Coronavirus-spurred growth in the technology sector will help drive M&A activity in the Asia Pacific next year, bankers and lawyers predict, with the potential easing of Sino-US tensions likely to revive Chinese outbound investment.

Deals involving Asia Pacific firms totalled US$1.2 trillion in 2020, up 12% from 2019. Seven of the year’s 10 largest transactions were announced in the third quarter, which in total accounted for 40% of the year’s deals by value.

High technology and telecommunications companies surged to a 23% share of deal value, up from 14% last year, while retail and consumer products and services firms also reported growth.

“Covid has dramatically accelerated digitalization, e-commerce and fintech,” said Jung Min, co-head of merger and acquisitions (M&A) at Goldman Sachs in Asia, excluding Japan.

“Companies that have benefited are now suddenly much larger in size and financial scale, creating significantly more potential to make strategic investments,” he said. “Industry disruption, change and transformation will continue and drive the larger transactions.”

In the latest such move, Qatar’s telecoms company Ooredoo and Hong Kong conglomerate CK Hutchison Holdings are exploring a deal to merge their units in Indonesia, the world’s fourth most populous country.

Samson Lo, UBS’ head of Asia M&A, said the outlook for China outbound deals was positive, despite persistent regulatory pushback from many countries. “There continues to be appetite for good quality assets in Europe,” he said.

In a report published this month, law firm Allen & Overy flagged the potential return of Chinese healthcare sector investors to the US market for the first time in many months on easing trade tensions.

Antagonism between Washington and Beijing over the past year under outgoing President Donald Trump has hampered deals. Investors say the incoming Biden administration may not mean an instant thaw in relations, but will likely provide a more predictable policy approach.

Dealmakers are also counting on a steady pipeline of cross-border deals involving Asian companies’ strategic investments as well as divestments of multinational companies in the region.

“We expect cross-border activity to be a prominent feature, although it’s unlikely to be China outbound driven like in years past,” said Richard Wong, Morgan Stanley’s Asia Pacific head of M&A. “We expect it to feature Asian sellers of overseas assets … or highly selective strategic acquisitions overseas.”

China and Japan led Asia’s M&A growth in 2020, against a 5.5% decline globally. China, the world’s second largest economy, recovered strongly from the earliest coronavirus outbreak with a 28% increase in deals from 2019.

Japan contributed half of the region’s mega deals worth US$5 billion or more, including Nippon Telegraph and Telephone Corp’s US$40 billion tender offer for NTT Docomo.

Private equity-backed deals in the region reached a record high of US$129 billion, up 51% year-on-year.

Despite the deal bonanza, M&A fees dropped to a five-year low of US$4.2 billion as fewer transactions were completed this year compared to 2019, Refinitiv data showed.

Dealmakers have also cautioned that China’s latest anti-trust crackdown on its tech companies could be deterrents in future M&A.

Morgan Stanley topped the region’s league table for announced M&A deals in 2020, followed by Goldman Sachs and CICC.

Source: Reuters       

Tech, cross-border activities set to drive Asia M&A next year

2020 has been an eventful year which saw some of the toughest social, economic and political challenges in recent times.

While stabilisation of markets seems to be within reach with the introduction of new COVID-19 vaccines and new leadership in the US, investors should expect the process to be gradual and long as the structural changes caused by the pandemic will take time to reverse if not already permanently shifted.

This is according to Manulife Investment Management in its regional outlook for the year ahead.

“One of the most critical features of the COVID-19 recession globally is that it more disproportionately hits the services side of the economy and it was much less painful for the manufacturing side,” said Manulife Investment Management’s Global Chief Economist, Frances Donald.

“We refer to this as the K-shape recovery going into 2021 of which sectors that provide the essentials during the pandemic, such as manufacturing, technology, will continue to grow, while those more driven by the demand and supply dynamics, such as retail and services, may continue on a downward slope.”

According to a statement, with the roll out of COVID-19 vaccines, reopening of borders and normalisation of economies in Asia seem to be within reach. 

Manulife Investment Management’s Chief Investment Officer, Equities, Asia (ex-Japan), Ronald Chan believes staying invested and diversified will continue to benefit investors in 2021, as the expected sector rotation in Asian equities will present a wider opportunity set for capturing alpha.

Negative yields in developed market bonds have made it more challenging for bond and income-focused investors, particularly in a lower for longer interest rate environment. Attention is now drawn to Asian bonds which not only offer positive yields but also higher quality investment opportunities.

Manulife Investment Management is the global wealth and asset management segment of Manulife Financial Corporation. More details at manulifeim.com.

Source: Bernama

Asia and emerging markets poised to lead global economic recovery — Manulife Investment Management

Asia is likely to influence the development of the next phase of globalisation as the region is now at the centre of the global economy, and its national economies are becoming more and more integrated through regional cooperation processes.

UNESCAP Sustainable Business Network vice chair David Morris said it is worth observing that globalisation 1.0 was underpinned by three factors that are currently missing in globalisation 2.0.

Firstly, globalisation 1.0 generated bilateral agreements, regional arrangements and global rules, norms and standards for economic cooperation, including free trade agreements, the open regionalism of the Asia Pacific and culminated in the establishment of the World Trade Organisation in 1995.

“In globalisation 2.0 we have no agreed rules, norms or standards yet to regulate giant technology companies to ensure data privacy, to protect cyber security, or to govern the development of artificial intelligence,” Morris said at the World Chinese Economic Summit held on Dec 21.

The United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) is the Secretariat of the UN for the Asian and Pacific region, of which one of its main functions is to promote economic and social development through regional and subregional cooperation and integration. 

Secondly, Morris said the global value chains built during globalisation 1.0 were based on trusted relationships between suppliers, distributors and customers, with reasonable expectations of mutual benefit.

“Supply chains were built on confidence that were acting responsibly, managing and mitigating risks. Food needed to be safe to consume, cars needed to be safe to drive. In globalisation 2.0, we expect reduced trust, including amongst customers, encouraged by populist leaders to distrust foreigners, with calls for shortened or nationalised supply chains.

“Even worse, we have weaponisation of supply chains, with governments using export controls to bolster their own industries and coercion to punish others, as well as increasing restrictions on investment and financial flows, often based on opaque national security grounds. Sometimes these actions are plainly protectionist,” he explained.

Thirdly, globalisation 1.0 took place during a remarkable period of peace, at a time when leaders invested in dialogue, cooperation and confidence building measures to avoid confrontation.

This was particularly important to the millions of people who benefitted from rapid development in the Asia Pacific region in recent decades.

“Is globalisation 2.0 destined to take place in a much more confrontational geopolitical contest between rival powers? Will this confrontation mean that we cannot agree on rules and norms for the new technologies that will underpin the future digital economy?,” he asked.

“The new technologies of the Fourth Industrial Revolution must provide us with the opportunity to embed sustainability into new industries as we design them, new supply chains as they evolve, into urban planning and transport, energy, agriculture, and fisheries of the future,” Morris added.

Source: Bernama       

Three challenges for Asia’s next generation digital economy – UNESCAP

Closely linked both geographically and economically to China, the epicentre of the novel coronavirus outbreak, emerging markets in Asia were among the first to feel the effects of Covid-19 in 2020.

The year has undoubtedly been a difficult one, with the virus disrupting both daily life and the economy for months. However, the largely successful containment of the virus in most countries, the development of new digital solutions and the move to diversify supply chains away from China have left the region well positioned to capitalise on the post-pandemic changes in the global economic landscape.

Using OBG Advisory’s “4R” matrix for analysing national Covid-19 responses – encompassing Resilience, Response, Recovery and Reinvention – we highlight success stories and lessons from the region over the year, and look ahead to 2021.

Asian countries’ levels of resilience to the pandemic varied in line with their respective levels of economic development.

More developed economies with strong health care systems and financial reserves, such as Japan and South Korea, were naturally better prepared to manage the health and economic effects of the crisis.

Others with weaker infrastructure and lower average disposable incomes faced a more challenging proposition.

Economic resilience

Generally speaking, more diverse and digitalised economies were better able to withstand the challenges accompanying Covid-19.

For example, Malaysia, with its high-tech industry and strong services sector, has a more diversified base than some of its Asean neighbours, and was thus better prepared to absorb the losses associated with the economic downturn. Nevertheless, the economy is still forecast to contract by six per cent in 2020 before rebounding to 7.8 per cent growth in 2021 – the fastest rate among the Asean-5 countries.

Elsewhere, Thailand’s key industries were badly affected by the pandemic. Heavily reliant on tourism and exports, the country was hit particularly hard by the closure of international travel and the drop in global demand for goods, with GDP falling by 12.1 per cent and 6.4 per cent year-on-year (y-o-y) in the second and third quarters, respectively.

Similarly, the Philippines continues to face challenges. The country imposed strict lockdown measures, with considerable restrictions in place until the end of the year.

Moreover, the economy is heavily reliant on overseas remittances, which account for around nine per cent of GDP, and – with some 250,000 of the country’s 12 million overseas foreign workers sent home over the course of the year as a result of the pandemic – remittances fells by 2.6 per cent y-o-y in the first eight months of 2020.

As the virus nonetheless spread to other countries in the following weeks and months, governments across Asia implemented lockdowns and restrictions on the movement of people and goods.

While most strategies consisted of broadly similar measures, some were stricter than others. Among those with tighter restrictions was the Philippines, whose enhanced community quarantine – imposed on the island of Luzon – severely restricted the movement of people, except for essential work and health purposes, and led to the closure of all businesses deemed non-essential.

Business response

Digital solutions were essential in enabling businesses to adapt to the new normal.

Given the restrictions on movement and social distancing guidelines, the expansion of online platforms offering payment, food delivery and medical advice was not only key to providing basic goods and services to the general public, but also a necessity for companies looking to adapt to rapidly changing demand.

“While e-commerce was just an option before Covid-19, it is now essential for retailers and producers to sell their products through e-commerce platforms in order to survive,” Kusumo Martanto, CEO of Indonesian e-commerce platform Blibli, told OBG in April. “The long-term impact will be positive for online shopping, as it will start to become habitual for consumers.”

Such a phenomenon was clearly evident in Indonesia, South-east Asia’s largest digital economy and home to five of the region’s 11 unicorns.

In addition to online platforms Gojek (Indonesia) and Grab (Singapore) adopting contactless delivery payment methods, innovations were made in other areas.

For example, in March local company Halodoc teamed up with Gojek to launch a telemedicine service called Check Covid-19, which allows Gojek users to remotely check their symptoms with the 20,000 doctors in the Halodoc system, helping to reduce the risk of further transmission.

Elsewhere, educational technology firm Ruangguru launched the Ruangguru Online School Programme, offering daily virtual classes to students of all grades via the company’s platform.

For Asia, the region’s ability to control infections has been key to facilitating economic recovery.

Stands to gain

Notwithstanding the challenges associated with coronavirus, the region stands to benefit from post-pandemic opportunities.

With much of the world’s production capacity based in China, virus-related restrictions on trade laid bare the risks associated with highly concentrated supply chains. This has in turn encouraged many companies to diversify their industrial and logistical operations.

As OBG has detailed, this process, known as China +1, was already under way before the outbreak of Covid-19, as rising labour costs and tariffs associated with the US-China trade war saw some companies relocate business operations.

Given their proximity to China, developed industrial sectors and low labour costs, a number of emerging markets in the region have become frontrunners in the race to attract industrial activity.

For example, in May regional media reported that US tech giant Apple was set to shift the production of around 30% of its AirPods from China to Vietnam. This was followed by a report from international media in November that plans were also in motion to relocate iPad and MacBook production to the country.

Elsewhere, in late November the Philippines’ Senate approved a bill that will immediately slash corporate tax from 30 to 25 per cent and offer a series of incentives to major projects.

Similarly, in October Indonesia’s Omnibus Bill on Job Creation – aimed at reducing red tape and incentivising investment – was passed into law.

In Thailand, meanwhile, the Eastern Economic Corridor special economic zone is set to play a key part in the government’s goal to transform the country into a regional centre for high-tech manufacturing and digital innovation.

With a series of incentives for potential investors and ongoing efforts to update logistical and industrial infrastructure, the zone also represents a major attraction for companies looking to diversify industrial production away from China.

Moving forward, this broader shift away from China, coupled with the incentives offered by governments in Asean, could see the region become a major producer of next-generation industrial products.

This Asian economic piece was produced by the Oxford Business Group. The

Source: Borneo Post

Asia: Economic Year in Review 2020

The year 2020, thanks to the novel coronavirus pandemic, may not have been particularly good for trade, regional and global, yet it has added vitality to multilateral economic and trade cooperation and win-win partnerships. The signing of the Regional Comprehensive Economic Partnership agreement by 15 countries on Nov 15 is indeed a booster to free trade.

That the 10 ASEAN member states, China, Japan, the Republic of Korea, Australia and New Zealand finally signed the RCEP after eight years of negotiations shows many countries in the region uphold multilateralism and are opposed to protectionism and unilateralism. It also means the establishment of the largest free trade zone in the world, which is expected to become the main engine of the global economy in the post-pandemic era.

The RCEP accounts for about 30 percent of the world’s population and global GDP, and nearly 28 percent of global trade. In its simplest form, the RCEP can be seen as a framework for facilitating free, streamlined trade arrangements among the 15 signatory countries. And the fact that the RCEP comprises both developed and developing countries sends the right message of cooperation to the world at a time when trade tensions and high tariffs seem to have become the de facto trade policy of some economies.

But instead of welcoming the joint efforts of the 15 countries to establish the world’s largest free trade zone and uphold multilateralism, some people are spreading misinformation about the free trade agreement, alleging that China is leading the RCEP to counter the United States, and that the new regional trade mechanism will prevent the US from trading with the countries in the region.

It was the Association of Southeast Asian Nations that initiated the RCEP talks, starting with the 10+3 mechanism, that is, the 10 ASEAN members plus China, Japan and the ROK. True, China has been a party to the negotiations from the beginning to the conclusion of the RCEP process. But neither China nor the other 14 member states have signed the RCEP agreement to challenge other countries. The very basis of the new trade mechanism is multilateral cooperation. And while signing the agreement, the RCEP members not only pledged to jointly promote global economic recovery but also work for the long-term prosperity of the region and beyond.

The RCEP is inclusive in nature and, given that it aims to boost co-development, will accelerate free trade in the region, strengthening the regional economy in the process. It will also help the ASEAN members and the other five RCEP signatories to better coordinate the bilateral economic and trade deals they had signed prior to the RCEP.

The COVID-19 pandemic has heightened the need for many enterprises to reconsider their supply chains. As a result, a number of trends have emerged including regionalization, digitalization, near-shoring, reshoring and rebasing of manufacturing. Customs and tariffs, government subsidies, changing costs of and access to labor, and taxation are all having an impact on the decisions of the enterprises. The RCEP will play a crucial role in their assessment process, and could even trigger supply chain reorganizations.

Preferential items under the RCEP framework will reduce trade costs, promote the streamlining and smooth operation of industrial chains, and diversify markets, which will help many Asia-Pacific countries to regain their vigor. And as a signatory to the RCEP and a country with the most comprehensive manufacturing sector in the world, China believes it is its responsibility to help stabilize regional trade. The stable development of the RCEP, on the other hand, will help the signatory countries maintain friendly relations and promote free trade.

Ironically, the RCEP has put the focus on the US administration too, not least because it has pulled Washington out of many international organizations and multilateral agreements including the Trans-Pacific Partnership. It was the United States that initiated and led the TPP negotiations, in order to regain its leadership in the Asia-Pacific region and offset the impact of various multilateral trade deals on its economy. But the incumbent administration took the radical decision of withdrawing the US from the TPP, after which Japan led the negotiations with the 10 other members of the original TPP leading to the signing of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership in 2018.

Since several signatories to the CPTPP and the RCEP are the same such as Japan, Australia, Malaysia, Vietnam and Singapore, there was a proposal, mainly by Japan, to include the US in the RCEP. But the US administration showed little interest in the regional free trade agreement.

The RCEP is not a threat to the US economy, and that’s why the incoming Joe Biden administration is expected to be less hostile toward the new trade mechanism. More important, the US cannot remain a silent onlooker while the world’s largest free trade zone boosts regional trade. So Biden may make efforts to ensure the US dominates global rulemaking, especially because one of his campaign promises is to regain the US’ global leadership.

The president-elect has also said he would seek multilateral solutions to repair and strengthen the US’ leadership in global democratic alliance and could even help restructure some key elements of global mechanisms. So the possibility of Washington cooperating with the RCEP and returning to the CPTPP cannot be ruled out.

Incidentally, China is considering joining the CPTPP with the aim of boosting regional and multilateral cooperation, which, unfortunately, has fueled speculation that the China-US competition could further intensify. There is a broad global consensus on the need to boost international cooperation. And spreading conspiracy theories vis-à-vis China and the US is harmful to global cooperation. Let’s hope such negativity soon becomes history with the passing of 2020.

The author is a research fellow at the Charhar Institute and a member of the Chinese Institute of Command and Control. The views don’t necessarily represent those of China Daily.

Source: China Daily

A year of RCEP and strengthening trade

The potential of the Asean digital economy, which is estimated to reach US$200 billion (RM812 billion) in 2025, can only be fulfilled if Asean can carry out a digital transformation.

However, the world, including Asean countries, has been facing the great economic crisis due to the Covid-19 pandemic.

More than 30 million people in Asean are at risk of losing their jobs, and all of the business and economic decisions must be recalculated.

In Indonesia, with its various stages of large-scale social restrictions or lockdowns, users turned to the Internet for solutions to the sudden challenges and changes.

According to Google, Temasek, and Bain & Company in their annual report “e-Conomy SEA 2020” recently, Indonesia’s digital economy is set to expand by 11 per cent to US$44 billion in 2020 from US$40 billion last year, showing resilience amid the pandemic that wreaks havoc on online transportation, food, and travel services.

The pandemic drove internet penetration in the region, with an estimated 40 million new users in 2020.

According to the report, there are around 400 million internet users in total in the Asean region — equivalent to 70 per cent of the total population.

The existence of social restrictions forms a new culture, such as work or school activities from home, resulting in a drastic increase in consumption of digital services.

On the bright side, more new customers use online services in droves, and health and education tech emerged as new frontiers for the country’s digital economy.

Such behaviour is reflected in e-commerce and media, which outgrew the slump in transport, food, and travel.

One interesting point is that Indonesia has 56 per cent of total digital service consumers this year coming from outside the metro area, while the remaining 44 per cent are from around the urban area.

It is said that digital development is currently still “Jakarta-centric”, and this cannot be denied because there is a significant gap between metro and non-metro areas in terms of accessibility to infrastructure.

It also happens in other countries in the Asean region.

President Indonesia Joko Widodo (Jokowi), at the 2020 Asean Business and Investment Summit themed “Digital Asean: Sustainable and Inclusive” in Hanoi, Vietnam last November, said that he also deemed the digital discrepancy as the biggest issue of Asean countries.

To overcome this, Jokowi conveyed three main points that must be encouraged in the use of digital technology in Asean, where the first of it is to ensure an inclusive digital revolution.

The president emphasised that access, affordability, and capacity are the three main keys for digital democratisation. To do that, the digital infrastructure and capacity of Asean human resources need to be carefully prepared.

The second point is — becoming a big player in the digital-based economy and not just a buyer.

The Indonesian President stated that the digital economy must be able to help Micro, Small and Medium Enterprises (MSMEs) entering the global supply chain since MSMEs, which represent 89-99 per cent of Asean’s economy, are the backbone of the economy of the region.

The acceleration of MSMEs digital transformation will encourage the revival of the regional economy.

Third – strengthening synergies to create a conducive digital ecosystem.

The president encouraged the strengthening of regional cooperation to eliminate digital trade barriers, build legal certainty, create synergies in digital trade regulations, and collaborate between the government and the private sectors for regional connectivity.

Source: Bernama

Report: Transformation must happen for Asean to realise digital economy potential

Free trade agreement to benefit China and create growth opportunities

The Regional Comprehensive Economic Partnership (RCEP) agreement is the 19th free trade agreement, or FTA, signed between China and other partners.

To date the country has reached FTAS with 26 countries and regions, further improving the global FTA network, and forming a regional development strategy with a largesize free trade area.

The opening-up layout of such an FTA network is conducive to promoting China’s new dual-circulation development pattern. The new pattern is centred on the domestic economy and aims at better integrating the domestic economy with the global economy.

It will not only benefit the Chinese economy but also create more growth opportunities for countries across the world.

To mitigate the impact of the Covid-19 pandemic and other uncertainties on the regional economy, China must seize this rare opportunity, actively promote the implementation of the RCEP, share the development dividends of the FTA, rely on the regional market and the various connectivity facilities to reach mutually beneficial or win-win cooperation.

Promoting regional economic and trade cooperation on the RCEP platform will open up new space for China’s economic growth and add new impetus to regional and even global economic recovery and development.

China has close economic ties with other RCEP member countries. The RCEP’S 15 member countries account for about 30% of the world’s total population, economy and trade, and are the world’s largest free trade zone, or FTZ, with the largest population.

With the pandemic leading to a general decline in the world economy, the East Asian economic circle has shown great resilience and growth potential.

As the most populous and manufacturing business-based region in the world, backed by relatively complete supply and industrial chains, the East Asian economic circle has frequent and dense exchanges of goods, people and capital among its members.

The circle has generally established an economic cycle from financing, scientific and technological research and development, raw material supply, production and processing to consumption.

The other member countries of the RCEP are also China’s important trading partners. China’s total trade with other RCEP member countries exceeded US$1.43 trillion in 2019, accounting for 31.2% of its total foreign trade.

Despite the impact of the pandemic, China’s total trade with other RCEP member countries amounted to Us$664.4bil in the first half of this year, accounting for about onethird of China’s total foreign trade.

Meantime, China attracted Us$7.2bil in foreign direct investment from other RCEP member countries, accounting for 10% of its total use of foreign capital.

In addition to Asean’s vital role in bilateral trade with China and the future development of the RCEP, the signing of the RCEP will help remove the obstacles in the ongoing negotiations of the China-japan-south Korea FTA.

The implementation of the RCEP has great significance and marks a breakthrough in regional economic integration, mainly in three important ways.

First, the pact will promote regional trade and investment liberalisation to a new level. The RCEP will achieve a high level of openness within the region.

With regard to trade in goods, member countries will further open their markets to each other.

As they have pledged that tariffs on most products would be reduced to zero immediately or within a decade, this FTA would achieve substantial and phased opening-up results in a relatively short period of time.

In the area of trade in services, the overall level of openness of the 15 member countries is significantly higher than the previous FTAS.

The RCEP will spur development across China, region and world.

In terms of investment, all 15 member countries have adopted negative lists for foreign investment to make open commitments to investment in the non-services sector, increasing policy transparency.

Optimising business

In terms of rules, the RCEP comprehensively benchmarks international high-level free trade rules in e-commerce, intellectual property rights, government procurement, small and medium-sized enterprises and other areas, providing longterm institutional protection for optimising the business environment in the region.

Second, the RCEP has changed the status quo of the fragmentation of FTAS in the region, forming for the first time a unified system of trade and investment rules in the region.

Previously, the 10 Asean countries and five other countries signed FTAS, rules of origin, open rules of investment and trade rules in services.

After the formation of the unified rules of the RCEP, companies will continue to see the drop in operational costs and uncertainty risk.

This will effectively stimulate business vitality in the region’s business activities.

Since all RCEP member countries have adopted a negative list for foreign investment to boost the investment in the non-services sector, economic policies will be more transparent, and cross-border investment and e-commerce will gain huge growth space across the region.

Because the RCEP brings together six of the world’s 20 most populous countries, the huge consumer market has great potential, and the high-level opening-up of regional standards will support the transfer of consumer markets from developed to developing member countries.

More demand

It will stimulate more demand for various products and provide sufficient sustainable impetus for companies’ growth throughout the region.

Third, the RCEP deal creates a new situation in the open world economy. Since protectionism and unilateralism have caused uncertainty and instability, the world economy has shrunk, and so have international trade and investment.

Thanks to the encouraging results achieved by the signing of the RCEP, companies are the beneficiaries of this pragmatic cooperation.

It certainly will impart momentum to China’s economic development and foreign cooperation, if the government, companies, trade and investment promotion agencies are able to achieve effective linkages and make full use of the preferential provisions of the RCEP.

Under the terms of the RCEP agreement, regarding the adjustments to the relevant domestic laws, regulations and management measures, the governments concerned should further relax market access restrictions, in order to create a fair and high-level business environment.

They should also provide a greater platform and create more favorable conditions for companies to further expand the East Asian market. Besides, they should build more stable regional industrial and supply chains.

Regional integration

Through a variety of channels to let the world better understand the RCEP policies, China will promote the ongoing talks of the ChinaJapan-south Korea FTA, actively press ahead with regional economic integration for the early realisation of a free trade area of the AsiaPacific, and promote institutional opening-up in terms of rules, regulations and management standards.

Under such circumstances, companies should actively study RCEP rules and operating mechanisms, re-examine the RCEP, which represents a large market with unified rules composed of “10+5” member states, and participate in international cooperation and competition.

Based on their own needs, companies can make more effective use of preferential trade and investment arrangements in the region, carry out corporate strategic investment planning, reconstruct the supply and value chains in the region, optimise production layout and upgrade the industrial structure.

It is also necessary to pay attention to the management of rules on the country of origin, and actively use preferential origin documents for export, in accordance with the rules on the origin of the FTA.

Companies must make better use of both domestic and international markets as two vital resources. They should increase import and export trade, and expand foreign investment, from raw materials to labor, from capital to technology, from production to market.

This way, they can optimise the allocation of regional resources for improvements in quality and efficiency, and for industrial upgrading, so as to open up a broader space for future growth.

The author is chairwoman of the Beijing-based China Council for the Promotion of International Trade, and former vice-minister of commerce. The views expressed are the writer’s own.

Source: The Star

RCEP will spur global economy

Global sales of semiconductors are projected to increase 5.1% in 2020 to US$433.1 billion (from US$412.3 billion in 2019), followed by an increase of 8.4% in 2021, said the US-based Semiconductor Industry Association (SIA).

Projections for both years are higher than they were in the previous World Semiconductor Trade Statistics (WSTS) forecast released in July

In a statement on its website yesterday, SIA said global sales of semiconductors rose 6% year-on-year (y-o-y) to US$39.0 billion in October 2020, said the SIA.

The SIA said the figure was 3.1% higher than the September 2020 total of US$37.9 billion.

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

SIA president and chief executive officer (CEO) John Neuffer said global semiconductor sales in October increased year-on-year (y-o-y) by the largest percentage since March, continuing to demonstrate the global semiconductor market’s resilience so far to headwinds caused by the pandemic and other macroeconomic factors.

“Annual semiconductor sales are projected to increase moderately in 2020, with somewhat larger growth forecasted for 2021,” he said.

The SIA said regionally, sales increased on a year-to-year basis in the Americas (14.2%), China (6.3%), and Asia-Pacific/all others (5.3%), but decreased in Japan (-1.0%) and Europe (-4.8%).

On a month-on-month basis, sales increased across all regions: Europe (6.0%), the Americas (3.2%), China (2.9%), Asia-Pacific/all others (2.8%), and Japan (1.6%).

Source: The Edge Markets

Global semiconductor sales forecast to rise 5.1% in 2020, jump 8.4% in 2021

Asean manufacturing conditions stabilised in November, ending an eight-month-long downturn, according to the latest IHS Markit Purchasing Managers’ Index (PMI).

In a note, IHS Markit shared that regional output rose for the first time since January, at the quickest rate in nearly two and a half years, amid renewed expansion of order book volumes. Consequently, job losses were the softest in nine months.

November’s PMI stood at 50.0 from 48.6 in October, signalling stabilisation in the health of the Asian manufacturing sector.

IHS Markit noted that the upward movement in the headline PMI was the first expansion in factory production since the start of the year, with the quickest rate of growth since June 2018. Additionally, there was a renewed increase in new orders. However, the rate of growth in order book volumes was only fractional, weighed on by a further, albeit slower, drop in export orders.

It also noted that firms continued to pare back on their staff numbers, extending the current sequence of falling unemployment to a year and a half. That being said, job cuts were the least widespread since February. Capacity pressure remained weak as the level of outstanding business fell, while the rate of backlog depletion was little changed in November and moderate.

Client demand had also yet to improve at any substantial rate, with companies continuing to cut back on purchasing activity in November. Covid-19 measures led to further supply chain disruption as input lead times increased to the greatest level since August. However, delays were not as severe as those seen at the height of the lockdown measures implemented earlier this year.

Cost inflation was the quickest since August, with firms in the region increasing their average charges for the first time in three months. Asean goods producers continued to remain optimistic with regard to output. That said, the level of positive sentiment dipped slightly from October and was subdued in the context of historical data.

IHS Markit economist Lewis Cooper opined that November’s data provided a small glimmer of positivity when it came to the regional manufacturing sector.

“At 50.0 in November, the headline figure signalled stable conditions on the month, merely highlighting that things were no worse than in October. Although this is welcome news in some sense and brings the eight-month-long downturn to an end, there remains a substantial amount of ground to make up following the sizeable economic hit caused by the pandemic.

“Moreover, with cases rising across the globe, and some Asean constituent countries enforcing tougher lockdowns, we may well see conditions deteriorate again if client demand is stifled by measures and factories ease back on production.

“Nonetheless, things are beginning to move in the right direction, with the latest data providing a tentative sign that the manufacturing sector may be turning towards a recovery. Heightened uncertainty continues to cloud the outlook, however, and nothing is certain,” Cooper said.

Singapore registered the strongest upturn, with the city state’s headline PMI standing at 51.7, while Thailand was at 50.4 and Indonesia was at 50.6. Malaysia recorded a fourth consecutive contraction, with a PMI of 48.4.

Source: The Edge Markets

Asean PMI stabilised in November, ending eight-month downturn — IHS Markit

Fitch Ratings forecasts an improving operating environment for the Asia-Pacific power and renewables sector in 2021, as the region’s economy gradually recovers from the coronavirus pandemic and electricity demand rebounds.

In a statement Nov 30, Fitch said electricity generation is perceived as an essential service, hence, it was less severely affected by pandemic.

It said many Asian countries are coming out of the crisis faster than other parts of the world, with power demand already picking up. We expect this trend to continue next year.

Fitch said renewables have shown greater resilience than conventional power plants during the pandemic, benefiting from a push for improved infrastructure.

“However, we believe overall energy transition to cleaner power production could be slower than we had expected prior to the pandemic due to China’s coal-friendly policies in response to the pandemic and delays in installation of flue gas desulphurisation for coal plants in India,” it said.

Fitch said the rating outlook is “stable”, with eight of the 10 Fitch-rated credits on “stable” outlook, due to contractual or regulatory protection from demand risk.

It said two transactions are on “negative” outlook, reflecting the “negative” outlook on their respective sovereigns’ ratings.

It added that all credits have sufficient liquidity to withstand shocks, with counterparty risk subsiding as power demand continuing to rebound.

Fitch-rated issuers were largely unaffected by the pandemic thanks to coal-fired and geothermal issuers’ contractual take-or-pay obligations and Indian renewables issuers’ must-run priority.

The rating agency said counterparty risk rose in 2020 due to payment delays, particularly for sales by Indian renewables issuers to financially weak state-distribution companies, but expects issuers to deliver stable operational performance in 2020, generate adequate cash flow for debt servicing and maintain healthy coverage ratios commensurate with their current ratings.

Source: The Edge Markets

Fitch: Improving outlook for Asia-Pacific power, renewables projects in 2021

In the US-China trade war, Donald Trump’s administration made the tech sector the main battlefield, placing the semiconductor segment in particular in the cross-hairs of the tech cold war.

As a result, Chinese tech giants Huawei Technologies Co Ltd, ZTE Corp and Semiconductor Manufacturing International Corp (SMIC) were among the major casualties of rising US-Sino tensions. Even companies such as Taiwan Semiconductor Manufacturing Co (TSMC) were caught in the crossfire.

Where is the global semiconductor industry headed now with the election of Joe Biden as the 46th president of the US?

Over the last couple of years, Malaysia’s tech sector has benefitted somewhat from the trade diversion that resulted from the trade war.

Should Biden adopt a softer approach on China, will the trend of relocation come to an end?

Captains of the tech industry tell The Edge they hope Biden’s administration will make America business-friendly again.

Nevertheless, they concede that POTUS, be it Trump or Biden, will always place America’s interests first, and hence, the long-term trade war narrative is not likely to change significantly.

Penang-based automated test equipment (ATE) manufacturer ViTrox Corp Bhd co-founder and executive vice-president Steven Siaw Kok Tong believes Biden can bring more trade certainty and stability with policy consistency and implementation.

“This will enable our customers, especially in China, to better manage and predict their capital investments and capacity expansions over the next few years. We can expect fewer disruptions due to overnight and frequent policy changes,” he says. He adds that it is too early to assess the impact of Biden’s presidency.

“It will very much depend on president-elect Biden’s direction with regard to the US-China trade relationship. Fortunately, Malaysia has maintained a neutral stance all this while. Therefore, I’m of the opinion that the situation will remain status quo for local E&E (electrical and electronics) companies, at least for the near term.”

Siaw says leading Chinese firms such as Huawei and SMIC are expected to continue accelerating their investments and technology acquisition to fulfil China’s objectives of self-sufficiency and independence from foreign technology and intellectual property, which is in line with Beijing’s aspirations to be self-sufficient by 2025, especially in semiconductor technologies and related supply chains.

He does not expect the trade war rhetoric to cool down over the next four years of Biden’s presidency.

However, as long as Malaysia maintains a neutral stance, the country will enjoy continuous demand and business opportunities from both US and China and their allies.

Business relocations will continue regardless of a trade war or cold war, as big corporations still need to mitigate their risks, Siaw explains. “Malaysia will benefit from relocations if we offer the right value proposition to prospective organisations,” he states.

Green energy to spur demand

Factory automation equipment specialist Pentamaster Corp Bhd co-founder and chairman Chuah Choon Bin does not expect any impact on the global semiconductor industry in the next six months, as Biden’s immediate task will be to tackle the Covid-19 pandemic, which has hit the US hard.

But going forward, he believes Biden may bring more supply chains back to the US, in a move to rebuild the American economy and claim dominance in the technological space.

“Biden’s plans to support green technology with the widespread use of electric vehicles (EVs) will definitely help boost the semiconductor industry,” says Chuah.

High-performance test contacting solution provider JF Technology Bhd CEO Dillon Atma Singh concurs.

“Biden has been known to be pro-green energy, and the anticipated increase in adoption of EVs and green energy will spur demand for, and renewed interest in, semiconductors,” he remarks.

Dillon also points out that the global semiconductor industry is projected to be on an upward trajectory, especially with the deployment of the game-changing fifth-generation (5G) network in the coming years.

“The adoption of 5G is imminent as everyone will want to enjoy the benefits and advantages of 5G, which will see the transformation of lifestyles through new applications and products such as artificial intelligence, autonomous driving and healthcare advancement, which will in turn drive the next wave of semiconductor demand,” he states.

Pentamaster’s Chuah observes that the tech war is centred around 5G technology and that irrespective of who is in power in the US, the trade war between China and the US will continue.

“Whoever dominates 5G technology will win politically and militarily, (as there are) trillions of dollars of economic opportunity and technological space,” he stresses.

Chuah notes that in the last four years of trade and tech wars between US and China, most American tech companies had asked their E&E and semiconductor-related suppliers to relocate their manufacturing base outside of China. As a result, many have already relocated or expanded their manufacturing footprint in Southeast Asian nations such as Vietnam or Malaysia, or in nearby Taiwan or India.

He says the lesson learnt by US tech companies during the trade and tech wars was to ensure their supply chain base was no longer concentrated in China. “Diversifying the manufacturing location is the main goal to mitigate risks in the long term,” he says.

While JF Technology’s Dillon does not expect any significant short-term shifts in the supply-demand of semiconductors for local players, he thinks Biden’s win will provide some cooling off in terms of trade tensions in the longer term, which will in turn positively impact local semiconductor firms.

“In the medium and longer term, we do expect the trade and technology cold war to ease, but to what level will be the million-dollar question. We hope Biden will reverse or at least slow down the decoupling of US and Chinese supply chains, which has been disruptive to the overall high tech industry,” he says.

What should we do?

Even though China will be looking to increase its independence in terms of manufacturing its own chips, the country would also need to rely on imports to meet the heavy demand, observes Green Packet Bhd founder and CEO Puan Chan Cheong.

“This presents a continued opportunity for other countries such as Malaysia to act as a semiconductor player in the international market and provide value add to the semiconductor supply chain,” says Puan, adding that it is possible that the US will continue to impose financial sanctions on Chinese companies in an effort to try and slow down China’s growth.

That said, China has begun to reduce its dependence on the US. In 2019, it announced a state-backed RMB204.2 billion fund to invest in its domestic semiconductor industry. Annually, China consumes more than 50% of all semiconductors produced, but domestic manufacturers have the capacity to meet only 30% of the demand.

Interestingly, tech company Green Packet is currently in a competitive bidding process for SilTerra Malaysia Sdn Bhd — one of the few semiconductor wafer pure-play foundries in the country.

“Semiconductor players will play a significant role in the future given the era of IR4.0, and these players will be key in making sure we are not disrupted by emerging tech. Green Packet would be able to leverage the know-how in the technology space and SilTerra’s expertise in the semiconductor space.

“Analysts across the globe have predicted that Biden is likely to return ties to a less contentious state. While he is expected to maintain a tough stance on China, he is also likely to take a more measured and multilateral approach,” Puan says.

Even if the US’ trade measures turn out to be not as harsh, he says the US-Sino relationship will still need time to heal. This could benefit Malaysia and other Asean countries as semiconductor players relocate their operations.

Source: The Edge Markets

New tech war narrative in post-Trump era

Economic and political observers are still uncertain about what kind of impact a Joe Biden administration would have on the oil and gas (O&G) sector.

At press time, the Senate tally stood at 49-48 in favour of the Grand Old Party. It is possible that the Republicans will continue to control the Senate, with Georgia being the last state to conclude vote counting for the Senate via a run-off on Jan 5.

A Republican-controlled Senate could make it harder for Biden to push through his Green New Deal (GND) — an economic plan that would see the US becoming carbon-neutral by 2035 by rolling out US$2 trillion worth of investments.

“The Green policies expected to be implemented by president-elect Biden is expected to hit the US O&G producers in terms of potential curtailment on both drilling and fracking to conform to environmental policies,” says Imran Yassin, head of research at MIDF Research.

“However, we have to recognise that there is still the possibility that the Republicans will retain control of the Senate. This is expected to curtail some of the policies of the Biden administration.

“If the Senate continues to be controlled by the Republicans, the current policies with regard to energy production may not change much and the tax incentives for shale producers are expected to continue.”

Prior to and during the 2020 presidential election, the Democratic Party campaign focused on outgoing President Donald Trump’s seeming disdain for the science on climate change and how to tackle the Covid-19 pandemic.

The GND, paying ode to Franklin D Roosevelt’s New Deal during the Great Depression, has become Biden’s central policy when it comes to rejuvenating the US economy as well as making it a greener and safer place to live in. The US$2 trillion investment plan, which the Democratic Party would like to see accelerated during Biden’s first term in the White House, is expected to create millions of jobs in the country while laying the foundation for sustainable growth.

In addition to rebuilding infrastructure in the US, the GND will make an ambitious move to generate clean electricity and reduce costs dramatically in critical clean energy technologies, including battery storage and next-generation building materials. It calls for a US$400 billion increase in federal procurement of key clean energy inputs such as batteries and electric vehicles, and accelerate R&D investments focusing on strategic areas like clean energy, transport, industrial processes and materials. However, the Biden administration will find it hard to push through these reforms if the Senate is controlled by the GOP.

The GND will eventually bring the US back in line with the Paris Agreement on Climate Change. With the world’s No 1 economy returning to the Paris accord, the goal of limiting global warming to 1.5°C by the end of the century is within reach, say observers. However, some say the growing global population means that the demand for fossil fuel will continue to increase.

“In the short term, this (GND) will affect the profitability of US oil companies but they will bounce back. After all, the world population is growing and with it, the demand for fossil fuels. Renewables simply can’t keep up,” says an O&G executive.

Apart from the GND, a Democratic president is usually more open to multilateral ties when engaging with the global community. This was seen in 44th US President Barack Obama’s approach to Iran.

Under the Obama administration, the US engaged with the permanent members of the United Nations Security Council plus Germany (P5+1) and the EU to bring Iran to the negotiating table to curtail its nuclear ambition. In 2015, the Joint Comprehensive Plan of Action (JCPOA) was agreed between the P5+1, the EU and Iran regarding the latter’s nuclear activity.

The JCPOA outlines the parameters for Iran, such as a reduction of installed centrifuges to 6,104 from 19,000 over the next 10 years, no enriched uranium above 3.67% purity for 15 years, and inspection of all its nuclear facilities. In response, the P5+1 will lift all sanctions against Iran within 4 to 12 months of the final accord, the US will remove sanctions against domestic and foreign companies from dealing with Iran and all UN resolutions related to the sanctions will be annulled.

However, this framework was scrapped by Trump in May 2018. As a result, Iran is continuing with its uranium enrichment programme and the economic sanctions imposed by the US and the EU against the Islamic republic remain in place.

Biden, who was vice-president when the JCPOA was entered into, has said that under his administration, the US will rejoin the accord as a starting point for follow-on negotiations if Iran returns to compliance with it.

A deal between the US and other world powers when it comes to Iran’s nuclear ambition could bring back two million barrels of oil per day (mbpd) into the market. Nevertheless, even if a deal is achieved, the volume from Iran will not come in immediately, says Imran.

“This may only happen 12 months down the road as Iran would need to ramp up production and the renegotiation may not be number one on the agenda for Biden early on in his presidency, given the multitude of issues [such as Covid-19 and the economic crisis].”

Another factor that could affect crude oil prices arising from the change in US leadership is the US’ relationship with Saudi Arabia, its closest ally in the Middle East and the Muslim world. While subsequent US administrations since the 1973 oil crisis have cultivated a close relationship with the Saudis, it was especially profound during Trump’s tenure as president. Following his 2016 election win, he broke the tradition of US presidents visiting neighbouring countries such as Canada or Mexico first, and went to Riyadh instead. Saudi Arabia is the world’s largest producer and exporter of crude oil.

Every US president wants an oil price that is “low enough” for the country’s consumption to grow and “high enough” for investments in oil production, especially in shale fracking, to continue. While this means Biden will continue the close relationship between the US and Saudi Arabia, observers point out that it will be cultivated through proper diplomatic channels, rather than a personal relationship.

“The US has always taken care to maintain its relationship with Saudi Arabia and the UAE. This started even before Trump’s tenure. There is no reason for Biden to change this,” says the O&G executive The Edge spoke to.

“In fact, Biden will probably try to build on Trump’s peace deals and try to strike a deal between Israel and Saudi Arabia. This will lead to stability in the Middle East and stable oil prices, probably in the US$60 per barrel range.”

All in all, the Biden administration may have a neutral to negative impact on oil prices, says Imran. This, of course, depends on the Opec+ decision on production cuts next month. But even then, it will most likely have a mild impact on oil prices even if the group decides to continue production cuts at the current rate of 7.7mbpd, he adds.

What does Biden’s GND mean for Malaysia?

The GND says the focus should be on the development and production of “Made in America” energy-efficient and energy-saving technologies.

Malaysia is the largest exporter of solar panels to the US (45% of its solar photovoltaic imports). It is unclear whether the GND will seek the local production of solar PVs.

None of the major solar PV producers in Malaysia are listed companies. They are mostly subsidiaries of companies from China and Germany with production plants here, leveraging the competitive production costs.

Under the Trump administration, the solar panel industry was the first to be slapped with tariffs in February 2018. Imported crystalline silicon cells, modules and AC/integrated modules were hit with a 30% tariff.

The Office of the US Trade Representative (USTR) also slapped a 25% import tariff on solar panels in 2019, 20% in 2020 and a scheduled 15% in 2021. However, in October, the USTR increased the tariff to 18% for 2021.

It is not known whether Biden will continue this practice or revoke it. What is clear is that he wants to bring jobs back to the US by way of producing green energy technologies in the country.

Therefore, it remains to be seen what Biden’s GND will bring, if and when he starts his tenure as the 46th president of the US. Nevertheless, the policy shift is expected to be the catalyst for the US to move towards a clean energy economy.

“Biden’s policy shifts on global climate change and the GND, with US businesses and investors embracing ESG (environmental, social and governance principles), are important catalysts for moving America faster towards a clean energy economy. This would involve an accelerated development of domestic wind and solar industries, as well as leveraging the carbon-pollution-free energy provided by existing sources like nuclear and hydropower,” says Lee Heng Guie, executive director of the Associated Chinese Chambers of Commerce and Industry of Malaysia’s Socio-Economic Research Centre.

The Trump tariffs have indeed boosted production of solar modules in the US, with manufacturers such as Hanwha Q Cells, Jinko and LG setting up solar module plants there. However, solar cell production is in the doldrums.

The tariffs have also softened solar price declines in the US, compared with the steep decline seen globally. An analysis with the Solar Energy Industries Association found that the tariffs have cost the US 62,000 jobs and US$19 billion in potential investments.

Source: The Edge Markets 

‘Too early to call’ impact on O&G

New players eye wide range of opportunities

Leading international online marketplace Lazada made the most of the Singles Day shopping extravaganza this month, cashing in on the e-commerce boom in Southeast Asia during the pandemic.

This year, the annual Nov 11 buying bonanza came with the e-commerce industry in the region enjoying rapid growth as the contagion and related lockdowns accelerated the digital shift in consumption.

This is in sharp contrast to many other industries, which are reeling from the unprecedented economic pressure caused by COVID-19.

Jessica Liu, co-president and regional head of commercial at Lazada Group, said that in the second quarter of this year, orders on Laz-Mall, Lazada’s business-to-customer virtual shopping platform, more than tripled year-on-year. Alibaba invested in Lazada in 2016 and acquired control of the company.

“In the past six months, we have seen an increase in new brands and sellers adopting an online retail approach, from food and beverages, to hospitality, recreation and personal services, as leading global and regional brands give their retail mix a digital overhaul,” Liu said.

Since the pandemic emerged, the number of brands handled by Laz-Mall has tripled to more than 18,000 international and local names across the region, according to the company.

Many well-known department stores and malls, including Metro and Robinsons in Singapore and the Siam Center in Thailand, have also hopped on the digital bandwagon to help their tenants set up virtual storefronts through Lazada’s platform.

In particular, Liu said the grocery sector has experienced exponential growth since the start of the pandemic.

For example, when Singapore raised its Disease Outbreak Response System Condition to the second-highest level of “orange” on Feb 7, that weekend, Lazada’s grocery arm RedMart saw a threefold rise in the average number of weekly orders.

On Nov 11 this year, Lazada even invited South Korean actor Lee Minho to be its first regional ambassador. It attracted more than 40 million users during its Singles Day sale, with its sales surpassing $100 million soon after the promotion began at midnight, less than half the time it took to reach this figure last year, according to the company.

The concept of the Singles Day online shopping festival was first promoted by Chinese e-commerce platforms and was introduced to Southeast Asian markets by Lazada in 2012.

The company is just one of many in the region’s e-commerce industry to benefit from the pandemic.

In the first half of this year, the average value of an order throughout the region rose by 23 percent year-on-year to $28.50, according to a report by e-commerce aggregator iPrice, which is based in Malaysia. The biggest gains－57 percent and 51 percent respectively－were made in the Philippines and Singapore, according to the report, which was produced in collaboration with SimilarWeb and App Annie.

Shopee, which is based in Singapore, was the most-visited e-commerce platform in the city-state as of the second quarter, the report said. From the first quarter to the second, the company saw an 82 percent rise in the number of users, garnering close to an additional 5 million visitors on average in the second quarter alone.

In Indonesia, management consultancy RedSeer forecast that the gross merchandise value, or GMV, of the country’s e-commerce sector would grow by 50 percent year-on-year to reach $35 billion this year and would rise to $101 billion by 2025.

Tokopedia, based in Jakarta, the Indonesian capital, and also backed by Alibaba, said in a statement early last month that food and beverage sales have nearly tripled during the pandemic. The company also found that the “new normal” of working and learning from home triggered a significant rise in sales of books and computers.

Growth market

In Vietnam, 76 percent of consumers said they had done more shopping online in recent months, according to a survey by digital marketing company Criteo.

In Thailand, e-commerce solutions company aCommerce reported year-on-year growth in new customers of between 150 percent and 200 percent during the pandemic.

” (The new customers) are not only limited to the tech-savvy generation, but also comprise the older generation, which you would not have targeted as a customer base as recently as last year,” said aCommerce co-founder and group CEO Paul Srivorakul.

On its way to becoming Thailand’s first unicorn－a startup valued at more than $1 billion－aCommerce operates across Southeast Asia in markets such as Indonesia, Malaysia and Singapore.

The way in which e-commerce is conducted has also diversified, Srivorakul said.

“Brands are not only doing it on e-marketplaces, but on ‘brand.com’as well, where we can see volume growing two to three times faster than on e-marketplaces,” he said.

Srivorakul added that social commerce is another growth channel, with brands offering their employees, influencers and store associates incentives such as commission to sell to their social networks.

Consumers in emerging Southeast Asian markets are conducting more brand research on social media, according to a report by the agency We Are Social, which is based in London, and Hootsuite, a social media management platform. In Vietnam, the Philippines, Indonesia and Malaysia, nearly 60 percent of internet users turn to social media for more information about brands. The global average is 42 percent.

Liu, from Lazada, said other critical factors driving the digital shift and redefining the e-commerce shopping experience include livestreaming and the use of artificial intelligence and algorithms to provide better shopping services.

In June, Lazada’s livestreaming service LazLive attracted more than 74 million views, nearly three times the number for April, Liu said. “Compared with last June, this led to more than 17 times the total GMV generated through livestreaming,” she added.

The advent of livestreaming can also be a cross-border opportunity to connect China with Southeast Asia.

In April, the Guangxi Zhuang autonomous region website reported that Guangxi TUS-Innovation Cross-border E-commerce Co held a livestreaming session on Lazada to sell anti-pandemic products such as face masks and goggles. The broadcast attracted nearly 10,000 views in Southeast Asia.

For Rachel Pang, the founder and CEO of online shopping portal Shopavision, increased digital consumption triggered by COVID-19 resulted in a “surprising opportunity” for her startup, which aims to be Singapore’s first and only livestream-focused shopping site.

“Over the past four years, I’ve seen the growth of livestream commerce, as well as the new retail concept in China,” said Pang, an observer of digital and business trends and a frequent traveler to China for market research. “Livestream commerce can work here (in Singapore), just like it did in China.”

Shopavision started its pre-launch marketing in December and is due to officially introduce its app before the end of this year.

During its first livestreaming session with a crab farm in Singapore, Pang said the portal helped sell live seafood on the spot, registering sales totaling $6,000 in just two hours, in addition to providing an educative and experiential tour of the farm.

More than 40 livestreaming shows were held during the three-month pre-launch marketing period, Pang said, generating over 400,000 views, more than $50,000 in sales and reaching 2 million people. The platform now has a team of 30 livestream hosts.

But until last year, Pang said nine out of 10 people she spoke to in Singapore were still unfamiliar with livestreaming.

“The number of online shoppers has hit a new high (during the pandemic),” she said. With livestreaming on social media platforms such as Facebook becoming more common, she added that such broadcasts have the potential to drive marketing and sales.

Lazada’s Liu said that even before the pandemic started, Southeast Asia was undergoing rapid digitalization, and the contagion has accelerated this trend.

According to a report by Facebook and the global consultancy Bain & Co, 70 percent of consumers, or 310 million people, in the region are expected to have gone digital by the end of this year－a figure previously forecast for 2025.

The region’s e-commerce GMV grew by 23 percent annually from 2018 to this year, faster than China’s compound annual growth rate during the same period, the report said.

Liu said, “E-commerce is projected to grow to $300 billion by 2025, but has a penetration rate of less than 5 percent among the 650 million people living in Southeast Asia.” She added that this presents huge opportunities for e-commerce companies.

However, she said the region faces a number of challenges in developing e-commerce, ranging from the lack of a logistics and payment infrastructure to numerous consumer preferences, as well as cross-border concerns.

Rise in demand

Srivorakul, from aCommerce, said logistics infrastructure in markets such as the Philippines and Indonesia is still in its infancy and is expensive.

“The significant spike in online traffic and e-commerce continues. Business across the entire value chain, from supply chain, logistics, marketing and customer service to e-commerce enablers, is growing significantly,” Srivorakul said.

As digital marketing is a large part of e-commerce, he said surging demand for online shopping has created several opportunities for such businesses to acquire new customers more easily.

“Offline shopping will definitely grow back when the pandemic ends, but consumers will not forget the experience they have when doing their shopping online,” Srivorakul said.

Pang, from Shopavision, who is eager to expand to other Southeast Asian markets such as Malaysia, Indonesia and Thailand, said she hopes to make livestream commerce an integral part of people’s lifestyles in the region, as is the case in China.

“We are definitely interested in collaborating with Chinese partners and have lots to learn from them,” she said.

Source: China Daily

E-commerce surges in Southeast Asia

Japan aims to expand a major regional free trade pact called the CPTPP, Prime Minister Yoshihide Suga said yesterday, potentially catering for China’s and Britain’s interest in joining the deal.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) links 11 countries, including Japan, Canada and Singapore.

“Japan will aspire for the Free Trade Area of the Asia-Pacific through the early conclusion of the RCEP agreement and the steady implementation and expansion of the CPTPP as next year’s chair,” Mr Suga said.

He made the comment in a pre-recorded video message delivered at the Apec (Asia-Pacific Economic Cooperation) CEO Dialogues, ahead of a leaders’ virtual summit later in the day.

RCEP, or the Regional Comprehensive Economic Partnership, is the world’s largest free trade deal, which was signed this month by 15 economies, while the Free Trade Area of the Asia-Pacific is potentially an even larger pact that the 21-member Apec has been aspiring to.

A spokesman for the Chinese Commerce Ministry said on Thursday that his country was open to the idea of joining the CPTPP, while Britain earlier this year announced its intent to pursue accession to the pact.

Chinese Foreign Minister Wang Yi is scheduled to travel to Japan next week, marking the first high-level visit between the two countries since the outbreak of the coronavirus pandemic, Japan’s Foreign Minister Toshimitsu Motegi said at a regular briefing yesterday.

Mr Motegi said he will meet Mr Wang for talks during the two-day visit that starts on Tuesday and will also likely include a courtesy visit on Mr Suga. Mr Wang will fly to Seoul the next day, the Korea Economic Daily said, and hold talks with South Korean Foreign Minister Kang Kyung-wha.

Source: Reuetrs

Japan aims to expand CPTPP trade pact as UK, China eye membership

The Asia-Pacific Economic Cooperation (APEC) Putrajaya Vision 2040, the forum’s fresh vision that replaces the Bogor Goals, is for an open, dynamic, resilient and peaceful Asia Pacific community by 2040, for the prosperity of all its people and future generations.

The member countries will remain committed to APEC’s mission and its voluntary, non-binding and consensus-building principles, and pursue the three economic drivers, namely trade and investment; innovation and digitalisation; as well as strong, balanced, secure, sustainable and inclusive growth.

“We acknowledge the importance of, and will continue to work together to deliver, a free, open, fair, non-discriminatory, transparent and predictable trade and investment environment.

“We reaffirm our support for agreed upon rules of the World Trade Organisation in delivering a well-functioning multilateral trading system and promoting the stability and predictability of international trade flows,” it said.

APEC said it will further advance the Bogor Goals and economic integration in the region in a manner that is market-driven, including through the work on the Free Trade Area of the Asia-Pacific (FTAAP) agenda which contributes to high standard and comprehensive regional undertakings.

“We will promote seamless connectivity, resilient supply chains and responsible business conduct,” said APEC.

On innovation and digitalisation, the vision is to foster an enabling environment that is, among others, market-driven and supported by digital economy and innovation.

The member countries will pursue structural reforms and sound economic policies to promote innovation as well as improve productivity and dynamism.

“We will strengthen digital infrastructure, accelerate digital transformation, narrow the digital divide, as well as cooperate on facilitating the flow of data and strengthening consumer and business trust in digital transactions,” the vision statement said.

While on the third driver, APEC said it will intensify inclusive human resource development as well as economic and technical cooperation to better equip its people with the skills and knowledge for the future.

APEC will also promote economic policies, cooperation and growth which support global efforts to comprehensively address all environmental challenges, including climate change, extreme weather and natural disasters, for a sustainable planet.

To maintain APEC’s unique position as the premier forum for regional economic cooperation as well as a modern, efficient and effective incubator of ideas, the members will embrace continuous improvement of APEC as an institution through good governance and stakeholder engagements.

“We will advance the APEC Putrajaya Vision 2040 with a spirit of equal partnership, shared responsibility, mutual respect, common interest, and common benefit.

“We will achieve the Vision by 2040, with an appropriate implementation plan and review of its progress,” it added.

Source: Bernama

APEC aims for open, dynamic, resilient and peaceful Asia Pacific community by 2040

APEC’s member economies and ASEAN member states have been urged to create linkages between the initiatives under both economic forums to reboot and kick-off the next phase of economic expansion.

Thailand Prime Minister Prayut Chan-o-cha said under the current context of Covid-19, the pandemic has affected health, security and stability, food security as well as essential supplies which somehow led the governments to pursue policies that opposed the values of free and open trade.

“The need to protect our people from Covid-19 has halted connectivity and disrupted trade and investment which are vital to growth and prosperity. Big and small businesses are struggling to survive, people are losing their jobs and income as a growing number of people face the challenge of poverty.

“This is the time for us to leverage the strengths of APEC and ASEAN to promote inclusive cooperation that is complementary in order to move forward for our mutual benefit and win-win cooperation,” he said in his keynote address, themed ‘ASEAN’s Place in APEC’s Future’, at the virtual APEC CEO Dialogues 2020, today.

He emphasised that both ASEAN and APEC shared the same objectives of fostering development and mutual prosperity for the livelihoods of all people in the region while having to face common challenges that a single economy cannot address on its own, including recessions, pandemics and environmental degradation.

“APEC was founded in 1989 to drive forward the Uruguay round of multilateral trade negotiations; ASEAN was established in 1967 to promote peace, stability and security in the region.

“As the world evolved, APEC and ASEAN demonstrated their readiness to tackle new challenges. The announcement of APEC Bogor Goals in 1994 came in tandem with the success of the Uruguay negotiations and the expansion of the ASEAN membership and its intensified economic cooperation in the late 1990s,” he noted.

Prayut also stressed that member economies must reconnect global value chains in the post Covid-19 economy.

He said they must reaffirm commitments to the multilateral trading system, free and open trade and investment, integrated and seamless connectivity, in particular the need to harness the potential of the digital economy and diversify global value chains.

“ASEAN and Thailand can greatly contribute to APEC in these areas. The successful establishment of ASEAN Economic Community allows for the free flow of goods and increases opportunities for trade in services and investment by leveraging the diverse comparative advantages of member states.

“In addition to the integration within ASEAN member states, ASEAN also attaches importance to extending economic cooperation with external partners,” he said.

On Nov 15, the 10 ASEAN countries and five dialogue partners signed the Regional Comprehensive Economic Partnership (RCEP), making it one of the largest free trade agreements (FTAs) ever concluded.

“The success of RCEP at this pivotal moment will reinvigorate regional economic integration and multilateral trade.

“RCEP is also a good example of an agreement that benefits all parties and can serve as a groundwork for the FTA of the Asia Pacific. Furthermore, ASEAN’s strength also lies in regional connectivity with the potential to link Asia and the Pacific,” Prayut said.

He reiterated that it was important for APEC to continue sailing forward in a strong, resilient, inclusive and sustainable manner as the leaders prepare to endorse the inter-governmental forum’s Post-2020 Vision that will guide member economies over the next 20 years.

Thailand will chair APEC in 2022.

Source: Bernama

Timely for APEC, ASEAN to leverage strengths, promote inclusive cooperation – Thai PM

The Asia-Pacific (APAC) economy is leading the global recovery from COVID-19, driven by the control of the pandemic, the easing of lockdowns and the improvement in global trade, said Moody’s Analytics.

Its chief APAC economist, Steve Cochrane said Asia’s recovery is led by China, and China’s recovery is led by exports, which have been above pre-COVID-19 levels since midyear.

“China’s acceleration of international trade and the rising amount of imports are being felt elsewhere in the APAC region, with Vietnam, Singapore, Taiwan, Malaysia, and New Zealand reporting exports above those one year ago as of September,” he said in a report titled “APAC Outlook: Next Year Looks Better for Most of the Region” dated Nov 17, 2020.

According to Cochrane, although only a few countries have reported their third-quarter gross domestic product (GDP) growth rates, those that have as of Nov 13, 2020 — China, Indonesia, Malaysia and South Korea — each reported quarter-to-quarter growth.

“The APAC economy has done the best job of containing COVID-19 and it is rebounding with the global recovery of industrial production and global trade.

“Further, it enjoys a level of fiscal support in many countries that will keep a floor under the economy and preserve enterprises and household financial conditions so that they are able to contribute to economic recovery,” he said.

In terms of portfolio flows, Cochrane said investors never lost confidence in China, while Malaysia and the Philippines similarly have had cumulative net positive debt flows so far this year.

Despite the recovery, he noted that the entire APAC region would not fully recover until an extended rebound of the global economy expands the range of global trade to include more consumer goods such as automobiles and commodities such as crude oil and petrochemicals.

He said the economic recovery in the APAC region would not be complete until international travel and tourism flourish once again.

“This will be a long process as officials assess the pandemic control measures in the origin countries of their inbound travellers and tourists,” he added.

Other risks within the region is the willingness of governments to continue to provide targeted fiscal support to households and industries hurt by the pandemic, he said.

However, he noted that Malaysia, Singapore, Australia and Japan do have sizeable support programmes that directly target households and struggling industries.

While it is easy to illustrate the APAC region’s abilities to contain the pandemic, he said there are local clusters that illustrate remaining risk within the region, for instance, Malaysia’s caseload is soaring and all but four of Malaysia’s states are now under movement restriction orders.

“Barring any large-scale return of COVID-19, investors will likely bolster the APAC region’s emerging markets, particularly if emerging markets in Eastern Europe, Latin America and Africa continue to struggle with the economic consequences of the pandemic,” he said.

Overall, Cochrane said the baseline economic outlook called for growth across the entire APAC region in 2021, with the fastest growth would be in China, Vietnam and Hong Kong.

Source: Bernama

Asia-Pacific economy leads global recovery from COVID-19 – Moody’s Analytics

The Asia-Pacific Economic Cooperations (APEC) needs to keep its economies ahead of the curve in order to stay relevant.

APEC Policy Support Unit director Dr Denis Hew said this could be done by addressing some of the emerging challenges that the region could face in the next 20 to 30 years.

“Not just looking at the Covid-19 pandemic, but also looking at the issues such as the emergence of different types of digital technology, artificial intelligence.

“We also have demographic challenges with many economies facing an aging population, which means a reduction of the labour force, as well as sustainable economic growth. Many APEC economies are middle income economies,“ he said during a virtual briefing on the APEC Regional Trends Analysis today.

According to a recently published APEC Regional Trend Analysis, the shift towards digitalisation was inevitable, so economies should allocate the funds needed to build more reliable technological infrastructure.

APEC economies should also reskill or upskill their population with digital skills to participate in the economy and to re-ignite innovation towards higher productivity and greater economic output, added the report.

Meanwhile, Hew also noted that there were concerns on the middle-income trap among APEC economies and this could be addressed by promoting innovation and looking at the skill sets of the workers to ensure sustainable economic growth.

He added that there were some early signs of economic recovery in APEC economies, particularly those that were adopting digital economy.

“During this period of time, many of us are using different types of digital platforms for work, as well as for education, and online grocery shopping. One of these sectors where applications of different types of digital technology will see a strong recovery,“ he added.

Meanwhile, APEC Secretariat executive director Tan Sri Dr Rebecca Sta Maria said there was a lot of political will among leaders to collaborate to ensure economic recovery among APEC economies.

With the ministers meeting virtually, she said a clear signal was sent or the willingness to share best practices on how each of the economies have been dealing with the pandemic and how collaboration rather than competition “would help us or get us out of these difficult times.”

On the devastated tourism sector, Rebecca said a number of initiatives were being discussed by the APEC Tourism working group to revive the industry, including through capacity building.

“We suspect in all probability that it (tourism sector) would be the last to recover. How do we build capacity during this period when there are no tourists coming in and what do we do to prepare ourselves for the return of tourism (activity),” she added.

Rebecca said the APEC Tourism working group was putting in efforts in, among others, maintenance of facilities, building collaboration with organisations such AirBNB to work with smaller rural communities to upgrade their facilities, and preparing tourism workers to engage with tourists.

“Works are also being done on travel bubbles (and) what kind of health protocols need to be put in place.

“Singapore is at the forefront of this (effort), working with different APEC economies to see how we can have specific health protocols to facilitate business travels and then look for lessons learned from this bubble so that we can take it further,” she added.

Source: Bernama 

APEC needs to keep its economies ahead of the curve

The current circumstances and challenges of the COVID-19 pandemic require all 21 member economies of the Asia-Pacific Economic Cooperation (APEC) to work together more closely to resolve barriers and push for free and open trade and investment in the region.

Rejecting allegations that the Bogor Goals were unsuccessful, APEC Business Advisory Council (ABAC) chair Datuk Rohana Mahmood said the previous Bogor Goals provided guidance for member economies in delivering economic progress and are important to each of the 21 economies.

“APEC deserves more credit than what it received, although it has non-binding principles, there is a summary of what we had achieved since the Bogor Goals were introduced in 1994, and since Bogor Goals will expire in less than a month, we need a new vision to make sure that the free, fair and open trade and investment in the region will continue,” she said at a press conference after the 4th ABAC meeting here, today.

She also hinted that the new vision and declaration by the APEC member economies would focus on the need to collaborate, cooperate and keep markets open as free trade and investment is crucial for the collective well-being of Asia Pacific.

“It would be along the same lines as the recently-concluded Regional Comprehensive Economic Partnership and ASEAN. APEC’s new vision will revolve around three pillars, namely trade and investment to get over COVID-19 and bring member economies to move forward, digitalisation, as well as sustainability and the inclusion of all economies,” she said.

Rohana said digitalisation would be a challenge for most economies, particularly in terms of infrastructure, affordability and accessibility.

“New Zealand will be hosting the APEC Summit in 2021 and the next host will have a tougher job of planning and drawing up the new agenda which is expected to be carried online,” she added.

Meanwhile, ABAC’s report this year to APEC economic leaders has highlighted the practical and pragmatic recommendation of tackling the immediate crisis and focusing on short and medium-term matters.

“Crisis response remains a pressing concern in many economies, and requires an ongoing focus on ensuring access to essential medical supplies and services, including a vaccine, keeping supply chains functioning, and avoiding fragmented policy approaches, including in the digital economy and the safe resumption of travel.

“These would serve to revive the business activities and market demand that would accelerate global economic recovery.

“We need to prioritise policies that are conducive to international trade, resist calls to undercut competitiveness with protectionist quick fixes, and ensure that the World Trade Organisation (WTO) remains relevant and fit-for-purpose,” she added.

The APEC Business Advisory Council met virtually today, in the lead up to the meeting of APEC Economic Leaders on November 20.

Source: Bernama

APEC economies need to work more closely to tackle COVID-19 issues

Moscow will hold the 12th BRICS summit on Nov 17, Malaysia will host the APEC meeting on Nov 20, and Riyadh will welcome world leaders to the highly anticipated G20 conference on Nov 21-22.

These high-level events will be held after the signing of the Regional Comprehensive Economic Partnership, the world’s largest free-trade pact, which could and should help build multiple new paths toward a shared future.

The global economy is expected to shrink by 5 percent this year, with trade likely to plummet by 20 percent. After misguided trade wars and the pandemic, global cooperation across all differences is vital to defeat the pandemic and facilitate economic recovery.

World’s largest free-trade pact to serve as inspiration

In the ASEAN summit last weekend, after nearly a decade of talks, 15 countries signed the Regional Comprehensive Economic Partnership. The RCEP includes the 10 ASEAN member states, East Asian leaders (China, Japan and the Republic of Korea), and Oceania (Australia, New Zealand). Their combined economic muscle is almost a third of the world’s gross domestic product.

The RCEP is expected to eliminate 90 percent of the tariffs on imports between its signatory economies within 20 years of coming into effect, which could be by as early as next year. It will also seek to establish common rules for e-commerce, trade and intellectual property.

Until recently, RCEP critics in the West argued that the pact represents “shallow” integration since its requirements are not as stringent as, say, the now defunct Trans-Pacific Partnership, which was negotiated in secrecy during the Barack Obama administration. Typically, when the remaining 11 TPP countries agreed on the revised Comprehensive and Progressive Agreement for Trans-Pacific Partnership, they omitted 20 provisions that the United States had included in the original TPP.

Second, “shallow” integration is better aligned with the integration needs in emerging Asia, where governments play a critical role in economic development, the idea of national sovereignty is vital, and legacies of Western colonialism remain prominent.

Third, the RCEP may be more aligned with the new international landscape that’s overshadowed by protectionism and tariff wars.

BRICS expediting global recovery

The BRICS countries bring together major economies of the emerging market bloc: Brazil, Russia, India, China and South Africa. Together, they account for one quarter of the world’s economy.

Given the uncertainties in the world economy, the BRICS summit is likely to focus on practical measures to contain the pandemic and support the BRICS’ economic recovery. It will seek to create an early warning system for epidemiological threats, and foster BRICS capabilities on medical products.

Most importantly, the summit could further facilitate trade, investments and small and medium-sized enterprises’ role in international trade. While large multinational corporations fuel the recovery of global GDP, it is the SMEs that have the relatively greatest job-creation effect, which is vital for global recovery.

New APEC vision, road map needed

In Asia-Pacific Economic Cooperation meeting, to be hosted by Malaysia on Nov 20, the bloc is expected to set a new vision to guide the forum’s work in the next decades. With APEC and its 21 member economies, the idea of regional free trade has been around since 1966 when Japanese economist Kiyoshi Kojima advocated a Pacific free trade agreement. Three decades later, APEC leaders opted for free and open trade and investment in the Asia-Pacific region.

In 2006, C. Fred Bergsten, then chief of an influential US think tank, advocated the “Free Trade Area of the Asia-Pacific”. If the FTAAP could be achieved, it would represent the largest single liberalization in history.

That’s the FTAAP goal that APEC put forward in 2006, which is supported by many Asian economies, including China. It would be very much in the long-term interest of the US as well. No single country can any longer have unipolar primacy in world trade; all countries have a critical stake in multilateral world trade.

What APEC needs is a timely road map for the effective implementation of its vision.

Cooperation must be focus of G20 summit

Since early spring, the major rich-income economies have been crafting massive stimulus responses against the pandemic. In 2020, fiscal support packages could climb to $15-$20 trillion worldwide. On the other hand, many medium- and particularly low-income economies are suffering from excessive debt burden.

The G20 summit is expected to address the implications of the global pandemic, future healthcare plans and measures needed to revive the global economy, including fiscal support, debt reductions and other vital measures.

G20 has the required economic muscle for global change. With the 19 largest economies and the European Union, it accounts for 90 percent of the global GDP and 80 percent of world trade.

When the major economies in Western Europe and North America failed to contain overcome the global financial crisis in 2007-09, it was G20, led forcefully by the International Monetary Fund, which played a vital role in surpassing fatal headwinds. More recently, such initiatives have been less evident.

Trade wars have no winners, shared future will benefit all

In January 2017, President Xi Jinping offered a strong defense of more inclusive free trade at the World Economic Forum. Xi likened protectionism to “locking oneself in a dark room” in the hope of protecting oneself from danger, but in so doing, cutting off all “light and air”.

Xi predicted, quite rightly in retrospect, that “no one will emerge a winner in a trade war”.

It is this global sense of a shared future that the summit season should promote for success in the battle against the pandemic and for global economic recovery.

The author is founder of Difference Group and has served at the India, China and America Institute (USA), Shanghai Institutes for International Studies (China) and the EU Centre (Singapore).

Source: China Daily

RCEP inspiration for regional trade, global recovery

Fifteen Asia-Pacific economies formed the world’s largest free trade bloc on Sunday, a China-backed deal that excludes the United States, which had left a rival Asia-Pacific grouping under President Donald Trump.

The signing of the Regional Comprehensive Economic Partnership (RCEP) at a regional summit in Hanoi, is a further blow to the group pushed by former US president Barack Obama, which his successor Trump exited in 2017.

Amid questions over Washington’s engagement in Asia, RCEP may cement China’s position more firmly as an economic partner with Southeast Asia, Japan and Korea, putting the world’s second-biggest economy in a better position to shape the region’s trade rules.

The United States is absent from both RCEP and the successor to the Obama-led Trans-Pacific Partnership (TPP), leaving the world’s biggest economy out of two trade groups that span the fastest-growing region on earth.

By contrast, RCEP could help Beijing cut its dependence on overseas markets and technology, a shift accelerated by a deepening rift with Washington, said Iris Pang, ING chief economist for Greater China.

RCEP groups the 10-member Association of Southeast Asian Nations (ASEAN), China, Japan, South Korea, Australia and New Zealand. It aims in coming years to progressively lower tariffs across many areas.

The deal was signed on the sidelines of an online ASEAN summit held as Asian leaders address tensions in the South China Sea and tackle plans for a post-pandemic economic recovery in a region where US-China rivalry has been rising.

In an unusual ceremony, held virtually because of the coronavirus pandemic, leaders of RCEP countries took turns standing behind their trade ministers who, one by one, signed copies of the agreement, which they then showed triumphantly to the cameras.

“RCEP will soon be ratified by signatory countries and take effect, contributing to the post-Covid pandemic economic recovery,” said Nguyen Xuan Phuc, prime minister of Vietnam, which hosted the ceremony as ASEAN chair.

RCEP will account for 30% of the global economy, 30% of the global population and reach 2.2 billion consumers, Vietnam said.

‘Historical breakthrough’

China’s finance ministry said the new bloc’s promises include eliminating some tariffs within the group, including some immediately and others over 10 years.

There were no details on which products and which countries would see immediate reduction in tariffs.

“For the first time, China and Japan reached a bilateral tariff reduction arrangement, achieving a historic breakthrough,” the ministry said in a statement, without giving further details.

The deal marks the first time rival East Asian powers China, Japan and South Korea have been in a single free trade agreement.

Despite being outside RCEP and having been in the administration that propelled the TPP, President-elect Joe Biden — Obama’s vice president — is unlikely to rejoin the TPP anytime soon, analysts said, as his government will have to prioritise handling the Covid-19 outbreak at home.

“I’m not sure that there will be much focus on trade generally, including efforts to rejoin” the TPP successor grouping, “for the first year or so because there will be such a focus on Covid relief,” Charles Freeman, senior vice president for Asia at the US Chamber of Commerce said this month.

RCEP “will help reduce or remove tariffs on industrial and agricultural products and set out rules for data transmission,” said Luong Hoang Thai, head of the Multilateral Trade Policy Department at Vietnam’s Ministry of Industry and Trade.

The pact will take effect once enough participating countries ratify the agreement domestically within the next two years, Indonesia’s trade minister said last week.

For China, the new group including many US allies, is a windfall largely resulting from Trump’s retreat from the TPP, said ING’s Pang.

India pulled out of RCEP talks in November last year, but ASEAN leaders said the door remains open for it to join.

Source: Reuters

Asia forms world’s biggest trade bloc, a China-backed group excluding US

The Regional Comprehensive Economic Partnership (RCEP) agreement may prove to be the tonic that Asia needs to recover from the Covid-19 pandemic-induced economic slump, said HSBC Bank Malaysia Bhd (HSBC Malaysia) today.

Chief executive officer Stuart Milne said although international trade continued to face uncertainty, the signing of the RCEP underscored the belief in market openness and that it will lead to greater economic growth.

“Intra-Asian trade, which is already larger than Asia’s trade with North America and Europe combined, will continue to power global economic growth and pull the economic centre of gravity towards Asia.

“We hope RCEP members will build on the progress they have made and further liberalise trade and investment in the region,” he said in a statement today.

The RCEP agreement has finally been signed today (Sunday) after going through 31 rounds of negotiations over the past eight years.

The signing of the RCEP, which is the world’s biggest free trade agreement (FTA), represents a significant and imperative milestone in the integration and revitalisation of economies of the 15 parties.

Milne said Malaysia could further strengthen its cross-border trade and economic ties with RCEP partners as the country serves as a gateway to Asean member countries.

“With greater market access, Malaysian businesses can look forward to growing regionally and beyond.

“In addition, we look forward to more investments into the country and the region as a whole with more foreign companies setting up their production base in Asean given that the RCEP effectively allows convergence between the FTAs,” said Milne.

With Malaysia as a key strategic market for HSBC, the bank remains committed to serving Malaysian businesses and helping to develop the country as an investment hub in the Asean region, he added.

He said HSBC was focused on accelerating growth from its Asian franchise while its international banking network provides access to more than 90 per cent of global gross domestic product, trade and capital flows.

“The network covers the world’s largest and fastest-growing trade corridors and economic zones and will be able to support clients to capture opportunities in the region,” said Milne.

Source: Bernama

HSBC Malaysia: RCEP may be a tonic for Asia to recover from Covid-19 impact

The 19th ASEAN Economic Community (AEC) Council Meeting, held as part of the virtual 37th ASEAN Summit, will concentrate on promoting the region’s post-pandemic economic recovery through digitalisation.

Senior Minister cum International Trade and Industry Minister Datuk Seri Mohamed Azmin Ali said through the ASEAN Comprehensive Recovery Framework (ACRF) and its implementation plan, ASEAN had established several main strategies, one of which is “Accelerating Inclusive Digital Transformation” to combat the severe impacts from the Covid-19 pandemic.

The strategy focuses on expediting the digital transformation in the region by leveraging on the momentum and imperative of digital transformation and seizing the enormous opportunities presented by digital technologies to boost the economy and improve society post-Covid-19.

“This includes the digitalisation of trade documents and processes for a seamless and uninterrupted supply chain,” he said in a statement today.

Mohamed Azmin also said that the region’s economic recovery post-pandemic was high on the agenda and was discussed extensively at both the ASEAN Leaders and the ASEAN Economic Ministers’ level.

“The discussions resulted in the inking of a Memorandum of Understanding (MoU) on the Implementation of Non-Tariff Measures on Essential Goods on Nov 10, 2020,” he added.

The MoU, comprising 152 identified essential goods in the categories of food, medicine, and medical appliances and devices, is aimed at facilitating the movement of essential goods to ensure unobstructed supply chain within the region.

Mohamed Azmin represented Malaysia during the signing of the MoU, which marked the furtherance of the previously endorsed Hanoi Plan of Action on Strengthening ASEAN Economic Cooperation and Supply Chain Connectivity in Response to the Covid-19 Pandemic.

“This MoU is also reflective of ASEAN’s determination to preserve centrality and solidarity, as well as to boost efforts to expedite the economic recovery from the impact of Covid-19,” he added.

The 37th ASEAN Summit and Related Meetings were held virtually from Nov 9-15, 2020, bringing together top leadership from the ASEAN member states in the midst of the Covid-19 pandemic.

The 10 ASEAN member states and five other ASEAN-FTA (free trade agreement) partners, namely China, South Korea, Japan, Australia, and New Zealand, today signed the Regional Comprehensive Economic Partnership (RCEP) Agreement, thus concluding eight years of discussions.

Source: Bernama

Digitalisation to accelerate ASEAN economic recovery post-Covid-19 — Azmin

The comprehensive partnership between the Association of Southeast Asian Nations (ASEAN) and the United Nations (UN) has been growing stronger than ever in recent years, UN Secretary-General António Guterres (pictured) said at the 11th ASEAN-UN Summit held online today.

In his speech, Guterres congratulated Vietnam on its role as ASEAN Chair 2020 and a non-permanent member of the United Nations Security Council (UNSC) for the 2020-2021 tenure and expressed his deepest condolences to the country over human losses caused by recent floods and landslides this year.

“The UN stands with the Vietnamese people and government,” the Secretary-General said.

Guterres pointed out an array of issues such as a global pandemic, climate emergency, rising geopolitical tensions, the risk of nuclear proliferation, persistent poverty, growing inequality and intense conflicts, among others.

Meanwhile, the world is on track to achieve the Sustainable Development Goals (SDGs) by 2030, he continued.

“I count on your leadership and your resolve for urgent actions to safeguard our shared world,” the UN chief stressed.

On this occasion, the UN Secretary-General welcomed ASEAN’s support for the nuclear non-proliferation regime and his call for a global ceasefire.

Regarding the Covid-19 pandemic, he commended the group’s swift and effective response, saying he welcomed ASEAN’s commitments to regional solidarity and international cooperation.

The UN welcomed ASEAN’s comprehensive recovery framework and stands ready to work with the bloc to build resilience, improve preparedness and safeguard the environment, Guterres said.

He reiterated his appeal at the 10th ASEAN-UN Summit for robust actions in the Asian region to reverse climate change.

Guterres also thanked ASEAN for its contribution of 5,000 peacekeepers to the UN operations.

Regarding the East Sea, the Secretary-General appreciated ASEAN’s commitments and efforts to a peaceful resolution in line with international law, including the 1982 UN Convention on the Law of the Sea (UNCLOS).

In his remarks, Vietnamese Prime Minister Nguyen Xuan Phuc hailed the UN’s role in coordinating actions of countries over the past 75 years, as well as its contributions to ensuring peace and promoting sustainable development in the world.

The principles of the UN Charter have helped to adjust the present international relations, he said.

Phuc said ASEAN has proven its central and inevitable role in promoting dialogue and cooperation in common matters for peace, development and stability in the region.

The bloc has also constructively contributed to international efforts led by the UN for peace, security and sustainable development in the world, he added.

Echoing Guterres’s view, Phuc further added the relationship between ASEAN and the UN has become a model of cooperation between the UN and regional organisations.

The relationship is of significance in the context of the present complex situation, with unprecedented challenges caused by the Covid-19 pandemic, the Vietnamese leader stressed.

Source: Bernama

ASEAN-UN comprehensive partnership grows stronger than ever — UN chief