The hospitality industry in the ASEAN region may recover in 2022 with aggressive vaccination, allowing for more businesses such as travel and tourism, lodging, food and beverage, and recreation to re-open.

AirAsia Malaysia chief executive officer (CEO) Riad Asmat believes a full recovery in travel demand is possible by the end of 2022.

With the tourism industry contributing over 15 per cent of Malaysia’s Gross Domestic Product (GDP), vaccines are key for protection and will play a strong role in supporting tourism and the economy to get back on its feet, he said.

“We foresee a gradual travel and tourism recovery by the end of 2021 and through 2022 thanks to the accelerated vaccine rollout across our key markets in ASEAN. Travel demand will rebound. By the end of next year we expect to be back to pre-Covid levels due to huge pent-up demand for travel,” said Riad.

The tourism industry contributed 14.3 per cent of the ASEAN’s GDP and 13.7 per cent of total employment in the region.

In 2020, however, international tourist arrivals plummeted 80.5 per cent and suffered the loss of 75.8 per cent of tourism receipts.

Intra-ASEAN travel that made up 36 per cent of tourism arrivals in ASEAN before the pandemic with over 51 million visitor arrivals in 2019 might be the first tourism segment to be revived once herd immunity is achieved in ASEAN, said CARI ASEAN Research and Advocacy (CARI) executive director Jukhee Hong.

Hong said the development of the ASEAN Travel Corridor Arrangement Framework should be concluded soon to facilitate essential business travels among ASEAN as ASEAN ramps up vaccination efforts.

Riad and Hong were speaking during a webinar hosted by CARI, the ASEAN Business Club, ASEAN Business Advisory Council (ASEAN-BAC), and ASEAN-BAC Malaysia, with the topic ASEAN Tourism Webinar 2021: Outlook and Pathways to recovery.

It featured a keynote presentation by H.E. Sandiaga Uno, Minister of Tourism and Creative Economy, Indonesia; William Heinecke, founder and chairman of Minor International PCL, Yanty Rahman, ASEAN-BAC chair 2021, and Riad.

The session was moderated by CARI chairman Tan Sri Dr. Munir Majid.

Munir said the speakers concurred that innovation and collaboration are needed to revive ASEAN’s tourism industry.

He said intelligent within-border risk management and mutually agreed standards will pave way for regional recovery.

“Achieving economic recovery, particularly in the tourism sector, in the covid world is like climbing up a greasy pole. No sooner have you moved up than you slip back. Countries that have been trying to reopen the tourism sector are suffering setbacks from the resurgence or new waves of the virus,” he said.

Munir said, apart from intelligent risk management within borders, concurrently mutually agreed standards have to be agreed upon if the tourism industry and other forms of travel are not to remain frozen.

“Such travel bubbles can start between or among tourist destinations in the region and the recovery really has to get going as the virus is not going away any time soon,” he said.  

For Heinecke, innovation and regional collaboration are key to rebuild the hospitality and tourism industries.

“Navigating this pandemic has been like sailing into a hurricane, never knowing if or when the winds will die down. At Minor, we are no longer trying to put things back to where they were. Instead, we are trying to build, create and imagine the new ways of business beyond Covid,” he said.

Source: NST

The hospitality industry in the ASEAN region may recover in 2022, says AirAsia Malaysia CEO

The most important thing right now is the countries that are going to be the most helpful in getting the world back to normal amid the Covid-19 pandemic.

And regardless of whether the particular countries have either soft or hard power, it should be a key foreign policy focus for those who have the resources and ability to try and help out.

This was according to Partner, Sanctuary Counsels, Jonathan McClory, at the Singapore International Foundation (SIF) Public Diplomacy in Asia 2021 Conference here today.

McClory, an independent strategy consultant specialising in soft power, public diplomacy, cultural relations, place branding and creative industries, spoke with three other speakers on the topic of “Public Diplomacy in a Post-Covid-19 World”.

The session was moderated by Director of the Center on Public Diplomacy at the University of Southern California, Dr Jay Wang.

McClory was asked if a country with no military strength can demonstrate excellent soft power and wonderful public diplomacy to rally people together to solve a particular problem, such as in getting proper global vaccine rollouts.

“It won’t necessarily be those countries that have the best military infrastructure, but those that can help build capability around public health or help in the rollout for funding of the vaccine rollout globally.

“And, I think that’s going to be the most important thing for soft power,” he said.

McClory noted that Japan is one of the countries that without a military per se could really get involved in “bringing this to an end.”

The consultant said it was proven by all the work that the country has done in Southeast Asia such as capacity building in various areas and developments and “part of that has been public health”.

McClory also said that the European Union have actually done fairly well in their work of supplying vaccines to the global Covid-19 Vaccines Global Access (COVAX) system and “they could probably make a bit more noise around that.”

“It’s taking a lot of arm-twisting for the US to actually let any vaccines out of the country. They need to do a lot more on that,” he added.

McClory stressed that it should be a key foreign policy focus for any countries that have the resources and ability to try and help out.

“They should be because over the next few years that is going to be in front of everybody’s mind that who was it that was there to help us in our hour of need and get us back to normal? That’s kind of everything right now,” he said.

Source: Bernama

Speeding up Covid-19 vaccine rollouts should be key foreign policy focus

The partnership between European Union (EU) and ASEAN is essential to put both parties on a firm path to recovery post-Covid-19 pandemic, said Ambassador and Head of Delegation of the EU to Malaysia Michalis Rokas.

He said no country can confront this crisis without international cooperation, and hence global trade is a key building block of recovery from the pandemic.

“The Covid-19 legacy requires an extraordinary level of collective efforts to jump-start the economy and revive people’s livelihoods.

“Trade can create jobs, generate income, improve people’s quality of life, and present many other opportunities that are crucial for the long-term social and economic transition. This activity underpins the EU’s steadfast commitment to multilateralism as well as an open and rules-based trade,” he said in a statement from the Delegation of EU to Malaysia in conjunction with an economic diplomacy course for ASEAN jointly organised by EU and Malaysia’s Institute of Diplomacy and Foreign Relations (IDFR).

Meanwhile, IDFR’s Director General Datuk Mohd Zamruni Khalid said it is important that both ASEAN and EU strengthen themselves with the means, knowledge and understanding learned from each other so that their economy remain resilient to ride the testing times.

The course, titled “Free Trade Agreements & EU-ASEAN Economic Cooperation”, was held online from July 13 to July 16 and attended by government officials from ASEAN countries as well as the ASEAN Secretariat, experts from international organisations, and leading think tanks in Europe and South-East Asia as well as academia.

The statement said the course — aimed at supporting ASEAN, the world’s fifth largest economy, in facing the challenges of Covid-19 pandemic while ensuring a speedy and sustainable recovery — focused on EU-ASEAN partnership and also the role of Free Trade Agreements (FTAs).

The course underscored the importance of global trade as an indispensable force to address the Covid-19 related challenges.

The EU is ASEAN’s number one development partner, and its third major trade partner and investor. The EU’s exports to ASEAN countries grew from €54 billion in 2010 to €85 billion in 2019, while the EU imports had increased from €72 billion to €125 billion during the same period.

Total Foreign Direct Investment (FDI) inflow of €131.6 billion from the EU accounts for 22% of the total investments made in the region — nearly a quarter of the total FDI stock.

To date, the EU has entered into FTAs with two ASEAN countries — Singapore and Vietnam. In the longer term, these bilateral FTAs will act as building blocks for the establishment of a region-to-region FTA, which remains the EU’s ultimate objective.

“By bringing together two of the world’s largest economies, such an agreement would create a free trade area with a combined market of more than one billion people”, it added.

Source: Bernama

EU, ASEAN partnership essential for post-pandemic economic recovery

The Asia-Pacific Economic Cooperation (APEC) Informal Leaders’ Retreat stand united to accelerate equitable access to safe, effective, quality-assured and affordable COVID-19 vaccines to expedite economic recovery.

The Ministry of International Trade And Industry (MITI) said the pledge was made at the APEC Leaders’ Informal Retreat held virtually on Friday where the Malaysian delegation was led by Prime Minister Tan Sri Muhyiddin Yassin.

“APEC Leaders also commit to redouble efforts to expand vaccine manufacture and supply, support global vaccine sharing efforts and encourage the voluntary transfer of vaccine production technologies,” it said in a statement today.

The retreat was chaired by New Zealand Prime Minister Jacinda Ardern and was attended by all 21 APEC Economies, including the newly elected United States President Joe Biden, Chinese President Xi Jinping, Russian President Vladimir Putin, Indonesian President Joko Widodo and Japanese Prime Minister Yoshihide Suga.

The ministry said in manifesting the solidarity in battling the Covid-19 health and economic crisis, the leaders issued the “APEC Economic Leaders’ Statement: Overcoming Covid-19 and Accelerating Economic Recovery”.

“Reiterating their commitment in realising the Putrajaya Vision of an open, dynamic, resilient and peaceful Asia-Pacific community by 2040, the statement focused on three main areas namely strong, balanced, secure, sustainable and inclusive growth; innovation and digitalisation; and trade and investment, which are also the key drivers of the vision,” it said.

MITI said in his intervention, Muhyiddin regarded the Informal Retreat as an “important occasion to reflect on any missed collaborative opportunities that could reinforce the efforts towards rapid, sustainable and even economic recovery.”

It said the prime minister also remarked that “while it is comforting to witness the return to normalcy in some economies, many of us are still grappling to regain economic stability,” referring to developing and non-vaccine-producing economies in APEC.

The ministry said Muhyiddin also emphasised the positive correlation between the success of the vaccination programme or increased rate of inoculation and the ability to speed up the economic recovery process.

“Malaysia supports global initiatives undertaken to boost global vaccines capacities, including through negotiation at the WTO on the temporary waiver of certain provisions of the TRIPS Agreement. This is a step in the right direction because extraordinary circumstances call for extraordinary measures,” the ministry said, quoting the prime minister.

It said Muhyiddin also took the opportunity to congratulate Suga and Japan for organising the Olympic Games 2020 which would convene next week.

MITI said the prime minister described the event as “a testament on how cross-border travels can be carried out, under stringent measures and controlled environment.”

Since the issuance of the Statement on Covid-19 by APEC Ministers Responsible for Trade during Malaysia’s hosting year in 2020, APEC has introduced numerous policies formulated to address the challenges arising from the health and economic crisis, which is expected to last for the foreseeable future.

Leaders will virtually meet again in November to conclude the efforts and achievements of APEC 2021.

Source: Bernama

APEC economic leaders stand united to expedite economic recovery

Southeast Asia is the world’s fastest-growing region for mobile wallets, followed by Latin America and Africa & Middle East, research from London-based fintech company Boku Inc shows.

The number of mobile wallets in use will grow 311% from 2020 to almost 440 million by 2025 across Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, reflecting an e-commerce boom, according to a global study on the industry, which was published on Thursday in partnership with Juniper Research Ltd. The usage in Latin America is set to expand 166% during the same period, while that in Africa and Middle East will grow 147%.

Mobile wallets overtook credit cards to become the most widely used payment type globally in 2019, according to the report, and adoption accelerated during the pandemic. There were more than 2.8 billion mobile wallets in use at the end of 2020, and that’s projected to increase 74% to 4.8 billion by the end of 2025.

The study found there are two distinct types of mobile wallets in the world. One is card-based mobile wallets like Apple Pay and Google Pay, which are more popular in developed markets. The other is stored value mobile wallets like China’s AliPay and Grab Holding Inc’s GrabPay, popular in emerging markets where credit-card usage is lower.

In 2020, there were 55 stored value mobile wallets that processed more than US$1 billion in annual transactions. Pakistan’s SadaPay is projected to be the fastest-growing mobile wallet in the world in the five years to 2025, followed by Mercado Pago and PicPay in Brazil.

Chinese wallets are likely to have limited impact outside their home market, the study said. That’s despite Ant Group Co’s Alipay taking stakes in international companies including mobile money platform bKash Ltd, and Tencent Holdings Ltd’s WeChat Pay getting approval for use in Indonesia in 2020.

“It seems unlikely that they will conquer emerging Asian markets as many once thought,” the report said, adding that their usage overseas was mostly limited to Chinese tourists.

Source: Bloomberg

Southeast Asia is world’s fastest-growing mobile wallet market

The International Monetary Fund’s No. 2 official on Tuesday called on countries to pivot from saving their economies from collapse to reviving growth-oriented policy reforms to boost their recovery prospects and make them more sustainable.

IMF First Deputy Managing Director Geoffrey Okamoto said in a blog posting on the IMF website that the Covid-19 pandemic delayed and reversed some pro-growth reforms and restoring these can help make up for output lost during the pandemic.

Reforms that allow for faster restructurings and resolution of unviable businesses and labor policies to help retrain workers and line them up with job openings can help shift workers and capital to more promising, dynamic parts of the economy, Okamoto said.

Improved competition policy frameworks such as those being debated in Europe and the United States can reduce the concentration of market power among a few firms and create more dynamic competition and innovation.

“Using this moment for some of these difficult reforms means that the monetary and fiscal stimulus still flowing will serve as a springboard to a brighter and more sustainable future rather than a crutch to a weaker version of the pre-Covid-19 economy,” Okamoto said. “Seizing the opportunity could deliver years of solid post-Covid-19 growth and progress in living standards.”

The call for a renewed focus on reforms comes as the IMF is shifting from non-conditional emergency Covid-19 pandemic financing toward the negotiation of more traditional IMF loan programs, which require recipient countries to meet policy reform benchmarks.

The Fund last week approved a new, US$1.5 billion, three-year Extended Credit Facility arrangement for the Democratic Republic of Congo, which includes reforms to boost revenue collections, improve natural resource management governance and strengthen the country’s monetary policy framework to ensure central bank independence.

The IMF is also negotiating a new Extended Fund Facility with Argentina, which has struggled under a US$57 billion IMF loan, arranged in 2018, the Fund’s largest-ever.

The IMF estimates that comprehensive growth-enhancing reforms in product, labor and financial markets could lift annual GDP per capita growth by over 1 percentage point in emerging market and developing economies in the next decade.

Countries taking such steps would be able to double their speed of convergence with advanced economies’ living standards relative to pre-pandemic years, Okamoto said.

For advanced economies, pro-growth reforms that target the supply side could guard against persistent inflationary risks caused by excess demand pressures.

These reforms can boost investor confidence in emerging market countries that have been able to maintain access to global capital markets during the pandemic and help these countries cope with any tightening of financial conditions, especially if inflation persists in advanced economies, prompting interest rate hikes.

The higher growth by reforms can help poorer countries avoid harsh fiscal austerity, allowing them to maintain social and health spending while investing in the future, Okamoto said. 

Source: Reuters

IMF urges countries to shift from economic rescue to reforms

Businesses in Asia-Pacific (APAC) are less likely to feel the long-term impacts of Covid-19 on their real estate portfolios, with only 14% expecting the pandemic to permanently alter their real estate strategies, according to Knight Frank’s global (Y)OUR SPACE 2021 survey, which features almost 400 international businesses with a combined headcount of over 10 million, providing an insight into the workplace strategies and real estate needs of global companies.

There is a contrast between APAC and overall global corporate real estate attitudes, with 17% more APAC businesses likely to increase real estate portfolios and 18% fewer APAC businesses likely to decrease their global portfolios compared to their global counterparts. 

For those expecting to increase or decrease their portfolios, however, the proportion of those seeking to make substantial changes of more than 20% is greater than that of global levels.

Knight Frank Malaysia executive director of corporate services Teh Young Khean said in a press release that the overall activity for new take-up in Malaysia’s office market will generally be slower in the next three years as companies are readjusting their plans for the short term. However, this varies depending on the industry. 

“Businesses related to e-commerce, hygiene and healthcare, technology and business process outsourcing are expected to be active and we foresee more take-up will be coming from these sectors. Despite the current market condition in Malaysia, we have also seen an increase in enquiries on workplace consultancy from organisations to assist in developing strategies on future workplace arrangements,” he said.

Other areas where APAC responses diverged from the global average is the likelihood of shifting headquarters (HQ). About 51% of APAC respondents said a move is likely to happen in the next three years, which is 13% higher than the proportion of global respondents who answered similarly. 

Teh said, “With the double whammy effects resulting from the current oversupply and weak market sentiment in Malaysia, certain occupiers may take this opportunity to relocate their office spaces for a building that offers better value propositions especially for an option that could provide better savings opportunity.”

While cost savings is the main driver globally for influencing this decision, the second key driver for relocation of Asia-Pacific HQ is access to different talent pools and to attract talent, as a significant portion of APAC corporations is looking to move HQ facilities. The question remains, however, on where exactly they are going and how this affects existing real estate strategies.

Meanwhile, some APAC cities are facing a new type of problem such as long commute times. In some developing and emerging countries particularly, traffic congestion and a lack of parking space run rampant. According to a study conducted by Boston Consulting Group, three developing markets see average commuters spend more than an hour in traffic congestion or in search of parking lots per day, with Kuala Lumpur coming up in sixth place in terms of congestion, especially during peak hours. 

In contrast, only 22% of global respondents found this important, giving priority to a change of work styles, business restructuring, and business transformation before considering this factor.

The survey also stated that the top three amenities demanded by employees in Asia-Pacific will include food and beverage offerings, healthcare and gym facilities. “Hence, we are witnessing the shift towards mixed-use development that boasts a diverse mix of residential, commercial and recreation spaces all in one area. Occupiers are likely to gravitate towards spaces that provide more amenity options, and landlords could consider implementing a long-term mixed-use strategy across their real estate portfolios,” said Teh.

The most sought-after amenities by Malaysian workers for a better workplace environment will be the building’s safety and security features, facilities and amenities within the development, amenity-rich office and wellness programmes and staff’s wellbeing. 

“Though some people find it more productive to work from home or outside the office, the human touch and collaboration are still required especially in workplaces where teamwork and cooperation are essential. As office space requirements from occupiers continue to evolve, more landlords are incorporating flexible solutions or coworking space into their buildings. This is accomplished by operating it in-house or by partnering with established coworking operators,” said Teh.

Source: The Edge Markets

APAC corporates less likely to feel long-term impacts of Covid-19 pandemic, says Knight Frank

The fast-spreading delta virus variant is on the march through a largely unvaccinated Southeast Asia, forcing restrictions on work and mobility that are taking the shine off the wider region’s recovery in energy demand.

Indonesia, Southeast Asia’s biggest economy, is being wracked by a particularly brutal wave of Covid-19, with movement curbed in the industrial heartland of Java and the tourist enclave of Bali. Malaysia is still in the midst of a nationwide lockdown, while Thailand has just stepped up restrictions.

The mobility curbs and a lack of success in reining in delta are prompting downward revisions in forecasts for consumption of fuels, particularly gasoline. Indonesian motor fuel demand will drop by 8% in the third quarter compared with May, before the virus resurgence started having a major impact on the economy, FGE forecasts. In Malaysia, it will plunge by 17% over the same period, the industry consultant said.

Daily traffic levels in Indonesia have fallen by around a fifth this month from June, Apple Mobility data and Bloomberg calculations show.

Delta’s spread through Southeast Asia — which has a population about twice that of the US — is a fresh headwind for Asian refiners struggling with still-depressed processing margins. Indian energy demand is yet to fully recover from the vicious virus wave in April and May, while in China there are signs the nation’s V-shaped economic rebound from Covid-19 is slowing.

Complex refining margins in Singapore, a proxy for the region, have averaged 62 cents a barrel since the end of May, compared with US$3.49 for 2019.

Further south, Australia has been spared the high death tallies of its neighbors but the largest city of Sydney remains locked down and traffic has dipped.

“Conditions continue to be stacked against fuel consumption” and this is weighing on margins, said Peter Lee, a senior oil and gas analyst at Fitch Solutions. Indonesia, Malaysia and Australia together account for 17% of Asia-Pacific gasoline demand and about 14% of diesel consumption, he said.

Malaysian diesel demand will drop 15% this quarter from May, while in Indonesia it should stay roughly steady, FGE said. The tightened restrictions won’t have as much impact on diesel as most industrial activity in Indonesia is still permitted, according to Grayson Lim, a senior oil market analyst at the industry consultant.

Snapshots of commuter activity show the situation is more dire for gasoline consumption. Daily traffic levels are down 21% so far this month in Indonesia from June’s average, with driving activity around 88% of its January 2020 baseline, according to the Apple Mobility data and Bloomberg calculations. The decline for Australia is 3% compared to June’s average.

Virus curbs have shown up in a drastic reduction in population mobility for most Southeast Asian countries in recent weeks, with people moving at around 40% to 60% of pre-pandemic levels, Wellian Wiranto, an economist at Oversea-Chinese Banking Corp., said in a note. The on-and-off cycle of pandemic surges and related restriction measures is going to remain a feature for most of the region’s economies in the near term, he said.

Indonesian fuel consumption is trending down and Pertamina’s previous estimate was for it to decline by about 5% this year from 2020, said Irto Ginting, acting spokesman for Pertamina Patra Niaga, a unit of the Indonesian state-owned energy company. The latest movement restrictions, imposed in early July, may push it even lower if the curbs are extended through the third quarter, he said.

Source: Bloomberg

Virus curbs in Southeast Asia threaten oil demand recovery

Economic recovery for the second half of this year is likely to firm across developed markets as indicated by the markit flash Purchasing Manager’s Index (PMI) for April 2021, says an analyst.

Affin Hwang Asset Management Bhd (Affin Hwang AM) managing director Datuk Teng Chee Wai said among other things, the recovery would be supported by the Covid-19 vaccine roll-out, which will allow the economy to start reopening.

“Developed markets are well ahead in terms of vaccination roll-outs to their population, while emerging markets are still struggling with a slower roll-out and this will affected the economic recovery,” he said at Affin Hwang AM’s 2021 Market Review and Outlook webinar today.

Meanwhile, Teng said Malaysia remains as an attractive investment market among its ASEAN peers, especially in the manufacturing sector.

Despite prolonged uncertainties within the rising geopolitical noise, investment opportunities still exist, he said.

Teng noted that the country’s manufacturing sector is on a recovery path, propelled by a modest recovery in consumer spending on autos and household electronics, as well as continued spending on staples and building materials.

On May 5, IHS Markit said Malaysia’s manufacturing sector recorded encouraging growth in April 2021 with its PMI climbing above the neutral 50.0 mark for the first time in ten months, and for only the second time since September 2018.

Malaysia recorded a PMI of 53.9 in April, the fastest rate of growth in the series’ history since mid-2012.

Source: Bernama

Global economy to recover in 2H, supported by vaccine rollout

Strategic merger and acquisition (M&A) activities will be a key driver of the post-pandemic recovery right across the Asia Pacific region, as companies more aggressively move to acquire technology and skills, while in some cases divest to reduce their regulatory burdens, according to a new report. 

Member firm of Baker & McKenzie International, Wong & Partners, said the report, Charting Growth – The New M&A Landscape in Asia Pacific, revealed that executives across Asia Pacific were sending a clear signal that deal making will be integral to their renewal and growth strategies in 2021 and into 2022.

According to the report, 77% out of 800 senior executives in Asia Pacific expect M&A in their industry to increase in the year ahead, including 42% saying there would be a major uptick in transactions.

In terms of industries, the technology sector was far and away the most bullish, with more than three quarters (78%) predicting transactions would increase markedly over the next 12 months. 

Baker McKenzie Wong & Leow Singapore managing principal Andrew Martin said differentiated economic recovery in the region is indicative of the varied challenges countries face in managing the pandemic.

However, as a region, M&A was expected to remain robust, particularly in tech acquisitions and for financial institutions, he added. 

“While overall economic outlook does affect investor outlook, factors such as regulation and access to new markets, and therefore demand, will also shape the deal landscape.

“The power of financial investors, including private equity and venture capital, infra and credit funds, as well as family offices, will also inform the deal climate in the region,” said Martin in a statement today. 

The Malaysian executives surveyed were broadly in line with their regional peers in their expectations for increased M&A activity, as out of the 50 respondents, 72% expect to see more activity, with the majority of them (42%) expecting a significant increase in deal activities in the M&A space.

Half of all Malaysian respondents meanwhile, identified tech disruptions as the likeliest driver of insolvencies in their sector.

A significant number of participants also pointed to greater regulatory enforcement (44%) and ongoing economic and pandemic uncertainty (44%) as potential causes for companies failing to stay afloat.

Source: Bernama

Report: Strategic M&A will drive recovery across Asia Pacific post-pandemic

Global sales of semiconductors jumped 21.7% year-on-year (y-o-y) in April 2021 to US$41.8 billion from US$34.4 billion a year earlier, according to the US-based Semiconductor Industry Association (SIA).

In a statement on its website June 9, SIA said the figure was 1.9% higher month-on-month (m-o-m) from the March 2021 total of US$41.0 billion.

Monthly sales are compiled by the World Semiconductor Trade Statistics (WSTS) organisation and represent a three-month moving average.

Meanwhile, the WSTS Spring 2021 global semiconductor sales forecast projects the industry’s worldwide sales will be US$527.2 billion in 2021, a 19.7% increase from the 2020 sales total of $440.4 billion.

WSTS projects y-o-y increases in Asia Pacific (23.5%), Europe (21.1%), Japan (12.7%), and the Americas (11.1%).

In 2022, the global market is projected to post slower – but still substantial – growth of 8.8%.

WSTS tabulates its semi-annual industry forecast by gathering input from an extensive group of global semiconductor companies that provide accurate and timely indicators of semiconductor trends.

SIA president and CEO John Neuffer said global demand for semiconductors remained high in April, as reflected by rising sales across a range of chip products and throughout each of the world’s major regional markets.

“The global chip market is projected to grow substantially in 2021 and 2022 as semiconductors become increasingly integral to the game-changing technologies of today and the future,” he said.

SIA said that regionally, m-o-m sales increased across all major regional markets: the Americas (3.3%), Japan (2.6%), China (2.3%), Europe (1.6%), and Asia Pacific/All Other (0.5%).

On a y-o-y basis, sales increased in China (25.7%), Asia Pacific/All Other (24.3%), Europe (20.1%), Japan (17.6%), and the Americas (14.3%).

Source: The Edge Markets

Global semiconductor sales forecast to hit US$527.2b in 2021, says SIA

Global semiconductor equipment billings increased 51% year-over-year to US$23.6 billion in the first quarter of 2021, according to the US-based Semiconductor Equipment & Materials International (SEMI).

In its Worldwide Semiconductor Equipment Market Statistics (WWSEMS) report released yesterday, SEMI said the figure was 21% higher quarter-on-quarter.

Compiled from data submitted by members of SEMI and the Semiconductor Equipment Association of Japan (SEAJ), the Worldwide SEMS Report is a summary of the monthly billings figures for the global semiconductor equipment industry.

Source: The Edge Markets

Global semiconductor equipment billings rose 51% y-o-y in 1Q21 to US$23.6b, says SEMI

The ASEAN manufacturing sector sustained its recovery in May as output and new orders increased for the third consecutive month.

According to the latest data of the IHS Markit Purchasing Managers’ Index (PMI) released today, the headline PMI was registered at 51.8 in May, slightly lower than 51.9 in April, signalling a third consecutive month of recovery in ASEAN manufacturing conditions.

It said the growth was led by Indonesia in May as the headline PMI reached a record high of 55.3, signalling a strong improvement. 

Meanwhile, Vietnam’s headline PMI dipped to 53.1, but still demonstrated solid growth overall.

Singapore recovered in May with a headline PMI of 51.7 after a slight decline in April. Malaysia was the only other constituent nation to register growth in May, with a headline PMI of 51.3, staying above 50.0 for the second month running.

Meanwhile, manufacturing conditions were stable in the Philippines, with the headline PMI at 49.9 following a contraction in April. 

Thailand registered a three-month-low headline PMI of 47.8, whereas Myanmar posted a PMI of 39.7 after a second month of contraction, with conditions remaining severe overall.

IHS Markit noted that more severe supply chain disruptions caused inventories to decline quicker since April, also causing the most widespread delays this year.

“May data highlighted further evidence of capacity pressures on ASEAN firms in May, with backlogs of work rising for the third month in a row. That said, the rate of backlog accumulation remained marginal. At the same time, firms trimmed their staffing levels, thereby extending the current sequence of job shedding to two years. However, the rate of decline remained mild.” said the report.

“The ASEAN manufacturing sector continued to recover during May, with sustained upturns in both output and new work. The rates of growth cooled slightly on the month, but were still strong overall,”  IHS Markit economist Lewis Cooper said of the latest survey results.

Going forward, firms remain positive about prospects for the coming year, but their optimism has moderated to a nine-month low and is historically more muted.

Source: The Edge Markets

ASEAN manufacturing sector sustained recovery in May — IHS Markit

Asia’s factory activity continued to expand in May thanks to an ongoing recovery in global demand, surveys showed today, though rising raw material costs and supply chain constraints clouded the outlook.

A spike in Covid-19 infections in some countries could disrupt supply chains, posing a headache for manufacturers and weighing on Asia’s export-driven recovery, analysts say.

Japan and South Korea saw expansions in factory activity moderate in May, purchasing managers’ indexes (PMI) showed today, underscoring the fragile nature of their recoveries.

“A spread of new variants is already having a negative impact on supply chains. If this situation persists, it would hit Asian manufacturers that had been scrambling to diversify supply chains out of China,“ said Toru Nishihama, chief economist at Dai-ichi Life Research Institute.

“Asia‘s recovery has been driven more by external than domestic demand. If companies have trouble exporting enough goods, that bodes ill for the region’s economies,“ he said.

China’s factory activity expanded at the fastest pace this year in May on solid demand at home and overseas, though sharp rises in input prices and strains in supply chains crimped some firms’ production, a survey showed today.

The Caixin/Markit Manufacturing PMI, which focuses on smaller firms, rose to 52.0 last month, the highest since December and inching up from April’s 51.9.

The survey followed China’s official PMI on Monday, which showed factory activity in the world’s second-largest economy slowed slightly in May on surging raw material costs.

The effects of surging infections on manufacturing were most prominent in India where factory activity growth hit its lowest in 10 months, the PMI for the country showed.

Factories in Taiwan and Vietnam were so far holding up despite rising infections. Taiwan’s PMI stood at 62.0 in May, slowing from April but remaining well above the 50-mark that separates growth from contraction.

Vietnam’s PMI also stayed above 50 at 53.1 in May, though slowing from 54.7 in April.

Separate data released today showed Japanese firms cut spending on plant and equipment for the fourth consecutive quarter in January-March, as the economy struggles to shake off the drag from the coronavirus pandemic.

South Korea’s PMI stood at 53.7 in May, slowing from April but extending growth into an eighth straight month although the pace of input price increases hit a 13-year high, the index showed.

Source: Reuters

Asia’s factories sustain expansion but supply squeeze dims outlook

The circular economy concept has the potential to spur economic growth in the Asean region, said Economic Research Institute for Asean and East Asia chief operating officer Hachiyama Koji.

A circular economy is an economic concept that prioritises material recovery at the end of a product lifecycle to channel resources back into production and eliminate waste, such as smart city and recycling.

Koji said in order to build a circular economy, there should be a large private investment and new technologies would potentially be established to change the social system.

“A circular economy will make a long-term contribution and the Asean way has to be respected for better coordination between countries in the region.

“A circular economy also contributes to promoting economic integration among Asean nations,” he said during the Asean-Japan Business Week conference entitled ‘Transforming Southeast Asia, Transforming Japanese Business’ today.

He highlighted the importance of an international production network, as well as production cost, especially for small and medium enterprises (SMEs).

“Before starting a business, they must secure sustainable financing feasibility.

“By using this principle, we can have outcomes such as a responsive framework, institutionalisation and raising awareness across countries involved in the Industrial Revolution 4.0,” he said.

Citing legal frameworks for circular economy from several countries, he said Malaysia has a Guideline on Procurement, Thailand has the National Master Plan for Waste Management, and Indonesia has a Policy and Strategy for the Management of Household Waste.

He said Japan, with its advanced technologies, encourages its people to get involved in the circular economy to grow together with Asean.

The five-day Asean-Japan Business Week is an online event hosted by multiple organisations from the region and Japan.

Source: Bernama

Potential for circular economy to drive Asean economic growth

ASEAN needs to collaborate with the private sector for greater and more sustainable progress of the ASEAN Economic Community (AEC) as part of the move for the region to recover from the COVID-19 pandemic, said the grouping’s secretary-general Lim Jock Hoi.

He said digitalisation and sustainability were critical to the recovery efforts in the next phase of economic integration.

“In fact, the recently launched mid-term review report of the AEC Blueprint 2025 highlights the need for ASEAN to embrace and adapt to new developments, which include digitalisation and sustainability.

“Moreover, these two high areas have become strategic thrusts for ASEAN to develop its 13 priority economic deliverables under the Brunei chairmanship this year,” he said during a session at the five-day ASEAN-Japan Business Week virtual conference which began Monday.

Regarding digitalisation, Lim said ASEAN had put forward a strong digital agenda through the ASEAN Digital Masterplan 2025 and the ASEAN Digital Integration Framework Action Plan 2025 to build a secure and open high-quality digital infrastructure, develop digital skills and formulate digital regulations in the region.

On sustainability and green growth, he noted ASEAN, through the financial regulators and central banks, had been continuously working on initiatives and promoting sustainable financing of the ASEAN Green/ Sustainability Bond Standards as well as a roadmap for sustainable capital market and the report of promotion of sustainable finance in the region.

“But to be successful, our efforts need to be supported by everyone and I do not think that ASEAN governments can do it alone. Instead, we need to support the various stakeholders in the region, particularly our business community,” said Lim.

He added that ASEAN needed Japanese business continuity by maximising cross-border productive activities as well as taking advantage of supply chain relocation to the ASEAN region.

“These are needed to restore consumers’ confidence and maintain market stability in the region. We also need the business community to assist in restoring the supply chain and trade connectivity by leveraging on digital technology.

“One possibility is for the companies to invest more on e-commerce platforms to enable fast and secure cross-border movement of goods as well as services and the economic recovery and job creation after the pandemic,” noted Lim.

He called for the ASEAN business community to also focus on sustainable investments such as green infrastructure and other low carbon investments.

“To do this, it will be critical to get investment decisions derived from strengthening private and public finance focused on green growth and mobilising all available forms of financing tools for the sustainable future of the ASEAN region,” added Lim.

ASEAN-Japan Business Week is an online event hosted by multiple organisations from ASEAN and Japan.

Source: Bernama

ASEAN Urged To Collaborate With Private Sector

The start of the second quarter saw manufacturing conditions across ASEAN improving at a quicker pace, said IHS Markit.

“Faster rises in both output and new orders boosted the headline index, alongside a renewed upturn in employment,” said IHS Markit principal economist Bernard Aw.

IHS Markit compiles the Nikkei Manufacturing Purchasing Managers’ Index (PMI) survey.

The Nikkei Manufacturing PMI for ASEAN rose to 51 in April from 50.1 in March 2018.

Five of the seven countries covered by the survey recorded a PMI reading above the neutral 50 level, up from four in March. The countries are Myanmar, Vietnam, Philippines, Indonesia and Singapore.

The other two, namely Thailand and Malaysia, recorded decreases in the reading. According to IHS Markit, Malaysia, whose PMI reading was at 48.6, signalled a decline in the health of its manufacturing sector, with the pace of deterioration the steepest since October 2017.

Aw said while April survey data was encouraging, it’s clear that demand needs to grow at a faster rate before stronger growth can take root.

“First, sales are not increasing fast enough to test the capacity of manufacturers across the region. Backlogs of work continued to fall, which weighed on hiring, suggesting that future job creation may be limited.

“Second, firms remained cautious about inventory management despite the pick-up in orders. Inventories of both inputs and finished goods continued to be depleted. Third, while business confidence remained positive, optimism was among the lowest in the survey history,” he noted.

Source: The Edge Markets

ASEAN manufacturing growth accelerates in April

Asia’s manufacturing activity remained robust through April even as a gauge of factory output in China, the region’s top economy and industrial powerhouse, showed signs of cooling.

Taiwan’s IHS Markit April manufacturing purchasing managers’ index rose to 62.4 from 60.8 in March, its highest reading since March 2010. New orders also reached their highest level since the same month.

South Korea’s IHS Markit PMI index for April slipped to 54.6 from 55.3 but remains well above the 50 level, signaling ongoing expansion. It was the seventh straight month of expansion for the South Korean gauge, a first in almost a decade.

Data on Saturday showed South Korean exports last month rose the most in 10 years, reflecting a recovery from the effects of the pandemic and boosted by an increase in the number of working days from a year earlier.

Global trade has kept up its pandemic-era winning streak, with Asian economies especially benefiting from the boom in goods orders, the Bloomberg Trade Tracker shows. Shipments from South Korea and Taiwan have surged, buoyed by demand for electronics.

Supply crunches worldwide are resulting in a backup at some of the busiest ports, with inbound containers at the Port of Los Angeles notching a monthly gain in March that was more than eight standard deviations above its long-run average.

Annabel Fiddes, economics associate director at IHS Markit, said supply-side crunches are beginning to dent Taiwan’s manufacturing boom as supplier delays hit a record.

“This is starting to weigh on overall production growth, while firms also registered a rapid increase in backlogs,” Fiddes said in a release. “Supply bottlenecks could weigh on performance in the months ahead, despite manufacturers’ efforts to build buffer stocks.”

Southeast Asia, India

India’s index inched up to 55.5 last month from 55.4 in March, even as a fresh wave of coronavirus infections began to weigh on output and sales.

There also wasrobust growth in Southeast Asia. Indonesia’s PMI reading rose to 54.6 from 53.2, its highest since the series began and its sixth consecutive month of expansion. A subindex for new orders also ticked up.

Malaysia’s PMI rose to 53.9 from 49.9, also its highest reading since the series began. New orders rose and output jumped to 53.3 from 46.2 in March, its best level since last June. The Philippines PMI fell to 49 from 52.2 — its lowest reading since October — reflecting ongoing restrictions to curb Covid-19.

The overall upbeat figures follow separate data released Friday that showed China’s manufacturing expansion cooled in April. The official manufacturing purchasing managers’ index fell to 51.1 from 51.9 in the previous month.

Source: Bloomberg

Asia Manufacturing Powers Ahead, Even as China PMI Cools

The Covid-19 pandemic provided a boost for e-commerce last year, but the digital windfall was not enjoyed equally across the board, a UN study found yesterday.

“Although it will take some time to get the full picture of the impact of Covid-19 on e-commerce… a number of developments point to the strong rise in e-commerce in 2020,” said the report by the UN Conference on Trade and Development (UNCTAD).

The study crunched data from seven countries — Australia, Britain, Canada, China, Singapore, South Korea and the United States — representing some two-thirds of online trade.

Online sales rose 59 per cent in Australia, 46.7 per cent in Britain, 32.4 precent in the United States and 14.6 per cent in China.

Turnover rose by 22.4 per cent last year to US$2.5 trillion (RM10.2 trillion), having increased by some 15 per cent in 2018-19, UNCTAD said.

By contrast, overall retail sales declined by one per cent.

“These statistics show the growing importance of online activities,” the report’s author, Torbjorn Fredriksson, told AFP.

They also underscore the need for countries, especially developing states, to use such data as they rebuild from the pandemic, said Shamika Sirimanne, head of UNCTAD’s technology and logistics section, in a statement.

A standout performer was Jumia, Africa’s online retail giant, whose transactions jumped by more than 50 per cent in volume in the first six months of 2020 compared with the first half of 2019, Fredriksson said. — ETX Studio

Source: Malay Mail

Covid-19 pandemic boosted e-commerce in 2020, UN study shows

Asia and the Pacific region should emerge stronger from COVID-19 pandemic by focusing on five areas that would help to achieve a prosperous, inclusive, resilient and sustainable future, Asian Development Bank (ADB) president Masatsugu Asakawa said.

These priority areas include placing ambitious climate actions at the centre of development, with an. increased focus on adaptation and resilience, and full commitment to the goals of the Paris Agreement, he said.

“(Furthermore, the region should) address inequality, including the gender gap which has worsened during the pandemic, by investing in health, education and social protection,” he told the ADB board of governors at the 54th Annual Meeting held virtually today.

ADB issued a statement on the speech he made at the meeting, where he also noted the need to promote high-quality green and digital infrastructure. This, he said, would enable economies to rebuild smartly while closing the digital gap and attracting substantial private investment.

“(We should also) deepen regional cooperation and integration so that ADB developing member countries can seize opportunities of renewed globalisation and strengthen regional health security,” he said.

Finally, he said, the region also needed to strengthen domestic resource mobilisation.

“(This is to ensure) that governments have the resources they need to finance sustainable growth and respond effectively to future crises,” he said.

Asakawa said the path that ADB had laid out would help lead the region out of these uncertain times.

He expressed confidence that the region would emerge from the current crisis stronger than before.

“Action on these priorities can build on ADB’s response to Covid-19 in 2020 where its total commitments in 2020 reached a record high of US$31.6 billion with just over half supporting operations to respond to the pandemic.

“The balance was committed to address long-term development issues such as the gender equality gap, the impacts of climate change and investments in quality infrastructure,” ADB said in the statement.

Established in 1966, ADB is owned by 68 members of which 49 are from Asia and the Pacific region.

Source: Bernama

Asia-Pacific can emerge from pandemic stronger by focusing on five areas — ADB president

KUALA LUMPUR, April 20 — The electrical and electronics (E&E) industry is characterised by internationally fragmented but well-integrated production networks with geographically extensive and highly modular value chains.

This provides opportunities for the Association of Southeast Asian Nations (ASEAN) countries to easily participate in the E&E value chain, according to the study by the ASEAN-Japan Centre (AJC), entitled Global Value Chains in ASEAN: Electronics, issued last month.

This is the 14th report of the 16-paper series of ASEAN global value chain (GVCs) by AJC, according to a statement.

Overall, the E&E industry in ASEAN relies on more foreign inputs and technology than other industries, with 53 per cent of E&E exports coming from foreign value added (FVA), or the foreign inputs integrated into ASEAN’s E&E exports.

Nonetheless, value added in exports differs across the region, depending on each country’s position in the E&E value chain.

During 1990–2017, ASEAN’s GVC participation in E&E equipment declined slightly, from 74 per cent to 70 per cent, while its regional value chain participation doubled, from nine per cent to 18 per cent.

The contradictory trends are explained by higher regional production capacity and well-established regional production networks.

With different areas of specialisation, ASEAN has become an attractive and important hub for the E&E industry.

The region hosts an extensive range of E&E production along the value chain, ranging from labour-intensive and simple activities such as assembly and testing to capital-intensive tasks such as component design and research and development.

More details at https://www.asean.or.jp/en/

Source: Bernama

Electrical and electronics among ASEAN’s global integrated industries – AJC

The world’s manufacturing heartland in east Asia is booming as global trade surges amid the recovery from the pandemic, data from several countries showed.

South Korea’s exports rose the most in more than two years in March, while Japan’s large manufacturers turned optimistic for the first time since autumn 2019, figures released Thursday showed. Manufacturing across Asia picked up after the volatile Lunar New Year period, according to purchasing managers’ indexes, indicating the recovery in goods production remains broadly on track.

The data underline how demand for Asian exports is gaining from continued economic stimulus in countries such as the U.S., while vaccination efforts in developed countries raises the odds of a “V-shaped” recovery this year for the global economy.

“As the vaccine roll-outs gather steam in developed markets, that’s always going to be a boost for Asia,” said Nick Marro, lead trade analyst at the Economist Intelligence Unit, with Taiwan and South Korea in particular benefiting from demand for microchips. “But that doesn’t mean it’s a rising tide lifting all boats. There is still going to be pain from the chip shortage for auto exporters, and we are seeing some of this bleed into electronics.”

South Korea’s exports rose 16.6% from a year earlier in March, the fastest pace since 2018, data Thursday showed. Shipments to the U.S. and European Union gained strongly — with values reaching some of the highest levels on record — while sales to China racked up solid increases.

A separate report from IHS Markit showed a purchasing managers’ index for Korean manufacturing held at 55.3, unchanged from February, which was its strongest reading since 2010. Readings above 50 indicate conditions improved from the previous month.

In Japan, sentiment at large makers of cars, electronics and other products improved to 5 in March, breaking above zero for the first time since September 2019, the Bank of Japan’s Tankan survey showed. The positive result indicates optimists outnumbered pessimists, and the figure was stronger than a -1 forecast by economists.

“That means the government won’t need a big sweeping stimulus package like the U.S., but just needs to help certain sectors,” said economist Hideo Kumano at Dai-Ichi Life Research Institute.

PMI Strength

China’s Caixin manufacturing PMI, which tracks smaller manufacturers, fell to 50.6 from February’s 50.9, while the sub-index of new export orders rose to 51.4 from 47.6. The data came a day after the country’s official PMI rose in March, with the industrial, services and construction sectors improving after the Lunar New Year holidays on the back of strong domestic and international demand.

“Both PMIs suggest recovery in export orders and elevated inflationary pressure in March,” Goldman Sachs analysts said in a note.

Elsewhere in Asia, Taiwan’s IHS Markit manufacturing PMI for March climbed to 60.8, its highest level in more than a decade, and PMIs from Vietnam and Indonesia remained in expansion. Malaysia and Thailand, while still below 50, inched closer to the level that separates expansion from contraction.

“Strong global demand for electronics, which has proved a key driver of industrial output, will probably soften further ahead as vaccines help a shift back to normality in key export markets. But this boost is still likely to endure for the next few months at least,” said Alex Holmes, Asia economist at Capital Economics Ltd. “As such, Asian industry looks likely to remain strong in the near term, helping recoveries to stay on track.”

Trade Revival

Earlier this week, the World Trade Organization raised its projection for 2021 trade growth to 8%, the largest increase since 2010. The rebound marks a significant bounce from 2020, when the pandemic saw global trade contract by 5.3%, the WTO said.

Global trade in goods rebounded relatively quickly during the pandemic, as consumers in developed countries continued to spend on manufactured products even as they cut spending on services with mobility restricted. World trade in January reached its highest monthly level since 2018, according to the European Commission-backed CPB world trade monitor.

Bloomberg Economics forecasts the global economy will grow 6.9% this year, fast enough to bring output substantially back onto its pre-Covid path, led by recoveries in the U.S. and China.

International Monetary Fund Managing Director Kristalina Georgieva said this week the lender would upgrade its global growth forecast next week. However, the IMF also sounded a note of caution on long-term economic “scarring” due to the pandemic, releasing a study estimating that by 2024 the world economy will still be about 3% smaller than expected before the pandemic, as developing countries and nations dependent on tourism struggle for longer.

Source: Bloomberg

Asian Manufacturing Is Surging on Strong Global Goods Demand

The global semiconductor materials market revenue rose 4.9% in 2020 to a record US$55.3 billion, exceeding the previous market high of US$52.9 billion set in 2018, according to US-based Semiconductor Equipment & Materials International (SEMI).

SEMI in its Materials Market Data Subscription report released yesterday said wafer fabrication materials and packaging materials revenues totalled US$34.9 billion and US$20.4 billion respectively in 2020 for year-on-year (y-o-y) increases of 6.5% and 2.3%.

It said the photoresist and photoresist ancillaries, wet chemicals and chemical mechanical planarisation (CMP) segments accounted for the strongest growth in wafer fabrication materials, while packaging materials expansion was driven by organic substrates and bonding wire market growth.

SEMI said that for the 11th consecutive year, Taiwan, at US$12.4 billion, was the world’s largest market for semiconductor materials on the strength of its large foundry capacity and advanced packaging base.

“With its aggressive capacity build-up, China surpassed [South] Korea to claim the second spot. Both China and Taiwan registered stronger growth, while South Korea, Japan and the rest-of-the-world markets also expanded.

“The North America and Europe markets saw declines due to the Covid-19 pandemic,” it said.

Source: The Edge Markets

Global semiconductor materials market rose to record US$55.3b in 2020, says SEMI

The No. 2 official at the International Monetary Fund on Saturday (March 20) pointed to emerging signs of a stronger global economic recovery, but warned that significant risks remain including the emergence of mutations of the coronavirus.

IMF First Deputy Managing Director Geoffrey Okamoto said that in early April, the Fund would update its January forecast for global growth of 5.5% to reflect additional fiscal stimulus spending in the United States, but gave no details.

In a speech to the China Development Forum, Okamoto raised concerns about the growing divergence between advanced economies and emerging markets, with some 90 million people seen falling below the extreme poverty threshold since the pandemic began.

Okamoto said China had already recovered to pre-pandemic growth levels ahead of all large economies, although private consumption was still lagging investment there.

Outside of China, he said, there were worrying signs of a widening gap between advanced economies and emerging markets.

The IMF projects cumulative income per capita in emerging and developing countries excluding China between 2020 and 2022, will be 22% lower than it would have been without the pandemic, which will push more people into poverty, he said.

The overall outlook remains “exceptionally” uncertain, Okamoto said, adding it is unclear as to how long the pandemic would last, while access to vaccines remains very uneven across both advanced and emerging economies.

Okamoto said some countries also had little scope of boosting spending to fight the pandemic and mitigate its economic impact, especially low-income countries with high debt levels.

He said tighter financial conditions could exacerbate vulnerabilities in countries with high public and private debt, citing recent increases in bond yields triggered by market expectations of an earlier withdrawal of monetary stimulus.

He said the crisis could also leave deep scars.

In the past, advanced economies have seen their output reduced almost 5% below pre-recession trends five years after the beginning of a recession, and it could be worse in countries that cannot afford a strong macroeconomic response and/or had large services sectors more affected by the pandemic, he said.

Source: Reuters

IMF sees signs of stronger global recovery, but significant risks remain

Southeast Asian countries, which are recovering from the COVID-19 pandemic, can benefit from investments in green infrastructure, digital transformation, big data, and revenue mobilisation through tax reform, said the Asian Development Bank (ADB).

“As countries slowly begin to emerge from the devastating health and economic impacts of the pandemic, we now stand at a critical juncture. The COVID-19 pandemic offers a unique opportunity to rebuild for a more resilient, inclusive, and sustainable recovery,” its president Masatsugu Asakawa said in his keynote address at the Southeast Asia Development Symposium themed “Innovation through Collaboration: Planning for Inclusive Post-COVID-19 Recovery” in Manila today. The event was streamed live.

Asakawa said the pandemic presents all with unprecedented challenges; hence the need to forge a new path forward together, one which taps new ideas and technologies, and leverages the existing platforms for innovation and partnership.

According to him, developing economies in Southeast Asia can benefit from action in three key policy areas.

These include investing in environmentally sustainable development in five sectors, namely agriculture, oceans, urban and transport, waste management, and clean energy which could create 30 million jobs in the region by 2030.

“Second, they need to expand the tax base, by maximising tax compliance and simplifying the compliance process which will significantly boost governments’ revenue and better position them to finance pandemic recovery.

“Third (is) by making better use of big data, whereby countries can capitalise on the region’s digital transformation to enhance the delivery of health care, social protection, and education,” he said.

Asakawa noted that these green growth opportunities will require financing and one way ADB is collaborating with countries in the region to address these financing needs is through the ASEAN Catalytic Green Finance Facility, which is owned by the finance ministries of the 10 ASEAN member countries and ADB.

Southeast Asian countries can use this facility to access finance and knowledge for sovereign green infrastructure projects on sustainable transport, clean energy, and resilient water systems, he said.

In making better use of big data, he said, Southeast Asia’s digital transformation is well underway. As such, countries can capitalise on this opportunity by making better use of big data to transform key government sectors to allow for more effective service delivery.

“One area where innovation and collaboration using big data can play an important role is in supporting safe and effective vaccine programs,” Asakawa said.

In addition to collaboration, knowledge, and innovation, governments need reliable streams of revenue and this is a sobering reality, he said.

Countries in Southeast Asia have already allocated over US$420 billion for COVID-19 response measures, he noted.

“This unparalleled fiscal expenditure has been accompanied by a substantial reduction in the tax base.

“This is due in part to subdued economic growth. But there are also underlying public finance management issues that have been exacerbated by the pandemic.

“In fact, even before the pandemic, the average tax yield of most Southeast Asian countries was far below the 15 per cent of Gross Domestic Product threshold required for sustainable development,” he said.

Asakawa said that with long-term interest rates rising in the United States, it may put further pressure on many ADB developing member countries, in terms of macroeconomic management and fiscal policy.

Against this backdrop, as governments help the nascent recovery in the region to gather steam, they also need to begin preparing measures to strengthen domestic resource mobilisation (DRM), he said.

DRM not only helps secure sufficient funding, it also creates positive conditions to spark greener and more inclusive recovery.

“Introducing more progressive income tax and property tax systems can help address the worsening income gaps that have proliferated after the pandemic.

“A carbon tax can also be pursued to accelerate green investment. Countries in the region can work together to close tax loopholes that multilateral businesses can use to avoid tax burdens,” he said.

He added that as all of the measures being described required knowledge sharing and collaboration, ADB has recently established a regional hub for DRM and international tax cooperation, a hub that will promote greater collaboration among the region’s fiscal authorities as they pursue needed reforms.

Source: Bernama

Green investment, revenue mobilisation, big data can help in Southeast Asia’s recovery — ADB