President's Newsletter - March 2015

Greetings! I have just arrived back in Washington D.C. from our successful business missions to Vietnam and the ASEAN Finance Ministers Meeting.  Currently we are awaiting the arrival of many of the U.S. Ambassadors to ASEAN for the annual chiefs of mission conference.

I want to express my condolences to all Singaporeans on the death of founding Prime Minister Lee Kuan Yew.  As many of you know, I was privileged to present him with a lifetime achievement award at the Council’s 25th anniversary in 2009.  You can read the Council statement on Lee Kuan Yew’s death here. 

As always, you can check out the calendar at the Council website to get a sense of our many coming events.  

Highlights

Advocacy

The past month was another busy one for Council advocacy activities:

• As a member of the TPP Business Coalition, the Council transmitted a letter to the Seattle City Council urging them to vote against a resolution opposing the TPP.
• On behalf of a member, the Council is developing an advocacy effort consisting of meetings and a letter regarding the Government of Thailand’s implementation of a WTO ruling on their import policies.
• During the Council’s recent Food and Agricultural industry mission to Thailand, the Council advocated for the use of free trade-based approaches to improving food security and attracting investment in meetings with Thailand’s Minister of Commerce and Minister of Agriculture.

A few upcoming opportunities:

• Many thanks to members who provided feedback on the Vietnam Energy Snapshot.  A draft of the next snapshot for Indonesia will be circulated on March 23 and is open for comments and input until April 3. The aim is to have this snapshot and key advocacy messages finalized in time for the US-Indonesia Energy Investment Roundtable, the dates of which are still to be confirmed.  For more questions about the Energy Country snapshots or the Energy Committee in general, please contact Alex Stuart at astuart@usasean.org.
• The Council is collecting input on Myanmar’s Draft Investment Law, which will combine the existing Foreign Investment Law and Myanmar Citizen’s Law.  Members interested in providing input should contact Anthony Nelson at anelson@usasean.org.

Intelligence

The Export-Import Bank of the U.S. has requested the Council’s help in conducting an ASEAN Market Demand Assessment Survey, which will help the Bank with its annual Competitiveness report to Congress.  By feeding into the report, we can help ensure the needs of Council members are reflected in ExIm’s priorities and budgets.

Our infrastructure team produced an in-depth look at the business environment in the Batam free-trade zone.  You can read the update here.

Relationship Building

Asia Pacific President’s Mission
The Council is organizing a business mission to Indonesia and Malaysia for Chairman's Council members at the Asia Pacific President's level.  The mission will seek to engage Heads of Government and Minister-level officials in both countries as well as the ASEAN Secretary General.  Mission participation will be capped at 12 Chairman's Council companies.  Interested members should reach out to Mads Stockwell at mstockwell@usasean.org. 

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

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

As ASEAN attracted more FDI than China for the second straight year, we are working with partners to promote the hashtag #ASEANadvantage on twitter!  Join the Council’s campaign at @USASEANBusiness.

Membership

Monsanto and DuPont have both joined the Chairman’s Council. This brings the membership to 150 members, with 63 Chairman’s Council and 87 Corporate members.  

APEC

Representatives of APEC member-economies are proposing a public-private partnership (PPP) Knowledge Portal to facilitate and accelerate investments in infrastructure in the region.  Under the proposal, the PPP Knowledge Portal will make all project-related data and documents from the region accessible to investors.  The initiative will also lead to the standardization of contracts or major provisions of the contracts for PPP.  It is expected that this initiative could be completed within one to two years.  This proposal was made following the APEC Finance and Central Bank Deputies’ Meeting held earlier this month.  Bangko Sentral Ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo stressed that while many APEC economies and emerging markets have excess savings, financing for infrastructure development remains a problem.

Upcoming opportunities:

The Council would like to highlight opportunities for private sector engagement during the 2015 APEC year hosted by the Philippines.  In addition to the annual CEO Summit in November, the APEC Business Advisory Council (ABAC) in partnership with the Philippines' government will be hosting a number of Public-Private Dialogues (PPDs) on key issues.  Learn more about these PPDs.

View the Council’s latest APEC updates

ASEAN

There are a number of future opportunities for engagement with the US-Business Alliance for Competitive SMEs.  Please contact Mario Masaya at mmasaya@usasean.org to register.

ASEAN has topped China as a foreign investment destination for the second consecutive year, with the big six ASEAN economies alone drawing in $128 billion to China’s $119 billion in 2014. ASEAN’s global trade is likely to continue to grow 2-3 points faster than the global average in 2015, according to current ASEAN Economic Ministers Chair Mustapa Mohamed.  In the March 10 weekly bulletin of Malaysia’s Ministry of Trade and Industry, Malaysia provided a number of key ASEAN trade statistics.

View the Council’s latest ASEAN updates

Customs

The Customs Committee held its 2015 planning call on March 11-12.  The call discussed priority countries, where Indonesia and Vietnam rose to the top of the list, and national issues like valuation, re-manufactured goods, local content regulations and transfer pricing.  The conversation then turned to ASEAN-wide issues where trade facilitation, intellectual property protection, and ensuring follow-through on reforms attracted attention.  Plans to increase the number of engagement activities in 2015 were also covered.  Proposed targets included the priority countries, ASEAN Customs Working Groups, U.S. Patent and Trademark Office, the World Customs Organization and APEC.  Members may contact Shay Wester at swester@usasean.org and Ian Saccomanno at isaccomanno@usasean.org with comments or suggestions.

Vietnam’s Ministry of Science and Technology (MOST) released an updated draft Circular 20 on Regulations on the Importation of Used Machinery, Equipment and Production lines (Circular 20/2014/TT-BKHCN), which is scheduled to come into effect on July 1, 2015.  This draft appears to ease import restrictions on used machinery and equipment older than five years and/or operating at less than 80 percent of its original efficiency.  The previous version of Circular 20 was suspended last September amidst strong industry opposition to its server restrictions on used equipment.  Although the official deadline for comments has passed, the government is likely to accept industry feedback.

Indonesia's Ministry of Communications and Information Technology (MCIT) is expected to issue details of the 4G local content requirement by June.  While the government was initially expected to finalize the minimum requirement for local content by the first quarter of this year, MCIT has delayed the deadline until June.  Under the current draft of the regulation, which will come into force on January 1, 2017, all 4G smartphones and tablets will have a 40 percent local content requirement.  MCIT, however, will solicit feedback from relevant parties prior to finalizing the local content requirement.  Public hearings will likely be held before the regulation is implemented.  One area of the regulation where industry may be able to find flexibility is in the definition of local content, which is still under deliberation.  The U.S. Trade Representative has reportedly expressed concern over the regulation’s forced localization of manufacturing operations, and Amcham Indonesia and we at the Council have also raised concerns.

View the Council’s latest Customs updates

Defense & Security

China has announced a 10.1% rise in military spending in 2015.  The new figures will put China’s defense budget at $145 billion, second only to the United States for military spending with a budget of $585 billion.  China says that the spending is to modernize the People’s Liberation Army (PLA).  Investments are expected to be in advanced equipment and improved conditions for personnel.  Officially, this adjustment will be the lowest increase in five years for defense spending.  However, the Chinese defense budget does not include expenditures such as research and development, weapons imports and strategic forces.  Some analysts expect that the real military budget could be 40-55 percent higher than reported.  Many countries are paying close attention to China’s defense modernization as it moves to assert itself as an emerging regional and global power.  In 2013, a military reform program was outlined that would see the People’s Liberation Army, traditionally a land power, begin to focus on naval and air superiority.  Further accusations of territorial assertion in the South China Sea have been raised in recent weeks after a series of photographs were released by CSIS.  The photographs show four man-made structures being built on the Itu, Gaven, Johnson South and Fiery Cross reefs.  The images depict China’s reclamation work through the form of supply platforms, communications, gun emplacements and docking facilities.  The new budget and territorial encroachments are likely to further escalate tensions in the South China Sea.  In January the Philippines and Vietnam held the inaugural Joint Commission on Concluding a Strategic Partnership, which focuses on issues relating to the South China Sea.  In addition to expanding defense cooperation with Vietnam, Malaysia has announced the country is looking to equip its naval base RMN Kota Kinabulu with an air defense system.  On February 20, Indonesian Military Chief Gen. Moeldoko announced greater operational focus in Sumatra and Kalimantan, which are flashpoints in the South China Sea.  Finally on February 17, a senior U.S. Naval official announced that four Littoral Combat Ships will be operating out of Singapore by 2018. Neither Singapore nor the United States are claimants in the South China Sea, but they have both declared their commitment to freedom of navigation in the region.

View the Council’s latest Defense & Security updates

Energy

The International Energy Agency (IEA) has urged Southeast Asian countries to increase the share of natural gas in power supply as electricity demand is set to triple in the ASEAN region in the next two decades.  During the Natural Gas Summit 2015 in Manila March 5-6, the IEA said power demand in Southeast Asia is expected to surge by 80 percent by 2035.  The 80 percent increase is not surprising given the projected growth of Southeast Asian economies and greater regional integration supported by the ASEAN Economic Community (AEC) in 2015 and beyond.  Population growth and the number of people still to be connected to power will also drive the increase in demand.  In the region, only Singapore and Brunei Darussalam have 100 percent access to electricity.  In the Philippines, 16 million people have no access to electricity.  The number is even higher for Indonesia at 63 million individuals with no access to power; Myanmar with 26 million; Cambodia with 10 million; Thailand with 8 million; Laos with 2.2 million; Vietnam with 2 million; and Malaysia with 200,000 of its population.  The IEA urged that power supply in the region must shift from coal to natural gas where possible to reduce environmental and climate impact of increased demand for energy.  The IEA projects that while liquid natural gas production will double by 2035, coal will still remain a predominant source of power in the region.  The IEA supports the Trans ASEAN Gas Pipeline (TAGP) Project which establishes interconnecting arrangements of electricity and natural gas among the ten member states of ASEAN to ensure greater security and sustainability of energy supply in the region.  According to the ASEAN Council on Petroleum (ASCOPE), the TAGP Project - led by Malaysia’s PETRONAS - has already established 11 bilateral connections with a total of 3,020 kilometers of pipeline connections making possible the transmission of gas among ASCOPE member countries. This year, ASEAN Energy Minsters will finalize the next five-year stage of the ASEAN Plan of Action for Energy Cooperation (2015-2020).

View the Council’s latest Energy updates

Financial Services

Singapore Exchange’s (SGX) chief executive has called for the implementation of direct connections between Southeast Asia’s exchanges beyond the nascent ASEAN Trading Link which now connects Singapore, Malaysia and Thailand.  In comments made to Reuters in late January, SGX’s Magnus Bocker argued that such ‘through train’ trading links would be vital to ensuring the continued growth of the region’s financial markets by providing greatly increased liquidity and investment options.  Bocker highlighted the Shanghai-Hong Kong Stock Connect system, launched in November 2014, as a model to be emulated.  In the case of the Stock Connect Scheme system, however, legal complications persist around the ownership of cross-border equity.  While under the leadership of the ASEAN Capital Markets Forum (ACMF), initiatives such as the Collective Investment Scheme and the Corporate Governance Scorecard have incrementally moved the ball forward in terms of regionalizing equity markets.  However, ASEAN’s historic inertia on joint initiatives, which stems from divergent corporate governance and listing standards, suggests that progress on a similar system for Southeast Asian bourses is likely to be slow.  Bocker foresees closer intra-ASEAN exchange connections possible within a “couple of years,” and recognizes the potential for Singapore to create links outside the region with exchanges such as those in Shanghai and Hong Kong.

View the Council’s latest Financial Services updates

Health & Life Sciences

Following up on the HLS Committee’s proposal to organize an HLS Industry Mission to a priority country in 2015, we have prepared draft concept papers proposing missions to the Philippines on July 8, and/or Indonesia in Q3 or Q4 this year.  The papers outline objectives, proposed themes, and proposed meeting targets for each mission.  An industry mission to either of these countries will only take place if there is sufficient interest and commitment from members.  To indicate interest, or to provide input on the proposed mission themes and meeting targets, please contact Fatimah Alsagoff at falsagoff@usasean.org by March 31.

On March 5, the Council submitted consolidated input on a draft Joint Position Paper on Implementation of the Halal Law being developed and co-signed by the international chambers of commerce in Indonesia (including EuroCham, AmCham, Jakarta Japan Club, and IFCCI).  If you have any additional input, we advise sending this as soon as possible. Please convey additional input to Fatimah Alsagoff at falsagoff@usasean.org to be sent to the task force for consideration.

The Draft Law on Halal Product Guarantee was passed by the Indonesian Parliament on September 25, 2014 and ratified on October 17, 2014 as Law No. 33/2014 on Halal Products Assurance (“Halal Law”).  The Law provides a five-year transition period and will be implemented gradually.  Implementing regulations must be issued within two years after enactment of the Law. The new Law is wide-ranging in scope.  It applies to food and beverages, cosmetics, pharmaceuticals, biological products, chemical products, genetically engineered products, or any products which are applied, used or utilized by people, if such products are manufactured, imported, distributed and/or traded in the Indonesian customs area. The Law also concerns the ingredient supply, processing, storage, packaging, distribution, selling and serving of these products.

View the Council’s latest Health & Life Sciences updates

ICT

Indonesia’s Coordinating Minister for Economic Affairs Sofyan Djalil has called for inter-ministry talks on new rules to govern e-commerce. The talks, involving officials from the Ministries of Trade, Finance, Transportation and Communications, would mark the beginning of a new integrated approach to regulating online transactions.  It remains unclear what requirements the Indonesian government will impose on e-commerce businesses.  The Council’s conversations have indicated that there are two versions of the regulation under consideration.  There are concerns that one or both of the drafts limit innovation and do not adequately address the needs of the industry.  The Council will continue to investigate the status of the regulation and engage with the government to support a well-designed policy.  A dialogue focused on the future of e-commerce in Indonesia is currently under development through our Indonesia ICT Consultative Forum (IICF).  If you have any suggestions or concerns, please contact Shay Wester at swester@usasean.org or Kim Yaeger at kyaeger@usasean.org.

Indonesia's Ministry of Communications and Information Technology (MCIT) is expected to issue details of the 4G local content requirement by June.  While the government was initially expected to finalize the minimum requirement for local content by the first quarter of this year, MCIT has delayed the deadline until June.  Under the current draft of the regulation, which will come into force on January 1, 2017, all 4G smartphones and tablets will have a 40 percent local content requirement.  MCIT, however, will solicit feedback from relevant parties prior to finalizing the local content requirement.  Public hearings will likely be held before the regulation is implemented.  One area of the regulation where industry may be able to find flexibility is in the definition of local content, which is still under deliberation.  The U.S. Trade Representative has reportedly expressed concern over the regulation’s forced localization of manufacturing operations.  The Council and Amcham Indonesia have also raised concerns in conversations with the government.

View the Council’s latest ICT updates

Infrastructure

President Joko Widodo has brought a surge of investor confidence to Indonesia due to his capital injections and early implementation of economic policies.  Economists have applauded his bold plan to finance US$400 billion of infrastructure projects throughout his five-year term.  With a budget of US$22 billion dedicated to infrastructure and billions more expected to come from the private sector, he is allocating 53 percent more than last year’s budget.  The question many infrastructure stakeholders in and outside Indonesia are asking is whether Jakarta can effectively manage these expenditures.   Last year, it spent only 84.7 percent of a smaller budget.  There are also worries that the state owned enterprises (SOEs) involved need more oversight.  An effective management of SOEs must show that the government has a financial stake in these projects.  However, their involvement must not crowd out efficiency-creating private sector involvement.  Jakarta is planning to streamline funding to SOEs by holding tenders for state projects at earlier stages of a project as well as through online disbursement systems.  These policies will hopefully provide greater accountability as the government can observe their actions earlier in the process, before it is too late.  Indonesia is attempting to usher in a new age of industrial manufacturing and export competitiveness.  If President Jokowi’s Administration pulls off these big infrastructure ambitions, the business community will be rewarded with lower logistics costs.  In turn, investors already tapping into Indonesia’s domestic “consumer” markets will likely see new opportunities in Indonesia as a “producer,” creating a multiplier effect for increased employment growth and consumption spending.  Clearly, President Jokowi holds investor confidence.  Now it is time for SOEs to gain that confidence and for greater private sector involvement in infrastructure development to be created through improved transparency and contract sanctity.  A successful year of infrastructure development would dramatically augment private sector involvement throughout Jokowi’s remaining four years in office.

US-ASEAN Business Council Infrastructure Industry Mission to Indonesia:  The US-ASEAN Business Council is registering senior-level executives for its inaugural Infrastructure Industry Mission to Indonesia on April 7.  We particularly recommend companies in the infrastructure, energy, construction, financial and technology sectors to join this inaugural industry mission.  For information on registration and planning for the mission, please contact Sunita Kapoor at skapoor@usasean.org.

View the Council’s latest Infrastrructure updates

Food & Agriculture

Indonesia’s President Joko Widodo’s aim to achieve self-sufficiency in staple products and food supply is driving up prices and provoking industry-wide criticism.  In line with President Jokowi’s campaign promise to reduce reliance on food imports, the government introduced a law banning imports of offal and secondary beef cuts in January and will allow only state-owned enterprises to import the products during shortages.  Since the imposition of the beef import restrictions, the Indonesian Meat Importers Association (ASPIDI) reports that domestic beef prices have escalated by more than 20 percent as demand exceeds domestic production capabilities.  ASPIDI warns that prices are likely to continue to rise ahead of Ramadan when beef demand typically skyrockets.  Besides beef, President Jokowi’s Administration has also refused to allow rice imports, despite 30 percent year-on-year increases in the prices for the grain in February.  According to academics, self-sufficiency is unlikely because Indonesia, the world’s biggest archipelagic nation with more than 17,000 islands, does not have enough land to grow all its own crops and animal feed or graze cattle, or the infrastructure to transport food quickly and efficiently.  Despite this lack of domestic capacity to achieve self-sufficiency in food supply, President Jokowi appears committed to pursuing this nationalist-based approach to a food self-sufficiency policy, which in some ways reflects a continuation of the protectionist-oriented policies of President Yudhoyono’s last term.  As the Government of Indonesia sustains the import restrictions, many political analysts warn that it risks repeating the mistakes of his predecessor.  Such protectionist policies also risk undermining a drive to revitalize Southeast Asia’s biggest economy, where growth has fallen behind Malaysia, the Philippines and Vietnam.  Indonesia is the largest market in the region for U.S. agricultural exports, which totaled US$3 billion in fiscal year 2014, and ranks as the United States' eighth-largest market worldwide, with top U.S. agricultural exports including soybeans, wheat, cotton, dairy, and feeds and fodder.

The Council led a Food and Agriculture-focused mission to Thailand on March 5.

View the Council’s latest Food & Agriculture updates

Cambodia

SAVE THE DATE: The US-ASEAN Business Council is pleased to announce that it will be organizing a two (2) day business mission to Phnom Penh from May 07-08, 2015. If you are interested in attending or would like more information, please email Daniel Henderson at dhenderson@usasean.org.

CALL FOR INPUT: The US-ASEAN Business Council will prepare a list of recommendations to facilitate access for U.S. companies to the Cambodian market.  We have designed an anonymous survey, the results of which will be summarized in a report that will be sent to Phnom Penh.  Prior to final submission, a draft of the report will be sent to the Cambodia Committee for feedback.

On March 6, the Council of Ministers passed the Industrial Development Policy 2015-2025, which seeks to increase foreign direct investment and deepen Cambodia’s manufacturing base. The decision arrived the day after Prime Minister Hun Sen’s speech to the 2015 Cambodia Outlook Conference in Phnom Penh.  In his remarks, Prime Minister Hun Sen said that the policy endeavored to move the economy away from dependence on garments, tourism and agriculture and towards agro-business, handicraft and light manufacturing. 

View the Council’s latest Cambodia updates

Indonesia

The Indonesian Coordinating Minister for Economic Affairs Sofyan Djalil has called for inter-ministry talks on new rules to govern e-commerce.  The talks, involving officials from the Ministries of Trade, Finance, Transportation, and Communications, would mark the beginning of a new, integrated approach to regulating online transactions.  Indonesia is Asia’s fifth largest e-commerce market.  Experts predict annual sales could triple by 2019 as internet and smartphone penetration increases.  Despite growing interest from domestic and foreign players, the industry still lacks a comprehensive legal framework for managing transactions.  It remains unclear what requirements the Indonesian government will impose on e-commerce businesses.  Local banks often restrict the use of debit cards to point-of-purchase sales, leaving consumers without a convenient form of payment for online transactions.  Vela Asia, a local e-commerce player, reports that only 10 percent of its customer purchases are by credit card.  Retailers rely on riskier cash-on-delivery systems and direct bank transfers to make up for the lack of access to credit cards.  As with other aspects of Indonesia’s economy, inadequate infrastructure is also an obstacle to development.  Poor roads and a lack of detailed maps hamper physical deliveries.  At the same time, however, limited development of formal shopping centers outside major cities may be encouraging consumers to adopt e-commerce.  The archipelago is still one of Asia’s most attractive destinations for e-commerce investment.  The Council will continue to monitor the development of e-commerce regulations.

Indonesia is moving ahead with plans to speed up infrastructure development.  Over the next five years the government aims to build 5,000 km of railways, 2,600 km of roads, 1,000 km of toll roads, 49 dams and 24 seaports as well as construct power plants with a combined capacity of 35,000 megawatts.  The Jokowi government was able to secure US$18 billion in savings from reducing fuel subsidies and has redirected those savings towards infrastructure development.  The revised 2015 budget increases spending for infrastructure to US$22 billion, up 53 percent from the 2014 budget.  President Jokowi’s focus on infrastructure has been widely applauded, but skeptics question the government’s capacity to implement the requisite higher spending, especially given that Indonesia has missed less ambitious targets in the past.  On March 9, President Jokowi inaugurated the construction of the new Keureuto Dam in Aceh province. Breaking ground on construction of this dam is an important signal of the administration’s commitment to accelerating infrastructure development.  The Keureuto Dam is the largest dam built by the government in at least five years.  It is also the largest ever in Sumatra.  The project will cost IDR1.7 trillion (US$130.17 million) and will be completed by 2019.  Construction of the dam is part of the North Aceh regency administration’s efforts to address the region’s annual flooding while also providing irrigation and drinking water.  Water from the dam will irrigate 9,420 hectares of land, provide up to 500 liters of fresh water per second, and generate 6.34 MW of electricity.  Progress on a project of this size and complexity is a promising sign of the government’s ability to move toward meeting its ambitious infrastructure development plans. 

Upcoming opportunities:

In keeping with the Indonesian Government’s strong focus on Infrastructure development, the Council will continue to identify news and opportunities related to this area.  Please see below for a number of important upcoming opportunities:

• April 7:  The Council will lead an Infrastructure Industry Mission to Jakarta.  The aim of the mission is to meet with a cross-cutting group of stakeholders involved in infrastructure development at the working level.  If you are interested in joining this mission please contact Sunita Kapoor at skapoor@usasean.org.
• May 5-7:  Asia Pacific Presidents’ Mission to Jakarta and Kuala Lumpur
• June (dates TBC):  President Jokowi is expected to visit Washington, D.C., and San Francisco 

On-going advocacy efforts:

• GOI engagement on local content regulations; white paper to be developed on broadening definition of local content. 
• Collecting member input on Halal Bill
• IICF

View the Council’s latest Indonesia updates

Laos

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.

View the Council’s latest Laos updates

Malaysia

On March 16, Prime Minister Najib announced the launch of the Services Sector Blueprint and Logistics and Trade Facilitation Master Plan. The Services Sector Blueprint will serve as a plan to meet the goals for the sector’s growth as well as the country’s goal of becoming a developed nation by 2020. The blueprint seeks to meet several challenges facing the services sector.  These challenges include a lack of talent and a lack of access to research and development as well as regulatory barriers for business. Through the implementation of four policy goals – the internationalization of services firms, effective management of investment incentives, enhanced human capital development, and enhanced sectoral governance integration – the government hopes to meet these challenges head-on. Additionally, the government’s Logistics and Trade Facilitation Master Plan will optimize the service sector’s contribution to the economy by increasing trade, business efficiency and economic growth.  The Logistics and Trade Master Plan will have five strategic directions and 21 action plans and is expected to create 146,000 jobs. The five strategic directives are to: strengthen the institutional and regulatory framework; improve trade facilitation mechanisms; develop infrastructure and freight demand; strengthen technological and human resource development; and internationalize logistics services. Malaysia believes that a heavy focus on the services sector and logistics will be essential in moving the country past the middle income level towards the developed nation status. According to Prime Minister Najib, the transformation efforts outlined by the blueprint and master plan show that the government is committed to improving the country economy as well as Malaysia’s standard of living.

In addition the government’s strategic plans to achieve its 2020 goals, the government is also working to get its fiscal house in order. One of the mechanisms to deduce Malaysia’s deficit is the implementation of a Goods and Services Tax (GST) , which will go into effect April 1, 2015. In preparation for the forthcoming Goods and Services Tax (GST), the Royal Malaysian Customs Department warned businesses against raising prices.  The Customs Department stated that businesses would be restricted from raising profit margins three months before and fifteen months after the implementation of the GST.  These restrictions are intended to protect consumers against profiteering, which is prohibited under the Price Control Anti-Profiteering Act of 2011.  The restrictions on pricing have been met with criticism, as businesses are worried about the effect of the GST within the supply chain and the need to raise prices in accordance with the 6 percent change on goods and services.  Critics argue that any changes in the prices within the supply chain will likely affect the supply chain as a whole.  Consequently, businesses that do need to raise prices to maintain profit margins will face an additional burden, as they will need to account for the fluctuation in the costs of materials and logistics when setting the prices of goods.  Nevertheless, the Customs Department has assured companies that they can avoid penalties as long as they keep records and can provide documentation of changes in prices.

In addition to monitoring developments with the GST, the Council is also busy planning several engagements with key stakeholders.  A list of our upcoming events has been provided below:

• Mar 24: Roundtable with Ambassador Joseph Y. Yun, U.S. Ambassador to Malaysia
• May 4: Asia Pacific President's Mission - Indonesia and Malaysia

View the Council’s latest Malaysia updates

Myanmar

The Council is working to provide final confirmation for our 2015 Myanmar Business Mission dates, targeted for May 11-13.  We hope to provide final confirmation within the next week.

The government of Myanmar’s bandwidth, already stretched thin by complex reform and capacity building efforts, has been further taxed by the violence in the Kokang region and protests over education reform.  On March 10, police and student protesters clashed over the new education law in Letpandan.  The protest, which transformed from a march for education reform to a march for wider political rights, started in Mandalay and planned to end in Yangon. However, upon arrival into Letpandan, protesters and riot police clashed, leading to many injuries and arrests.  The opposition National League for Democracy (NLD) weighed in on the treatment of the protests through a spokesman to say, “What is happening nowadays is not in line with the process of a democratic government.”  Focus on these issues may hinder the government’s ability to engage the international and business communities as the government’s time and resources will likely be spent attempting to resolve these conflicts.  They may also serve to galvanize political opposition, as the NLD recently confirmed it would contest the General Elections later in the year, and stated it would not agree to a compromise floated by many international observers whereby Speaker of the Lower House Thura U Shwe Mann would assume the Presidency.  The government still has an ambitious agenda, but repeating minor crises have slowed its momentum and lent credence to the feeling of many international observers that reform has slowed.  Nevertheless, major economic reform plans such as the new Investment Law continue to move forward.

View the Council’s latest Myanmar updates

Philippines

Senate President Franklin M. Drilon delivered the keynote address at the 4th annual Arangkada Philippines Assessment Forum March 3, during which he outlined a series of reform measures expected to be implemented this year.  As President Aquino enters the final stretch of his presidency, Parliament appears willing to institutionalize reforms to maintain economic growth and boost foreign investment.  Among the measures Mr. Drilon discussed were:

• The creation of a Philippines Competition Commission to monitor unfair business practices and anti-competitive behavior
• The Customs Modernization and Tariff Act, which seeks to streamline customs practices through automation of all forms and procedures
• A bill creating the Department of Information and Communication Technology to develop the Philippines’ communication systems
• Reforms to the Sandiganbayan, the country’s anti-graft court. Once enacted, the measure will increase the court’s divisions from five to seven, in a bid to speed up resolution of corruption cases
• The Bangsamoro Basic Law (BBL), a measure intended to bring peace to war-torn Mindanao but suffered a huge setback following a bloody encounter between police and Moro fighters this year. 

Speaker of the House of Representatives Feliciano R. Belmonte, Jr., said that the Fair Competition Act should pass before Congress adjourns on March 18.  It is the longest existing bill in the House of Representatives and long overdue for implementation.  Many economic analysts believe that lack of competition has hampered the Philippines’ development.  The sectors most hindered have been infrastructure and ICT.  For example, consolidation in the telecoms sector has adversely affected network speed and cost.  President Aquino has regularly cited the need for robust laws against anti-competitive behavior since his first State of the Nation Address in July 2010.  The bill is likely to face the same entrenched political interest it has in the past.  The government will have to overcome these interests to create a level playing field and foster fair business competition.

View the Council’s latest Philippines updates

Singapore

On February 23, Singapore’s Deputy Prime Minister and Minister for Finance Tharman Shanmugaratnam unveiled “Budget 2015” in Parliament, aimed towards building Singapore’s future through more innovation and strengthening of social security measures.  The budget introduced a more progressive income tax structure from Year of Assessment 2017 (increased top marginal tax rates for chargeable incomes above S$160,000 to S$320,000 by one to two percent).  Middle income taxpayers will receive a one-off personal income tax rebate of S$1,000 for Year of Assessment 2015 and the bottom 30 percent of Singaporeans will receive assistance in their elderly years via the newly introduced Silver Support Scheme.  Citi dubs Budget 2015 as “An Expansionary, Redistributive Election Budget” and points to the sheer size of the deficit as a sign that elections could be held in 2015.  PwC calls it the “Darwinian Hong Bao Budget” organized into three categories:  Competiveness, Social Spending and Issues, Innovation.  More on PwC’s budget commentary is available online.   A day after the Budget was announced, ratings agency Standard & Poor’s (S&P) issued a top AAA unsolicited rating on Singapore.  The rating “shows the strength of the government’s institutional and governance effectiveness” and would keep Singapore’s credit strong despite its aging population.  S&P notes that investments in the S$68.2 billion budget – including efforts to boost innovation, skills training and funding to meet the needs of Singapore’s aging population – “significantly outsized” the S$705 million transferred to households.  On March 3, the annual debate on the Budget Statement convened in Parliament with about 60 Member of Parliaments (MPs) speaking in the first three days.  The SkillsFuture programme to help Singaporeans keep developing their skills to advance their careers will be a key topic.  DPM Tharman will address and respond to comments and concerns in remarks.  Thereafter, Parliament will move on to what is termed the Committee of Supply to scrutinize the spending plans of each of the 15 ministries and the Prime Minister’s Office.

The Council’s Singapore Committee also recently published a Singapore Budget Analytical Update.  In FY2015, the government will spend S$68.2 billion in total, a 19.3 percent increase from FY2014.  While each fiscal year’s budget experiences an increase in total expenditure, the percentage change from the last fiscal year was the largest witnessed in the past decade.  This includes a 16.3 percent increase in social development expenditure, and a 49.9 percent increase in economic development.  The former will include investment in the public healthcare system.  Meanwhile, the latter will largely fund infrastructure projects such as the expansion of Changi Airport, Thomson-East Coast train line and Tuas Seaport.  Social development now comprises 47 percent of the total budget, and economic development is just behind the country’s security and foreign affairs expenses at 22.2 percent.  Overall, social and economic development expenditures will reach S$30 billion by 2020.

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Thailand

Thailand’s National Anti-Corruption Commission (NACC) indicted 250 MPs for alleged unconstitutional behavior in attempting to amend the 2007 constitution to make the Senate fully elected.  The case has been sent to the National Legislative Assembly (NLA).  Of the 250 indicted lawmakers, 223 belong to former Prime Minister Yingluck’s Puea Thai Party.  Prosecutors previously indicted Ms. Yingluck on the recommendation of the NACC over allegations of negligence in her management of a rice-subsidy scheme.  Some analysts have interpreted the NACC’s actions as an effort to remove the Shinawatra political machine from Thailand’s political landscape.  Although the decision to impeach the 250 MPs is expected mid-March, there is no definite date set for the vote.  The MPs are generally optimistic, as the NLA recently voted not to impeach 38 former senators over the same issue, initially appearing to lessen the likelihood of the NACC pressing ahead with impeachment proceedings.

The Royal Thai Government is making strides to mend ties with the U.S. government after generally “chilly” relations since the Thai military assumed control of the government.  Thailand has charged its new ambassador to the United States Pisan Manawapat with the task.  Ambassador Pisan’s immediate goals are to improve the relationship and to help upgrade Thailand’s position in the U.S. State Department’s Trafficking in Persons (TIP) report.  As Pisan settles into Washington, he outlined six key areas in a letter to President Obama where Thai-U.S. ties can be enhanced:  security, climate change, global health security, economic cooperation, science and technology, and economic cooperation.  In Bangkok, Prime Minster Prayut recognizes the U.S.’s messaging on the current state of affairs, but insists the "one-size-fits-all" shirt pushed by the United States does not suit everybody, and Washington needs to have a better understanding of the multitude of changes taking place in Thailand. 

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Vietnam

The Council organized its annual business mission to Vietnam March 16-18.  The delegation of 29 companies participated in three full days of meetings with key Ministries and government bodies as well as President Sang.  The week was rounded out with a one-day ICT forum focused on the Policies and Regulations Governing the Management of Data in Vietnam.

This will be an especially busy year for Vietnam.  As the Communist Party of Vietnam (CPV) grows and reforms itself structurally and managerially, it also faces difficulties posed by the country’s gradual transition to a market-based economy.  Vietnam has enjoyed heady economic growth over the past few years, but internal constraints, specifically in the banking sector, threaten to check the pace of development.  Policymakers are reportedly split on the best way to handle such problems, with one faction advocating increased market liberalization, and the other the preservation of state enterprises as a tool for macroeconomic stability.  In this same vein, there is a hopeful optimism for the reforms that accompany participation in the Trans-Pacific Partnership and the way in which those reforms are implemented throughout the government. 

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