News Briefing - October 28, 2008

ASEAN

Political News

• An ILO report on Labor and Social Trends in ASEAN in 2008 reported that labor shortages were expanding from multinationals to local businesses, saying the problem was not a lack of applicants, but poor qualifications. The ILO estimated that, based on IMF predictions, the financial crisis could cost twenty million jobs worldwide.
• The Indonesian House of Representatives ratified the ASEAN Charter.
• An ASEAN meeting on the advancement of women was held in Hanoi on October 22, focusing on the draft master plan for an ASEAN socio-cultural community.
• Somchai called on EU leaders at the ASEM Summit to support Burma through development, not sanctions, saying his ASEAN leadership would focus on making it more ‘people-centered.’
• The ASEM summit ended with leaders committing themselves to a post-Kyoto set of goals to be discussed at the December 2009 meeting in Copenhagen. The Summit also saw discussion on human rights, food security and sustainable development.
• Though meetings between Thai and Cambodian leaders were supposedly positive, ASEAN Sec-Gen Surin announced the organization was ready to mediate the conflict.
• ASEAN’s summit December 15-18 will be moved from Bangkok to Chiang Mai.

Business News

• Thailand has proposed at $350 billion plan, 10% of foreign exchange reserves, to protect currencies and buy equities, bonds and fund infrastructure projects.
• China, Japan and South Korea will meet in mid-December to talk about forming an $80 billion currency swap scheme by the first half of 2009.
• ASEAN agreed to form a control group of finance ministers and central bank governors to study proposals to alleviate the crisis. ASEAN +3 leaders agreed to joint efforts to combat the global financial crisis while on the sidelines of the ASEM meeting in Beijing focusing on global warming.

Indonesia

Effects of the Global Financial Crisis

• The budgets for election campaigns may need to be reduced due to current economic problems and contributions will probably not be as large as they were in the past.
• SBY has been invited to attend a meeting of world leaders in Washington to address the global financial crisis.
• Jusuf Kalla held talks with the CEO of JP Morgan Asia to discuss measures that must be taken by banks and the government to support all sectors of the economy.

Coal News

• A consortium led by TPG has offered $1.28 billion for a 35 % stake in Bumi.
• Bukit Assam posted a net profit of $132 million for the first nine months of this year, a 150% jump from the same period last year.
• A syndication of four European banks will inject $400 million into coal-fired plant projects as part of the 10,000 MW electricity program. This injection will account for 25% of the total loan.

Cepu News

• MCL has begun cleaning wells in Bojonegoro, and plans to begin production of the block by December 10. MCL is targeting to produce of 20,000 bpd.
• People in the Banyuurip and Jambaran areas threatened to report the scandal involving the team clearing the Cepu block to the KPK.
• The government targets the Cepu block refinery will begin operating in February 2009. The refinery is expected to process crude oil at a capacity of 6,000 bpd.

2009 Elections

• NGOs are warning the 2009 legislative elections could fail because the KPU’s poor performance, such as not meeting schedules, enforcing election regulations inconsistently, and delaying the publication of the final list of eligible voters and the final list of legislative candidates.
• However, the KPU maintains that everything is on track for next year’s elections, and it is better prepared now than for the 2004 elections.
• Thirty-five kings from across the country will gather in Yogyakarta on October 28 to consider Sultan Hamengkubuwono X's bid for the presidency.

ADDITIONAL NEWS

Political News

• The KPK will take over the investigation of BLBI corruption cases from the AGO after criticism that the AGO had failed to resolve them.
• The stock market slowdown and decrease in banking liquidity may force mining firms to reduce their spending on exploration, causing commodity scarcity during the next four to five years.
• The BPK said it has found some irregularities in Indonesia's energy sector that might indicate corruption, after auditing the 2007 financial reports of government agencies and ministries. The 2007 non-tax revenue and income tax on oil and gas, worth $10.86 billion, were not transparently reported by contractors.
• After a three year deadlock, the House of Representatives passed the state ministry bill, which limits the number of ministries to 34 and allows ministers to have deputies.

Business News

• Indonesia's communications minister announced Qtel cannot control more than 65% of Indosat.
• As many as 23 operators have taken pre-qualification documents for repeat tender for universal service obligation, with potentially more to come since the deadline has not passed.
• The U.S. government has asked for reassurance from the Indonesia government that oil and gas contracts will be respected in order to create a more stable investment climate. Indonesia has said it will do all it can to respect the contracts.
• The government will consider lowering fuel prices following the drop in global crude oil prices, depending on whether it is economically feasible.
• The government is considering revising the negative investment list for the health and pharmacy sectors.
• Indover Bank, a Netherlands-based subsidiary of BI, defaulted on debt payments. Lawmakers have approved a $707 million bailout by BI, which will use massive taxpayer funds. The situation is being blamed on mismanagement on the part of BI.
• The Constitutional Court turned down a petition filed by labor unions to review a bankruptcy law allowing companies to prioritize paying their debts, which they said was in violation of workers' constitutional right to severance pay.
• Two geothermal power plants with a total capacity of 122 MW could be in operation by next year to help ease the country's power supply shortage.

Malaysia

Elections Scorecard

• Mukhriz is leading the UMNO Youth race with 66 nominations, while Khairy obtained 44. Khir Toyo has obtained 39 nominations, qualifying him to run.
• In the UMNO VP race, Hishamuddin is leading with 66 nimnations, followed by Ahmad Zahid with 46, Mohamed Khaled Nordin with 39, and Shafie Apdal with 36.
• Najib has acquired 82 nominations, while Tengku Razaleigh Hamza has none.
• Muhyiddin Yassin is well in the lead for deputy president with 54 nominations. The next contender, Mohd Ali Rustam, has 16.
• UMNO supreme council nominations are favoring new candidates over incumbents, possibly due to people desiring change and new blood in the leadership.

The Global Financial Crisis

• Badawi has called on world leaders to pay attention to the global food crisis, blaming the use of agricultural land for biofuels as the cause of rising prices.
• Malaysia is planning to reevaluate its projects, emphasizing those that will ensure employment is created and give people more disposable income. The focus will be on areas with high potential, biotechnology, agriculture, biofuel and services.
• Najib is planning to announce new measures to boostthe economy after finishing up the 2009 budget on November 4.

ADDITIONAL NEWS

Political News

• Najib has promised more will be done to stop money politics, and the UMNO disciplinary board has been given full mandate to take stern action against those in the party involved in money politics.
• Najib accepted Malaysiakini's apology with regards to the report on a manifesto which was wrongly attributed to him.
• Karpal Singh was suspended from Parliament for two days after being disrespectful to Speaker Tan Sri Pandikar Amin Mulia.
• There may be a Cabinet reshuffle if the newly-elected MCA president Ong Tee Keat wants to make any changes concerning ministers from the party.
• Eleven members of Hindraf were arrested after holding an illegal gathering outside the prime ministers office on Thursday, and have snce been released.
• The Pahang UMNO liaison committee has received eight complaints, including six on money politics, since the divisional delegates meeting started early this month.

Business News

• The exploration and production arm of Petronas has awarded 15 fabrication contracts worth a combined $782 million, with the largest going to Malaysia Marine and Heavy Engineering.

Philippines

Effects of the Global Economic Crisis

• The legislative proposal to increase the maximum insurance coverage of bank deposits could cause a spike in interest rates and trigger moral hazard, according to bank officials.
• Banks are in the middle of an eight day period in which they will be allowed to shift assets from categories that require mark-to-market accounting to categories that don't while booking them at their market value on July 1. That will allow banks to avoid hits from the recent plunge in prices for bonds and other investments world-wide.
• Food security, implementation of infrastructure, re-engineered education, and energy self-sufficiency top the list of priorities that the business community would like government to address to maintain gains that have been made in light of the economic crisis.
• Sen. Roxas has announced he believes the 2009 budget should be revised to enhance public spending and help protect against the global economic crisis.

Meralco News

• Barely a week after approving the new rate structure of Meralco, the Energy Regulatory Commission told the company that it could no longer implement a rate increase scheduled for November.
• San Miguel has announced it has an agreement with GSIS to buy a 27% stake in Meralco for $547 million. The company is also eyeing a stake in Petron from the Ashmore Group.
• The Commission on Audit expects to finish auditing Meralco sometime in January, which is being done to clarify rate-related issues in compliance with a 2006 Supreme Court order.

Philamlife Sale Status

• AIG’s sale of Philamlife should be finalized before the end of the year. Among those that have declared their intent to buy Philamlife’s assets are Ayala, the Yuchengco Group, Metrobank Group and GSIS.
• GSIS will have to take on a partner if it wants to bid for Philamlife, though they have not publicly stated who the partner might be yet.

ADDITIONAL NEWS

Political News

• The House of Representatives will have a long list of issues to contend with when it reconvenes on November 10, including the 2009 General Appropriations Act, economic reforms, and GMA’s impeachment complaint.
• House leaders are remaining firm against GMA’s impeachment bid, feeling it is ill-timed, bad for the country, and the elections are too close.
• GMA will have the opportunity to appoint seven new members to the Supreme Court next year, which is causing some to worry that she will strengthen her hold on the institution which well last until the end of her time in office and beyond.
• Jocelyn Bolante has been implicated as a major player in a huge fertilizer fund scam, and is being deported from the U.S. back to the Philippines.
• MILF is planning to disband its peace negotiating panel due to “loss of trust” in the government.

Business News

• Angelo Reyes Announced that the Philippines is on the brink of a power shortage. The Visayas are already experiencing occasional blackouts, he expects Mindanao to begin facing problems next year, and for Luzon to reach a critical point in 2010.
• Energy sales of Napocor went up by 2% in the first half of the year with increased sales across the country, especially in the Visayas.
• Sen. Edgardo Angara is calling on government officials to promote renewable energy, which the Philippines is in a good position to do as the second-largest geothermal producer in the world and with the highest wind-power potential in Southeast Asia.
• The Presidential Anti-Smuggling Group has asked the Commission on Audit and the Bureau of Internal Revenue to audit the stock of Unioil and Oilink in order to determine the extent of fraudulent practices perpetrated by these two companies.
• The Clark Development Corp. is willing to award the operation of Mimosa Leisure Estates to Waterfront Philippines a second chance to reach a settlement with Pagcor regarding the payment of the P350 million unpaid debt.
• Stakeholders have sought prior consultations before the Secretary of Health issues drug price ceilings under the implementing rules of the cheaper medicines law. The draft of the act has included an advisory council that may be consulted on price setting.
• The Philippines plans to ask for $100 million from the Millenium Challenge Corporation to fund its tax administration programs.

Singapore

Business News

• Singapore and China have a signed a free trade agreement that will eliminate 85% of Singapore’s exports to China.

Thailand

THEMES

October 7 Fallout Continued

• The Government said the Constitution rewrite would be halved to 120 days and signaled the House might then be dissolved. At least 40 senators will voice opposition to the formation of a CDA and push for government to dissolve the House rather than buy time with a rewrite, bringing the number of opposition votes to around 80 out of 150.
• The fact-finding committee on the police crackdown said it will not be able to finish its investigation within the 15-day deadline.
• Interior Minister Kowit said he believes no violence will occur if retired Pol Gen Salang leads officers to surround Government House.
• Somchai went to the ASEM Summit in Beijing despite widespread rumors of a coup.
• ABAC poll shows 56.3% support Somchai as PM, compared with 43.7% against. The most positive response came from the traditional base of northern poor.

Ever-Active Courts

• Democrat MP Withoon was acquitted of electoral fraud by the EC, while two additional Democrats were yellow carded, vacating House seats but allowed to contest by-elections.
• Prosecutors are translating the TS verdict as part of a slew of documents being prepared to get him extradited. Thaksin said he was confident the UK would not extradite him. Thai authorities must prove that he was convicted of an offense that is also punishable in Britain.
• The PAD leaders briefly considered discontinuing their protest last week after the TS verdict, but said that their new goal is his extradition. PAD leader Pibhop Dhongchai has proposed younger PAD members form a political party to push for ‘New Politics’ despite most PAD leaders insisting they will not contest elections.
• Thaksin was scheduled to phone into Truth Today’s mobile show on November 1; that is now in doubt.
• PPP execs may vacate their House seats to allow party-list candidates to become MPs and retain majority rule once disbanded.

Economic Indicators Update

• The Thailand Development Research Center (TDRI) has forecast the global crisis will lead to growth of less than 3.8% next year. However, TDRI’s recommendation was that the BoT trim its growth forecast to 2.2%.
• The Baht fell to an 18-month low of 34.79 to the dollar with analysts saying it has further to go as investors dump emerging market assets.
• The SET fell 10.5% on Monday to 387.43 points, crashing through the 400 point mental barrier amid widespread panic and prompting a trading cut at 4pm.
• The Federation of Thai Industries (FTI) said that export output has dropped 30% and could continue into 2009, leaving over 1 million people unemployed.
• Olarn said the government will apply six more measures to cope with the impact of the crisis and will budget $34.5 billion of private-sector and bank money for injection into credit for SMEs and farmers and for encouraging the stock market.
• Suchart said eight state-controlled banks could be directed to increase lending to ease liquidity shortages if private banks scale back credit.
• The TAT will spend $1.4 million in the rest of the year to boost domestic tourism.

ADDITIONAL NEWS

Political News

• Cambodian provincial and military officials say they’re recruiting militias along the border with Thailand in case of another outbreak of hostilities. Thailand denied claims by Cambodia that its soldiers had damaged the Preah Vihear Temple with rocket fire on October 15, saying it was Cambodia that had used rockets.
• Anupong issued a warning that the military would not tolerate the implication of the monarchy in politics and would be strict with lese majeste vigilance.
• An ABAC poll shows 63% of Thais believe graft is a part of every government and is acceptable if the government still brought prosperity to its people.
• A bomb blast went off in the early morning before the land case verdict at the home of the Supreme Administrative Court President.
• About 200 state employees surrounded Somchai’s car when he arrived at the ICT Ministry, pelting him with shoes and insults.
• An article in the Vancouver Sun suggested that royal succession was at the heart of the turmoil.
• Chalerm will partner with the ICT Ministry to target websites selling abortion drugs.

Business News

• The BoI approved privileges for 45 projects worth $562.7 million.
• AIS will cut its 3G services budget for this year by 40% to $60 million, with the remaining 60% ($90 million) slated for provincial expansion next year.
• TOT forecast its net profit will drop 13% this year to $154.4 million.
• The GSM Association urged Thailand to proceed with 3G licensing and to begin planning for the 2.5GHz spectrum. Intel called for the NTC to speed the auction on WiMax licenses to complement 3G services.
• Thailand may barter rice for Iranian oil on a trip in November.
• The Central Transport Committee will lower non-air-conditioned public bus fares by $0.04 and air-conditioned fares by $0.03 from October 28.
• Protestors demonstrated outside the SET on Monday against a planned listing by Beer Chang Company, owned by Thai Beverage, and plan to demonstrate outside the Ministry of Finance on Wednesday.

Vietnam

THEMES

Managing Growth While Containing Inflation

• CPI in October dropped 0.19% against September, the first decrease in 18 months, though it remains 26.72% higher than October 2007. HCMC CPI dropped 0.24% in October.
• October marks the fifth straight month of curbing the trade deficit below $1 billion, making its level in June-October just 19.7% of that from January-May. It is forecast the 2008 deficit will be lower than planned targets.
• Imports rose 43% to $70.1 billion in October, down from 48% import growth through September. The estimated trade gap in the ytd is $16.3 billion. The MoIT said imports were forecast to rise 15% to $96.6 billion in 2009, creating a trade deficit of $20 billion.
• The MoIT set a target to increase exports by 18% to $76.7 billion in 2009.
• The MoIT asked the MoF to exempt rice from export taxes in order to boost exports; taxes were applied in July when worries about a shortage reigned.
• The SBV will cut the benchmark interest rate by as much as 2% in the coming months.

Building Infrastructure, Influx of FDI

• FDI inflows in October reached $2 billion on 68 new projects, bringing FDI in the ytd to $58.3 billion. Disbursement in the ytd reached $9.1 billion, a 38.3% rise yoy. Thua Thien-Hue Province has attracted $2.3 billion in FDI this year, a 600% increase over 2007. Industry and construction have taken 53.7% of projects and 55.7% of FDI value.
• Vietnam and China signed 8 deals during Dung’s visit to Beijing, including the establishment of a confidential phone line, cross-border medical quarantine, credit for the Hanoi-Ha Dong light rail project, preferential credit, a trade zone in Haiphong, cooperation, construction and operation of the Sao Mai-Ben Dinh port and strategic cooperation between PetroVietnam and CNOOC.
• Vinashin’s Nha Trang Shipyard won two contracts to build four new cargo ships for Norway’s Calypso Group (two ships at $71 million to 2010) and Laos’ LS Tourism and Transport Company ($63 million to 2009).
• Dung signed approval for the establishment of the Dong Dan-Lang Son border economic zone.
• MoTC estimates it will need $60 billion to fund road infrastructure from 2008-2020. The ADB is spending $29 million to finance preparations for three expressway projects from Hanoi to Lang Son, Ha Long to Mong Cai and Ben Luc to Long Thanh. Korea’s Incheon Urban Development Corporation (IUDC) will invest a build-operate-transfer project on construction of the Dau Giay-Lien Khuong expressway.
• Foreign investors will be able to own 100% of SOEs operating in certain sectors, in accordance with a new decree on the transferring and selling of state companies. In addition, intermediaries involved in appraisal and auctions, may not buy stakes in SOEs.
• MARD and Japan’s JICA signed a $3.5 million cooperation project to develop handicrafts and agriculture in four northwestern provinces.

Capital Market Development

• The VN-Index dropped 4.25% on Monday to close at 345.11. The VN-Index has lost 109.3 points, or 24%, since October 1.
• The SSC published a list of companies illegally selling shares on the HOSE and HASTC and forwarded the violators to the judiciary.
• The Dong fell against the dollar due to increased demand for dollars.
• Joint-stock banks have followed state-owned banks in cutting deposit interest rates to an average of 16% from a peak of 19% this summer.
• The BIDV said that almost all banks are falsifying documents on deposits to enjoy lower reserve requirements; some are suggesting a standard rate across all levels.
• Vietcombank plans to list by the end of Q1 regardless of the stock market value, despite two earlier delays for that very reason.
• Phu Nhuan Gold, Silver and Gemstone Company (PNJ), with a charter capital of $18.18 million, was approved to list 30 million shares on the HOSE.
• A new NA bill would have the Ministry of Finance assume responsibility for all foreign loans taken out by provincial governments.

Education Developments

• In 2009-2010, Vietnam will call for bidders for projects on training workers sent abroad through labor export companies in an effort to match supply and demand.
• Many students are now transferring from junior college to university to gain access to higher education from a lower starting point, with transfers increasing 200% this year over last.

OTHER NEWS

Political News

• The NA is discussing draft laws on categorizing and creating a legal framework for urban planning and another law on public debt management, which will not include SOE debt. Another NA draft law will broadly increase the level of subsidies for health insurance coverage.
• During his visit to China, Dung and counterpart Wen Jiabao agreed to push up negotiations on demarcation in the Gulf of Tonkin as well as completing land border demarcation by the end of 2008.
• The FM spoke out against the EU Parliament’s adoption of a resolution on human rights in Vietnam, which it says is inaccurate and threatens fruitful relations.

Business News

• The SBV moved to ensure financing for viable EVN projects by requiring banks to evaluate projects and finance loans for all feasible ones.
• Vietnam and the EU finished the second round of talks on the PCA; the next round will take place in Brussels in Q3 2009.
• Triet and President Medvedev witnessed the signing of a series of cooperation documents including agreements on cooperation in intellectual property protection, prevention of illegal immigration, repatriation of citizens, and implementation of this agreement, as well as an agreement on temporary working visits by Vietnamese citizens to Russia and Russian citizens to Vietnam and continued cooperation in oil and gas exploration and exploitation through Vietsovpetro until 2012, in addition to a number of cooperation agreements on oil and gas. The two sides also signed an agreement on cooperation in the sharing of information and a memorandum of understanding on cooperation in an investment project to build a mining and processing complex in Vietnam.
• Vietnam and Nigeria signed a deal to promote trade ties; Vietnam says Nigeria is a target for expanded export markets.
• A delegation of more than 230 businessmen from almost 160 Italian firms will visit Vietnam in November.
• Investment promoters from 30 northern cities and provinces met in Vinh Phuoc on October 24 to review their work and to coordinate with the MPI to assist investment promotion activities.
• CBRE said the real estate market for retail services remains appealing to local and foreign investors despite the global economy.