1 OCTOBER 20 12 I SSUE 95

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01 ASEAN’S MISSED OPPORTUNITIES MAY

LEAD TO A COMPROMISED SINGLE MARKET

ASEAN

Despite ASEAN’s commitment

to form an ASEAN Economic

Community (AEC) by 2015, its lack

of preparedness will lead to a severe

disadvantage vis-à-vis China, the US,

Japan and the EU. ASEAN GDP is outmatched by other blocs

and countries like the US, EU, China, India

and Japan; however ASEAN’s comparable

trade, consumption and population growth

rates makes it one of the most interesting

growth markets in the world

The AEC is currently 72% complete,

however lagging schedules and the

tendency of members to focus on domestic

interests may lead to a formation of the

AEC in a compromised form

At the recent AEC Symposium in

Jakarta on 20 September, ASEAN Deputy

Secretary-General for AEC, Lim Hong Hun,

urged the private sector to actively engage

in realising the AEC, yet only a predictable

handful of regional conglomerates have

responded

The majority of ASEAN conglomerates are

ethnic Chinese which are well connected in

their own countries but haven’t historically

done well in regional arenas where their

connections are weak – consequently, they

may enjoy the current protection afforded

them

Many of ASEAN’s SMEs – which dominate

98% of all enterprises – employ no

innovation in their business models, and

AEC would provide very few opportunities

for them except in tourism

ASEAN members still regard each other as

competitors, and a strategy to change this

paradigm to one of collaboration has not

been made

Infrastructure networks to support

trade is still a work in progress – the high

speed railway between Thailand, Laos, and

Southern China for example is still at the

idea stage (see story 6)

Streamlining of customs procedures via

the National Single Window is progressing,

however there is no common banking

framework in place to integrate its financial

sector

Diversity between ASEAN members

creates sensitivities as less developed

countries hold back progress, and assistance

by more developed members can be

construed as interference

Another major impediment is the differing

legal systems in each country, as this is

the framework upon which business is

conducted

(Sources: Asean Statistics Leaflet 2011, Doing Business Data, CIA World Factbook)

Asia Sentinal, Business Mirror, Philippine Information Agency, Business World Online

(24 September 2012)

Regional Comparison of Indicators

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.

China, ASEAN

ASEAN, India

0403 CHINA-ASEAN

CONTINUE TO INDIA RISING

Commercial relations between

ASEAN and China continue to

strengthen following the conclusion

of the 9th China-ASEAN Expo

in Guangxi Zhuang Autonomous

Region. The China-ASEAN Expo brought together

thousands of businesses between the two

regions

The China-ASEAN Business and

Investment Summit concluded with over

US$6 billion worth of agreements signed

in manufacturing, agriculture, tourism and

trade sectors.

China and ASEAN continue to develop

positive sentiments towards each other

despite disagreements in the South China

Sea

Sino-Malaysian ties have been upgraded

from purely commercial relations following

the first security consultation between the

defense ministries

Sino-Thai relations were reaffirmed by

the Chinese Ambassador to Thailand Guan

Mu, who stated that bilateral relations have

deepened after the two countries formed

a comprehensive strategic cooperative

partnership last year

Xinhua, Asia Times, Pattaya Mail

(11 July 2012)

This year, India is commemorating

its two decades of economic

partnership with ASEAN with a

12,000 mile sea expedition and a car

rally, amid increased economic ties. The relationship, which coincided with

India’s look east policy, began with India

joining the grouping as a dialogue partner,

a step that culminated in the Free Trade

Agreement that became operational in

2010

An early conclusion of agreements in

services and investment can provide the

wherewithal for getting the trade in goods

off the ground

The rapid rate of urbanisation and the

gradual opening of the Indian economy

offer opportunities for companies from the

region to penetrate the Indian market in

the near future.

The Indian government this month moved

to ease restrictions on foreign investments

in areas such as retailing and airlines

Meanwhile, India’s second sail training

ship Sudarshini on 15 September embarked

on a six month historic voyage to highlight

India’s maritime linkages with South East

Asia, calling on 13 ports in 9 countries

An ASEAN car rally is also scheduled later

this year to commemorate this milestone in

relations

Bangkok Post, Business Standard

(24 September 2012)

DEEPEN TIES

The Indian Connection

Indonesia, Singapore, US, China

02 SOUTH CHINA SEA: WORDS AND ACTIONS BUILDUP

The US is working to broaden

Singapore’s role in resolving the

South China Sea dispute, while China

is calling for Indonesia to continue

its constructive role. US Council on Foreign Relations analyst

Joshua Kurlantzick says Washington is

“definitely walking a fine balance with some

of these countries, like Singapore, where

our ties are increasingly close. They are the

best in the region”

Singapore, home to a small US military

base of mainly naval personnel that act

primarily as logistical support for ships

and aircraft passing through the region,

understands well its position at the nexus

of South China Sea claims

“Given their strategic positioning in this,

they have played, I think, a very adept

diplomatic game in trying to be friendly

with everyone because everyone wants to

be friendly with them”, says Washington-

based Cato Institute analyst Justin Logan

Meanwhile, Indonesia is circulating among

South-east Asian nations a draft code of

conduct for the South China Sea, hoping

for progress before a regional summit in

November, says its Foreign Minister Marty

Natalegawa

The US is proposing a potential US$1.4-

billion arms package for Indonesia,

including eight Boeing Apache AH-64D

attack helicopters, providing Indonesia

assets vital to deterring external and other

potential threats

“China reiterated its hope that Indonesia

maintained its constructive role in dealing

with South China Sea,” Foreign Minister

Marty Natalegawa said after his meeting

with Chinese counterpart, Yang Jiechi,

during the UN General Assembly session in

New York on 24 September

Voice of America, Reuters, Today Online

(21 September 2012)

ASEAN-India TradeTrade flows at US$80 billionRate of growth (2011-2012): 37%

MalaysiaMaxis has 74% stake in AirCel IJM (India) Infrastructure, GMR Infrastructure - involved in building New Delhi and Mumbai airports

SingaporeSingTel has 32.25% stake in Bharti AirTel

ThailandPruksa Real Estate in Bangalore

Singapore- SingTel has 32.25% stake in Bharti AirTel

Thailand- Pruksa Real Estate in Bangalore

Malaysia- Maxis has 74% stake in AirCel

- IJM (India) Infrastructure, GMR Infrastructure are involved in building New Delhi

and Mumbai airports

Trade flows at

US$80 billion

Growth

Rate:37%(2011-2012)

ASEAN-India Trade

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.

MYANMAR

MONITOR05Economy

The US government announced that it will ease its import ban on Myanmar during a meeting on 26 September with President Thein Sein on the sidelines of the UN General Assembly. The ban has been in place since 2003. Specific companies, which are seen as corrupt or violating human rights, will still be subject to US sanctions.

Associated Press (27 September 2012)

SMEs should take the opportunity to enter the Myanmar market as there is little competition from multinational corporations at present, said CIMB Asean Research Institute chief executive officer John Pang at the CIMB ASEAN SME Forum on 24 September, adding that smaller businesses are more agile and able to operate in a slightly more uncertain environment.

The Star (25 September 2012)

Myanmar’s energy grid is inadequate and failing due to poor maintenance, ill-trained staff, lack of planning, and a crippling bureaucracy, according to the Asian Development bank. Only 26 percent of Myanmar’s 60 million people have access to mains electricity but the country is one of the five major energy exporters in the region.

Asia Sentinel (26 September 2012)

General Electric Co (GE) reached a deal on 24 September to lease two Embraer jets to Myanmar’s state airline, the latest in a series of deals since the US lifted investment ban on the country. GE aims to open an office in the country once US laws permit it.

Reuters (24 September 2012)

Politics

Public anger has risen against a giant copper mine near Monywa in northwestern Myanmar, owned jointly by Myanmar’s military and a subsidiary of a Chinese arms manufacturer China North Industries Corp. Plans are underway to expand the mine, which would require moving as many as 26

villages, locals say.

The Wall Street Journal (24 September 2012)

Foreign Affairs

President Thein Sein addressed the United Nations General Assembly on 27 September. He saluted opposition leader Aung San Suu Kyi in his speech and spoke about the difficulties ahead for its country on its path towards democracy.

Bloomberg (27 September 2012)

Myanmar’s transition to democracy will not change the country’s traditional friendship with China, Myanmar President Thein Sein was cited as telling Chinese Vice President Xi Jinping, on his visit to China just a few days before he headed to the US.

Reuters (21 September 2012)

Thailand, Malaysia, China

06TRANSPORT LINKS ARE BEING BOOSTED

ASEAN is making headway in

boosting its transport links in

Thailand, Malaysia while more

cooperation is needed in Vietnam. Thailand

Competition among budget carriers in

Thailand will likely heat up once AirAsia

starts using Don Mueang airport, which

will replace Suvarnabhumi airport as the

airline’s new main hub from 1 October

The duel will be between Thai AirAsia,

AirAsia’s flagship in the country, and

the Thai-owned Nok Air, both of which

will compete on the same battlefield of

Bangkok’s old airport, which is set to

become a fully functional aerodrome

Malaysia

Malaysia plans to take the lead as Asean’s

rail transport hub with a RM400 million

manufacturing complex to be set up in

Batu Gajah, Perak

The Transport Ministry and the China

Southern Rail Group, China’s largest metro

vehicle maker, signed a memorandum of

agreement on 25 September

Vietnam

Following the failure of Van Phong port

in southern Vietnam, analysts said a better

option would be developing road and rail

around ports in greater Ho Chi Minh City

and also developing a deep-water port near

the northern city of Hai Phong

Vietnam has a coastline of 3,200

kilometres and a prime location on the

South China Sea, which includes some of

the world’s biggest shipping channels

Vietnam has about three dozen seaports

and several high-quality terminals that

welcome international shipping lines, but

no major port with swift connections to

efficient roads and rail

China

China is urging ASEAN to develop an

integrated logistics system to boost cross-

border trade

The first cross border highway between

China and Vietnam was built seven years

ago, but a planned full road project to

connect China and Singapore via Vietnam,

Laos, Thailand and Malaysia is far from

completion

Bangkok Post, China Daily, News Times

(26 September 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.

Editorial Team: Angela Goh, Manissa van Geyzel, Chayut Setboonsarng

Consultant Editor: Tunku ‘Abidin Muhriz Designer: Iqbal Hakim

09

10

CAMBODIA AIMS FOR

VIAGRA AT

80 US CENTS

The Cambodian government

expects US oil major Chevron to

begin developing the country’s first

offshore oil field early next year,

and hopes the nation will become

a regional hot spot for oil and gas

investment. Cambodia has vast untapped oil and gas

resources both on land and offshore, but

development has been slow as the country

has emerged from decades of war

The area in question covers 26,000

square kilometres and holds potential

reserves of 12 trillion to 14 trillion cubic

feet of natural gas and an unspecified

amount of oil, said Sok Khavan, acting

director-general of the Cambodian National

Petroleum Authority

Chevron has said it expects to make a

final investment decision on the project

this year, but is awaiting the government

production permit

Onshore, Cambodia has licensed blocks

to state-run PetroVietnam, and Japan Oil,

Gas and Metals National Corp, but the

government is unlikely to conduct a big

licensing round until it develops existing

projects and the necessary infrastructure

Wall Street Journal (26 September 2012)

Thailand has approved an affordable

generic version of the anti-impo-

tence drug Viagra to go on sale next

week as the country looks to combat

rampant counterfeit production. The Thai diamond-shaped little blue pill,

which resembles the original produced by

US pharmaceutical giant Pfizer, is called

‘Sidegra’ and available on prescription

across the country from 1 October

Priced at 25 baht (80 US cents) per pill,

Thailand’s Food and Drug Administration

(FDA) said it will be ten times cheaper than

full-price Viagra

AFP (27 September 2012)

Thailand

ASEAN, Thailand

08 ASEAN HALAL PLAYERS NEED

CONCERTED EFFORT

A halal science centre in Thailand

has called for a concerted effort

by Asean countries to develop a

regional halal industry, using a

globally-accepted unified logo and

certificate. Currently, each ASEAN member now has

its own halal logo and certification which

are not universally accepted

Thailand hoped to work closely with

Malaysia to develop the halal food industry

in the region, said Assistant Director of

The Halal Science Centre of Chulalongkorn

University

Asean countries with Muslim populations,

such as Indonesia, Malaysia and Thailand,

should take the lead to capitalise on the

huge potential halal market

Bernama (25 September 2012)

IN THAILAND

Singapore, Thailand

07 MAJOR FIRMS SELLING OFF

STAKES IN ASEAN COMPANIES

While the ThaiBev and F&N saga

continues, the stakes in two major

companies, Singtel and Bank of

Ayudhya are being floated by their

respective owners, Temasek and

General Electric. Last month, the Singapore’s second

largest bank, the Overseas Bank of China

(OCBC) sold its 26% stakes in Fraser &

Neave, which controls the Asia-Pacific

Breweries to ThaiBev, the brewers of

Chang beer in Thailand for US$2.55 billion

The Singaporean sovereign wealth

fund, Temasek Holdings, is decreasing

its ownership of ASEAN’s largest

OFFSHORE PRODUCTION NEXT YEAR

Cambodia

2.5% for US$1 billion

25.3%for US$ 1.65 billion

Selling

Temasek Holdings

GE Capital

SingTel

Bank ofAyuthaya

Stake for sale

GLOBAL HALAL INDUSTRY

1.8 billion

Muslim population

}

Global demand for halal products

US$2.3 trillion

}

Halal Foodaccounts

of globalfood exports

20%

Brazil US China India Thailand

Thailand leads Asean in halalfood exports in 2011, shipping

US$4.8 billion worth to 57 Islamiccountries.

Top 5 Halal food exporters

(estimated)

telecommunications company, SingTel, to

51.9%

GE Capital is also selling its stake in

Thailand’s Bank of Ayudhya to strategic

investors

Malayan Banking Bhd and Australia &

New Zealand Banking Group were among

the lenders approached to the sale

Analysts indicated that the non-

controlling stake was not favourable for

Maybank, but an outright purchase of the

entire bank was better

Why it Matters: As companies restructure

and sell off stakes in ASEAN operations,

there appears to be plenty of capital and

demand to absorb these sales.

The Bangkok Post, Reuters, Financial Times

(26 September 2012)