OIL SUBSIDY COMPOSITION

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INDONESIA RECONSIDERS ITS FUEL SUBSIDIES AND

HOLDS ITS BREATH

Indonesia

45

2 5 M A R C H 2 0 1 3 I S S U E 1 1 8

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Indonesia has long been under pressure to reduce its fuel subsidies, which cost US$22 billion and was 54% over budget last year. The fiscal burden of the subsidy, exasperated

by growing consumer demand which forced

Indonesia to import oil and gas, contributed to

the trade deficit of US$ 24.2 billion, or 2.6% of

GDP

This year, Indonesia is expected to consume

between 46 million and 53 million kl (kilolitres)

of subsidized fuel, up from last year’s figure of 46

million kl

Economists and businesspeople have intensified

pressure to raise the subsidised fuel price, with

fears the government is sacrificing long-term

development as fuel costs fracture the budget

President Susilo Bambang Yudhoyono admitted

that the subsidy policy was not sustainable, and

that a final policy will be announced on March 28

In the cards is a plan to restrict subsidised fuel

use by private vehicles in major cities, although

critics argued that such a program had limited

impact on spending in the past

Why it matters: Given upcoming elections in 2014

and the experience of protests against raising

fuel prices in the past, it is unlikely that Jakarta

will withdraw the subsidy. More importantly, the

issue highlights how domestic affairs continues

to dominate the policymaking process in ASEAN

member states

Strait Times (14 March 2013)The Jakarta Globe (13 March 2013)

DIGGING DEEPER INTO SHANE TODD’S DEATH

Singapore’s Foreign Minister, K. Shanmugam, said the city state will allow US officials to inspect the work of a research institute linked to Huawei Technologies which Washington suspects of espionage, adding that no improper transfer of technology took place

between the two organisations.

The Institute of Microelectronics (IME) was thrust

into the spotlight last month after a report cast

doubt on the apparent suicide of one of its former

Singapore, US

02researchers – US electronics engineer Shane Todd,

who was found hanged in his Singapore flat in June

last year

The murder is suspected to involve a project

between the IME and Huawei, but both have said

that talks on a joint project did not progress beyond

preliminary stages

The Singapore Government recently expressed

“deep disappointment” with the actions of US

senators Max Baucus and Jon Tester who introduced

legislation on March 14 to block US funding to the

IME until the US Attorney-General could certify that

the FBI had full access to all evidence and records

relevant to the probe

US and Singapore law enforcement officers met

last week to discuss the investigation into Todd’s

death, with the embassy reporting “productive and

forthright” outcomes consistent with the assurances

provided by Washington and in accordance with the

legal frameworks of both countries

The Sunday Times (14 March 2013)Strait Timese (17 March 2013)

Source: CEIC

DISCLAIMER: The news articles contained in this report are extracted and republished from various credible news sources. As such, CIMB ASEAN Research Institute (CARI) does not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information and opinion contained in this report. Should any information be doubtful, readers are advised to make their own independent evaluation of such information.

THAILAND TO SPEND BIG ON TRANSPORT DEVELOPMENT

Thailand

Funding problems and huge stockpiles threaten a policy that wins votes for the government. In the previous crop year alone, the

Yingluck administration spent 336 billion

baht (US$ 11.5 billion) to buy 21.6 million

tonnes of pledged rice

However, the government has failed to sell

enough rice to secure funds to finance the

subsidy

The policy has knocked Thailand off its

perch as the top rice exporter in the world

and resulted in stockpiles of about 17 million

Thailand

THAILAND’S RICE PLEDGING SCHEME MEETS ITS

MATCH04

03The Thai Cabinet recently approved a plan to spend 2 trillion baht (US$ 68 billion) on a high-speed railway and other transportation mega projects to drive the nation’s economic development and avoid the “middle

income trap”. The project is expected to boost

economic growth by one percentage

point per annum for the next 7 years and

will be 100% financed by borrowings,

subject to parliamentary approval

However, former finance minister

Thanong Bidaya expressed concern that

such a move may raise public debt to

more than 70% of GDP from its current

level of 45%, ultimately threatening the

country’s credit rating

A poll conducted by the National

Institution of Development

Administration found that 75% of

tons of milled rice – nearly twice what

the country normally exports – leaving

authorities struggling to find warehouse

space

Thai rice exporters said that it was only

a matter of time before the government

would have to sell grain from its stocks and

possibly dump it on the world market at a

loss

Dr Banchob Junhasavasdikul also raised

concerns that the stored rice may have

become rotten and mouldy, further creating

worries for consumers

The government responded by banning 18

varieties of paddy grown for less than 110

days from the programme

Virabongsa Ramangkura, chairman of the

Strategic Committee for Reconstruction and

Future Development, recently expressed

disagreement with the rice pledging

programme, adding that the government

should instead shift its focus on promoting

high-value crops

The New York Times (7 February 2013)Bangkok Post (14 March 2013)Bangkok Post (18 March 2013)

WHITE RICEPRODUCTIONPRICE(THB/Tonne)

Widespread hoarding in April 2008

The ThaiFlood in

July 2011

Election of Prime Minister

Yingluck in August

2011

Source: CEIC

respondents expect there to be

corruption on the project, but just over

half still approve of the plan

Transport Minister Chatchart

Sithipan defended the project, adding

that “corruption and infrastructure

investments are two different issues” and

ensured corruption-free bidding for the

infrastructure schemes

The Malaysian Insider (25 March 2013)Bangkok Post (17 March 2013)

More interest rate cuts on special

deposit accounts (SDAs) and

greater domestic borrowing to

temper the peso’s appreciation

against the US dollar. Central bank Governor Amando Tetangco ,

Jr. has not ruled out future cuts as authorities

hope to flush funds from the economy in

support of consumption and investment

Philippine Savings Bank President Pascual

M. Garcia III said with lower gains on their

SDA deposits, banks will face thinner profit

margins and could prove problematic due

Former ASEAN Secretary General Rodolfo Severino said full regional integration in ASEAN is unlikely to happen in 2015 but will be the start of a gradual step towards attaining the

goal. Severino said that the 2015 timeline for

the ASEAN Economic Community (AEC)

is good as a benchmark for the ASEAN

countries, but added that change would

not happen immediately”

He noted that some timelines in the

ASEAN agreements have been set by

leaders knowing that they cannot be met,

and that implementation is ultimately

dependent on domestic political climates

Having implemented 300 out of a total

of 342 measures, Malaysia is second to

Singapore in terms of compliance to the

AEC Blueprint

International Trade and Industry

Minister Datuk Seri Mustapa Mohamed

described the 88% compliance score as

commendable, and that Malaysia remains

committed to its obligations

He added that the business community

will see further liberalisation under the

9th ASEAN Framework Agreement on

Services (AFAS) Package, where 24 new

sub-sectors will be earmarked for market

opening in 2015

Manila Buletin (20 March 2013) Business Times (25 March 2013)

Philippines

ASEAN, Malaysia

05

07to the significant cost of maintaining retail

operations

A Cabinet official said the government also

expects to source nearly all of its borrowing

requirements of P150 billion (US$ 3.7 billion)

for 2013 from the local debt market to

address the peso’s appreciation

The Philippines also aims to further cut

its dependence on foreign borrowing by

pursuing debt buybacks, swaps and global

local-currency denominated bonds to

better manage its debt load and win its first

investment-grade rating

Business World (20 March 2012)Business World (21 March 2012)

DISCLAIMER: The news articles contained in this report are extracted and republished from various credible news sources. As such, CIMB ASEAN Research Institute (CARI) does not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information and opinion contained in this report. Should any information be doubtful, readers are advised to make their own independent evaluation of such information.

Source: World Bank

FULL ASEAN

INTEGRATION

WHEN PUSH COMES TO SHOVE

TEMPERING THE PESO

UNLIKELY TO

HAPPEN BY 2015Indonesia

06The US has asked the WTO to strike down import restrictions imposed by Indonesia on horticultural and animal

products. US Trade Representative Ron Kirk said

Indonesia’s “complex web” of import

licensing requirements and quotas have

the effect of unfairly restricting US

exports, and added that Indonesia is acting

inconsistently with several of its WTO

obligations

The request for dispute settlement comes

amid failed direct negotiations between the

two countries

Western car manufacturers complained

that they are losing out to Japanese firms

owing to Indonesia’s higher tariffs and

safety standards applied to imported

European luxury cars relative to Japanese

ones

Why it matters: The disputes focuses

attention on Indonesia’s trade policies

as it prepares to host the APEC leaders

summit in October and the ninth ministerial

meeting of the WTO in December, and

highlights the level of leverage and sway

Indonesian trade policies have relative to

its neighbours due to its sheer market size

The Jakarta Globe (17 March 2013)The Jakarta Globe (15 March 2013)

2011 EXTERNAL DEBT STOCKS(public and publicly guaranteed; current US$ billion)

Google opened a sub-domain for Myanmar for this occasion at www.google.com.mm.

Eleven Myanmar (22 March 2013)

Vietnamese President Truong Tan Sang and Myanmar’s Vice President Nyan Tun pledged to boost bilateral ties when met in Hanoi on 20 March. Vietnam and Myanmar set a trade target of US$500 million by 2015.

Xinhua (21 March 2013)

Australian Prime Minister Julia Gillard announced a new US$20.7 million aid commitment to Myanmar during Myanmar President Thein Sein’s visit to Australia last week. Australia also agreed to ease some of the restrictions on defence cooperation between the two countries.

Australia Network News (18 March 2013)

DISCLAIMER: The news articles contained in this report are extracted and republished from various credible news sources. As such, CIMB ASEAN Research Institute (CARI) does not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information and opinion contained in this report. Should any information be doubtful, readers are advised to make their own independent evaluation of such information.

Editorial Team: Manissa van Geyzel, Sóley Ómarsdóttir, Radin Faizal Consultant Editor: Tunku ‘Abidin Muhriz

Leaders of Myanmar’s activist group 88 Generation Students said they plan to form a political party to work for democratisation, peace and reconciliation in the country. No clear time frame has been set but the new party is likely to compete in the 2015 national elections.

The Irrawaddy (19 March 2013)

Lao Airlines will begin direct flights to Myanmar in October after a two-decade absence of air links between Vientiane and Yangon. The new air link is part of plans by Thailand, Laos, Myanmar, Cambodia and Vietnam to build better connections between the Mekong region neighbours.

Bangkok Post (21 March 2013)

Google’s executive president Eric Schmidt addressed a forum on the future of the internet in Yangon on Saturday.

At least 32 people were killed and 1200 people displaced due to sectarian violence in central Myanmar over the weekend. President Thein Sein declared a state of emergency in the area on Friday.

The New York Times (23 March 2013)

Myanmar’s parliament agreed on 20 March to set up a commission to review the 2008 constitution, which was made by the previous military government and constitutes a 25% military share of parliamentary seats. The Opposition party NLD is hoping the changes will allow Aung San Suu Kyi to run for president in the next election. However, ruling USDP party members say the changes will be focused on allowing increased self-rule of ethnic minorities.

ABC News (20 March 2013)

08 MYANMAR MONITOR

FORE IGN AFFA IRS

ECONOMY

POL I T I CS

THE WORLD BANK AND CANADA

COME TO VIETNAM’S AID

Vietnam

Vietnam receives support to boost its economic competitiveness and reform its banking sector. The World Bank Board of Directors recently

approved the first Economic Management

and Competitiveness Credit for Vietnam,

EMCC 1, to help the country with economic

management reforms for higher productivity

and competitiveness

EMCC 1, the first of three operations,

provides US$ 250 million concessional

financing to support reforms in seven key

policy areas and is expected to provide a

platform for deepening dialogue between

development partners and the Vietnamese

government with a view on helping Vietnam

09transition to a new model of growth

Macroeconomic stability is a major priority

for competitiveness in Vietnam, and a core

objective of EMCC

Canadian Foreign Minister John Baird said

Canada will help Vietnam modernise and

strengthen its banking system through the

Banking Regulation and Supervision Support

(BRASS) project, an initiative worth US$ 14

million

Key areas of focus include improving the

central bank’s management and supervision

capacity and modernising the country’s

banking system and financial regulations in

accordance with international standards

4-Traders (17 March 2013) Touitrenews (16 March 2013)

MALAYSIAN

NOVELIST

Malaysia

10

Writer Tan Twan Eng became the first Malaysian to claim the Man Asian Literary Prize, one of Asia’s

main literature prizes. Tan beat four other authors in what

was described as a “far-ranging and

intricately layered novel”

“The Garden of Evening Mists”, which

was shortlisted for the Man Booker

Prize in 2012, tells the story of Yun Ling

Teoh, the survivor of a Japanese prison

camp who in her old age looks back

at the early 1950s and her relationship

with the mysterious creator of then-

Malaya’s only Japanese garden

He welcomed the growing recognition

for Asian writers in the West seeing

how talented Southeast Asian voices

were sometimes overlooked

This year’s shortlist spanned from

Turkey to Japan and included Indian

Jeet Thayil whose book was shortlisted

for the 2012 Man Booker Prize and

Turkish Nobel Laureate Orhan Pamuk

Reuters (14 March 2013)

WINS TOP ASIAN

LITERARY PRIZE