Asia News Update
China/Japan: Countries interested in forming strong ties with South Asia
Source: Quartz, 9 September 2014
The diplomatic rivalry between China and Japan is rising, as both countries want to develop strong relations in South Asia. Last week, Japanese Prime Minister Abe concluded his visits to Bangladesh and Sri Lanka, just before Chinese Prime Minister Xi Jinping plans to visit the area. Abe reported that Japan will be delivering patrol vessels to Sri Lanka to help enhance maritime security, and Sri Lankan President Mahinda Rajapaksa requested Japan to help the nation construct more ports and harbors. In addition, Japan is offering Sri Lanka a USD 330 million loan to construct a passenger terminal at its airport, whereas China is assisting the nation by constructing a USD 500 million port terminal in Colombo.
Japan and China also wish to form strong alliances with India. Under Modi’s office, India is anticipated to be a more active regional participant. Abe visited India and announced Japanese investment of nearly USD 34 billion were projected for India. This week, Xi plans to visit India. Nonetheless, Japan has better ties with India – the Sino-Indian War of 1962 affected the relationship between China and India. In addition, Modi and Abe have been close since Modi was chief minister of Gujarat. Japan is a key investor in infrastructure plans, including the USD 90 billion Delhi-Mumbai Industrial Corridor that operates through Gujarat.
Indonesia: Mitsubishi Corp considers investing in auto facility
Source: Reuters, 10 September 2014
Japan’s Mitsubishi Corp could invest in a new car plant in Indonesia with its partners, as the nation under the Widodo administration projects to attract investment s into manufacturing and cut it reliance on volatile resources. However, Mitubishi Corp’s Senior Advisor Mikio Sasaki stated that nothing had yet been decided. An individual familiar with the matter said that the chief executive would visit Indonesia this week.
Various corporations from nations such as Japan have shown interest to invest in the automotive industry, as Indonesia is projected to overtake Thailand as Southeast Asia’s biggest vehicle market. The medium term project of these manufacturing corporations looking at Indonesia to build nearly 3 million vehicles by 2020, compared to 1.3 million this year. Mitsubishi Corp could invest up to USD 1 billion to enhance its Indonesian automotive business, according to the Jakarta Post. However, a company spokesman mentioned the amount was incorrect.
Thailand: Domestic political instability will not alter Japanese auto makers’ investment plans
Source: The Wall Street Journal, 12 September 2014
The Japanese Automobile Manufacturers Association chairman, stated that the current political unrest in Thailand will not a restraint on the Japanese automobile manufacturers’ projects to invest in the country. Fumihiko Ike, who is also the chairman of Honda Motor Co, further mentioned that political instability would not alter their decisions as political changes occur almost every year. In addition, the tsunami of 2011 raised concerns that the auto manufacturers would reconsider their expansion projects in Thailand. Domestic car production in dropped 26.1% y/y in June 2014.
In April, Honda announced that it would postpone the construction of a USD 530 million car-assembly facility in Thailand by at least half a year as a result of rapid changes in the car market. In May, Thai Army Chief General Prayuth Chan-ocha ousted Prime Minister Yingluck Shinawatra succeeding months of political instability and street protests that affected the country’s economy. Ike reported that Japanese automobile manufacturers are also considering India and will take the appropriate measures to increase their commitment there. He did not disclose further information.
Malaysia: Vehicle prices forecasted to drop between 1-3% after GST implementation
Source: The Star, 11 September 2014
According to the Malaysian Automotive Institute (MAI), the average vehicle prices are forecasted to drop between 1% to 3% after the implementation of the Goods and Services Tax (GST) in April of the next year. MAI CEO Madani Sahari stated that the agency conducted a price-stimulation to figure out how car prices would be affected by GST. The automobile corporations, not the government, would establish the offering price of cars. The current sales tax of 10% will be replaced by the 6% GST. The multiple tariff level feature of GST is the essential change from the current single-stage sales tax and service tax imposed at solely one stage of the supply chain.
After the implementation of GST, tariff can be levied various times by the producer and retailer – not only once at the end before the product is presented to the customer. Madani reported that it would be useless to wait to purchase a new car until after GST is imposed as a result that an individual would be losing on the resale value of an old car – a vehicle depreciates on average nearly 10% a year. Furthermore, he stated that car prices are anticipated to be more competitive in 2015, as the MAI has expected total industry volume to reach 700,000 cars next year.
India: Aditya Birla Chemicals plans to acquire Jayshree Chemicals’ chlor-alkali unit for INR 2.12 billion
Source: Chemicals-Technology, 9 September 2014
Aditya Birla Chemicals will purchase Jaysharee Chemicals’ chlor-alkali division for INR 2.12 billion. The chlor-alkali division runs a facility Ganjam, Odisha with production capacity of nearly 57,000 tonnes per annum, and also owns 1,600 acres in Andhra Pradesh. The deal will enhance Aditya Birla Chemicals’ position as a main producer of chlor-alkali, and raise its caustic soda capacity of nearly 3,55,0000 tonnes per annum.
Kumar Mangalam Birla, Aditya Birla Group chairman, says, the acquisition "will take our chlor-alkali business on a higher growth trajectory…solidifies the group's position as the country's largest producer of chlor-alkali and bolsters caustic soda supply, which is a critical input for the aluminium business." Aditya Birla Group Chemicals head Lalit Naik stated that the company anticipates considerable operational collaboration on account of cost savings. The corporation projects to finance the deal through internal accruals and debt.
Vietnam: Country breaks ground for Vung Ro petrochemical refinery complex
Source: Chemicals-Technology, 11 September 2015
Vietnam has broken ground for the new USD 3.2 billion Vung Ro oil refinery and petrochemical development in Dong Hoa, Phu Yen. The complex, which is constructed in a 538 hectare, will make fuel products, including: liquified petroleum gas (LPG), gasoline RON 92/95, jet fuel, diesel and fuel oil; and petrochemical products, including: benzene, toluene, mixed xylene and polypropylene. Scheduled to begin operations in 2017, the facility will process 8 million tonnes of oil and petrochemical products.
The complex is expected to be the third of its kind in Vietnam and complementing the petrochemical refinery facilities in located in Dung Quat, Quang Ngai and Nghi Son, Thanh Hoa. The Dung Quat complex, which began operations in 2009, processes 6.5 million tonnes of crude oil and projects to increase it capacity to 10 million tonnes per annum by next year. The USD 9 billion Nghi Son refinery is forecasted to process 10 million tonnes of crude oil per annum. According to Thanhnien News, the demand for petroleum products in the country is anticipated to hit 27 million tonnes per year by 2025.
China: Honeywell UOP’s C4 Oleflex technology chosen for Shangdong Shouguang Luqing Petrochemical’s isobutylene plant
Source: Chemicals-Technology, 12 September 2015
Honeywell UOP’s C4 Oleflex process technology has been selected by Shandong Shouguang Luqing Petrochemical to produce isobutylene, which is utilized to make high-octane fuel and synthetic rubber. Projected to be commissioned in 2016, the new technology will be installed at the company’s plant in Shandong Province and will produce nearly 170,000 tonnes of isobutylene per annum. Honeywell will be in charge of providing the engineering design, technology licensing, catalyst, adsorbents, equipment, personnel training, and technical service.
Peter Piotrowski, UOP process technology and equipment business unit senior vice president and general manager, says, “Oleflex technology is proven to have the smallest environmental footprint, the lowest cash cost of production, and the highest return on investment compared with competing technologies, and we look forward to continuing to offer this value in China and other parts of the world." Utilizing catalytic dehydrogenation, the C4 Oleflex process, turns isobutane to isobutylene, and includes a recyclable platinum alumina-based catalyst system that utilizes continuous catalyst regeneration (CCR) technology, which is highly reliable and provides high isobutylene yields.
Construction & Property Development
India: NRI investments in domestic property market to rise by 35%
Source: Business Insider, 12 September 2014
Studies show that NRI property buyers’ investment is anticipated to rise by 35%, in comparison to 18% in the last fiscal year. According to a survey given to 850 real estate developers, there has been a considerable increase in number of enquiries made from NRIs – mainly from Indians residing in the Middle East, US, Singapore, Australia, UK, Canada, and South Africa. D S Rawat, secretary general of ASSOCHAM, associated this surge to the revival of the economies worldwide. The survey suggests that NRI property buyers have shown an interest towards high-end residential and commercial properties in the nation.
Top preferred city in the domestic property market is Bangalore, followed by Ahmedabad, Pune, Goa, and Chennai. Key factor that lead NRs to invest in Bangalore real estate market is the growing IT industry. In addition, Ahmedabad remains to be the most stable market in terms of demand for commercial and residential properties. The enhance investment in the domestic real estate market, participants have organized property shows and exhibitions, in addition to extending their current distribution chains and entering into strategic collaborations.
Indonesia: REI encouraging real estate developers to enhance funding
Source: The Jakarta Post, 10 September 2014
Indonesia’s real estate sector has a very positive outlook for the long-term future. As the population of young adults in the country is 50% or 250 million of the total population, there will likely be many plentiful potential first time homebuyers in the next few years. In addition, there would probably be a rising demand for commercial properties, including shopping malls and office buildings. Projecting to start the ASEAN Economic Community (AEC) next year, The Real Estate Developers Association (REI) is advocating developers to strengthen competitiveness by enhancing funding. It was not until recent years that developers only utilized conventional financing from internal funds and/or from the banking sector. Internal funding, with 62.4%, was the main source of funding among most developers, according to a Bank Indonesia survey conducted in Q2/2014.
However, domestic developers are now facing competition from overseas developers that have different advantages, including large assets and equity, a firm business network, capital with low-interest financial base, and more refined investment models. The largest local listed developer’s assets and equity stands at USD 1.9 million and USD 1.1 million, respectively. Whereas Keppel Land’s assets and equity stand to USD 10.9 million and USD 5.9 million, respectively. Currently, only large developers can be registered in the capital market – only 54 real estate developers are listed as public companies in the Indonesia Stock Exchange. Out of those listed, 38 property corporations have made bond public offerings. Developers utilizing real estate investment trusts (REITs) remain low for two main reasons: low efficiency of the banking system and the capital market in the country and the lack of disclose of property companies.
Vietnam: Property market shows signs of improvement
Source: Saigon, 12 September 2014
After a long period of stagnation, Vietnam’s real estate market has displayed signs of recovery. At the Vietnam Real Estate Symposium, Deputy Minister of Construction Nguyen Tran Nam stated that real estate prices had not risen and were now selling at fair prices, particularly in the mid-range housing division. For the first six months of the year, prices remained stable in the high-end market, with various projects prices rising by 1% to 2% percent only. In addition, the amount of transactions also increased – nearly 5,100 negotiations were concluded at in Hanoi in from January to July 2014 (double the figure of for the period in 2013). In HCM City, there were 4,500 transactions reported for the first seven months, an increase of 30% y/y.
As of August 20, the total worth of the real estate inventory was USD 3.9 billion, a decline of USD 2.2 billion compared to Q1/2013. For the first half of 2014, the total credit balance for property had risen by 7.7% to hit USD 13.3 billion. At least 20% of the government’s housing credit package, worth USD 1.4 billion, had been spent. There has been 427 foreign direct investment (FDI) projects in Vietnam, with a total reported capital of USD 51 billion. The office-for-lease segment rose by 1.6% to 5% in most large cities, such as Hanoi and HCM City, in the H1/2014, according to Savills Vietnam. The country’s property leasing prices were competitive in comparison to other countries in the region - particularly in the hotel, retail, and serviced apartment segments.
Consumer & Retail
Japan: Consumer sentiment index drops to 41.2 in August
Source: BBC News, 09 September 2014
The consumer sentiment index was 41.2 last month, a drop from 41.5 in July, according to the Cabinet Office. This poll was presented a day after data reported that the Japanese economy declined 1.8% in Q2/2014. This drop in GDP attributed to the increase in the country’s consumer sales tax that was introduced in April to 8% from 5%. Another tariff rise is projected for next year. However no decision has been made by Prime Minister Shinzo Abe to increment the sales tax to 10% in October 2015.
Abe is expected to make a final judgment in December of the current year. Akira Amari, Japan’s economy minister, stated that authorities are prepared to propose an incentive package that would buffer the effect of another sales tariff. Amari, says, "[Mr Abe] said no countries have doubled the sales tax rate over a year and a half…I expect that he will make a considerably cautious decision."
Singapore: Consumers less confident about economic future in August
Source: Asia One, 08 September 2014
A new survey, the ANZ-Roy Morgan Consumer Confidence Index, suggests that individuals were less confident about domestic economic prospects in August than they were the previous month. Among the 1,000 respondents, 46% stated that they anticipate Singapore to have a good economy over the next year, a drop of 14% from July. In the long term, 44% believed that the country would be financially good over the coming five years, a drop from 58% in July. Respondents that believe it is now a good time to purchase important household items dropped to 17% in August, a drop of 10% m/m.
The survey also revealed that 22% of those surveyed believed it was a bad time to buy these items – a rise of 6% from July. According to Glenn Maguire, ANZ’s chief economist for South Asia, Asean, and the Pacific, stated that the results succeed a boost in confidence in July driven by the strong gains in the domestic equity market, a recovering economy and the Great Singapore Sale. The tight labor market and the related rising costs will continue to affect the consumer confidence.
Australia: Local retailers concerned with overseas fashion chains entering market
Source: ABC, 10 September 2014
The arrival of big international fashion chains in the country is negatively affecting local retailers who are currently competing with online shopping and coping with slow consumer spending and confidence. Richard Jenkins, a commercial property director at Knight Frank, stated that if a company is looking to grow internationally, it would have to be outside the US and Europe – and Australia would be a good place to start as it has 21 years of economic prosperity. However, that is not what current retailers are experiencing, particularly those in shopping centers.
Jenkins stated that vacancies have risen in the past several years, and currently there are high records in measures of the retail strip vacancy rates. Retailers and wholesalers report that demand has decreased as clients are shopping elsewhere. Rent is increasing as well. Michael Abeysekera, a director of the Australian Textile and Fashion Industries Council, states, “We've had the major mega retailers of the world come in. In addition to that, we've had mega online retailers attack this market…there are cases of some online retailers from the UK taking a million dollars in sales a day from this market." Nonetheless, long established retailers have reported they have taken considerable measures to continue in the domestic business.
Energy, Resources & Environment
China/Tajikistan: Presidents attend groundbreaking ceremony of Line D gas pipeline project
Source: People Daily, 14 September 2014
Chinese President Xi Jingping and Tajik President Emomali Rahmon attended the groundbreaking ceremony of the Tajikistan section of Line-D of the China-Central Asia Gas Pipelines. Line D, which is 1000 km long, one of China’s key energy collaboration projects in Central Asia. The line will operate from Turkmenistan across Uzbekistan, Tajikistan and Kyrgyzstan to China, with forecasted delivery capacity of 30 bcm of natural gas per annum once construction is finished in 2016. Among the nations the pipelines runs through, Tajikistan has the longest section of nearly 410 km.
At the ceremony, President Xi stated that this project was really important for regional economic development. He said, "I believe that this energy aorta, a symbol of China-Tajikistan friendship, will be built on time with joint efforts and close cooperation between our two countries." Additionally, President Rahmon announced this plan would establish more than 3,000 jobs in Tajikistan. He added that his country is prepared to work with China to carry out common development, advocate regional peace, stability, and prosperity.
Australia/India: Prime ministers reach bilateral nuclear compromise
Source: World Nuclear News, 08 September 2014
Australian Prime Minister Tony Abbott and Indian Prime Minister Narendra Modi signed a bilateral nuclear agreement that allows the sale of Australian uranium to India. In addition to this compromise, Abbott and Modi agreed to strengthen the collaboration on energy security and agreed to create a strategic cooperation based on long term supplies of Australian resources, such as coal and uranium to aid India satisfy its energy demands. Australia’s plan of withholding to offer uranium to India due to its status as a non-signatory of the Nuclear Non-Proliferation Treaty (NPT) took some time to formally change.
Yet, India had previously signed bilateral civil nuclear compromises with the US, Russia, France, UK, South Korea, Canada, Argentina, Kazakhstan, Mongolia, and Namibia with its non-proliferation credentials secured. India has an aggressive nuclear power project but very few uranium resources of its own, whereas Australia is one of the largest producers in the world. Thus, both nations would benefit from the trade. Australia’s Former Prime Minister Julia Gillard planned in 2011 to end the country’s embargo on uranium imports to India. The bilateral agreement, which was signed in New Delhi, is an apex of two years of compromises between the both nations.
Japan: Country to restart two reactors at Kyushu Electric Power’s Sendai plant
Source: The National, 13 September 2014
Japan’s Nuclear Regulation Authority granted the final authorization to restart two reactors at Kyushu Electric Power’s Sendai facility, nearly 1,360 km south of Tokyo. After the Fukushima disaster, the plant’s two reactors had been ceased, together with 48 others across the nation. Sendai facility is the first to have satisfied the vigorous regulations set by authorities, which were established after the disaster. The reactors at the Sendai facility are required to be given approval from the city and regional officials before it can restart operations. It is anticipated to be clear to begin generating electricity again earlier next year. The cease of the Japan’s nuclear power industry has affected very much affected the nation’s economy and environment.
According to the International Energy Agency, the country’s carbon dioxide emissions increased by 70 million tonnes, or 5.8% in 2012, a growth rate that had not been noticed in 20 years, as fossil fuels were burnt to compensate for the loss of 90% from the nuclear power for energy generation. Before the disaster, nearly 30% was Japan’s overall electricity had been provided by the nuclear sector. Laszlo Varro, the head of power, coal, and natural gas analysis at the IEA, reported that power generation coming from oil-fired accounts for nearly 15% of the country’s power generation and will be the first one to be replaced. Nonetheless, the natural gas market will probably experience the effect more, as Japan depends very much on LNG for gas-fired generation to fulfill the power generation hole left by nuclear.
Singapore: London and Singapore establish RMB offshore centres
Source: FTSE Global Markets, 10 Sep 2014
Beijing’s ambition of making the RMB a global currency has created fierce competitions for offshore RMB business since financial centres seek to grab a share of the pie and capitalise. With London and Singapore’s establishment of RMB payment centre, Hong Kong may lose its place of No.1 offshore RMB payments centre. Since the China-EU trade represents the second biggest global economic co-operation pact as well as more than 40% of all global foreign exchange trading happens in London, it is likely that London would be in the position of the main offshore trading centre for RMB. And Singapore is also believed to play the same role in RMB trading for its rapid ascendancy has been fuelled by the fact that offshore RMB growth to date has been stimulated mainly by the settlement of trade finance settlement.
Singapore has an advantage against London by already being capable of processing and providing easier access to RMB locally in form of the nominated clearing bank ICBC while there is no clearing bank that has been named in London yet. However, despite the fierce competition between London and Singapore, two countries have also agreed to work on further development of offshore RMB together. But it seems that neither of the two countries will be guaranteed the place of market leadership since other countries may also seek to be the centre of RMB offshore trading. So only time will tell who the winners will be among the competition.
China: Financial services enhance China-ASEAN trade ties
Source: Ecns, 09 Sep 2014
After setting up a free trade zone by China and the ASEAN bloc, two sides have entered a golden period in trade and investment since 2002. According to the data offered by the Ministry of Commerce, bilateral trade has increased from USD 100 billion in 2004 to USD 443.6 billion in 2013. It is believed that enhanced financial services will make the future development of trade and investment ties between China and ASEAN much easier. And in order to meet the increasing demand for financial services, the China-ASEAN Expo has set up a special exhibition area for financial services and finance-themed forums in Nanning since 2009.
Guangxi, as one of the southern gateways to ASEAN for China, is banking on the growth of its financial services industry to facilitate more trade with the members of ASEAN. After Guangxi was approved as a pilot region for RMB trade settlement with ASEAN in 2010, a number of finance cooperation projects have been inked. And by the end of 2013, Guangxi has managed cross-border RMB trade settlements worth over USD 34.76 billion. In November 2013, the central bank of P.R.C. has approved the Yunnan-Guangxi border pilot zone for comprehensive financial reforms and a mapped finance reform area including cities of Nanning, Qinzhou, Beihai, Fangchenggang, Baise and Chongzuo, which are located in frontline of cooperation areas.
Malaysia: New global center of financial inclusion formed
Source: Forbes, 10 Sep 2014
The rapid progress and development has happened in Malaysia in a very short period of time. The Southeast Asia’s third-largest economy has increased 6.4% in Q2/2014 due in part to another strong showing in exports. Malaysia had also announced that Kuala Lumpur would be the new permanent host for Alliance of Financial Inclusion (AFI) at the annual Global Policy Forum. Malaysia’s willing of being connected with financial inclusion policy is part of the country’s overall strategy to increase its influence on global economic issues as well as the reflection of the altering balance of economic strength toward emerging economies in establishing global policy.
Malaysia has become a world leader in supporting for the 2.5 billion unbanked and its central bank, Bank Negara Malaysia, is making financial inclusion efforts for its own citizens, supporting other countries as well as sharing experience. Financial inclusion has been recognized as an engine for inclusive growth that leads to financial stability and employment through the G20 and other international policy platform. And the effort Malaysia has made to become the new global center of financial inclusion has proven that Asia is the main power to drive the existing global economic system.
Logistics & Transportation
Thailand: Plans to boost Ranong Port’s potential
Source: The Nation, 15 Sep 2014
Port Authority of Thailand (PAT) is making full use of the approaching ASEAN Economic Community in its expectation to let Ranong Port be a pathway to Myanmar as well as the BIMSTEC (the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) group, the Middle East, and Europe. After being expanded in its second phase in 2006, Ranong Port is capable of managing up to 40,000 containers (twenty-foot equivalent units) a year. However, it has yet to be utilized at full capacity since it is considered a deep-sea port, serving Ranong province's strategic plan of becoming a hub of sea transport on the Andaman coast.
The disadvantage is that the port is quite small and far from production bases, which are mostly located in the Central region, while the advantage is that the port is near Myanmar. The port has already been under the process of registering for upgrading its warehouse to a duty-free warehouse, which would be as large ad 1,500 square meters. As a way of getting success, shipping-line operators could profit from mooring at the terminal. Another factor is the Thai government's policy on deciding how to make use of Ranong Port. If it wants more than exporting oil and import gas, the next expansion phase of Ranong Port should be completed and a four-lane highway from Bangkok to the port as well as proceed with railway double-tracking should also be constructed by government.
Singapore: E-commerce causes logistics industry to change
Source: Channel NewsAsia, 15 Sep 2014
The e-commerce ‘business-to-business’ model has been developed fast and is changing the landscape of Singapore logistics industry, which will requires a different set of systems and mindsets. New industry players claimed that they could offer solutions from one end of logistics supply chain to the other, from webhosting to warehousing as well as picking and packing. They could also help smaller retailers who are lack of enough resources and volume for being online.
E-commerce companies tend to have small inventories while most logistics companies require a least volume commitment. More companies that allow e-commerce companies to store and fulfill about a few thousand products, which would meet the requirements of smaller retailers, are in need. While new firms are entering market, the main challenge is to cost least as well as to manage to scale up. The e-commerce market in Singapore was valued to be more than USD 2 billion in 2013 and is likely to increase in line with its Asian peers, at an average annual rate of approximately 30% over the next four years.
China: Country plans to build huge seaport in North Asia with Russia
Source: RT Business, 11 Sep 2014
Since the US put its first sanctions into action in March, Russia has made quick efforts to get away from the Western financial system. Beijing and Moscow are bring their economics closer as well as diversifying from Western influence by building one of the largest ports in northeast Asia on Russia’s Sea of Japan coast. The new port will be built in Russia’s Far East, from which is just 18 km away from the Chinese border and will be able to handle up to 60 million tons of cargo per year.
In August, Russia and China had achieved an agreement on establishing a special logistics center that will allow selling fruit and vegetables directly to Russia. The construction of the first part of Gazprom’s 'Power of Siberia' pipeline has been launched on Sep 1. The construction will provide the world's fastest growing economy with 4 trillion cubic meters of natural gas it needs to keep pace for the next 30 years.
Manufacturing & Industrial
Vietnam: Country becoming the next manufacturing powerhouse in Asia-Pacific
Source: The Establishment Post, 11 Sep 2014
A growing number of manufacturers have moved their operations from China to Vietnam to avoid rising costs and an increasingly complex regulatory environment. Being in a strategic position for foreign companies with operations throughout Southeast Asia, Vietnam is also the suitable export hub for pursuing a China + 1 strategy to reach other ASEAN markets. Vietnam has the lower cost manufacturing and sourcing, when compared with other developing markets in the region. The labor costs in Vietnam are now 50% of those in China and around 40% of those reported in Thailand and the Philippines.
With an annual increase of about 1.5 million of country’s workforce, Vietnamese workers are inexpensive, young, and, increasingly, highly skilled, which will create a fierce competition with India and Singapore’s reputation for providing highly-skilled workers. Another reason why Vietnam is so popular is the country’s collection of free trade agreements (FTAs)—most notably, the soon-to-be-signed Trans-Pacific Partnership (TPP) and EU-Vietnam FTA. Another key factor drawing investors is Vietnam’s participation in the ASEAN Economic Community (AEC) and will be fully realized in late 2015.
India: Industrial production grows at weakest pace in four months during July
Source: The Wall Street Journal, 12 Sep 2014
It is reported that industrial production in India grew at the weakest pace in four months in July. Industrial output, influenced by a contraction in manufacturing, rose 0.5% from a year earlier, weaker than the 3.9% expansion in June. The reading fell significantly short of economists' expectation of a 2% increase. But there is still a relief as consumer-price inflation (CPI) eased to 7.8% in August from 7.96% in July, which is matched the prediction of economists.
The official gross domestic product (GDP) data released in late August showed that India’s economy expanded 5.7% in the three months ended June 30. July's slower industrial growth was mainly because of a weak manufacturing sector, which contributes about 3/4 of industrial output. Manufacturing output fell 1.0% from a year earlier, lowering after a 2.5% increase in June. Output of capital goods fell dramatically to a 3.8% contraction from a 23.2% increase in June. Economists believed that the turnaround is proof that businesses still are cautious about ramping up spending.
Indonesia: New industrial policy needed for manufacturing sector
Source: The Establishment Post, 10 Sep 2014
As in the case of advanced economies, the Indonesian manufacturing sector shows the abnormal process of positive de-industrialization as the economy progresses. There is a widening gap between earnings and labor productivity that has been noticed as well within manufacturing sector. In 2012, earnings in manufacturing were only 12% of labor productivity, a decline of 2.4% points, from 14.4% in 2001. The employment share of large and medium firms in Indonesia’s manufacturing sector overall has declined from 36% in 2001 to 32% in 2011.
The experience of earlier industrialized countries in East Asia shows that the role of the government in industrial development cannot be ignored. The government can pick ‘winners’ and use ‘selective’ policy interventions in the form of policy packages to create and support ‘winners’. Thus, there should be momentum for renewed industrial policy to reverse the trend of de-industrialization that has influenced Indonesia since the Asian crisis in 1990s.
Pharmaceuticals & Healthcare
South Korea: Asiana Airlines improves medical tourism
Source: International Medical Travel Journal, 10 Sep 2014
Asiana Airlines is now cooperating with hospitals and clinics in South Korea to encourage the country to be a medical tourism destination with advanced medical techniques and facilities rather than passively carrying more medical tourists each year. Asiana seems to be the main carrier for foreign medical tourists and has established business partnerships with 24 hospital and clinics. And it intends to have more partnerships with more hospital and clinics.
Asiana has also recently made an agreement with Yonsei University Healthcare System to attract non-Korean patients. They will set up a health check program for foreign tourists as well as hold promotional events overseas. Asiana will offer discounts to those visiting Yonsei University Healthcare System for healthcare services. In return, the hospital will offer more affordable medical services for Asiana passengers. According to the Korea Tourism Organization (KTO), the number of medical tourists will likely reach 250,000 in 2014, up from 211,000. In 2013, the Chinese topped the list, with 56,000 going to Korea. The United States came in second, followed by Russia, Japan and Mongolia.
Japan/India: Japan turns to India for exports of generics
Source: Dnaindia, 8 Sep 2014
Japan was so far had been a market for patented and innovative drugs, but it is slowly realizing the importance of low-cost generics because of its growing ageing population. Japanese market was earlier only allowed patent-based products. But with the ageing population growing, burden of healthcare on the government is significantly increased, which let Japan slowly understand the need for generic drugs. Except for Lupin and Zydus Cadila, no other pharma companies have been able to really enter the Japanese market for now.
Lupin acquired Kyowa Pharmaceutical Industry in 2007 and later from Pharmaceutical in 2012. Zydus Cadila also entered Japanese market through its Nippon Universal Pharmaceutical acquisition in 2007. Japan now accounts for only 1% of the country's USD 16 billion overall pharma export. That is only about INR 900-1000 and among it, INY 600-700 is active pharmaceutical ingredients (APIs) export to Japan while the rest is generic formulations. Formulation exports value has increased from 10% to 30-35% out of the overall exports to Japan.
Australia: Samsung launches health and medical equipment group
Source: Healthcare Global, 12 Sep 2014
Samsung tries to simplify and accelerate patient care through the seamless integration of new technologies in a changing medical environment. The healthcare providers are able to provide more patient-centric care as well as delivering high quality treatment with its best medical equipment. Samsung is bringing imaging and diagnostic technology innovations into the Australian healthcare sector with its first global sale in Australia of the RS80A premium ultrasound systems designed for radiology diagnosis.
The RS80A has enhanced the way ultrasounds are captured by combining imaging technology with high usability. Video clips can be downloaded to a mobile phone and updated scans can be provided every time a check-up takes place by the help of a mobile application. Physicians can devote more time to patient needs, with the help of collaborative technologies that enable facilities to streamline administrative functions while providing seamless, secure access to confidential patient records.
Asia: Carlyle raises USD 3.9 billion to bet on economic growth in Asia
Source: Bloomberg, 08 Sep 2014
Carlyle Group LP (CG) has raised USD 3.9 billion for its fourth Asia buyout fund. The final amount exceeds a targeted USD 3.5 billion, bringing the firm’s assets under management in Asia funds including Japan to USD 13.6 billion. The latest pool is 53% bigger than the USD 2.55 billion compiled for its previous Asia fund in 2010. Global investment firms are collecting new funds in Asia as previous rounds raised from around 2005 to 2008 have already approached the end of investment cycles. CVC Capital Partners Ltd. gathered USD 3.5 billion for a fund in the region this year and TPG Capital raised USD 3.3 billion.
Carlyle started approaching investors for its latest fund in 2012, and TPG began compiling its sixth Asian pool in the same year. The firms had been slower to gather fresh capital than peers including KKR & Co. and CVC. Fort Worth, Texas-based TPG sped up the process and completed the fund after overhauling its senior management. KKR raised USD 6 billion for its second Asian fund in July last year. CVC started raising cash for its fund in June 2013 and finished eight months later after exceeding its USD 3 billion target and it compiled USD 3.5 billion in May. Blackstone Group LP (BX) is putting together a USD 4 billion pool for real estate in Asia. It hasn’t raised a buyout fund specifically for the region since it opened its first Asia office in 2005.
Malaysia: Southeast Asia’s private equity deals to double in 5 years
Source: The Star Online, 8 Sep 2014
In the past five years, there were 33 private equity deals totaling USD 3.11 billion (RMB 9.93 billion) in Malaysia. There is no capital gain tax for private equity investments in Malaysia compared to 25% in Indonesia and the Philippines. HarbourVest Partners, LLC senior managing director and founder D. Brooks Zug said “a growing market like Malaysia offered good opportunities for the growth of private equity firms.”
On the overall cyclical private equity scene, there was still upside for the asset type, which is supported by financing facilities available in the market as well as the buoyant equities market. The private equity funds would be paid much higher for a transaction due to cheap funding but there were still opportunities. For HarbourVest, most of its investments are in the United States with less than 10% in South-East Asia.
Australia: Top five growth sectors noticed by private equity
Source: The Australian, 8 Sep 2014
Industry experts told the Australian Private Equity and Venture Capital Association (AVCAL) conference that private equity groups are calm to do more consolidation work within their current portfolios and make investments to generate returns. Wealth management, international education, agribusiness, tourism and gas are identified as five sectors with growth potential for investors in Australia.
London-based private equity sponsor Intermediate Capital Group (ICG) is behind two acquisitions made in the last two months by Brisbane’s Cura Day Hospitals Group, and intends to offload the group via either an IPO or trade sale once it reaches a certain scale. Private equity firms can generate value through their consolidation activities in aged care sector. Estia Health, owned by private equity firm Quadrant, will use its positive record in the sector's consolidation as a selling point to investors since it is preparing to float the business this year, valued over USD 1 billion.
Technology, Media & Telecommunications
China: Chinese tech companies catching up to US counterparts
Source: South China Morning Post, 16 Sep 2014
Alibaba may change the fact that few Chinese companies are famous around world. Alibaba and China's other Internet giants are among the world's biggest tech companies with their names are barely known overseas. Alibaba has accounted for 80% of the mainland's online retail sales, which means its turnover is greater than American counterparts Amazon and eBay combined. With a New York listing, its operations and ambitions and those of its Chinese rivals are squarely in the international spotlight.
Chinese tech companies have been obtaining famous talent and innovative beginning in Silicon Valley and elsewhere to energize operations and such people give links to foreign markets and add credibility. Buying and investing in start-ups enables the nurturing of innovative ideas that can add to existing products and create new ones to deal with rising competition. And healthy competition will help Chinese Internet firms attain the global stature.
Japan: Tech giant NEC targets outer space
Source: The Wall Street Journal, 8 Sep 2014
NEC Corp. established a factory that doubled the company's ability of satellite-making after withdrawing from fields like smartphones and semiconductors. Several other Japanese companies have similar hopes as NEC’s that they want to turn themselves into bigger players in the global space industry. From 2004 through 2013, Japanese companies generated combined sales of about USD 5.4 billion from their satellite-making activities, which compares with USD 75 billion for U.S. companies and about USD 26 billion for those based in Europe.
NEC has made efforts to find commercial customers overseas. Out of total space-related sales of USD 475 million, the company exports JPY 5 billion to JPY 7 billion worth of parts to satellite makers elsewhere. Mitsubishi Electric has been exporting satellites for more than a decade. But its overseas sales still represented less than 30% of the space division's overall sales of JPY 85 billion last year. It is tough to get business from the leading international commercial satellite operators who have longstanding relationships with established U.S. and European manufacturers.
South Korea: Robotics gaining more attention
Source: Bloomberg Businessweek, 11 Sep 2014
South Korea is popularizing robotics by making it a force in high-speed broadband, widescreen televisions, and smartphones. And a state-subsidized KRW 758 billion theme park featuring futuristic rides as well as research and development labs, which is called robot Land, is planned to open in 2016. According to the Ministry of Trade, Industry and Energy, the scale of that industry has doubled since 2009, with revenue reaching KRW 2.1 trillion in 2012.
The government is investing KRW 1.1 trillion to support the nation’s robotics industry and seeks to boost that to KRW 7 trillion by 2018 with 600 domestic robot companies employing 34,000 workers. Catching up to competitors is not an easy task. The domestic robot market in South Korea is mainly pushed to manufacturing bots that meet with the shipping and auto industries as well as heath-care industry.