President's Newsletter - President's Newsletter - February 2015

Amb. Ted Osius
President & CEO
US-ASEAN Business Council

Happy Lunar New Year! We hope the Year of the Ram is a happy, healthy, and prosperous one for all.

The Council hit the ground running with a busy January, and events are now in full swing.

All of our committees are currently in the process of finalizing their 2015 work plans, and you should be receiving invitations for Committee calls. If you are interested in becoming more engaged in a certain country or industry committee, these calls are the perfect way to start. Please visit our country and industry pages on our website to find out more about the work of the committees and our staff.

Highlights

Advocacy

The Energy Committee will be preparing country specific Energy advocacy papers for a number of ASEAN countries starting with Vietnam, Indonesia and Myanmar. For more information please contact Alex Stuart at astuart@usasean.org.

The Council will hold a one-day Food & Agriculture mini-mission to Thailand March 5. For further details, please contact Sunita Kapoor at skapoor@usasean.org.

The Council is registering senior-level executives for its annual Business Mission to Vietnam for meetings Monday – Wednesday, March 16-18, 2015.

Members of the Council’s Financial Services Committee will attend the 2015 ASEAN Finance Ministers Meeting in Kuala Lumpur March 19-21.

There are a number of upcoming opportunities for ASEAN-wide advocacy, including:

The ASEAN-OECD Regulatory Reform Meetings in Kuala Lumpur March 9-12
The OECD Southeast Asia Regional Program in Jakarta on March 25
The ASEAN Business Club’s launch of the “Lifting the Barriers” report in Singapore in May
MIDA’s annual Global Flagship Forum, to be held in Malaysia in May.

Members interested in coordinating advocacy activities for these events should reach out to Marc Mealy at mmealy@usasean.org.

As part of the Council’s increased focused on advancing the policy advocacy priorities of our members January/Early February activity included:

Issued a press statement in support of Trade Promotion Authority (TPA) in response to Chairman Ryan’s first public speech on TPA.
As a follow up action to the December business mission to Indonesia, we requested input from members to draft an advocacy letter to Indonesia’s financial regulator (OJK) on data management policies and regulations for financial sector development.
Organized roundtable with Malaysia’s Ministry of Finance for members to advocate for more transparency of the implementation of the GST policy.
Initiated a discussion with the Financial Services and ICT committees on the idea of creating a joint industry Council publication in 2015 on: Data Management Policies in the ASEAN Economic Community(AEC)
Drafted a “Quick Wins” paper on business issues in Myanmar in response to a request from Myanmar’s President’s office, and, as a follow up action to the December business mission to Indonesia.
Drafted an advocacy letter for review by members entitled: Liberalization of Services Industries to Expand Indonesia’s Trade Capacity.

Intelligence

Our Malaysia team analyses the fallout from the new conviction of Opposition Leader Anwar Ibrahim. Read the Council’s take here.

Our Food & Agriculture and Thailand teams take different looks at the consequences of the impeachment of former Prime Minister Yingluck Shinawatra. Check the Food & Ag and Thailand sections in this newsletter.

The latest Defense update looks at several issues that could have ripple effects throughout the region. Members who do not focus on defense may still be interested in receiving the Defense updates because of the tracking of security issues that may affect regional stability. Contact Daniel Henderson at dhenderson@usasean.org to be added.

Relationship Building

The US-ASEAN Business Alliance for Competitive SMEs, a joint effort between the Council and USAID, 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. There are many opportunities to engage, but immediately upcoming is a March 10 training in Cebu, the Philippines, which has several opportunities for new speakers and sponsors to join the program. Please contact Mario Masaya at mmasaya@usasean.org for more information about this event and other opportunities within the Alliance.

The US-ASEAN Business Council is currently registering senior-level executives for the 2015 Business Mission to Vientiane, Laos on March 30-31. As the first Business Mission to Laos since 2011, it will be a significant step in strengthening our relationship with the government and other stakeholders in Laos. For more information please contact Kim Yaeger at kyaeger@usasean.org or Praab Pianskool at praab@usasean.org.

Promotion

The Council is organizing special activities to celebrate the 20th anniversary of diplomatic relations between the United State and Vietnam.

Sunday, March 15, Vietnam-US 20th Anniversary Golf Tournament – Members have an opportunity to play a round of golf with government officials and local business leaders prior to the Vietnam Business mission.
Tuesday, March 17, US-Vietnam 20th Anniversary Corporate Citizenship Exhibition & Reception – Member companies have an opportunity to highlight Corporate Citizenship projects in an exhibition and reception during the Business Mission. The audience will include government officials, US embassy officers, Vietnamese business leaders (major SOEs & private sector companies), US corporate executives and selective media reps.

Membership

At the beginning of the year we welcomed Boston Scientific and Archer Daniels Midland as our two newest members, bringing total Council Membership to 150 companies.

Boston Scientific makes medical supplies and devices used to diagnose and treat conditions in a variety of medical fields, with an emphasis on cardiovascular products and cardiac rhythm management (CRM). It also makes devices used for electrophysiology, endoscopy, pain management (neuromodulator), urology, and women's health. Its 13,000 products -- made in about a dozen factories worldwide -- include biopsy forceps, catheters, coronary and urethral stents, defibrillators, needles, and pacemakers. Boston Scientific markets its products in about 100 countries.

Archer Daniels Midland Company is an agricultural processing company, engaged in procuring, transporting, storing, processing, and merchandising agricultural commodities and products. The company operates in North America, South America, Europe, Middle East, Africa, and Asia Pacific. It is headquartered in Chicago, Illinois and employed approximately 31,100 people as on December 31, 2013.

APEC

The First Senior Officials’ Meetings (SOM-I) were held between January 26 and February 7 in Clark, Subic, Philippines. The APEC Business Advisory Council (ABAC) also held their first meeting of the year concurrently in Hong Kong. The SOM/ABAC-I covered a wide range of both existing and newer initiatives including supply chain improvement, implementation of the environmental goods list, a review of the Bogor goals and improving the ease of doing business. Other foci included infrastructure investment, womens’ economic empowerment, a study of barriers to healthcare, the internet economy, disaster relief, trade facilitation, and local content requirements. During the SOM-I APEC members presented a paper on promoting SME development and hope to have an SME Action Plan done by the end of 2015. Members also presented a paper calling for the establishment of an APEC Services Cooperation Framework by the end of 2015. For questions please email Alex Stuart at astuart@usasean.org.

ASEAN

Council Member Baker & McKenzie, in collaboration with the Economist and CIMB, released a report entitled “Re-Drawing the ASEAN Map: How Companies are Crafting New Strategies in Southeast Asia”. They have kindly agreed to make the report available to membership. Please download Re-Drawing the ASEAN Map Here. You can visit Baker & McKenzie’s AEC website here for additional info.

There are a number of future opportunities for engagement with the US-Business Alliance for Competitive SMEs, but the next opportunity is the March 10th program in Cebu. Please contact Mario Masaya at mmasaya@usasean.org to register.

View the Council’s latest ASEAN updates

Customs

The Council looks forward to leading a strong U.S. business delegation to meet with the ASEAN Customs Directors-General from May 20-22 in Brunei Darussalam. The schedule will consist of two days of bilateral meetings and a formal consultation with the Customs Directors-General. In addition to the Directors-General meeting, the Customs and Trade Facilitation Committee looks forward to an active year and will be holding a planning call in early March to discuss member priorities. Details for both the mission and the call will be circulated soon. If you have input for the Work Plan or questions on the Directors-General Mission, please contact Shay Wester at swester@usasean.org and Ian Saccomanno at isaccomanno@usasean.org.

There is hope that the Customs Modernization and Tariff Act (CMTA)—a bill aimed to overhaul the Bureau of Customs and streamline procedures— will finally receive serious attention. The Senate reportedly included the CMTA on a list of priority bills expected to pass by June. It is currently pending in the Senate Committee on Ways and Means, chaired by Senator Sonny Angara. Bills on changes to cabotage rules and the charters of the Philippine Port Authority and Maritime Industry Authority are also on the priority list. The Philippines has executed a series of reforms to improve customs efficiency, including the Integrated Enhanced Customs Processing System and the Philippine National Single Window Phase 2 Project to ensure informed and diligent compliance with customs procedures. Additionally, on January 21, the Bureau of Customs repealed the requirement for brokers to be present during the packing of export containers and cancelled the requirement that export documents be filed prior to the entry of containers into any port. While the Philippines reported strong economic growth in the last quarter of 2014, chronic port delays that reforms have not yet solved appear to be holding back further development. Several shipping companies have reported diverting cargo to Batangas, 130km from Manila, to avoid the five day delay at the Manila port. Customs reforms in Vietnam and Thailand are also being watched with anticipation, with both countries joining the World Customs Organization Container Control Program since the new year.

View the Council’s latest Customs updates

Defense & Security

Malaysia says it will upgrade its naval base at Sepanngar Bay, known as RMN Kota Kinabalu, with several new facilities, including a modern air defense system. Defense Minister Hishammuddin Hussein announced the plan during a visit to the base, which – as the only facility capable of berthing the nation’s two Scorpene-class attack submarines – forms a vital component of Malaysia’s maritime defense strategy. While Putrajaya has historically pursued a neutral and moderate foreign policy, particularly with respect to Southeast Asian issues, the last few years have forced a reevaluation of this stance. In 2013, and again in 2014, China alarmed Malaysia by conducting two exercises around the James Shoal. Though it is only 50 miles off the coast of Sarawak, the shoal, which China refers to as Zengfu Reef, falls within the southernmost portion of the so-called ‘nine-dashed line’. Separately, Malaysia has endured several attacks and incursions from Islamist militants based in the southern Philippines. In the face of these challenges, Prime Minister Najib has initiated a broad campaign of military modernization. While priority has been given to the Royal Malaysian Navy (RMN), there are also plans to raise a new infantry a division in Sabah State – a significant endeavor for an army that is at present only four divisions strong. Malaysia’s current political and economic climate, however, calls into question the feasibility of many of these efforts.

The United States and Thailand launched their annual Cobra Gold war games on February 09. Originally a bilateral drill between Bangkok and Washington, Cobra Gold has developed over the last 30 years into the largest multilateral military exercise in the Asia-Pacific region. Since the ousting of Yingluck Shinawatra’s administration last May, the U.S. has largely suspended military aid to the Thai government, and this year’s Cobra Gold will feature a reduced complement of U.S. troops. Republican Congressman Steve Chabot, head of the House Subcommittee on Asia and the Pacific, had even suggested the exercise be moved to Australia, but the Pentagon is clearly reluctant to jeopardize ties with its oldest Asian ally. Officials on both sides acknowledge that Cobra Gold 2015 comes at a difficult time for U.S.-Thai relations, particularly in the wake of comments made last month by Assistant Secretary of State for East Asian and Pacific Affairs Daniel Russel. During a speech delivered at the Institute of Security and International Studies in Bangkok, Mr. Russel strongly disagreed with Prime Minister Prayuth’s decisions to postpone elections and maintain a state of martial law. The Thai Foreign Ministry expressed disappointment over Mr. Russel's comments and said that Thailand's internal politics have little influence on U.S. society or economic interests. Meanwhile, China, which regards the diplomatic rift as a strategic opportunity, has recently stepped up engagement with Thailand’s interim government. Beijing has proposed expanding the current Sino-Thai military exercise program, known as Blue Strike, into an annual multilateral drill.

View the Council’s latest Defense & Security updates

Energy

The Indonesian Ministry of Energy and Mineral Resources (ESDM) has announced plans to increase subsidies for biofuels. This is part of the budget strategy to shift funds previously spent on fossil fuel subsidies to other uses—in this case a move to protect and nurture the domestic biofuel industry. If approved by the House budget committee, it is expected to result in higher demand for crude palm oil (CPO) as it is the prime ingredient in Indonesian biofuels. The Biofuel Producers Association (Aprobi) estimated that biodiesel consumption might climb by as much as 30 percent. CPO prices have plunged by ten percent over the past year partly because of sharply falling crude oil prices (which have declined by 60 percent since mid-June 2014) and weakening CPO demand from India and China. The government hopes the increase in the biofuel subsidy will allow biofuel companies to offset the cost of production, increase biofuel availability and decrease Indonesia’s dependence on fossil fuels. A higher CPO price is also important in terms of foreign exchange earnings. Indonesia is the world’s top CPO exporter but has set a zero percent CPO export tariff since October 2014 due to low CPO prices. Environmentalists and forestry advocates believe that supporting the industry will encourage deforestation and will result in more land transferred from smallholders to large private palm oil corporations. This case illustrates another difficult public policy conflict that the Jokowi administration is trying to navigate – support for an important domestic industry versus commitments to local farmers and environmentalists. Nevertheless, ESDM intends to push forward with the proposal and is seeking approval from Parliament’s budget committee.

View the Council’s latest Energy updates

Financial Services

Members of the Council’s Financial Services Committee will attend the 2015 ASEAN Finance Ministers Meeting in Kuala Lumpur March 19-21. The second of three planning calls for the mission will take place on February 24 at 7:30pm Washington time.

Indonesia’s House of Representatives, or DPR, has re-signaled its intention to proceed with a new banking bill which, if passed into law, could greatly limit foreign investment in the country’s profitable banking sector. A draft banking bill was under consideration before seats turned over in the DPR on October 1, 2014 and was therefore not acted upon. In its draft form, the bill would cap foreign ownership of banks in Indonesia at 40 percent, with existing offshore stakeholders given a 10-year period to divest their shareholdings down to the permitted level. The Indonesian Financial Services Authority (OJK) would purportedly exercise the right to waive the cap on a case-by-case basis in light of banks’ histories of corporate governance and transparency, among other factors. It is unclear exactly how this exemption would operate in practice. The proposed legislation will also require foreign banks to re-register as limited liability companies (Perseroan Terbatas, or PT) within the transition period, effectively prohibiting them from operating under branch status in Indonesia. Lawmakers say the bill is needed to protect the country’s banking sector from external competition. Critics including prominent members of the Indonesian financial community, however, say enactment of the bill would deter desired offshore investment into the country’s growing banking sector. President Jokowi himself has publicly stated in the recent past that Indonesia’s financial services development will require substantial foreign direct investment going forward. It would also appear that the proposed bill would contradict the terms of the ASEAN Banking Integration Framework (ABIF) which allows qualified banks from neighboring ASEAN countries, which establish bilateral agreements with Indonesia, to invest in Indonesia under their existing ownership structures. Indonesia currently enjoys a highly profitable banking sector, in some part due to prudential regulations passed in the aftermath of the 1997/1998 Asian financial crisis. If the country reverses course, foreign investors could turn to other Southeast Asian nations, particularly the Philippines, which may soon allow full foreign ownership of domestic banks. At the very least, forced divestments would strongly deter global banks from pursuing opportunities in the Indonesian market going forward.

View the Council’s latest Financial Services updates

Health & Life Sciences

On January 29, the Health & Life Sciences Committee held a quarterly call focused on developing opportunities and activities for inclusion in the HLS Committee 2015 Work Plan. Please provide your input to Fatimah Alsagoff at falsagoff@usasean.org.

The focus in ASEAN continues to be on pursuing universal health coverage (UHC). Singapore’s Ministry of Health recently hosted a Ministerial Meeting on Universal Health Coverage: The Post-2015 Challenge from February 10-11. The meeting hosted delegations from 16 countries, including health ministers from Brunei, Indonesia, the Philippines, Thailand and Vietnam, as well as the deputy health minister from Malaysia. Topics discussed included infrastructure, manpower and financing for UHC, social determinants of UHC, challenges for ageing and fiscal sustainability for UHC, and non-communicable disease and UHC. Further information, a list of delegates, speakers and moderators, as well as presentation slides can be found on the Singapore Ministry of Health website.

The ministerial meeting was held following the launch of the MediShield Life Scheme, which was passed by Singapore's parliament on January 29. The scheme, which provides for extensive government subsidies, is scheduled for implementation at the end of 2015. It will extend the existing MediShield program to cover all Singaporeans for life. The government will subsidize at least 90 per cent of any increase in premium in the first year and at least 70 per cent in the second year, up from the 80 per cent and 60 per cent proposed earlier. Those with pre-existing health conditions are also covered, with the government helping to bear the cost of insuring them. Of note is the broad enforcement powers granted to the government to administer the scheme, including authority to access individual medical and income records to calculate premiums and subsidies, recover unpaid premiums through payroll deduction, and take action against defaulters. Singapore has traditionally refrained from provided welfare programs, but there has been increasing public expectation of this particularly since the 2011 General Elections, which saw the ruling party’s share of the popular vote fall. Since then there has been a series of reforms including new policies on immigration, housing, transport and education. Singapore has become one of the fastest-greying societies in the world with a life expectancy of 82.5 years. MediShield Life is the first example of national health coverage in ASEAN, but it is unlikely to be repeated elsewhere in the region in the foreseeable future, given that Singapore is likely the only government that has the administrative and enforcement capacity to implement it. Nonetheless, as populations in other ASEAN countries age over time, public demand for greater healthcare support can be expected to grow.

View the Council’s latest Health & Life Sciences updates

ICT

The ICT Committee has continued to deepen engagement with Indonesian policymakers on data localization and local content requirements. Indonesia's Ministry of Communications and Information Technology (MCIT) recently developed a draft Ministerial Decree on Local Content (Tingkat Komponen Dalam Negeri - TKDN) for 4G LTE technology, which imposes a 40 percent local content requirement for smartphones by January 2017, among other mandates. On January 30, members of the US-ASEAN Business Council and Amcham Indonesia engaged in a positive discussion with Indonesian Minister of Information and Communication Technology Rudiantara on issues related to local content requirements on smartphones and base stations, luxury taxes on smartphones, and data center localization. Although Minister Rudiantara said that the government is unlikely to eliminate the local content requirement for smartphones, he welcomes private sector input in determining the definition of local content. In terms of concerns over data center localization, Bambang Heru said the ministry is focused on the “public service” language in the data center regulation, particularly related to banks and financial institutions. The Ministry is speaking to foreign banks through the Foreign Bank Association to determine which operations can be located locally and abroad by 2017. Please contact Shay Wester at swester@usasean.org or Kim Yaeger at kyaeger@usasean.org with any comments or questions.

Moving forward in 2015, the Council will build on the momentum of its partnership with the Coordinating Ministry for Economic Affairs through the Indonesia ICT Consultative Forum (IICF). In 2015, the IICF intends to hold policy dialogues, forums, and additional engagement around examining local and global regulations and best practices that advance sustainable ICT growth, incentivizing localization, and updating policymakers on emerging digital trends relevant to Indonesia.

In recent months, Vietnam has drafted a series of regulations, including the decree on Information Services and over-the-top (OTT) circular, which threaten to impose significant restraints on foreign investors and increasingly restrict the digital economy. In light of these developments, the Council is arranging a roundtable discussion in late March on policies and regulations governing data management in Vietnam. This discussion aims to engage key Vietnamese government officials on issues related to cross-border data flow, which could include localization of data centers, TPP commitments on cross border data flows, regulation of the Internet of Things, and cybersecurity and data management. Contact Kim Yaeger at kyaeger@usasean.org if you are interested in supporting this discussion or have any further questions.

View the Council’s latest ICT updates

Infrastructure

As infrastructure development ramps up across ASEAN, industry watchers are questioning governments’ tendencies to award contracts to lowest bidders. In Singapore, contractors Alpine Bau, L&M Prestressing, and Hexagroup all were selected for projects after making the lowest bids—only to encounter delays and financial difficulties. The latter secured a $29 million contract to widen Braddell Road from dual-three lanes to five. The contractor possessed assets of only one percent of the total value of the project. Singapore’s Land Transport Authority (LTA) may have found the bid as value for money, when selecting this project-lowest bid in late 2012. However, after encountering logistical challenges the company lacked experience in handling, the LTA is now faced with deciding whether it will find another contractor to correct Hexagroup’s sunk costs. Singapore is not alone in using a Least Cost Technically Acceptable (LCTA) selection model. Many of the LTA’s projects do not incorporate non-price factors such as product quality or long-term maintenance agreements during bidding processes. Some industry watchers, including the US-ASEAN Business Council’s Infrastructure Committee, regularly advocated to government officials in ASEAN the value of incorporating Life-Cycle Cost Analysis (LCCA) in how they evaluate proposals from bidders for infrastructure project tenders. In other words, a higher initial project bid price can be frequently justified due to greater cost savings over life cycle of the project. The fatal tragedy of the Circle Line Nicoll Highway station collapse in 2004 brought this argument to the forefront in Singapore. Four years later, the LTA claimed to augment its two-envelope system, under which authorities can only evaluate the monetary value of a bid in the second envelope if it is satisfied with the proposal made in the first envelope. Since this time, over nine out of ten contracts went to the lowest bidder, demonstrating the propensity of procurement officials to limit their value-analysis to the least cost. Singapore has taken a step towards a LCCA selection model, but more is needed in order to train officials to consider the “whole life costs” of a project. Greater emphasis on long-term costs and non-price factors can ensure Singapore retains its regional reputation for being efficient, dependable and transparent.

The Council's Infrastructure Committee will be working on the following activities in 2015:

Infrastructure Industry Mission to Indonesia, April 6/7
Infrastructure Technology Seminar in Philippines, mid-May
Infrastructure Meeting with Indonesian Government in Washington D.C., June 2015
Infrastructure Roundtable with Civil Authority of Singapore (CAAS), Q1/Q2 2015
Infrastructure Lunch Panel Discussion with The World Bank's Global Infrastructure Facility (GIF), China's Asian Infrastructure Investment Bank (AIIB), The New Development Bank (NDB) and Asian Development Bank's ASEAN Infrastructure Fund (AIF)

Please contact the Council's Infrastructure Team, Sunita Kapoor at skapoor@usasean.org and John Corrigan at jcorrigan@usasean.org if you would like to participate in any of the above activities.

View the Council’s latest Infrastructure updates

Food & Agriculture

On January 23, Thailand’s Parliament voted 190 to 18 to impeach former Prime Minister Yingluck Shinawatra over her role in the government’s contentious rice subsidy scheme. According to Thailand’s Finance Ministry, rice subsidy programs have cost the country about US$20 billion since 2004, with over 75% of the losses incurred under the Yingluck administration. At the program’s height in 2011, Yingluck’s Pheu Thai Party (PTP) offered farmers up to US$458 per ton of un-milled rice, with no limit on pledged amounts. The military-led government pledged to end the country’s “culture of subsidies,” and now says it will cut rice production and sell the country’s 17.8 million ton stockpile to drive up prices. Like the civilian governments that preceded it, however, the military confronts a practice that has become an indelible part of Thai politics. Prime Minister Prayuth Chan-Ocha has been compelled to implement populist agricultural policies of his own. If the Thai government persists in subsidizing noncompetitive industries, they will become wholly dependent on government handouts, and it will become increasingly difficult for the country to effect economic reform. In the interim, the government’s plan will likely contribute to lower food costs throughout the region, as well as a decline in the domestic use of fertilizer.

The US-ASEAN Business Council is pleased to announce a Food & Agriculture Industry Mission to Thailand on March 5. This one day event will take place in Bangkok. Based on input from delegation members and the growing bilateral government-to-government ties, the Council proposes the following themes for this year’s Food & Agriculture Industry Mission to Thailand:

Support the Government of Thailand’s plans to improve food security and agricultural initiatives in preparation for ASEAN Economic Community (AEC) 2015
Support and facilitate the growth and development of Thailand’s agriculture, food processing and animal health sectors
Support the promulgation of new agri-innovation technologies to improve productivity in the agricultural sector and animal health
Enhance market access and opportunities for U.S. companies to expand business activities in the food, agriculture and animal health sectors
Support the harmonization of standards and adherence to international science based standards such as Codex, OIE (World Organization for Animal Health) and IPPC (International Plant Protection Convention).

Please contact the Council's Food and Agriculture Manager, Sunita Kapoor at skapoor@usasean.org for more information.

View the Council’s latest Food & Agriculture updates

Manufacturing

Members of the Council’s Manufacturing Committee will have opportunities to engage line ministries in key ASEAN manufacturing countries during annual country business missions throughout 2015. As Trans-Pacific Partnership (TPP) negotiators near a final deal and domestic political paths are cleared in the 12 TPP countries, leading economists project game-changing gains for Vietnam’s manufacturing sector. During the Vietnam Business Mission from March 16-18, member companies can engage relevant Ministries including: Finance, Trade and Industry, Planning and Investment, and Education. Delegates will also meet Vietnam’s President, Prime Minister and Central Bank Governor during the mission. The Council will seek meetings with a similar constellation of senior officials during the Cambodia and Myanmar Business Missions in May, Philippines Business Mission in June and Thailand Business Mission in August. Finally, the rapidly developing Indonesian manufacturing sector will be the subject of key meetings during the Indonesia Business Mission in October. Manufacturing Committee members with proposals for Council programming in countries that are targets for manufacturing expansion and/or critical to their businesses can contact Vu Tu Thanh at tvu@usasean.org and John Corrigan at jcorrigan@usasean.org. Companies interested in attending the 2015 Vietnam Business Mission are required to register by February 25 and can download a registration form here.

Cambodia

U.S. State Department Assistant Secretary for East Asian and Pacific Affairs, The Honorable Daniel R. Russel visited Cambodia at the end of January. During his visit, Assistant Secretary Russel engaged with the Royal Government of Cambodia, political parties, civil society, local media and youth representatives. In each of these engagements he reinforced the U.S’ commitment to Cambodia and ASEAN integration. U.S. private sector investment in Cambodia was highlighted for its role in supporting trade and investment. Coca-Cola’s recent announcement of a US$100 million expansion in Cambodia received special mention. Assistant Secretary Russel also emphasized that business with the U.S. private sector meant not just quantity but quality. U.S. private sector investment also brings better labor practices, training and skills development for Cambodian workers and improved environmental standards. The U.S. supports programs such as Better Factories Cambodia and the AFL-CIO Solidarity Center that have improved the working conditions for thousands of garment workers. To maintain further economic growth in Cambodia, Assistant Secretary Russel encouraged the government and opposition groups to work together on the challenges facing the country. These include corruption, human rights concerns, labor issues and environmental protection.

View the Council’s latest Cambodia updates

Indonesia

In February the Indonesian House of Representatives agreed to prioritize 37 bills under the national legislation program for deliberation in the next year. The program highlights a priority placed on economic reforms as 25 of the 37 bills are related to the economy. The bills include:

Industrial relations
Protection of migrant workers
Tax amendments
Banking
Land
Patents
Amendments to the Oil and Gas Law to improve legal certainty.

This year’s program is significant for two reasons. The first is the focus on economic reforms that could have a positive short-term impact, such as improving labor relations and increasing transparency in the oil and gas sector. Secondly this year’s program is more realistic in terms of what Parliament can accomplish. The previous House had around 100 bills submitted but passed less than 20. The current program is seen as more realistic and achievable. The Council’s Indonesia team will continue to monitor these 37 priority bills, especially those that will impact the business environment.

At the end of January Indonesia’s Investment Coordinating Board (BKPM) launched a one-stop investment licensing service (PTSP). 22 ministries and government bodies have each delegated licensing representatives, or liaison officers, to the BKPM headquarters so that investors will not need to visit the offices of multiple government agencies. President Jokowi inaugurated PSTP at the BKPM headquarters on January 26, initiating a process to ease and simplify investment procedures. Increasing investment is essential for raising economic growth from 5.1 percent in 2014 to the target of 5.6-5.8 percent in 2015. The Council will continue to watch this policy closely as it moves forward as it is an important part of President Jokowi’s pledge to cut through Indonesia’s excessive bureaucracy to increase investment efficiency and boost economic growth.

President Joko Widodo is expected visit the United States (Washington, D.C. and San Francisco) in early June. The Council is working with partners to coordinate private sector engagement during the President’s visit.

View the Council’s latest Indonesia updates

Laos

View the Council’s latest Laos updates

Malaysia

On February 10, the Malaysian Federal Court upheld a decision made by the Court of Appeals, which found the opposition leader of Pakatan Rakyat (PR), Anwar Ibrahim, guilty of sodomy and sentenced him to five years in jail. The conviction and sentence effectively disqualified Ibrahim from parliament, leaving the PR without a leader. In a statement addressing the court after the verdict, Ibrahim stated, “[in] bowing to political powers, you have effectively murdered the judiciary.” International bodies also voiced their discontent with the Court’s decision, including the U.S. National Security Council, which said that the, “decision to prosecute Mr. Anwar and the conduct of his trial have raised a number of serious concerns about rule of law and the fairness of the judicial system in Malaysia.” The court's decision also comes at a critical time in U.S.-Malaysian relations as the U.S. and Malaysia are eager to conclude negotiations on the Trans-Pacific Partnership. As a result, Prime Minister Najib’s anticipated trip to the U.S. will likely be pushed to later this year to allow for both the U.S. and Malaysia to address the political issues that have come about due to the conviction.

In addition to the criticism that Malaysia is receiving for the conviction of Anwar Ibrahim, Malaysia’s state-owned investment firm, 1 Malaysia Development Berhad (1MDB), has attracted much unwanted attention as of late. On January 31, 1MDB missed the deadline to repay a USD 550 million loan for the third time. Originally, the deadline had been set for the end of November 2014; however, when it became apparent that 1MDB would not be able to pay, the deadline was extended to December and then again to January. As a result of the firm missing the January deadline, creditors have given the firm one last chance to make the payment and set a new deadline of Wednesday, February 18. The firm staved off default by settling the debt before the deadline. Statements by 1MDB President, Arul Kanda, did not reveal the sources of the funds and he did not go into detail about plans for the 1MDB IPO. Kanda did recently announce that 1MDB will not undertake new projects, stating “The company will now focus on its core businesses. No new investments or projects will be undertaken. Furthermore, no new debt will be raised except in order to refinance existing debt, meet existing liabilities, and/or on a non-recourse, project finance basis, as needed.”

Despite 1MDB’s economic woes, Malaysia is attempting to get its fiscal house in order. The new 6 percent Goods and Services Tax (GST) is scheduled to come into effect April 1, 2015 . On February 2, Royal Malaysian Customs Department Director General, Datuk Seri Khazali Ahmad, announced that there will not be any legal action taken against companies that register for the Goods and Services Tax (GST) by February 28, 2015. In a statement, Khazali urged companies “to take this opportunity to register for the GST to avoid legal action from being taken against them.” Any company that generates RM 500,000 or more that fails to register by this deadline may face legal sanctions and a fine of RM 30,000. The original deadline had been set for December 31, 2014, however, according to the Customs Department, an estimated 50,000 companies have yet to register for the GST.

View the Council’s latest Malaysia updates

Myanmar

The tension between Myanmar and some of its long-running ethnic insurgencies burst into the open this week, as fighting in the Kokang region intensified to the point that the Federal Government declared martial law over the area and thousands of refugees crossed the border into China. The nationwide ceasefire, which had been targeted for Union Day February 12, appears even further away as the Karen National Union (KNU), announced it would pursue separate negotiations with the government. Myanmar’s President U Thein Sein marked February 12 by signing a Deed of Commitment to an inclusive Federal Union, a symbolic gesture that will be further tested in the months ahead leading to elections.

Earlier this month, the Myanmar Garment Manufacturer Association (MGMA) published its first code of conduct for Myanmar’s apparel industry. MGMA’s code of conduct will include core ILO conventions to codify a higher standard of labor relations in the country. The announcement of the code of conduct comes about after the November 2014 launch of the Initiative to Promote Fundamental Labor Rights and Practices in Myanmar. This initiative, which was headed by the United States, Myanmar, Japan, Denmark and the International Labor Organization (ILO), sought to help modernize Myanmar’s labor code and improve Myanmar's compliance with international labor standards. Myanmar’s current infrastructure and power generation standards present difficulties for large scale heavy manufacturing, but there is significant potential for light manufacturing such as garments. Higher labor standards in this area can help attract global brands and mitigate concerns over reputational risk.

View the Council’s latest Myanmar updates

Philippines

The Philippines’ economy is gathering increased momentum following better than expected GDP growth in 2014. JP Morgan raised its forecast for economic growth from 5.4 percent to 6.4 percent; Standard & Poor’s, Fitch, and Moody’s upgraded the country’s investment and credit ratings; and the Bureau of Internal Revenue reported that tax collections grew by 6.5 percent in the same period last year. The rise of the middle class— driven by the expansion of the business process outsourcing (BPO) industry and higher employment rates— is bolstering consumer confidence and contributing to growth. This growth is reflected in the Philippines’ improvement in Nielsen’s latest Global Survey of Consumer Confidence and Spending Intentions; the Philippines recorded a five-point rise to 120 from 115 in the previous quarter’s survey, against a global average of 96, which fell from 98 in the third quarter. That outcome represents one of the largest quarterly increases globally, propelling the Philippines to the number 2 spot alongside Indonesia. High government spending, low oil prices, and strong external demand are also expected to accelerate growth in 2015.

Information for House Bill 5367 on revenue-sharing between the government and foreign mining companies was filed at the House of Representatives and referred to the Committee on Ways and Means in February. Under the proposal, the government receives 10 percent of the miner’s gross revenues or a 55 percent share in annual net mining revenue, whichever is higher, in addition to 60 percent of windfall profit above the net revenue threshold. Although mining companies would receive exemptions from corporate income tax, duties on imported specialized capital mining equipment, and business permits, they would still be required to pay value added tax, capital gains tax, stock transaction tax, documentary stamp tax, withholding taxes on passive income, donor’s tax, environmental fees, and property taxes. The current revenue-sharing rates—a 50 percent government share in profits, and a 2 percent excise tax on actual market value of outputs—are already among the highest rates globally. Given the industry reaction, it is likely that extensive consultations and amendments will occur before the bill is approved.

In late January, rebels of the Moro Islamic Liberation Front (MILF) killed dozens of Filipino police in southern Mindanao in an apparent accidental confrontation that occurred when a paramilitary police force encroached on MILF territory in Mamasapano. The clash ended a three year ceasefire between the government and the MILF in Mindanao, the heartland of the Philippines’ Muslim minority, where there is a longstanding history of secessionism and extremist violence. Congress is currently debating a bill regarding the constitution of a new autonomous Muslim region, and both the government and MILF officials appear committed to the peace process. Although the confrontation threatens to exacerbate uncertainty in the peace negotiations, both sides seem eager to avoid a return to secessionist violence, which has killed tens of thousands of people over a span of decades. The government of the Philippines is conducting investigations to see who is to be held responsible for the accidental confrontation – the Philippine National Police Chief General Alan Purisima has resigned and faces a probe from the House to assess his role in the confrontation.

View the Council’s latest Philippines updates

Singapore

On the 50th year anniversary of the Republic, politicians are prepping the Budget 2015 to address Singapore’s future employment tribulations. Minister for Trade and Industry Lim Hng Kiang asserted that Singapore’s current economic outlook remained positive due to high levels of investment going into and from the country. Nevertheless, he noted that Singapore will face future challenges of matching employee skills with the demands of employers and supporting an ageing population. Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam likewise claimed that the budget will contribute to the long-term objectives of the country by addressing the socio-economic needs of Singaporeans of all ages. The government should promote the accessibility of high skilled jobs to mid-career, middle-aged Singaporeans as well as recent graduates, he elaborated. On a diplomatic trip to Germany, Prime Minister Lee Hsien Loong echoed these concerns by praising Germany’s employment model, which provides apprenticeships for graduates and employer-based training programs for adults. Singapore’s upcoming budget will likely target its high skilled workforce as a resource for the country’s economic growth. Singapore’s Budget 2015 will be presented to Parliament on February 23.

View the Council’s latest Singapore updates

Thailand

In late January, Thailand’s parliament voted 190 to 18 to impeach former Prime Minister Yingluck Shinawatra over her alleged role in the government’s contentious rice subsidy scheme, discussed in further detail in our Food and Agriculture section. The impeachment carries a five-year ban from politics, and the former Prime Minister could face up to ten years in prison on charges of criminal negligence. While the military-led government maintained martial law to limit public protests over the decision, the impeachment has already appeared to exacerbate the political divide. Proponents of the decision believe impeachment will initiate a new era of reform and establish a higher standard for politicians. On the other hand, Weng Tojirakarn, a red-shirt leader and ex-Pheu Thai MP, said the National Legislative Assembly’s decision to impeach Yingluck was tantamount to destruction of the justice system and warned that people in the Kingdom could no longer expect to co-exist peacefully; the government has not explained how people who no longer hold political office can be impeached. Many Yingluck supporters claim that the impeachment elevates her as a symbol of democratic struggle, similar to her brother, Thanksin Shinawatra, who was removed in a 2006 coup. Thaksin, the founder of the political movement that revolutionized Thai politics by drawing its strength from provincial voters, was widely considered corrupt and autocratic while in power, but his removal helped to rally and unite the pro-democracy movement. With both Yingluck and Thanskin banned from politics, the Pheu Thai party may have an opportunity to transform itself and reduce ties and dependency on the Shinawatra family.

Daniel Russel, the Assistant Secretary of State for East Asian and Pacific affairs, delivered remarks at the Institute of Security and International Studies in Bangkok on Monday, January 26. As the most senior U.S. official to visit Thailand since the coup, Russel reinforced America’s commitment to ASEAN and longstanding defense alliance and economic partnership with Thailand. Although the overall message was supportive, Assistant Secretary Russel did deliver strong words to the military government regarding its delay of elections and continuation of martial law. The Thai Foreign Ministry expressed disappointment over Russel's comments and said that Thailand's internal politics have little influence on U.S. society or economic interests.

A digital economy working group warned that delays in enacting the digital economy bills could prevent the fourth-generation (4G spectrum) auctions from occurring this year. Thailand’s government has drafted eight new bills designed to support Thailand’s digital transformation. The bills cover the development of digital technology for the economy, digital economy funding, promoting the digital economy, electronic transactions, cybersecurity, protection of personal information, computer crimes and the National Broadcasting and Telecommunications Commission (NBTC). Combined with two other bills drafted in December and expected to go in front of the National Legislative Assembly this month, (Digital Board for National Economy and Society Act and Reorganization of Ministries and Departments) these bills make up Thailand’s new digital economy policy. Members of the National Broadcasting and Telecommunications Commission recently identified several areas of concern in the draft legislation; they are particularly concerned that the digital economy bills will compromise the authority of NBTC as an independent regulator and enable politicians to intervene in the spectrum allocation processes. Under the NBTC bill, the Digital Economy Policy Committee will determine which frequencies are for security, public, or commercial use. While the Prime Minister was initially slated to chair the Digital Economy Policy Committee, the Council of State now reportedly prefers that the Deputy Prime Minister assume chairmanship of the committee. The structure of the committee will be crucial for implementing digital economy policy, particularly during the transition period for renaming the ICT Ministry as the Digital Economy and Society Ministry. Public and academic debate over the slew of digital economy bills is likely to compound the delay of the bills and spectrum auctions.

View the Council’s latest Thailand updates

Vietnam

As Vietnam celebrates Tet and welcomes the Year of the Goat, the US-ASEAN Business Council extends warm wishes to the people of Vietnam for a successful, happy and prosperous near year.

The Council is registering senior-level executives for its annual Business Mission to Vietnam for meetings Monday – Wednesday, March 16-18, 2015.

The Council is also organizing special activities alongside of the business mission to celebrate the 20th anniversary of diplomatic relations between the United State and Vietnam.

Sunday, March 15, 20th Anniversary Golf Tournament – Members have an opportunity to play a round of golf with government officials and local business leaders prior to the mission.
Tuesday, March 17, 20th Anniversary Corporate Citizenship Exhibition & Reception – Member companies have an opportunity to highlight Corporate Citizenship projects in an exhibition and reception during the Business Mission. The audience will include government officials, US embassy officers, Vietnamese business leaders (major SOEs & private sector companies), US corporate executives and selective media reps.

Internet penetration in Vietnam has increased dramatically over the past decade, from 10.8 million users in 2005 to nearly 40 million in 2015. As connectivity has grown, so have the opportunities afforded to foreign companies and domestic entrepreneurs. According to the Ministry of Industry and Trade, online sales to Vietnamese consumers totaled $2.2 billion in 2013, and may reach up to $4 billion in 2015. Observers have attributed the success of Vietnam’s IT sector to a number of factors, including smartphone sales, robust infrastructure, and a proficient, competitively-priced workforce. Controversy has grown, however, concerning the Communist Party’s increasing efforts to rein in this dynamic young market. Much of this attention has focused on the prevalence of government censorship: the U.S.-based NGO Freedom House recently designated Vietnam and China as the worst abusers of internet freedom. Less scrutinized, but arguably as important, are the burdensome and restrictive regulations that have been imposed on IT companies. Decrees require owners of social media and news websites to obtain licenses from the central government, in addition to maintaining a two-year archive of user posts. Another rule currently under consideration would require offshore technology companies that supply cross-border services to maintain permanent representatives in the country. The wave of new and proposed regulations has prompted concern from foreign and domestic businesses alike - such restrictions are likely to conflict with the Trans Pacific Partnership’s (TPP) rules concerning cross-border data flows.

View the Council’s latest Vietnam updates