Amb. Ted Osius
President & CEO
US-ASEAN Business Council
Welcome to the March President’s Newsletter!
As always, we welcome your thoughts on how we can continue to improve and expand this product as well as the Council as a whole.
Highlights
On April 9, the Council will launch the updated and expanded ASEAN Matters for America on Capitol Hill. This new publication, highlighting the benefits of trade with ASEAN down to the State and Congressional District level, will be presented to Members of Congress and their staffs through an interactive panel discussion followed by a reception. For additional details email Mads Stockwell at mstockwell@usasean.org.
The next event in the ASEAN Dialogue Luncheon Series with Senior USG Officials will be April 2 at the Council offices. NSC Director for Southeast Asia Colin Willett will speak. Sponsorship opportunities are available for the series. Companies interested in participating should contact Anthony Nelson at anelson@usasean.org.
On March 14, Megawati Sukarnoputri, the head of the Indonesian Democratic Party of Struggle (PDI-P), named Jakarta Governor Joko Widodo as the party's presidential candidate. To read the Council’s Indonesia team’s analysis of a possible Jokowi Presidency, please click here.
Please join me in congratulating the following staff members whose excellent performance in 2013 merited promotion:
- Alexandra Stuart has been promoted to Senior Manager.
- Shay Wester has been promoted to Senior Manager.
- Colette Morgan has been promoted to Manager.
Events
ASEAN Matters for America
On April 9, the Council will launch the updated and expanded ASEAN Matters for America on Capitol Hill. This new publication, highlighting the benefits of trade with ASEAN down to the State and Congressional District level, will be presented to Members of Congress and their staffs through an interactive panel discussion followed by a reception. For additional details email Mads Stockwell at mstockwell@usasean.org.
ASEAN Ambassadors’ Tour
From May 5-9, the Council will organize a tour for all ten of the ASEAN Ambassadors to the United States (including the new Indonesian and Malaysian ambassadors) to visit Memphis, TN and Chicago, IL as an opportunity to engage member executives based in those cities as well as local government officials, academics and business leaders. For additional details on the tour and for the opportunity to participate please email Mads Stockwell at mstockwell@usasean.org.
ASEAN Dialogue Series
The next event in the ASEAN Dialogue Luncheon Series with Senior USG Officials will be April 2 at the Council offices. NSC Director for Southeast Asia Colin Willett will speak. The lunches are limited to one representative per Chairman’s Council company, with limited seats that are first-come, first-serve. Sponsorship opportunities are available for the series. Companies interested in participating should contact Anthony Nelson at anelson@usasean.org.
Managing Risk in ASEAN
The Council and the American Indonesian Chamber of Commerce are presenting "Managing Risk in ASEAN: Opportunities and Challenges," a half-day conference in New York City on April 14, followed by a private lunch for sponsors featuring exclusive commentary from VIP panelists. Participants will receive nuanced analyses of the political and economic risks to be considered when devising business and investment strategies in ASEAN. Panelists will give particular focus to Indonesia and Thailand. To register, please click here.
Welcome to H.E. Budi Bowoleksono
The Council will host a welcome luncheon for H.E. Budi Bowoleksono, Ambassador Designate of Indonesia to the United States, on Monday, April 7 at the W Hotel in Washington, D.C. Opportunities to sponsor the luncheon are available. Please contact Alex Stuart at astuart@usasean.org if you are interested in sponsoring or have any questions.
Regional Highlights
APEC
The APEC Business Advisory Council (ABAC) held meetings in Auckland in February regarding plans for the APEC CEO Summit in November.
For a summary of updates received during the recent ABAC meetings, please click here.
Energy
Analysts at ANZ have predicted that electricity prices across ASEAN are set to rise, making it considerably more expensive to run factories. It will also add half a basis point on average to inflation. A rise in LNG prices is putting short-term upward pressure on electricity prices, and in the medium term the issue is the strain on power distribution infrastructure which continues to see under-investment. Power grids will come under increasing strain as some manufacturing shifts from China to ASEAN, and as urbanization adds to demand. Malaysia and Indonesia have recently started to scale back subsidies that have been in place for years – also contributing to higher electricity prices. For the Council’s take on electricity prices in ASEAN, please click here.
The President of Indonesia signed a regulation on January 11, 2014, implementing the ban on the export of raw commodities from Indonesia. Shortly after the ban went into effect, the government approved new regulations that permit shipments until 2017 of copper, manganese, lead, zinc and iron ore concentrate, but not bauxite or nickel, provided they meet specific purity levels. This reprieve was short-lived as the Ministry of Finance released regulations imposing an escalating tax on shipments of processed or refined materials to limit the amount of mineral concentrate exports over the next few years. At a minimum 20% tax rate of gross revenue, the export tax effectively acts as an export ban for most of these commodities. After exports declined substantially, recent reports suggest that the government will reduce the export tax in exchange for commitment to build smelters. For the Council’s latest Energy news, please click here.
ICT
The Council’s ICT Committee will host the first Executive Committee meeting of the new Indonesia ICT Consultative Forum on April 1. This forum was created as a result of the ICT Mission to Indonesia in 2013 and is led by the Council and Indonesia’s Coordinating Ministry for Economic Affairs. A joint consultative body will be formed composed of Government of Indonesia officials and representatives of the international and domestic ICT private sector. This Forum will create a collaborative platform between government and industry to support Indonesia’s long-term industrial policy of building a local ICT industry and the shared goal of creating an innovation and knowledge economy in Indonesia. It will serve to improve mutual understanding in the areas of innovation, investment and regulation and will assist in the development of future ICT policy in Indonesia as well as support the implementation of MP3EI (Acceleration and Expansion of Indonesian Economic Development Masterplan). For additional details please email Shay Wester at swester@usasean.org.
Cambodia
Opposition leader Sam Rainsy’s return to Cambodia in late March has revamped expectations that an end to the political deadlock, which has lasted more than six months, is in sight. However, these new hopes may be misplaced. In a recent statement, the head of the opposition's working group for negotiations, Kuoy Bunroeun, said that negotiations could resume shortly. However, he also added that any discussions would be dependent on the ruling CPP ceasing to intimidate opposition supporters. Another spokesman for the opposition CNRP, Yim Sovann, said that all demands of the opposition, including an agreement for substantial election reforms in the future have been met. The only remaining issue is a commitment from the CPP to new elections. Sak Sitha, secretary of state at the Ministry of Interior and a member of the CPP's working group for negotiations, said the ruling party was waiting for the CNRP to make official contact to kick-start fresh talks. His colleague, CPP lawmaker Cheam Yeap, pushed back on the call for fresh elections, as it would require a constitutional amendment by the National Assembly, a move two-thirds of lawmakers would have to support. For now, the CNRP has refused to join the National Assembly, so it is not clear that an amendment would pass even if a deal is struck by the leadership of the two parties and the CNRP joined the Assembly. For the Council’s latest Cambodia news, please click here.
Indonesia
On March 14, Megawati Sukarnoputri, the head of the Indonesian Democratic Party of Struggle (PDI-P), named Jakarta Governor Joko Widodo as the party's presidential candidate. To read the Council’s Indonesia team’s analysis of a possible Jokowi Presidency, please click here.
The legislative elections will take place on April 9 throughout Indonesia. The campaign season officially kicked off on March 16. With the nomination of Jokowi, the PDI-P is predicted to win 30% of the vote in the legislative elections on April 9, which would push the PDI-P over the threshold required to nominate a Presidential candidate for the Presidential election in July (the aforementioned threshold is 20% of seats in parliaments, or 25% of the legislative vote). Multiple polls put Jokowi as the clear frontrunner. The announcement has been met with enthusiasm by economists and investors as the rupiah continues to strengthen and Indonesian stocks rally on the prospect of a future Jokowi administration. As Governor of Jakarta, Jokowi has made infrastructure development and streamlining tax collection top priorities throughout his tenure. The business community is hopeful that as a potential president, Jokowi will continue to invest in infrastructure and promote a business-friendly environment to spur more economic growth for Indonesia.
On February 11, Indonesian lawmakers passed a trade bill that will give the government greater authority to restrict the exports and imports of goods to protect domestic industries. It is expected to be signed by President Yudhoyono within the next month. This latest law highlights Indonesia’s recent push to limit commodity exports and food imports to develop local production and boost manufacturing capabilities in the country as the government seeks to reduce the current account deficit and the economy’s dependence on overseas imports for growth. Deputy Trade Minister Bayu Krisnamurthi said this law seeks to balance achieving market efficiency and protecting domestic industries. Implementation of the new trade bill will likely create uncertainties for investors and increase the regulatory costs of doing business in Indonesia. For the Council’s complete take on the new Trade Law, please click here.
On February 12, President Yudhoyono announced Muhammad Lutfi as the new Minister of Trade. Lutfi was Indonesia’s former chief of the Investment Coordinating Board (BKPM) from 2005-2009 and most recently the Ambassador to Japan from 2010-2013. He has declared stabilizing prices, improving food distribution and boosting exports as the Ministry's top priorities for President Yudhoyono's remaining term. He is replacing Gita Wirjawan, who resigned on January 31 to focus on becoming the Democratic Party’s presidential nominee for this year's election.
Malaysia
On February 6, the Ministry of International Trade and Industry announced the appointment of Dato’ Azman Mahmud as the new Chief Executive Officer (CEO) I of the Malaysian Investment Development Authority. Dato’ Azman began his appointment February 10, and succeeded Datuk Noharuddin Nordin, who officially retired on the same date. For more information and the official Press Release from the Ministry of International Trade and Industry, please click here.
Please contact Colette Morgan at cmorgan@usasean.org if you have questions.
Myanmar
On March 25 the Council and the National Bureau of Asian Research (NBR) co-hosted the launch of NBR’s report “Myanmar’s Growing Regional Role” on Capitol Hill. To read the report, please click here.
Myanmar’s growing civil society is shifting the government toward requiring greater shares of revenues from projects to be earmarked for local development. Responding to questions from a member of parliament from Kayin State, Minister for Mines U Myint Aung said that a new mining law will compel the government to put a portion of profits derived from mining projects into a development fund for local communities. After massive public protests, the Leptadaung copper mine was shut down in 2012, and only re-opened after a contract re-negotiation in which the government’s share of profits was increased from 4% to 51%. Most notably, much of the opposition to China’s Myitsone dam project stemmed from the fact that 90% of the dam’s power output was to have gone to China, stoking nationalist feelings and anti-Chinese rhetoric. Government officials also announced recently that energy projects in Myanmar’s newly opened exploratory blocs would first serve domestic demand before the export market.
The Myanmar Parliament is likely to push through a bill over President U Thein Sein’s objections that will allocate just over $100,000 per year to each of Myanmar’s 330 townships, money that will go to small-scale, local development projects. The President’s office is objecting that such local development projects are already funded and implemented by various executive ministries and is thus concerned that there will be significant ‘overlap’ between projects. Lawmakers counter that their proposed projects serve to enhance, rather than interfere with, what the executive branch is doing, and they generally shrug off any suggestions that their actions amount to ‘vote-buying’ in an election year. Such intra-government wrangling is also taking place as a response to draft legislation proposed by some nationalist Buddhist monks that would restrict interfaith marriages. After handing the draft over to Parliament, only to have Parliament hand it back to him, President U Thein Sein has formed a new commission to address the draft with input from the Union Supreme Court. This is an area where the Myanmar government must carefully balance domestic political concerns with international opinion. For the Council’s latest Myanmar update please click here.
Philippines
The Philippines has agreed to allow the United States access to its military bases. Both sides hope to finalize the deal before President Obama's April 2014 trip to Asia, which includes a visit to the Philippines. U.S. military access in the Philippines is currently restricted to annual joint exercises and port visits, and for the United States, this new agreement on enhanced defense cooperation will allow more rapid troop, ship, aircraft and humanitarian deployment. Manila looks to an enlarged U.S. military presence as sound deterrence against China's ambitions in the disputed South China Sea, as well as to provide humanitarian assistance during natural disasters. The proposal has not received unanimous support from Philippine lawmakers, with some opponents feeling the deal would further “deteriorate” the country’s ties with China, further escalating the situation. These lawmakers believe that the Philippines should seek a diplomatic solution with China instead. For the Council’s latest Philippines update, please click here.
Singapore
Singapore Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam delivered the Budget Speech for the Financial Year 2014 on February 21. The government is taking active steps to tackle domestic socio-political issues by tightening foreign worker policies, extending generous social services to its aging population, and broadening measures aimed at cooling the property market. On the economic front, Singapore has indicated greater support for education and human capital, as well as information and communications technology. Businesses will receive generous subsidies for their Internet subscriptions, and for adopting new technology. These will include a 100% subsidy for Internet access (broadband above 100mbps) and an 80% subsidy for adopting innovative solutions that are new to Singapore, capped at S$1 million per firm. For the Council’s latest Singapore update, please click here.
Thailand
On March 21, Thailand’s Constitutional Court ruled the February 2 election held throughout most of Thailand unlawful, voiding results of that election. Thailand’s election charter states that the national poll must be held on the same date throughout the country in all 375 constituencies. Since 28 constituencies were unable to accept voters on February 2 due to obstruction from anti-government protestors and a follow-up election was scheduled for a later date, the overall election process violated the charter. Faced with limited alternatives, the Election Commission will now focus its efforts on what to do next. The Pheu Thai party remains disappointed with the court’s decision while anti-government groups continue to push for the installment of an interim government to lead reform efforts prior to any future election. The political conflict continues. For the Council’s latest analysis on Thailand, please click here.
Vietnam
The Council organized its 2014 Senior Executives Business Mission to Vietnam February 24-26 with a delegation of 33 companies representing various industries. The delegation met with leaders of key government Ministries and decision-making bodies and organized engagements with the U.S. Embassy in Hanoi. Please click here for the press release on the Council’s 2014 Vietnam Business Mission.
The government of Vietnam continues to focus its efforts on macroeconomic stability, reforms in the financial services sector, and negotiations in the Trans-Pacific Partnership. State Owned Enterprise (SOE) reform is also a priority, with the Prime Minster releasing a list of SOEs that will undergo restructuring in 2014. This is part of a broader goal to open some SOEs to greater foreign investment and equitization.
Weakness in the banking system remains a concern for the business community – there is still a large chunk of non-performing loans in the system, which impedes businesses’ access to much needed credit to fund projects and investments. There is progress being made by the Asset Management Company created by the Government of Vietnam to deal with these bad debts. Positive signs are also coming from the real estate sector.
President Obama approved a civilian nuclear deal with Vietnam, which would allow the United States to sell reactors to the country in the future. The agreement will go through a 90-day review process by Congress, and will go into effect if no new legislation is passed within that timeframe. U.S. Secretary of State John Kerry and Vietnamese Foreign Minister Pham Binh Minh signed an initial agreement for civilian nuclear cooperation at the East Asia Summit in October of 2013. For the Council’s take on the US-Vietnam civilian nuclear deal, please click here.