, a highly-educated workforce and its proximity to other emerging markets in ASEAN to better compete for foreign direct investment.

View the Council's latest Brunei updates

Cambodia

Major Developments

On September 6, the Cambodian Parliament voted in new parliamentary and executive leadership. With all key ministers firmly placed in their former positions, the operating environment in Cambodia is very likely to remain business-as-usual.  To view the full Cabinet list, please click here.

With the election now over and the Cambodian People’s Party’s (CPP) firm grip on the country’s political system once again secured following the widely-criticized July 29 general election, the government is likely to go back to focusing on its development priorities and economic reform initiatives.  While the year in the run-up to the election was characterized by the CPP’s sharp criticism of the United States, the government now appears to be softening its rhetoric, hoping to build up the international goodwill that it lost in the run-up to the polls and show that Cambodia is not internationally isolated.  Prime Minister Hun Sen’s planned speech to the United Nations General Assembly later this month is one of the first steps the long-time leader is taking to help rebuild his government’s international legitimacy post-election.

In the July 29 general election, the ruling CPP declared a landslide victory, with the party taking all 125 seats in the National Assembly. The win extended Prime Minister Hun Sen’s decades-long rule by another five years. The election had an 82.89 percent turnout rate (6.94 million out of the eligible 8.38 million voters), and the CPP outperformed the other 19 parties on the ballot by large margins. The CPP received a total of 4.88 million votes, or a 76.78 percent majority, which far outweighs runner-up FUNCINPEC’s 370,000 votes, or 5.88 percent of the total.

The results of the July 29 general election were widely condemned by international observers as flawed and illegitimate.  American, European and Japanese election monitors refused to observe the election process.  ASEAN member states were also urged to criticize the elections but have held fast to ASEAN's non-interference policy.  In a statement, the White House said the elections were “neither free nor fair and failed to represent the will of the Cambodian people.” The White House also expressed an intent to expand economic sanctions and visa restrictions against certain government officials in response.  However, the European Union and the United States have thus far not indicated that they plan to roll back preferential trade access for Cambodia’s vital garments sector, which shows an attempt to separate criticism of the domestic political situation from economic relations with Cambodia. In the United States, the Cambodian Accountability and Return on Investment Act (click here to access), which calls for imposing further sanctions and precluding Cambodia from any debt renegotiation, remains held up in the Senate Foreign Relations Committee and seems unlikely to pass anytime soon.

Looking Ahead

October 2-3: Cambodia Business Mission: The mission will serve as an opportunity for the Council to identify key decision makers in the post-election environment, and support the Cambodian government on its economic reform and development agenda.

View the Council's latest Cambodia updates

Indonesia

Major Developments

• The Indonesian Financial Services Authority (OJK) recently issued Regulation No.13/POJK/2018 on Digital Financial Innovations within the Financial Services Sector.  This regulation provides a comprehensive framework for OJK to monitor and regulate the burgeoning FinTech industry in Indonesia as the previous regulations only covered peerto-peer (P2P) lending.  Under this regulation, FinTech companies are required to register with OJK unless an exemption has been given.  OJK has set up a regulatory sandbox for the testing of new products and services, and the regulation also sets out provisions for protecting consumers and data confidentiality.  FinTech companies are required to establish onshore data centers and disaster recovery centers under the new regulation.  While this OJK regulation does not make any reference to GR82, the data localization requirement is consistent with GR82’s Article 17.  However, OJK may amend the data localization requirement in the future as the Government of Indonesia is in the process of amending GR82.  OJK hopes this regulatory framework will further improve the domestic startup ecosystem to better enable FinTech’s growth to be a new source of expansion in Indonesia’s economy.  The FinTech industry is expected to contribute up to IDR 25.97 trillion (US$ 1.7 billion) to the economy.
• Indonesia issued Ministry of Finance Regulation No. 110/2018 to raise import taxes on more than 1,000 consumer goods.  The regulation is an amendment to the tariff guidelines of Minister of Finance Regulation No. 34/2017 on Income Tax for Imported Goods (PPh 22).  Responses raised from the local business community were cautious or even negative.  The Government’s decision was motivated by the latest foreign selloff of Indonesian assets that followed reports showing that the current account deficit had widened in the second quarter, putting further pressure on interest rates and the rupiah.  As of September 12, Indonesia’s rupiah dropped to its weakest level since the 1998 Asian financial crisis, closing at IDR14,930 per dollar.  The current account deficit was US$ 8 billion in the second quarter, twice the total value of consumer goods imported in the same period.  Because the tariffs are so small and on such a narrow range of products, mostly in the relatively small consumer sector, it is unlikely they will have a significant shortterm effect on the deficit.  Ordinarily, Indonesia’s current account deficit and reliance on foreign portfolio investment to finance it is not a significant challenge.  However, it did leave the country particularly exposed to last quarter’s instability in developing markets, which the government fears will continue.  At the same time, foreign direct investment, which is much steadier during periods of turbulence, has been falling as election season begins.

View the Council's latest Indonesia updates

Laos

Major Developments

Following the tragic dam collapse on July 23, the Government of Laos is taking drastic measures to mitigate the effects of the disaster and help prevent future disasters.  These measures include the suspension of all new hydropower dam projects, and renewed inspection of all existing projects, as of August 7.  In addition, the Government has established a special committee to inspect all existing dam projects, particularly for design or construction flaws, and a special task force to oversee the management of all national-level crises.  Finally, the Lao government is reconsidering its position to become the “Battery of ASEAN,” as the country’s extensive investment into hydropower may lead to further disasters like the dam collapse in Attapeu Province.  For more information, see our recent Laos Update here.

Advocacy

Earlier this week, the Council had the opportunity to engage Laos Foreign Minister Salermxay Kommasith in private meetings on the sidelines of the UN General Assembly.  The discussions with Minister Kommasith focused around how we might best follow-up on our business mission to Laos last month and how we could continue to work together to improve healthcare in Laos.

View the Council's latest Laos updates

Malaysia

Major Developments

• On September 1, the Sales and Service Tax (SST) was reintroduced with Sales Tax between 5 and 10 percent while the Service Tax is fixed at 6 percent for nine types of services.  As part of the implementation process, Malaysian Customs has released resources on the recently launched mySST website to help businesses and consumers navigate the SST. The swift implementation of the SST shortly after its passage has drawn considerable criticism over the lack of a transition period.  Since the new tax went live, reports have surfaced regarding the confusion for consumers and businesses in addition to operational issues.
• On September 10, Malaysia announced that the Kuala Lumpur-Singapore high-speed rail project will be deferred until May 31, 2020 without penalty to either country.  Economic Affairs Minister Azmin Ali led the Malaysian negotiation team to Singapore at the end of August to finalize the deal.  Singapore’s agreement to the deferment comes as good news to a Malaysian government grappling with debts and liabilities that were not disclosed by the previous administration.  Malaysia’s fiscal position would have been exacerbated by the RM500 million (US $120 million) penalty incurred as a result of a cancellation.
• On September 10, a Finance Ministry spokeswoman confirmed that Malaysia had contacted relevant parties in China to cancel the pipeline projects that were previously shelved.  No details have been disclosed regarding the consequences of backing out of the deals.  The pipeline plans would have linked the state of Malacca to a refinery plant in the state of Johor.

Advocacy

• Malaysia’s Personal Data Privacy Commission held a public comment period on public consultation paper no. 1/2018 on The Implementation of Data Breach Notification which they intend to implement by the end of 2018.  Notably, the policy proposes that companies need to notify the commission of a data breach within 72 hours.  However, there is little detail on scope and the cross functionality of this framework with existing laws and other agencies.  The Council has submitted joint comments with BSA to the Commission promoting a risk-based approach and flexibility in timing of notification. The Council will look to follow up during our annual Malaysia Business Mission on October 16-18 if interest arises among our delegates.

• Bank Negara Governor Nor Shamsiah Mohd Yunus has been reviewing pending BNM policies since her appointment in June, including many which the Council has been advocating for action:
  • The Interoperable Credit Transfer Framework (ICTF), which is now under the advisement of the Department of Financial Innovation
  • The Draft Outsourcing Guidelines which BNM hopes to finalize soon and has reportedly incorporated some stakeholder feedback
  • The June 30 enforcement date for foreign insurance companies to divest down to 70 percent has been extended indefinitely to give companies time to make new proposals to BNM after many companies did not meet the original deadline.

As these policies continue to be reviewed, the Governor is striving to create better transparency and stakeholder engagement.  The Council will be meeting with Governor Nor Shamsiah during our Malaysia Business Mission October 16-18.

Looking Ahead

October 16-18: Malaysia Business Mission: The mission will be an opportunity to engage the new administration under Prime Minister Mahathir and gain a better understanding of the new government’s priorities and plans.  The deadline to register is October 2.  To register please click here.  Contact Kim Yaeger at kyaeger@usasean.org for more information.

View the Council's latest Malaysia updates

Myanmar

Major Developments

On August 27, the United Nations Human Rights Council released a damning report issued by the UN Fact Finding Mission on Myanmar, calling for the investigation and prosecution of Myanmar’s top military leaders in the International Criminal Court. The report cites sufficient information of crimes against humanity and war crimes in Rakhine, Kachin and Shan States.

Key observations of the UN Report:

• This is the UN’s most pointed condemnation released to date. The UN is calling for the indictment of Commander-in-Chief Senior General Min Aung Hlaing along with five other senior commanders of the Tatmadaw (Myanmar’s military).  Prior condemnations have been limited to the operational leadership level, and Senior General Min Aung Hlaing has not yet been called out by name at the UN or sanctioned by any foreign governments.
• The UN report is extending some of the responsibility for the humanitarian crisis on State Counsellor Daw Aung San Suu Kyi and Facebook. The UN points to Daw Aung San Suu Kyi for not using her position as head of the civilian government or her moral authority as an international figure and Nobel Laureate to prevent the humanitarian crisis. The report also called Facebook an instrument used to spread hate speech.
• This is the first time the UN has officially used the term “genocide” to define the situation in Myanmar.

The United States and the European Union have commented on the UN report. The U.S. Department of State is currently completing its own separate report on allegations of human rights atrocities in Myanmar.  On August 25, Secretary of State Michael Pompeo said in a Tweet that the United States would “continue to hold those responsible accountable” for “abhorrent ethnic cleansing of ethnic Rohingya in Burma.”  On August 27, a spokeswoman for the European Commission said those responsible for the alleged human rights violation “must be held to account.”

The UN report could mean further international sanctions imposed on Myanmar. The United States placed sanctions on several Tatmadaw commanders and two entire military units for “engaging in serious human rights abuse” earlier in August. The European Union and Canada have also imposed sanctions against specific officials.  

Looking ahead, and in the context of U.S. business interests, the few weeks after the State Department report comes out will be key in determining the direction of U.S.-Myanmar policy. It remains unclear when U.S. Secretary of State Mike Pompeo plans to issue the full U.S. report.  If the report follows the direction of the UN, and labels the situation in Rakhine to be “genocide” and accords part of the blame to the civilian government, the concurring policy actions will most likely mean broader economic sanctions, or additions to the Global Magnitsky List.  Ambassador Nikki Haley said before the UN Security Council that the U.S. report was “consistent” with the UN report findings, but did not use the term “genocide.”  Currently, the terminology used by the U.S. government to describe the situation in Rakhine is “ethnic cleansing,” which the human rights community has deemed insufficient and has called for an upgrade to “crimes against humanity” or “genocide.”

View the Council's latest Myanmar updates

Philippines

Major Developments

•  On September 10, the Philippines House of Representatives approved the third and final reading the Tax Reform for Attracting Better and High-quality Opportunities (TRABAHO) bill or TRAIN 2. With 187 voting in the affirmative, 14 in the negative, and 3 abstentions, the lower chamber passed House Bill 8083 after passing it on second reading on September 4.  The Senate is expected to begin hearings on TRAIN2 next week.  The passage of TRAIN2 by the House of Representatives comes at a critical juncture for the Philippines, with higher inflation rates and lower growth reported for this past quarter.  In addition, the bill is likely to be significant for politicians participating in the 2019 midterm election.
• The Philippines is currently in negotiations with China to share oil and natural gas resources in the South China Sea.  China has been aggressively expanding in the South China Sea with the construction of artificial islands to stake claim to the surrounding waters.  A successful agreement between these countries would strengthen China’s grasp over the South China Sea.  The Philippines seems to have decided that collaborating with China is the best course of action.  With the Malampaya gas field estimated to run dry within a decade, the Philippines needs access to alternative areas to sustain its energy needs as a growing economy.

Advocacy

During the Council's Health & Life Sciences Industry Mission to the Philippines earlier this year, the mission delegation discussed with Secretary of Health Francisco Duque III the idea of establishing a Memorandum of Understanding (MoU) between the Council and the Philippine Department of Health (DOH) on partnerships to strengthen healthcare in the Philippines, following the successful model of the Council's MoU with the Vietnam Ministry of Health signed in 2015. During the Council's meeting last month with Secretary Duque, he affirmed his vision and support for the establishment of this MoU, allowing for a way forward.  Following this meeting, a draft of the MoU between the Council and the Philippine DOH has been finalized.  The Council has reached out to our HLS committee members for input on this MoU and will finalize and submit it to DOH by the end of September.

Looking Ahead

October 2: Innovation Series: “Traditional Business Disrupted.”  The Council, in partnership with Manila House, is launching The Innovation Series, a program composed of two talks on emerging, transformative and disruptive technologies. The goal of the Innovation Series is to deepen levels of understanding between public and private sector stakeholders and increase public awareness of how technological innovations are driving changes in society.  The first talk, “Traditional Business Disrupted,” is scheduled for October 2. For inquiries, please contact Norika Pineda at npineda@usasean.org or +63 918 947 5892.

View the Council's latest Philippines updates

Singapore

Major Developments

The cyberattack on Singapore’s SingHealth discovered in July has prompted renewed focus on cyber security in the country.  After a period of investigation, Singapore’s Ministry for Communications and Information concluded that the cyberattack on SingHealth was the work of a state-linked “advanced persistent threat” group.  The ministry would not reveal which state was thought to be the mastermind of the attack.  In response to the attack, the Health Ministry has initiated studies on the feasibility of Internet Surfing Separation as a permanent fixture in public healthcare organizations.  In addition, an alternative approach using virtual browsers which reduces the number of potential attack points is being studied and piloted.  The Committee of Inquiry, which was formed on July 24, held its first hearing on August 28.

Advocacy

On August 20-21, a delegation of 22 leading U.S. companies participated in the Council’s annual business mission to Singapore. The delegation was one of the largest that the Council has led to Singapore since the Council's founding in 1984. This year's business mission was framed within the context of the Government of Singapore’s themes for its 2018 ASEAN Chairmanship – innovation and resilience.

Looking Ahead

• October 29-November 2:  Singapore International Energy Week (SIEW) is an annual platform for energy professionals, policymakers and commentators to discuss and share best practices and solutions within the global energy space. SIEW aims to facilitate the exchange of ideas and discussions on pertinent energy-related issues, while simultaneously meeting the strategic objectives of Singapore’s commitment to becoming a global leader among energy companies converging on the event, as well as providing a platform to showcase innovative products and solutions in the energy marketplace. A calendar of SIEW 2018 events can be found here.

View the Council's latest Singapore updates

Thailand

Major Developments

• On September 27, the Council was pleased to have supported the Royal Thai Embassy of Washington, D.C.’s event to celebrate 200 years of U.S.-Thai friendship and 185 years of diplomatic relations. The event took place in the beautiful Library of Congress, and consisted of several special elements, including: a beautiful display of traditional Thai musical instruments that were specially crafted and gifted to the Library of Congress by His Majesty King Bhumibol Adulyadej of Thailand in 1960; remarks from H.E. Virasakdi Futrakul, the Deputy Minister of Foreign Affairs of Thailand, who is leading the Thai delegation to the U.N. General Assembly; and a very special performance of His Majesty King Bhumibol Adulyadej’s musical compositions by the renowned John Di Martino Quartet. The Council is pleased to be the Royal Thai Embassy’s exclusive partner, along with the Library of Congress, for this timely event to celebrate the important, longstanding relationship between the U.S. and Thailand, which will become even more important as Thailand takes on the ASEAN Chairmanship in 2019.
• On September 11, the NBTC announced that it plans to propose a tax regime to the ASEAN Telecommunications Regulators Council (ATRC) by the end of the year to set a regulatory framework governing over-the-top (OTT) companies.  It remains unclear when this meeting will take place, or if it will be in the context of a larger ASEAN meeting, such as the ASEAN Telecommunications and Information Technology Ministers’ Meeting (TELMIN), but it is encouraging that NBTC will be looking to gain ASEAN consensus on its proposed regime, which has been highly contested by U.S. industry since the first drafts were released in 2017.  For more information, see our recent Thailand Update here.
• On August 30, the National Legislative Assembly of Thailand passed its 2019 Fiscal Year Budget. The budget amounts to 3.3 trillion baht (around US$ 100 billion) and will begin financing the government starting October 1.  The budget still requires royal assent before it is made publicly available, which should be within the coming weeks.  For more information, see our recent Thailand Update here.
• On August 25, Thailand’s National Council for Peace and Order (NCPO) approved a partial lift on its ban of political activities, which have been in place since the NCPO transitioned to power in 2014.  According to Prime Minister Prayut Chan-o-cha, the partial lift will allow for political parties to hold meetings, make adjustments to regulations, appoint managers and accept new members, and will be put into place via a Section 44 order soon.  The NCPO originally promised to lift the entire political ban in June, but the Prime Minister stated that the (now-partial) ban needed to remain in place to ensure harmony and order prior to elections.  For more information, see our recent Thailand Update here.

View the Council's latest Thailand updates

Vietnam

Major Developments

• The Council offers its deepest condolences to the Government and People of Vietnam on the passing of President Tran Dai Quang. During his tenure, President Quang helped to grow the Vietnamese economy at a remarkable pace, all while strengthening trade and political ties with regional and global powers. Vietnam has made much progress and the Vietnamese economy prospered under the leadership of President Quang and Prime Minister Phuc. President Quang’s passing at this critical juncture will be felt and the Council stands with our friends in Vietnam at this difficult time.
• Vietnam chaired the latest round of talks on investment during the Regional Comprehensive Economic Partnership (RCEP) Meeting at the 50th ASEAN Economic Ministers Meeting (AEM) and Related Meetings from August 28 to September 1 in Singapore.  Previously, Vietnam chaired talks on government procurement at the 23rd round of RCEP discussion last July.  The AEM and related meetings focused on Asia’s position in deepening multilateral economic cooperation and trade liberalization.  RCEP is expected to form the biggest free trade area in the world and continue to support economic growth and development in ASEAN nations.
• During AEM, Vietnam’s Minister of Industry and Trade Tran Tuan Anh also met separately with Ministers from Singapore, Indonesia, the Republic of Korea and the Deputy U.S. Trade Representative.  Minister Tuan Anh's meeting with Singaporean Minister of Trade and Industry Chan Chun Sing covered key measures to improve the bilateral trade balance and to reach agreement on positions in RCEP talks.  Minister Tuan Anh’s meeting with Indonesia’s Minister of Trade Enggartiasto Lukit covered boosting trade in commodities and reducing barriers to trade. The trade deficit with the United States and reinforcing the Trade and Investment Framework Agreement and Bilateral Trade Agreement were discussed during the meeting with Deputy USTR Ambassador Jeffrey Gerrish. The Government of Vietnam also submitted concrete recommendations to the ASEAN regional negotiations on services, with the hope that an ASEAN agreement on trade in services could be signed later this year.

Advocacy

On August 27, the Council held a strategy planning call to discuss opportunities and strategies for engagement on the Vietnamese Law on Cybersecurity (LOCS) and Over-the-top (OTT) regulations. Notes from the call and key follow up opportunities can be found here.  Please contact Ella Duangkaew (eduangkaew@usasean.org), Vu Tu Thanh (tvu@usasean.org) or Shay Wester (swester@usasean.org) with any questions or comments.

View the Council's latest Vietnam updates