Driving commercial and political engagement between Asia, the Middle East and Europe
Driving commercial and political engagement between Asia, the Middle East and Europe
Driving commercial and political engagement between Asia, the Middle East and Europe
Asia House Advisory takes a look at the top developments in Asia this week affecting trade, investment and public policy.
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FRIDAY 30 APRIL 2021
Hong Kong’s legislature unanimously passed an immigration bill on Wednesday 28 April, prompting international concern over the new powers it gives the government to restrict the movement of people. The bill, which comes into effect on 1 August, empowers Hong Kong’s immigration chief to prohibit individuals from boarding planes entering or leaving the territory, without the need for a court order. The government has stated that the bill is solely aimed at screening illegal immigration and has dismissed concerns over the potential impact on constitutional rights of free movement. The legislature also approved the 2021/22 budget in record time, with a single dissenting vote. The development marks a sharp contrast to last year when lawmakers debated the budget for more than three weeks.
Hong Kong’s economic outlook was discussed by Paul Chan, Financial Secretary for Hong Kong SAR, during a briefing with Asia House Corporate Members on 30 April. Read more.
Taiwanese chip manufacturer United Microelectronics Corp (UMC) announced investments of US$3.59 billion to expand capacity over the next three years. The move comes amid an ongoing global semiconductor component shortage, which is directly impacting a range of manufacturers beyond the automotive industry, where the shortage was initially most strongly felt. Increased pressure on the semiconductor sector is accelerating expansion drives, as demonstrated by UMC and a recent announcement by Taiwan Semiconductor Manufacturing Co (TSMC) for US$100 billion investment to expand capacity across its plants.
Global semiconductor supply is an aspect of the US-Japan CoRe Partnership struck between President Biden and Prime Minister Suga during this month’s Washington summit. Read Asia House Advisory’s analysis note on the agreement.
Discussions between China and Germany took place this week, with 25 ministers participating in talks. The meetings produced a number of cooperation agreements in areas such as research, transport and health. The consultation is the sixth of its kind, and is the last that will be attended by German Chancellor Angela Merkel. Wider issues addressed included a request by Merkel for Beijing to re-engage in a dialogue on human rights, referencing the importance of China ratifying protocols set out by the International Labour Organization. In response to the comments, Premier Li Keqiang said Berlin should stay out of ‘internal affairs’.
Norbert Röttgen, Chairman of the Foreign Affairs Committee, German Bundestag, briefed Asia House Corporate Members this week on Germany-China relations. Read more.
The government of Saudi Arabia is reportedly in discussions with China Investment Corporation (CIC) and other Chinese national oil companies for the possible sale of a one per cent stake in Saudi Arabia’s Aramco. The state oil company was partially listed on Saudi Arabia’s stock exchange in late 2019, raising US$30 billion for the country’s economic diversification efforts. Saudi Arabia is currently China’s biggest supplier of oil. The sale, if confirmed, would lock in Chinese demand for Saudi oil and Aramco’s products. Proceeds from the sale will likely go to Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF), which is being used as a major vehicle to encourage economic diversification within Saudi Arabia.
Saudi Arabia’s economic diversification efforts will be discussed when HRH Prince Khalid Bin Bandar Bin Sultan, Saudi Ambassador to the UK, briefs Asia House Corporate Members on 25 May as part of the Asia House COP26 Programme. Find out more.
Crown Prince Mohammed bin Salman participated in a wide-ranging TV interview this week to commemorate the fifth anniversary of Saudi Arabia’s Vision 2030 national transformation programme, and discuss future Saudi economic policy. The Crown Prince said there were no plans to introduce an income tax in Saudi Arabia and that the sharp rise in VAT from five per cent to 15 per cent in July 2020 was temporary and would eventually be reduced to between five and 10 per cent within five years. Saudi Arabia has slowly introduced taxes over the last few years to develop alternative revenue streams to oil. Excise taxes on tobacco, soft drinks, and energy drinks were introduced in 2017, and a VAT of five per cent was introduced in 2018. COVID-19 and resulting economic stimulus measures introduced by the Saudi government, coupled with a collapse in oil prices in 2020 has widened Saudi Arabia’s budget deficit. The IMF expects this budget deficit to narrow from 12 per cent of Saudi GDP to four per cent in 2021.
G7 meeting scheduled between 3-5 May 2021: The UK will host foreign and development ministers in London; a trilateral sideline meeting between the foreign ministers of the US, Japan and South Korea is also set to take place.
India-EU virtual summit scheduled for 8 May: A ‘connectivity’ partnership is set to be announced, developing digital, transport, and energy sectors in what could represent an alternative to China’s Belt and Road Initiative.
LAOS: A two-week lockdown has been imposed in the capital, Vientiane, lasting between 22 April-5 May following a COVID outbreak that likely originated in Thailand.
BRUNEI: On Saturday 24 April, the national vaccine campaign in Brunei commenced; according to the country’s vaccine strategy, the first phase of the roll-out will target frontline workers.
THAILAND: On Sunday 25 April, Thailand recorded 2,438 new coronavirus cases and 11 new deaths, marking the second consecutive day for a record daily number of COVID-related deaths; lockdown restrictions in Bangkok will be ramped up between 26 April and 9 May due to rising infection levels.
JAPAN: A targeted state of emergency has been declared in the prefectures of Tokyo, Osaka, Hyogo and Kyoto, with the ruling coming amid mounting pressure on the government to move away from partial emergency measures and impose wider restrictions due to rapidly increasing COVID infection numbers.
HONG KONG: A 14-day flight ban has been imposed on the Philippines amid a recent surge of new COVID infections there; a travel bubble between Singapore and Hong Kong will commence from 26 May.
These COVID-19 insights are taken from Asia House Advisory’s focused 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.
FRIDAY 23 APRIL 2021
Indonesia will host a summit of leaders of the Association of Southeast Asian Nations (ASEAN) in Jakarta on Saturday 24 April to discuss the deepening post-coup crisis in Myanmar. Since the military took power in February, economic stability has deteriorated with wide-spread food and income shortages, alongside escalating violence – an issue that will likely be a key focus of the summit. The leaders of Singapore, Indonesia, Malaysia, Vietnam, Laos, Cambodia, and Brunei have confirmed their attendance. Myanmar’s coup leader, Senior General Min Aung Hlaing, is also set to take part. However, Philippines President Rodrigo Duterte will not attend; the country will be represented by Foreign Minister Teodoro Locsin. Similarly, Thai Prime Minister Prayuth Chan-ocha will be represented by Deputy PM, Don Pramudwinai. The United Nations Special Envoy for Myanmar, Christine Schraner Burgener, will hold meetings alongside the event with senior officials. The summit is a notable shift in ASEAN’s previous diplomatic policy, which ordinarily avoids direct involvement in the domestic affairs of member-states. It follows weeks of attempts by ASEAN, notably Indonesia, to restabilise the political situation in Myanmar.
Australian Foreign Minister Marise Payne announced on Wednesday the cancellation of two deals made in 2018 and 2019 by the government of Victoria with China as part of the Belt and Road Initiative (BRI). According to a foreign ministry statement, the deals have been deemed ‘inconsistent with Australia’s foreign policy and adverse to our foreign relations’. Responding to the decision, China’s Embassy in Canberra warned of ‘further damage to bilateral relations’. The action comes amid escalating tensions between the two countries following a series of trade rows. This notably also marks the first time the federal government has used newly acquired powers to veto deals made by sub-national governments with foreign countries. It elevates the risk of retaliatory action from China over the weeks ahead, likely further targeting Australia’s export sector.
The US hosted a two-day virtual climate summit this week, attended by 40 countries. China joined the dialogue, despite heightened tensions between Beijing and Washington. US President Joe Biden opened with the pledge that his country would reduce carbon emissions by 50 per cent by 2030. While not announcing any new climate targets, President Xi Jinping outlined commitments to ‘phase down’ coal consumption from 2025 and ‘strictly control coal fired generation projects’ over the next five years. Similarly, India did not pledge any new goals, but announced a ‘Climate and Clean Energy Agenda’ with the US. Japan announced a new carbon emission reduction target, now set at reaching 46 per cent by 2030; a significant increase in its short-term ambitions, previously set at 26 per cent. Elsewhere, South Korea pledged to prohibit state institutions from financing overseas coal projects and indicated that a new target to reduce domestic carbon emissions would soon be confirmed.
The European Council published a 10 page document on 19 April setting out its new strategy for the Indo-Pacific region, which is specifically intended to ‘contribute to regional stability, security, prosperity and sustainable development at a time of rising challenges’. A wide range of issues are covered, including climate change, trade and investment, sustainable development, and the role of technology in stimulating green growth. Areas of note in the report include a commitment to negotiate ‘ambitious trade and investment agreements’ in the region such as those concluded with Japan, the Republic of Korea, Singapore and Vietnam; conclude free trade agreements with Australia, Indonesia and New Zealand; and drive forward a Comprehensive Agreement on Investment with China. It also indicates efforts towards stronger economic ties with India, a key area of focus for the upcoming India-EU virtual summit on 8 May.
Norbert Röttgen, Chairman of the Foreign Affairs Committee of the German Bundestag, will brief Asia House Corporate Members on Europe’s Indo-Pacific strategy on 28 April. Find out more.
Rayyan Nagadi, the head of Saudi Arabia’s National Center for Privatisation (NCP), this week announced a 2021 target of US$4 billion in infrastructure deals with private investors. The figure is the largest set since the NCP was established in 2017, likely reflecting Saudi Arabia’s ramped up efforts to speed up privatisations in a bid to narrow a budget deficit that rapidly expanded in 2020 during the COVID-19 pandemic. Included in this target will be the completion of a number of key asset sales. Most recently, this was exemplified in the Kingdom’s complete privatisation on 8 April of the Third Milling Company (MC3) from Saudi Grains Organisation (SAGO), 100 per cent of which has been acquired by a consortium of Al Ghurair Investment, Al Rajhi Holding Group and Masafi. More widely, these sales reflect the Kingdom’s Vision 2030 strategy, which aims to diversify the economy away from oil-dependency.
Saudi Arabia’s diversification efforts will be discussed when HRH Prince Khalid Bin Bandar Bin Sultan, Saudi Ambassador to the UK, briefs Asia House Corporate Members on 25 May as part of the Asia House COP26 Programme. Find out more.
Bank of Japan to publish latest Outlook Report: The Bank of Japan’s monetary policy meeting will take place on Tuesday, with analysts expecting raised growth projections and inflation forecast at one per cent.
SOUTH KOREA: The pharmaceutical company, Huons Global, has confirmed that it will lead a consortium of pharma firms, including local entities Prestige BioPharma, Humedix and Boran Pharma, to produce 100 million doses of Russia’s Sputnik V COVID-19 vaccine per month.
MALAYSIA: The Health Ministry has proposed restricting interstate travel ahead of Hari Raya Aidilfitri celebrations in a bid to curb the spread of COVID; the recent spike in infections has sparked concern among government officials that a fourth wave is imminent.
THAILAND: The Civil Aviation Authority of Thailand (CAAT) has implemented a restriction on domestic flights, suspending airline transport operations between 11pm-4am local time amid rising infection levels; CAAT has also advised airlines to consider implementing social distancing on flights. They must also now inform all passengers of the penalties imposed if found to be travelling while infected with COVID.
JAPAN: The National Institute of Infectious Diseases has warned that COVID variants are set to account for 80-90 per cent of all new infection cases in the Tokyo area by early May, amid surging infection levels.
HONG KONG: The national inoculation scheme was extended to individuals aged between 18-29 from Thursday 15 April amid ramped up efforts to boost vaccine uptake.
These COVID-19 insights are taken from Asia House Advisory’s focused 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.
FRIDAY 16 APRIL
US President Joe Biden hosted Japan’s Prime Minister Yoshihide Suga in Washington today (Friday 16 April), marking the first foreign leader to meet in-person with President Biden at the White House. The meeting signals a recalibration of US foreign policy from the isolationist stance of the Trump administration, with the Indo-Pacific region now a major priority. The two leaders are set to cover a wide-range of topics, including the deepening of economic ties; security issues, likely to include China’s increasing assertiveness in the region; COVID-19; and climate change. Discussions on a potential joint initiative involving the development of technological infrastructure across the Indo-Pacific region are also set to take place, likely focusing on the promotion of hydrogen power and fifth generation wireless technology.
China’s National Bureau of Statistics (NBS) published its first quarter gross domestic product (GDP) figures today, with a record 18.3 per cent growth year-on-year across the first three months of 2021. It compares to a sharp contraction of 6.8 per cent in the first quarter of 2020 during the country’s first outbreak of COVID-19. Elsewhere, industrial production increased by 14.1 per cent in March, while retail sales rose by 34.2 per cent. The figures reflect a strong recovery, although this has notably slowed following a jump in economic growth after COVID-19 was initially curbed in China. The NBS release follows Premier Li Keqiang’s announcement at the National People’s Congress in March that China is aiming for a minimum six per cent growth target across 2021. Despite being the only major economy to expand in 2020, constraints to the recovery process will likely continue to impact momentum, notably across the consumer goods and service sectors.
Chinese President Xi Jinping joined the leaders of France and Germany for a joint virtual climate summit this week, at the invitation French President Emmanuel Macron. Beijing’s attendance will likely raise hopes that President Xi will agree to US President Joe Biden’s invite to the upcoming international climate summit, hosted in Washington later this month. The US envoy for climate, John Kerry, is currently in Shanghai to meet with Chinese counterparts in closed-door talks, aimed at easing tensions by promoting the shared interest of climate change ahead of the summit.
The United Arab Emirates cabinet has approved the adoption of a ‘Strategy for Talent Attraction and Retention’, which aims to strengthen the country’s position as a preferred destination for living, working and investing. A press statement about the cabinet meeting, held on Wednesday, indicated that the strategy forms part of an integrated national initiative, aimed at enhancing the country’s attractiveness to foreign investment and talent. The cabinet also approved an export development policy. These developments signal the country’s ongoing efforts to diversify the economy by supporting growth of the non-oil sector via greater access to international markets. It is likely that the approval of these two measures has been accelerated, given the need to bolster economic recovery mechanisms amid the pandemic.
President Rodrigo Duterte has lifted an executive order first implemented in 2012 by his predecessor, Benigno Aquino, which suspended all applications for mineral contracts across protected areas, agricultural land, and tourism and development regions. The move likely reflects ramped-up efforts by the government to bolster state revenue by encouraging new investment amid the economic impact of COVID-19. The new EO 130 order signed by Duterte on Wednesday, which lifts the suspension, will permit new mining deals, while also allowing existing contracts to be renegotiated. The ruling remains subject to compliance with the Philippine Mining Act of 1995 and other applicable laws, rules, and regulations. An acceleration of mining projects moving to the commercial extraction stage should be anticipated in the near-term.
US releases semi-annual foreign exchange report: Secretary of the Treasury, Janet Yellen, is set to designate Taiwan a currency manipulator in the report; the anticipated move has caused the Taiwan dollar to drop sharply by 2 per cent.
Washington hosts international climate summit on 22 and 23 April: US President Joe Biden has invited 40 world leaders to participate.
Indonesia President Joko Widodo set to enact cabinet reshuffle: The move is highly anticipated following a reorganisation of government ministries; if carried out, it will mark the second reshuffle in five months.
PHILIPPINES: The use of the Astra-Zeneca vaccine has been suspended for individuals under the age of 60 amid international concerns over its safety; lockdown measures have been relaxed across the Manila region alongside Bulacan, Rizal, Laguna and Cavite provinces
MALAYSIA: Johor state government has announced that it will launch the ImmuPlan app, specifically aimed at Malaysians who commute to Singapore. It is set to include a COVID-19 vaccine certificate recognised by the governments of Singapore and Malaysia, enabling more efficient travel between the two countries.
AUSTRALIA: The use of the AstraZeneca COVID-19 vaccine has been limited amid concerns over its safety, while the government has changed its policy on vaccine recommendations, now suggesting that adults under 50 should endeavour to receiver the Pfizer’s COVID-19 vaccine.
JAPAN: The country’s COVID-19 inoculation campaign for the general population has commenced, previous efforts having solely focused on health workers; the elderly population – those over 65 years of age – will be first to receive the vaccine.
INDIA: The highest number of COVID-19 daily death count in five months was recorded on Saturday 10 April, totalling 794, with the overall daily case figure recorded at 145,384.
HONG KONG: The Department of Health confirmed that 12 April marked the third day with no untraceable COVID-19 infections, 13 new daily cases were reported, 11 of which had been imported; a selection of measures are set to be eased this week for individuals who have received at least one dose of a COVID-19 vaccine.
These COVID-19 insights are taken from Asia House Advisory’s focused 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.
FRIDAY 9 APRIL 2021
Vietnam’s 500-member National Assembly voted on Monday 5 April to elect Pham Minh Chinh as the new Prime Minister. Chinh, a former security official, already leads the Communist Party’s (CPV) Central Organization Committee, and will now move to form a cabinet in the weeks ahead. He succeeds Nguyen Xuan Phuc, who has been appointed to the largely ceremonial role of President. The result is not unexpected, following leaks during the CPV’s 13th Party Congress, held in Hanoi between 25 January – 1 February. Chinh will likely remain in power for the next five years, with his selection marking a continuation of Vietnam’s political environment. A key priority for Chinh will be to secure the economy amid the continued impact of COVID-19. Elsewhere, an increased focus on the rising tensions between Beijing and Hanoi in the South China Sea was indicated after Chinh used his first speech as PM to pledge to ‘sovereignty and territorial integrity’.
President Moon Jae-in’s ruling Democratic Party incurred heavy losses in mayoral by-elections held across two major municipalities on Thursday 8 April. Mayoral candidates Oh Se-hoon in Seoul and Park Hyung-joon in Busan, both from the opposition conservative People Power Party, secured overwhelming victories. The results, widely seen as a referendum on the administration, mark yet another blow for Moon and his party; their approval ratings declined to a record low of 32 per cent last week amid corruption scandals and policy failures. The results signal the potential for further political shifts as the country moves towards Presidential elections, slated for 9 March 2022.
Japanese Prime Minister Yoshihide Suga has revised the country’s carbon reduction target to a 40 per cent cut by 2030 – a rise from the current 26 per cent reduction set in 2013. The revision comes as the government works towards a finalised 2030 target in time for the G7 summit in June. In October 2020, Suga pledged that Japan would become carbon neutral by 2050. The ramped-up approach towards its climate commitments will necessitate a compromise between the environment and industry ministries, given the latter’s more conservative approach towards climate reform. Indications of a potential increase to cuts notably come ahead of a scheduled meeting in Washington on 16 April between Prime Minister Suga and US President Joe Biden; greater cooperation between the two countries on issues including climate change are set to be addressed.
Asia House is exploring the business and policy response to climate change in Asia through its COP26 Programme, which continues next week with a briefing from John Murton, UK COP26 envoy, on 15 April. Find out more.
Diplomatic officials from the UK, France and Germany have acted as intermediaries for the US and Iran amid ongoing talks hosted in Vienna aimed at revising the Iran nuclear deal, which former US President Donald Trump pulled out of in 2018. The discussions, which are also being attended by diplomats from China and Russia, have so far been described as constructive by the two sides. Two expert-level working groups have also been tasked with identifying measures to be taken by Iran and the US in order to fully restore the deal. A key focus of the groups will be to find ways for the US to lift sanctions on Iran and to secure Iran’s nuclear compliance amid escalating violations against conditions set in 2015 under the Joint Comprehensive Plan of Action (JCPOA). Despite the progress, an immediate breakthrough remains unlikely in the near-term, with significant pushback likely from sceptics of the deal in both countries.
Indonesian President Joko Widodo has revised the target for the country’s ambitious sovereign wealth fund to US$200 billion – double the goal outlined earlier this year. The Indonesia Investment Authority, as the fund is known, is designed to attract greater foreign investment into Indonesia to develop and diversify its economy. President Jokowi highlighted the fund’s flexible approach, saying “we give investors the freedom to choose whether to invest in the entire portfolio or to choose the thematic funds.” Pledges have already come from fund managers in Canada, Japan, the UAE and the US, the president said, adding details of plans to incentivise sustainable investment in the country. “We want to build a green economy, which produces green products, so that we can move toward green energy,” he said.
Indonesia’s Deputy Minister for the Environment and Forestry, Alue Dohong, briefed Asia House Corporate Members last week on the country’s efforts to tackle climate change and build a greener economy. Find out more.
Foreign and Defence ministers from Japan and Germany to meet on 16 April: In the first meeting of its kind, the ‘two-plus-two’ talks will focus on security issues in the Indo-Pacific region.
Singapore central bank monetary policy review: The bi-annual meeting is set to take place on 14 April; Monetary Authority of Singapore (MAS) will also release the Q1 2021 GDP report.
President Biden and Prime Minister Suga to meet: The leaders will meet in Washington on Friday 16 April to agree on a joint initiative across the Indo-Pacific, including plans for a US-Japan alternative to China’s Belt and Road Initiative.
PHILIPPINES: Lockdown measures in Manila and nearby provinces have been extended by one week as of Monday 5 April amid surging infection levels and the spread of new COVID variants.
JAPAN: A new COVID variant identified as the E484K mutation is spreading across Japan. Recent findings indicated that in March around 70 per cent of COVID patients at Tokyo Medical and Dental University Hospital had been infected by the mutation, which is known to reduce vaccine protection.
AUSTRALIA: The EU has blocked 3.1 million doses of AstraZeneca’s COVID-19 vaccine to Australia amid a tightening of exports, marking a setback to the country’s inoculation campaign.
SOUTH KOREA: COVID-19 vaccine deliveries from the global vaccine-sharing scheme COVAX have been delayed for a third time, further jeopardising the country’s inoculation campaign.
HONG KONG: The Pfizer-BioNTech inoculation campaign has restarted following a two-week suspension. 11,000 vaccinations took place last Monday 30 March, the first day of resumed distribution.
SINGAPORE: From May, Singapore will accept the International Air Transport Association mobile travel pass for pre-departure checks – the pass contains digital certificates for COVID-19 tests and vaccines.
MALAYSIA: Brunei and Malaysia have established a Reciprocal Green Lane (RGL) to facilitate essential business and official cross-border travel.
These COVID-19 insights are taken from Asia House Advisory’s focused 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.
