The Week in Asia – November 2020

Asia House Advisory takes a look at the top developments in Asia this week affecting trade, investment and public policy.

Join our mailing list to receive The Week in Asia direct to your inbox every Friday.

FRIDAY 27 NOVEMBER 2020

ByteDance gets one more week to solve US issues

The US Committee on Foreign Investment has given ByteDance a one-week extension to restructure the ownership of TikTok. The extension gives ByteDance until 4 December to finalise an arrangement that will allay US national security concerns about the app. ByteDance this month said it had submitted a proposal to restructure TikTok’s US operations as a new entity, owned by Oracle, Walmart, and ByteDance’s US investors, as well as detailed solutions to satisfy national security concerns. Bytedance says it has received no feedback on its data privacy and security framework.

The role of tech in global geopolitics and business will be explored during the Asia House Global Trade Dialogue on 7 December, featuring leading AI pioneer Kai-Fu Lee and WTO Chief Economist Bob Koopman. Find out more.

India bans 43 more Chinese apps

The Indian government this week banned 43 more Chinese apps from operating in India, including Alibaba’s shopping site AliExpress. The Electronics and Information Technology Ministry said that the apps were blocked for “engaging in activities which are prejudicial to the sovereignty and integrity of India.” The government has banned more than 200 apps since June this year. The latest move, described as a “digital strike” by India’s technology minister, have seriously impacted major Chinese companies, including Tik Tok owner ByteDance; Alibaba; and Tencent. Indian technology companies have looked to take advantage of the exit of Chinese competition from the market.

Indonesian sovereign wealth fund approaches US private and public funds

Indonesia has begun funding discussions with both private and public investors for its new sovereign wealth fund. The fund was created by the recently passed Omnibus Bill in October. The US International Development Finance Corporation (DFC) has signed a letter of interest for a US$2 billion investment. Indonesia has also approached private equity firms in the US, including Blackstone and Carlyle, to take part. The fund is looking to raise up to US$15 billion to focus on infrastructure such as toll roads and electricity networks. The government will put an initial US$5 billion into the fund. It will be the first serious stock take of interest in such funds in the region since the 1MDB scandal in Malaysia in 2015.

Hong Kong leader Carrie Lam makes annual policy address

Hong Kong leader Carrie Lam Yuet-ngor made her fourth annual policy address this week, laying out a list of economic and social measures and emphasising the need to save Hong Kong’s constitutional order. Key policy points included restoring the constitutional order and filling gaps in China’s national security; Greater Bay Area integration; bolstering the economy; overcoming the impact of the pandemic; and increasing the supply of housing. Lam stressed the importance of assistance from – and coordination with – Beijing in implementing the measures, doing little to abate concerns over Hong Kong’s independence. This week, senior UK ministers also warned that British judges sitting on Hong Kong’s highest court should not lend a ‘veneer of legitimacy’ to the city’s legal system if it was compromised by the national security law.

Saudi Crown Prince and Israel’s Netanyahu meet

Saudi Crown Prince Mohammed bin Salman and Israeli Prime Minister Benjamin Netanyahu met in a historic meeting on Sunday, following the signing earlier this year of the Abraham Accords, which Israel signed with the United Arab Emirates. The normalisation of relations with Saudi Arabia, a leading Arab power in the region, would be a huge diplomatic coup for Israel in the Middle East. However, both Saudi Arabia and Israel have only indirectly referred to the meeting, suggesting that both countries are delaying definitive diplomatic moves for now.

Asia House Corporate Members were briefed by the Saudi Ambassador to the UK, HRH Prince Khalid Bin Bandar Bin Sultan, earlier this month. Read more.

NEXT WEEK IN ASIA

New Zealand to declare climate emergency: Prime Minister Jacinda Ardern’s government is expected to declare a climate emergency next week, on 2 December. The move is expected to increase pressure for action to combat global warming.

Malaysia to vote on supply bill next week: Following the passing of the national budget in parliament on Thursday, Malaysia’s supply bill will enter the committee stage next week, with several rounds of voting to go while the lower house of parliament scrutinises each portion of the bill.

Asia House will be welcoming Charles Hay MVO, British High Commissioner to Malaysia, for a briefing with Corporate Members on 9 December. Find out more.

COVID-19: ASIA ROUND UP

HONG KONG: Bars and nightclubs are closed in Hong Kong as the number of COVID-19 cases continues to go up. Companies have also been encouraged to adopt work-from-home arrangements.

JAPAN: Japan’s COVID-19 advisory panel has urged residents to avoid travelling to and from areas with high numbers of cases for the next three weeks. Tokyo’s metro government has urged bars and restaurants to operate shortened hours from Saturday.

THAILAND: The Prime Minister has said Thailand is set to sign a purchase agreement for AstraZeneca’s potential COVID-19 vaccine this week, in the country’s first COVID-19 vaccine deal. The cabinet has extended its state of emergency until 15 January.

Asia House partnered with Pfizer last week to explore the progress being made on a COVID-19 vaccine and the importance of global collaboration in fighting the pandemic. Read more.

These COVID-19 insights are taken from Asia House Advisory’s focussed monitoring service, one of the ways in which Asia House is providing analysis on economic and public health policy measures taken by governments across Asia and the Middle East. Please reach out to Ed Ratcliffe, Head of Advisory, at ed.ratcliffe@asiahouse.co.uk for further details on this and our other advisory services.

Asia House Advisory helps organisations understand new operating environments and meet business-critical challenges. Find out more.

FRIDAY 20 NOVEMBER 2020

Thai government tensions continue to rise

Further clashes this week in Bangkok have highlighted the ongoing political tensions in the country. Protestors gathered to urge lawmakers to accept constitutional amendments proposed by seven different groups, most aimed at reining in the Senate’s power on amendments and reforming the relationship between the government and the monarchy. Five of the proposals were turned down on Wednesday by a joint session of the Senate and the House. Two proposals suggesting a constitution drafting committee – which will stop short of reviewing the role of the monarchy – were passed. The vote was followed by further demonstrations in Bangkok, and Prime Minister Prayut Chan-o-cha has warned pro-democracy protestors to expect harsher police tactics and measures in the days ahead.

Read Asia House’s primer on the political situation in Thailand here.

China-Australia tensions continue to heighten

A Chinese government document seen this week has further increased tensions between Australia and China. A dossier of 14 disputes was handed over by the Chinese Embassy in Canberra to various news outlets. Issues among the 14 grievances listed include “government funding for anti-China research at the Australian Strategic Policy Institute”; “raids on Chinese journalists and academic visa cancellations”; “calling for an independent investigation into the origins of COVID-19”; and “banning Huawei from the 5G network in 2018.” A Chinese government official in a briefing said that if Australia backed away from policies included on that list, “it would be conducive to a better atmosphere.” The Australian government has rejected the characterisation and has called for further dialogue.

Google and Temasek invest in Indonesian unicorn Tokopedia

Google and Temasek have invested in Indonesian e-commerce start-up Tokopedia. Google now holds 1.6 per cent of Tokopedia and a Temasek-affiliated firm has a 3.3 per cent stake in the company. The move follows a recent investment by Microsoft into Tokopedia rival Bukalapak. The investment will help Tokopedia to further accelerate digital transformation in the company and in Indonesia. US tech firms are increasingly looking for investment opportunities in Asia as growth in the US and Europe slows, while continuing to increase in Asia. Indonesia’s e-commerce market is worth US$32 billion this year and is set to grow to US$83 billion in 2025.

Read Asia House’s briefing on Indonesia’s AI ambitions here.

Malaysia hosts digital APEC meeting

The Asia-Pacific Economic Cooperation (APEC) summit was held virtually this week by chair country Malaysia. Though the COVID-19 pandemic was a major issue of discussion, the original main objective this year’s summit was to decide on a vision to replace the group’s ‘Bogor Goals’. These goals centred around a long-term aim for free and open trade and investment in the Asia Pacific. Chinese President Xi Jinping also addressed the summit, vowing to continue opening up the Chinese market to support global economic growth. Xi said that China “will not reverse course or run against the historical trend by decoupling, or forming a small circle to keep others out.”

Reserve Bank of India takes over another ailing regional bank

The Reserve Bank of India (RBI) has taken over the regional bank Lakshmi Vilas in the latest of a series of rescues of lenders close to collapse. Shares in Lakshmi Vilas dropped 20 per cent in opening trading on Wednesday. The Chennai-based bank is struggling with a sharp increase in bad loans, erosion of its capital base, and three years of losses. As part of the rescue package, the RBI has also proposed folding the bank into the Indian unit of Singaporean bank DBS. The rescue is part of the RBI’s wider attempt to prevent a bigger crisis in the country’s financial system, which has been long burdened with one of the world’s highest bad-loan ratios.

RCEP, the world’s largest trade agreement, signed

Leaders of 15 Asia Pacific countries signed on Sunday the world’s largest trade deal. The Regional Comprehensive Economic Partnership (RCEP) could add almost US$200 billion annually to the global economy by 2030.

Read Asia House’s briefing on the trade deal here.

NEXT WEEK IN ASIA

Chinese Foreign Minister Wang Yi to visit Japan: Foreign Minister Wang Yi will visit Japan next week for meetings with senior Japanese officials. The two are likely to discuss reopening business travel between the two countries, and issues in the East China Sea.

G20 summit: Saudi Arabia will host this year’s G20 Summit on 21 and 22 November. The summit will be held virtually and will cover pressing global issues – from economic recovery to climate change and growing inequality.

Asia House Corporate Members were briefed this week on Riyadh’s aims for the meeting by the Saudi Ambassador to the UK, HRH Prince Khalid Bin Bandar Bin Sultan. Read more here.

COVID-19 AND ECONOMIC RECOVERY: ASIA ROUND UP

JAPAN: The Japanese government is seeking legal changes to allow corporate shareholder meetings to be held fully online. Prime Minister Yoshihide Suga said Japan is on ‘maximum alert’ after reporting record numbers of COVID-19 cases. GDP grew five per cent in Q3 compared to the quarter before.

AUSTRALIA: Prime Minister Scott Morrison travelled to Tokyo this week to discuss strengthening ties between the two countries. He is the first foreign leader to meet Prime Minister Yoshihide Suga. He is expected to spend the nationally mandated two weeks in quarantine when returning to Australia.

INDONESIA: The central bank lowered its benchmark interest rate for the fifth time this year.

THAILAND: Thailand’s central bank left its key interest rate unchanged at a record low. The country’s economy contracted 6.4 per cent year-on-year in Q3.

These COVID-19 insights are taken from Asia House Advisory’s focussed monitoring service, one of the ways in which Asia House is providing analysis on economic and public health policy measures taken by governments across Asia and the Middle East. Please reach out to Ed Ratcliffe, Head of Advisory, at ed.ratcliffe@asiahouse.co.uk for further details on this and our other advisory services.

Asia House Advisory helps organisations understand new operating environments and meet business-critical challenges. Find out more.

FRIDAY 13 NOVEMBER 2020

Samsung and Toshiba announce plans to stop coal investments

Samsung Group’s financial units and Toshiba have both announced that they will stop any future involvement in new coal projects. Samsung’s financial units have pledged to stop investment into new coal projects, including via bonds or insurance underwriting. Toshiba will stop taking orders for new coal-fired power plants and will boost revenue from renewables by 242 per cent over the next 10 years. The decisions follow recent pledges by South Korea and Japan to become carbon neutral by 2050, and reflect growing global pressure to reduce investment in fossil fuels and focus more on renewables.

India’s competition watchdog orders investigation into Google

The Competition Commission of India has ordered an in-depth investigation into the links between Google’s mobile app store and its payments service. This comes after an initial review suggested that the internet company was unfairly squeezing out competitors, with the watchdog concluding that requiring mobile app store customers to use Google Pay was an “imposition of unfair and discriminatory condition.” The 60-day investigation could impact its business in India, where it is facing stiff competition from rival payments apps. Both Facebook and Walmart have launched payments services through platforms in India, as both domestic and international players look to take a lead in the market.

China Construction Bank to issue offshore blockchain bond

China Construction Bank has partnered with Fusang Exchange, a digital platform, to launch an offshore bond based on blockchain. The deal will aim to raise up to US$3 billion and will allow investors to buy digital tokens that are backed by deposits at China Construction Bank’s branch in Labuan, Malaysia. The tokens will be available for purchase by investors on an exchange that specialises in digital assets and can be traded using either dollars or bitcoin. The move comes as part of a wider push in China towards new financial technologies. China’s central bank is working on a digital version of the renminbi, and the country’s financial sector is moving rapidly towards the development of such new technology.

Hong Kong pro-democracy lawmakers resign

After the Hong Kong government ‘disqualified’ four opposition lawmakers this week, most pro-democracy legislators resigned en-masse. The government made the decision using new powers, granted by Beijing earlier this week, that allows for the removal of lawmakers on national security grounds. Hong Kong Chief Executive Carrie Lam said the decision was “constitutional, lawful, reasonable and necessary.” The decision has drawn criticism from the US, with bipartisan condemnation from the Senate. These changes come as Hong Kong’s opposition politicians, educators, and journalists are facing increasing pressure from the introduction of the new national security law earlier this year.

National League for Democracy wins majority in Myanmar elections

Myanmar’s Election Commission announced today that the ruling National League for Democracy (NLD) has won a majority in parliament. The NLD, led by Aung San Suu Kyi, has said it is on track to win more seats than in the 2015 election – the Election Commission has confirmed that the party has won at least 346 seats, or more than 80 per cent of seats up for election. The country’s ethnic parties have not polled as well this time, with nine ethnic parties having won 41 seats. The Election Commission has received criticism for not allowing voting to go ahead in a number of districts, primarily in ethnic minority regions, nominally for security reasons. Following the election, parliament will hold a session early next year to choose the president. The polls are the second national elections since the end of several decades of military rule.

NEXT WEEK IN ASIA

RCEP signing on Sunday: Fifteen Asia Pacific countries are set to sign the Regional Comprehensive Economic Partnership (RCEP) on 15 November. If signed, the RCEP will be the world’s largest trade deal in terms of GDP.

Four central banks to meet next week: Central banks in China, Indonesia, the Philippines, and Thailand are due to hold meetings next week. All are likely to review interest rate policies, but few changes are expected to be made.

COVID-19: ASIA ROUND UP

HONG KONG: Hong Kong and Singapore will start an ‘air travel bubble’ from 22 November, allowing no-quarantine general travel between the two cities.

INDIA: Prime Minister Narendra Modi’s coalition has retained power in state legislative elections in Bihar. The vote was viewed as a referendum on Modi’s handling of COVID-19. Finance Minister Nirmala Sitharaman announced a new stimulus package worth US$35 billion.

AUSTRALIA: Prime Minister Scott Morrison has said that foreign students will not be allowed to return to the country, as the government prioritises the return of citizens stuck overseas.

INDONESIA: Indonesia has signed a US$1.09 billion loan deal with the Australian government to help combat the COVID-19 pandemic.

MALAYSIA: The Malaysian economy contracted 2.7 per cent in the June to September quarter.

PHILIPPINES: The economy shrank 11.5 per cent in Q3 from a year earlier.

NEW ZEALAND: The central bank unveiled a new monetary policy tool that will reduce borrowing costs for lenders.

These COVID-19 insights are taken from Asia House Advisory’s focussed monitoring service, one of the ways in which Asia House is providing analysis on economic and public health policy measures taken by governments across Asia and the Middle East. Please reach out to Ed Ratcliffe, Head of Advisory, at ed.ratcliffe@asiahouse.co.uk for further details on this and our other advisory services.

Asia House Advisory helps organisations understand new operating environments and meet business-critical challenges. Find out more.

FRIDAY 6 NOVEMBER  

Microsoft to invest in Indonesian e-commerce unicorn

Microsoft has announced a strategic investment in Indonesian e-commerce start-up Bukalapak. The company’s latest funding values Bukalapak at between US$2.5 and US$3.5 billion. Bukalapak will be able to use Microsoft’s cloud services as its ‘preferred cloud platform’ and will be switching from using Google’s services as part of the terms of the deal. E-commerce is a rapidly growing sector in Indonesia and has benefitted from the COVID-19 lockdowns this year. Bukalapak was the third most visited e-commerce platform in the country in Q2 2020. Microsoft’s investment is the latest in a series of big global tech firms to invest in Indonesia’s digital market – Facebook and PayPal invested in Gojek in June, and Google is investing in rival e-commerce platform Tokopedia.

Read Asia House Advisory’s analysis on Indonesia’s tech sector.

Ant Group IPO faces six-month delay

Ant Group’s IPO could be delayed by at least six months after Beijing halted its trading debut this week. Shares of Ant Group were due to begin trading in Shanghai and Hong Kong in what would have been the world’s largest IPO at US$37 billion. However, early this week Beijing announced new draft regulations that investors have said will make Ant Group rethink its business model. The group will have to submit a new IPO prospectus in Hong Kong, which could take at least six months. The draft regulations could heavily impact Ant Group’s lending business, as they require internet platforms to provide at least 30 per cent of the funding for their loans and to cap loans at US$44,843 or a third of a borrower’s annual salary.

Indonesian President Widodo signs omnibus bill into law

Indonesian President Joko Widodo this week signed the controversial ‘omnibus bill’ into law. The job creation law is a cornerstone policy of Widodo’s second term and makes wide changes to more than 70 laws across labour, tax, and other key areas. The package of bills aims to reduce red tape and improve the foreign investment environment. The package has been met with widespread protests from labour unions, students, Islamic organisations, and international civil society who argue that it reduces workers’ rights and endangers the environment. The government has said the bill will create an additional one million jobs per year and increase worker productivity.

Ed Ratcliffe, Head of Advisory at Asia House, spoke to FDI Intelligence about these developments. Read more.

US makes moves in Southeast Asia trade relations

Indonesia this week saw a potential boost to its economy as negotiations with the US on its access to the GSP (Generalized System of Preferences) facility resulted in an extension of reduced US import tariffs based on Indonesia’s developing country status. This development closely follows punitive US moves against two nearby ASEAN member states, Thailand and Vietnam. In late October Thailand had its access to the GSP facility withdrawn based on allegations that the Thai market was not open to imports of US pork, and in early November the US significantly increased import tariffs on light vehicle tires from Vietnam in its first move against the country based on allegations of currency manipulation. While these developments may point to a new pattern of engagement for the US with Southeast Asia, all eyes will be on the outcome of the US Presidential elections, which could herald a new era for the US strategy on global trade.

Protests in Thailand continue

Protests in Thailand continued this week, with a pro-democracy movement calling for a large weekend rally as it seeks to communicate with the King. Leaders of the protests have also dismissed Prime Minister Prayut Chan-o-cha’s proposals to set up an inclusive committee to find a way to break the current political impasse. The country has seen mass demonstrations for weeks targeting changes to the monarchy. Protestors have also been calling for two other demands: the resignation of the prime minister and his cabinet, and constitutional changes drafted in consultation with representatives of the Thai people.

NEXT WEEK IN ASIA

Myanmar holds general elections: Myanmar will go to the polls on 8 November. Nearly 100 political parties will be contesting in the general election, which will be seen as a test for Aung San Suu Kyi and her National League for Democracy party.

South Korea’s top diplomat to visit US next week: South Korean Foreign Minister Kang Kyung-wha will travel to the US next week for a four-day visit, after Seoul pledges a solid alliance with the US regardless of the presidential election results.

COVID-19: ASIA ROUND UP

CHINA: China has banned non-Chinese travellers from Britain, France, Belgium, the Philippines, and India, as COVID-19 cases continue to surge in Europe and Asia.

INDONESIA: The government will offer sovereign guarantees on loans to businesses under a new regulation. Q3 GDP figures were released, showing GDP contracted 3.49 per cent in the July to September quarter from a year earlier.

THAILAND: Foreign investment pledges to Thailand dropped 29 per cent year-on-year in the January to September period.

MALAYSIA: Two ministers told Parliament this week that the government is looking at ways to defer or suspend elections due to the surge in COVID-19 cases in the country.

NEW ZEALAND: The government has announced an extension of its small business loan scheme to three years and will begin rolling out a new job support programme before the end of the year.

CAMBODIA: Prime Minister Hun Sen and four cabinet ministers are in quarantine after having met with Hungary’s Foreign Minister the same day he tested positive for COVID-19.

These COVID-19 insights are taken from Asia House Advisory’s focussed monitoring service, one of the ways in which Asia House is providing analysis on economic and public health policy measures taken by governments across Asia and the Middle East. Please reach out to Ed Ratcliffe, Head of Advisory, at ed.ratcliffe@asiahouse.co.uk for further details on this and our other advisory services.

Asia House Advisory helps organisations understand new operating environments and meet business-critical challenges. Find out more.