08 OCTOBER 20 12 I SSUE 96

CARICAPTURES

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BETA

ASEAN

Indonesia

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ASEAN NEEdS to rESolvE kEy

tAx iSSuES

iNdoNESiA rE-ArmS itSElf

ASEAN must resolve its tax issues

ahead of the ASEAN Economic

Community (2015) for successful

economic integration. President of the, International Tax and

Investment Centre, Daniel A. Witt said that

“ASEAN will have to answer fundamental

questions and a lot of work remains

Indonesia will resume production

of its own military hardware to

modernise its weaponry. The House of Representatives on 2

October passed the Defence Industry Law,

enabling its strategic industries to develop

military hardware after more than 20 years

of dormancy

With this law in place, Indonesia will no

longer import military hardware unless

purchases are authorised by the House of

Representatives

The law stipulates that primary defence

to be done before 2015, but it can be

accomplished”

Outstanding issues include how to

determine the region’s tax base and which

goods and services are covered

The type of taxes also vary from those

based on volume, prices, ad valorem taxes,

or a mixture

There is no need for a unified tax policy,

industries that produce weaponry and

strategic defence equipment shall come

under the auspices of the Ministry of

Defence while supporting industries shall be

under the Ministry of State Enterprises

China, Russia, and Germany are planning

to supply defence hardware to Indonesia,

but those plans are likely to be altered by

the new law, analysts said

Why it matters: Indonesia aims to develop

its domestic defence industry to cater to

boost sales to South Korea, the Philippines,

Malaysia, Singapore and East Timor

Jakarta Globe (3 October 2012)

but administration must be clarified, for

example, details of how and who will collect

taxes, how revenues are distributed, and

how taxation operates cross-borders have to

be clarified

Witt also emphasised the role of

technology that can help offset risks in

transactions

Business World Online (3 October 2012)

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

ASEAN

ASEAN

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ASEAN ExchANgE liNk lurES

rEtAil iNvEStorS

thAi AgriculturE

fAcES thE AEc

The ASEAN trading link currently

between Singapore and Malaysia

which started on 18 September needs

a strong public relations campaign

to inform investors of the differing

regulatory regimes of the exchanges. A potential issue is that the broker system

means there is no central clearinghouse,

and transactions are governed by the

relevant exchange’s regulator

The Stock Exchange of Thailand is

expected to join the link in October –

collectively the three account for 67%

of the total market capitalisation of the

ASEAN Exchanges group, which includes

Indonesia, the Philippines and Vietnam’s

two bourses

Singapore, Thailand and Malaysia have

the benefit of high corporate governance

When:

Bursa Malaysia (BM) and Singapore

Exchange (SGX) connected on 18

September 2012. The Stock Exchange of

Thailand (SET) will be added in October

2012.

Why:

1. Promote the growth of the ASEAN

capital market as an asset class

2. Bring more ASEAN investment

opportunities to people

3. Enhance liquidity amongst member

Exchanges

ASEAN trading link

The ASEAN Economic Community

will open Thailand’s agriculture

sector to ASEAN’s large market

and demand, however Thai farmers

will also face stiff competition from

producers in Vietnam. Thai farmers will have access to larger

markets especially for sugar, rice, corn,

cassava, palm oil, cocoa, and coffee

Myanmar has the most potential for

agriculture sector growth within the CLMV

(Cambodia, Laos, Myanmar, and Vietnam)

countries

According to a survey, Thai farmers

lack understanding of the AEC, Thailand

is spending 15 times less than Vietnam in

agricultural R&D and 80% of Vietnamese

arable land is covered by the irrigation

system compared to only 25% in Thailand

Thai farmers are encouraged to

improve management systems and form

cooperatives to increase quality control,

increase their knowledge of the AEC, and

try to find high-value add niches such as

halal foods for regional Muslim consumers

There will be more competition in palm

oil between Malaysia and Indonesia

Bangkok Post, My News Hub

(1 October 2012)

What:

A B2B gateway which allows pioneer brokers to trade directly to connected

exchanges being licensed in that market.

Who:

Pioneer Brokers connected on the ASEAN Trading Link:

Malaysia

1. AA Anthony Securities

2. Affin Invesment Bank

3. CIMB Investment Bank

4. HwangDBS Investment Bank

5. Kenanga Investment Bank

6. Maybank Investment Bank

7. Mercury Securities

8. OSK Investment Bank

9. RHB Investment Bank

Singapore

1. CIMB Securities (Singapore)

2. DMG & Partners Securities

3. Lim & Tan Securities

4. Maybank Kim Eng Securities

5. Phillip Securities

6. UOB Kay Hian

standards compared to other ASEAN

jurisdictions

Countries may have to adjust their

regulations before the link can be

implemented – the recent rule change in

Thailand whereby Thai security companies

can now publicise research reports of

foreign securities companies demonstrates

this

IFLR, Bloomberg (27 September 2012)

Click here for media factsheet and information on how the trading link works

Source: SCB EIC analysis based on data from World Bank. FAO. and Department of Labor and Employment, Republic of the Philippines

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

myANmAr

moNitor05Vietnam

Malaysia, Indonesia, Philippines, Cambodia

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07

full forEigN owNErShip?

gEAriNg up for ElEctioNS,

Not AEc

Vietnam is proposing to allow

foreigners to take full ownership of

some joint-stock companies and set

up wholly owned securities firms in

an effort to bolster the stock market. Overseas companies can acquire as

much as 100% of the registered capital of

brokerages, up from the current maximum

of 49%, or establish wholly owned

securities firms if they have been operating

in the banking and insurance industries for

two years and posted a profit in the most

recent two years, according to a draft

measure posted on the State Securities

Commission’s website

Foreign investors are very interested

in buying shares of companies in some

industries such as banks or consumer

goods, according to Giang Trung Kien, head

of research at FPT Securities Joint-Stock

Company

Meanwhile, Moody’s Investors Service cut

Vietnam’s credit rating further into junk

territory, citing risks the government will

have to pump money into the country’s

banks and the sector’s limited ability to

support the economy

Moody’s on 5 October downgraded

Vietnam by one notch to B2 with a stable

outlook and said risks to the rating were

balanced going forward

Why it matters: Allowing foreign

investors to increase their stakes in

publicly listed brokerages and joint-stock

companies may boost liquidity in the stock

market

Bloomberg, Wall Street Journal (2 October 2012)

As election season looms in several

ASEAN countries, new policies and

campaigns focus on catering to

domestic interest groups with no

clear emphasis on preparing for the

ASEAN Economic Community. Malaysia recently released the national

budget geared towards an impending

general election, with generous offerings of

education subsidies, smartphone rebates

for young voters, cash handouts, and raises

in public sector salaries

Indonesia’s presidential elections are

scheduled for 2014 and have had an effect

on the mining industry through new policies

that restrict foreigners, say experts, citing

a new law requiring foreign companies to

divest within 10 years

The Philippines is also preparing

for general elections next year and is

committed to anti-corruption and anti-

poverty campaigns

In Cambodia, two opposition parties have

combined forces to face Hun Sen’s 27 year

tenure in next year’s elections

Why it matters: Despite reduction in

subsidies, Malaysia’s budget does not have

an ASEAN vision. Indonesia’s economic

protectionism in its mining industry is

also not promising. While Aquino’s anti-

corruption drive is admirable, the lack of

regional outlook reminds us that ASEAN

integration is not on national agendas.

CNBC, CSIS, Bangkok Post, Wall Street Journal,

The Jakarta Globe (2 October 2012)

Economy

Myanmar seeks to cut gas exports to

Thailand to meet own needs as domestic

power shortages continue to cripple the

economy and scare off potential investors.

Myanmar is hoping to retain 200 million

cubic feet of the 1 billion cubic feet it

exports to Thailand per day. Gas exports to

Thailand increased from US$2.52 billion in

the fiscal year 2010-2011 to US$3.50 billion

in 2011-2012.

Asia One (4 October 2012)

The Asian Development Bank has

increased its prediction of economic growth

in Myanmar for the next two years at the

same time it is scaling back its prediction

of growth in the region. ADB now predicts

that growth in Myanmar will be 6.3% and

6.5%, while growth in the region is expected

to be 6.1% and 6.7%, for 2012 and 2013,

respectively.

Mizzima (3 October 2012)

Myanmar is planning to set up seven more

local industrial zones in addition to the 18

existing zones.

Bernama (3 October 2012)

Investment banker Alisher Ali has founded

Myanmar’s first investment bank - Mandalay

Capital. The business is modelled on Eurasia

Capital, a boutique investment bank in Ulan

Bator, Mongolia, founded by Ali in 2008.

Silk Road Finance is Mandalay Capital’s

parent company.

The Irrawaddy (2 October 2012)

Felda Global Ventures plans to develop

a complete supply chain of its three core

businesses – palm oil, sugar cane and

rubber - in Myanmar. The group has signed

a MoU with local partner, Pho La Min

Trading, to explore rubber plantations and

processing.

New Straits Times (1 October 2012)

Politics

President Thein Sein said in an interview

he would accept opposition leader Aung

San Suu Kyi as president if elected, but

added he could not alone amend Myanmar’s

constitution which currently bars her from

power due to a clause that prohibits those

with close foreign relatives from holding

high office.

The Star (30 September 2012)

Foreign Affairs

US President on 5 October signed into

law a measure making it easier for the

United States to back international financial

institutions which support Myanmar’s

reform drive.

New Straits Times (6 October 2012)

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

Singapore , Indonesia ASEAN, Thailand

09 10goiNg for

gold Book ExchANgE

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

Consultant Editor: Tunku ‘Abidin Muhriz Designer: Iqbal Hakim

From 1 October, Singapore is

scrapping a 7% tax on gold and

silver in an effort to turn the city

into a precious-metals trading hub

to rival London and Zurich, where

value-added taxes don’t apply to the

investment-grade gold trade. Singapore, touting its image as a safe,

stable and few-questions-asked haven for

investors, is hoping to store an increasing

amount of gold and silver

Gold sales in Singapore are expected to

jump after the tax change takes hold, in

part, because investors have been holding

off on purchases awaiting the tax break,

according to Singapore’s United Overseas

Bank

Singapore’s position between India and

China, the world’s two biggest gold buyers,

also makes it well-placed to benefit from

growing Asian demand

Meanwhile, Indonesia’s gold production

potential may be hampered by illegal

mining, politicking between central and

regional government and a spate of

demonstrations and violent attacks against

junior gold miners

Indonesia is endowed with the world’s

fifth-largest gold reserves estimated at

3,000 tonnes, is the world’s seventh largest

gold producer with annual output of 111

tonnes in 2011 and the mining industry now

accounts for around 12% of its GDP

Wall Street Journal, Reuters (2 October 2012)

The Publishers and Booksellers

Association of Thailand (Pubat) is

promoting an exchange of literature

between ASEAN members before

the advent of the Asean Economic

Community (AEC) in 2015. Pubat will push for the campaign at

next month’s meeting of the Asean Book

Publishers Association, where it will

suggest a special rate for publication of

ASEAN, UN

08ASEAN BooStS tiES with uN, gcc

ASEAN pledges to continue

expanding cooperation with the

United Nations (UN) and the Gulf

Cooperation Council (GCC) in the

fields of trade, investment, education

and culture. ASEAN made the commitment on the

sidelines of the 67th session of the UN

General Assembly (UNGA) held in New

York recently

At the ASEAN Foreign Ministers’ meeting

with the UN Secretary General and the

President of the UNGA, the first of its kind

since the adoption of the Joint Declaration

on Comprehensive Partnership between

ASEAN and the UN at the 4th ASEAN-UN

Summit in Bali last November, participants

reviewed the implementation of the

ASEAN-UN Comprehensive Partnership,

based on the joint report by the

Secretariats of ASEAN and the UN.

Meanwhile, ASEAN members have

pledged to support each other’s bids for

seats at the United Nations, including

Vietnam’s candidacy for the 2014-16 UN

Human Rights Council tenure

The bloc’s foreign ministers confirmed the

arrangement at the recent Informal ASEAN

Foreign Ministers’ Meeting on the sidelines

of the UNGA

Vietnam Net, Vietnam News (2 October 2012)

literature under the programme.

In addition, there can be business

matching between publishers, writers and

distributors

These activities may begin at the Bangkok

International Book Fair 2013 next March

The multilingual exchange would educate

the various countries about other cultures

and prepare people for the AEC, Pubat

president Worapan Lokitsataporn said

Bangkok Post (3 October 2012)