asia pacific executive brief global outlook regional outlook ... most of the trade ... china...

CONTENTS Overviews

Global Outlook

Regional Outlook North Asia Japan

China Hong Kong Taiwan

South Korea Southeast Asia Indonesia Malaysia

Philippines Singapore Thailand

Vietnam South Asia India Australasia Australia

New Zealand

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CONFIDENTIAL

Asia Pacific Executive Brief August 2017 © IMA Asia

Editor: Richard Martin ([email protected]) Asia economist: Veasna Kong ([email protected]) China economist: Matthew Li ([email protected]) Consulting economist: Kostas Panagiotou ([email protected])

This report summarises the current business environment analysis and short-term forecasts of country directors running executive briefing programs across Asia. The Asia Pacific Executive Brief is owned and produced by International Market Assessment Asia Pty Ltd (IMA Asia). This report is issued by IMA Asia to clients only. It is for general informational purposes and is not guaranteed as to accuracy or completeness. The analysis and forecasts are subject to change without notice. IMA Asia does not accept any liability arising from the use of this report. For more information and press enquiries please contact [email protected]. Copyright 2017 IMA Asia. All rights reserved. Intended for recipient only and not for further distribution or web loading without the consent of IMA Asia. www.imaasia.com

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Asia Pacific Executive Brief August 2017 www.imaasia.com

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Global outlook A synchronized global upturn … means a sustained but mild lift in global growth

Most of the trade, production, price, and PMI data released through August continues to point to a consolidating global recovery. That’s leading to a gradual lift in global forecasts from major institutions, with a recent notable comment from the OECD that all 45 of the economies it tracks will be expanding at the same time this year. That last happened in 2007, and has only occurred twice before in the last five decades (the late 1980s and before the 1973 oil price hike). That doesn’t mean a boom or even a return to the 3.8%pa average growth rate in the two decades to 2008. In July, the IMF lifted its global growth forecast to 3.5% this year and 3.6% for 2018. However, it does mean four things. First, the Euro zone is well into a firm recovery, and Euro zone growth could outpace US growth over the next 18 months. Second, China has proved it can sustain 6.5%+ growth. Third, big emerging markets that floundered in the last few years – notably Brazil and Russia - are growing again. And finally, there are hints of a better balance in global demand and supply, whether than be for manufactured goods, commodities, or cargo ships. That implies capacity has been removed from the market as much as demand has improved. That is a small plus for a renewed investment cycle (see, for example, the comment in this month’s Australia page on renewed growth in mining capex and jobs after a four-year slide).

Less Euro and China risk … the risk from a populist US president

Along with a synchronised global upturn has come a reduction in the headline risks of the last decade. The Euro zone is no longer in danger of fracturing or its currency collapsing. German Chancellor Merkel (likely to get a 4th term) and newly elected French President Macron have emerged as a strong and stable political core for Europe. The chance of a China financial crisis has also receded as Beijing has tighten its control over China’s finance sector. The new risk is a populist US president with no coherent domestic or foreign policy. So far, we’ve adjusted our forecast by trimming expected US growth and forecasting a weaker US$. A government shutdown in 2H’17, which Trump threatens, would lead to a bigger cut in US growth but wouldn’t necessarily end the current global expansion.

The new normal … low inflation, cheap money, little pay growth … and rising consumer debt

Several poorly understood developments look like remaining prominent in the next few years. Although there are hints of a better demand/supply balance (mostly via rising commodity and producer prices), inflation on the consumer price index is expected to remain low or marginal in many countries. That means a two-decade long slide in the price of money (as measured by the 10-year government bond yield for the G7) is unlikely to reverse. That contributes to a number of commercial trends, including the rise of private equity and activist investors (who aim to crank up equity yields) and the growing dominance of big firms (leveraging up on cheap cash for M&A). Wage growth has also slumped in advanced economies and in many of the emerging economies covered by the Asia Brief. That has led to a steady rise in consumer debt, which at some point will start to suppress demand in many countries when households halt borrowing and start deleveraging.

Adjusting to game changing technologies

By far the biggest impact on global markets over the next decade will be game changing technologies. Fracking has changed the global energy market (with electric vehicles and renewable energy becoming important). The internet is reshaping media and advertising, and changing the tastes, preferences, and behaviour of consumers and employees. Big data, AI, and the cloud are emerging as a powerful force that will restructure companies as much as entire markets. How companies manage such trends will likely have a bigger impact on performance than incremental moves in GDP growth rates and currencies.

IMA Asia’s forecasts 2014 2015 2016 2017 2018 World – Real GDP growth, % 3.5 3.4 3.1 3.5 3.6 - US 2.4 2.6 1.6 1.9 2.0 - Euro area 1.2 2.4 2.0 2.0 1.9 - Asia/Pacific (14) 4.4 4.4 4.7 4.8 4.7 - NICs (4) 3.5 2.2 2.3 2.8 2.6 - Developing or “EM” Asia (7) 6.8 6.7 6.6 6.4 6.3 - ASEAN (6) 4.4 4.5 4.6 4.9 4.8

World goods & services trade volume, % growth 3.5 2.8 2.3 3.8 4.2 Interest rates, US Fed target rate, year end, % 0.25 0.50 0.75 1.25 1.75 Inflation, CPI, US, year avg., % 1.6 0.1 1.3 2.5 2.2 Inflation, CPI, Euro area, % 0.4 0.0 0.3 1.1 1.3 Crude oil, avg of 3 spot crudes, US$ 96 51 43 47 40 US$ / Euro 1, year average rate 1.33 1.11 1.11 1.13 1.15 Yen / US$1, year average rate 106 121 109 111 108

The Asia/Pacific 14 = the countries on the forecast summary page. NICs are the newly industrialised countries = Korea, Taiwan, HK, Singapore. The ASEAN 6 = Indonesia, Thailand, Malaysia, Philippines, Vietnam, + Singapore. Dev Asia = ASEAN 5 + China and India. IMA Asia forecasts.

Richard Martin, IMA Asia ♦ Email: [email protected]




Regional outlook Summary of forecasts in this month’s Asia Brief GDP (Expenditure), real growth, % 2014 2015 2016 2017 2018 Japan 0.3 1.1 1.0 1.7 1.3 China 7.3 6.9 6.7 6.7 6.4 Hong Kong 2.8 2.4 1.9 3.4 3.3 Taiwan 4.0 0.7 1.5 2.3 2.1 South Korea 3.3 2.8 2.8 2.9 2.7 Indonesia 5.0 4.9 5.0 5.4 5.6 Malaysia 6.0 5.0 4.2 5.2 4.3 Philippines 6.1 6.1 6.9 6.5 6.2 Singapore 3.6 1.9 2.0 2.7 2.7 Thailand 0.9 2.9 3.2 3.3 3.3 Vietnam 6.0 6.7 6.2 6.3 6.3 India (CY) 7.0 7.5 7.9 6.3 6.9 Australia 2.8 2.4 2.5 2.5 2.6 New Zealand 2.8 3.2 3.6 3.0 3.0 Inflation, CPI year average, % 2014 2015 2016 2017 2018 Japan 2.8 0.8 -0.2 0.4 0.6 China 2.0 1.4 2.0 1.6 2.3 Hong Kong (composite CPI) 4.5 3.0 2.4 1.7 2.2 Taiwan 1.2 -0.3 1.4 0.9 1.2 South Korea 1.3 0.7 1.0 2.1 2.5 Indonesia 6.4 6.4 3.5 3.8 3.8 Malaysia 3.2 2.1 2.1 3.9 3.6 Philippines 4.1 1.4 1.8 3.4 4.3 Singapore 1.0 -0.5 -0.5 1.1 1.5 Thailand 1.9 -0.9 0.2 0.7 1.4 Vietnam 4.1 0.6 2.7 3.9 4.0 India (CY CPI urban non-manual workers) 6.7 4.9 5.0 3.4 4.9 Australia 2.5 1.5 1.3 2.1 2.3 New Zealand 1.2 0.3 0.6 2.1 2.5 Exchange rate to US$1, year avg. 2014 2015 2016 2017 2018 Japan 106 121 109 111 108 China 6.16 6.28 6.64 6.87 6.65 Hong Kong 7.75 7.75 7.76 7.80 7.80 Taiwan 30.4 31.9 32.3 30.5 29.6 South Korea 1,053 1,131 1,160 1,126 1,083 Indonesia 11,868 13,389 13,308 13,262 13,388 Malaysia 3.27 3.90 4.14 4.34 4.24 Philippines 44.4 45.5 47.5 50.0 50.8 Singapore 1.27 1.37 1.38 1.39 1.35 Thailand 32.5 34.2 35.3 34.2 33.9 Vietnam 21,148 21,677 21,932 22,496 23,203 India (FY) 61.0 64.1 67.2 64.9 65.5 Australia 1.11 1.33 1.35 1.29 1.23 New Zealand 1.20 1.43 1.43 1.37 1.31 Sources: CEIC, central banks, and national statistics offices. Forecasts are by IMA Asia.



Regional outlook Political & policy issues to watch North Korea’s threat … to Chinese President Xi … rather than to the US, Japan or South Korea

North Korea’s missile launch across Japan at the end of August is an unusually dangerous step for the country’s leader, Kim Jong Un, as it is a direct threat to the political future of Chinese President Xi Jinping. President Xi is in the final run up to the Chinese Communist Party’s 19th Congress, at which he’ll get a second 5-year term, while his supporters are expected to sweep top party posts. That is unless he blots his copy book. That blot could come from Pyongyang’s missile antics. They have swung popular support in South Korea behind the installation of a US THAAD anti-missile system. They have boosted PM Abe’s popularity in Japan, and will help him amend his country’s constitution to allow for a more active offshore military role. Finally, they’ve given US President Trump the sort of leverage he likes in extracting a deal from China on trade. None of that will look smart to Beijing’s generals or party hardliners. Pulling Pyongyang into line (and, at an extreme, replacing Kim) will never be easy for China, yet President Xi will have to act soon to protect his 19th Congress game plan. If he doesn’t act, he’d still get a second term, but with far fewer of his supporters rising to the top.

Tricky politics in the Philippines and Malaysia

President Duterte in the Philippines faces a make-or-break year. His violent anti-drugs campaign has been popular so far, but the public mood is shifting. If there’s a significant fall in community backing, then Duterte will find it hard to retain support in Congress, and that will undermine the tax reform bills that are needed to fund his plans for a major push on infrastructure. Doubts about Duterte’s course have made the Peso Asia’s weakest currency in 2017. In Malaysia, PM Najib has put UMNO, his party, on an election footing. UMNO hasn’t lost an election since independence, yet the next race, which has yet to be called, could be very close.

Watch for government change … in NZ and Australia

The opposition Labour Party in New Zealand has substantially improved its position under a new leader with populist policies in the approach to the September 23rd election. That could see the National Party government tumbled out of office after nine years in power. In Australia, PM Turnbull’s government has struggled to survive with a single seat majority in the lower house. He could be deposed within his party or he could lose government to the Labor Party, either via by-elections or being forced into an early general election. We’ll know the outcome in NZ in weeks, but prolonged uncertainty is possible in Australia, and that’s not good for policy or investment.

Outlook for the market Our forecast for Asia/Pac’s growth continue to edge up

As in the last two months, our forecast growth for the 14 main markets in Asia/Pacific continues to edge up, with 4.8% growth now expected in 2017 (previously 4.7%) and 4.7% now forecast for 2016 (previously 4.5%). The upgrade reflects two broad forces. First, the global recovery is gradually picking up pace, and that has led to stronger export growth in 2H’17 than we were expecting. Second, the conditions for future growth are good. Inflation is low, oil and food prices are stable, exports are strong, and prices have risen for hard commodities like iron ore, copper, and coal.

A puzzling lack of wage growth … limits Asia’s consumer outlook

One unusual area of weakness in the upturn is an absence of wage growth. Countries like Japan and Taiwan have low unemployment and strong export recoveries that are almost a year old. In prior decades that would have led to a lift in overtime work and pay rates, yet there’s no hint of that this year, with wages barely rising. A similar pattern is apparent in South Korea and Thailand. Where consumer demand is lifting without wage growth it is because of increased debt and a reduced savings rate. The main factor limiting wage growth appears to be the continual offshoring of factory work to cheaper countries, alongside weaker productivity growth in other sectors of these economies.

Disappointing growth in India and Indonesia

PM Modi in India and President Jokowi in Indonesia both entered office in 2014 promising strong growth driven by reform. This year, neither have delivered, with India’s 6% growth rate and Indonesia’s 5% rate at least two percentage points below their goals. Both are genuine reformers who fully intend to lift growth. Yet bad policies (like last November’s demonetisation in India) and the enormous inertia of vested interests and bureaucracy have proved harder to fix than expected.

Richard Martin, IMA Asia ♦ Email: [email protected]




Japan Political & policy issues to watch

PM Abe recovers from early 2017 stumbles

PM Abe has recovered from stumbles in 1H’17 that saw his opinion poll support fall below 30% in July for the first time since he returned to power in 2012. An early August reshuffle for his cabinet and the leadership of the ruling LDP lifted his support back to 46% in late August. The fall in approval ratings was due to Abe’s poor handling of two minor scandals in which he was implicated, as well as his ramming a long delayed anti-conspiracy bill through the legislature in June (it will, however, allow Japan to be the last of the OECD countries to ratify the 2000 UN Convention Against Transnational Organized Crime).

Watch for a push on his defence agenda

PM Abe remains the dominant force in Japanese politics, and with a recovery in poll support he’ll likely return to plans to amend the war renouncing article 9 in the constitution. While there’s never been majority support for this, the popular mood is swinging in Abe’s favour following threats from North Korea. As the current parliament has reached its halfway point, Abe could well call a snap election in the next six months to clear the way for a referendum on changing the constitution. Having secured a change to the LDP’s leadership rules earlier this year, Abe should win a third 3-year term as party head in 2018, opening the way for him to be PM to 2021, making him the longest serving post-war PM.

No need for Abe’s 3 arrows this year

Abe is fortunate to be riding on a firm economic recovery, which means this is one of the few years in recent memory unlikely to need a supplementary budget (although none actually had much money for fiscal stimulus). The flash manufacturing PMI for August climbed to 52.8 from 52.1 for July, and a Reuters monthly survey of business confidence has reported its strongest score since August 2007.

Outlook for the market

We’ve lifted our forecasts … as a broad recovery consolidates

Q2’17 saw a broad consolidation of Japan’s recent recovery, with GDP growth lifting to 2%yoy from 1.5% in Q1’17. This was due to a 1.8%yoy rise in private consumption (from 1.1% in Q1’17 and 0.4% for full 2016), a doubling in fixed investment growth to 5.2%yoy (from 2.3% in Q1 and 0.9% in full 2016), and a 6.6%yoy in export volumes (equalling the Q1’17 pace and well up on 1.2% growth in full 2016). Japan’s annualised calculation of growth puts the pace at 4% in Q2’17 from an annualised rise of 1.5% in Q1’17. Taking the strong Q2’17 performance into account and the better global outlook, we’ve raised our 2017 growth forecast to 1.7% (previously 1.3%), while 2018 lifts to 1.3% (previously 1.2%).

Strong exports lift industrial production

While Japan’s annual exports at July are still 20% below their peak of mid-2011, they have been climbing steadily since May 2016. That has lifted industrial production growth to 5.8%yoy in Q2’17 from -0.3% for full 2016. We now expect a 4% lift in industrial production for full 2017 followed by 2.5% growth in 2018. That helped lift the producer price index by 2.6%yoy in June, suggesting better profits for industrial firms.

… & good job conditions lift consumer spending

Consumer demand has improved thanks to better employment conditions rather than a lift in wages. Growth in average monthly cash earnings remains stuck under 1%yoy in June. However, the ratio of job openings to applicants reached 1.52 in July, the highest point since 1974. Along with a strong lift in consumer confidence, that helped propel car sales growth to 9%ytd by July, after a 1.7% fall in 2016. We expect real growth in consumer spending of 1.6% this year and 1.4% next year from 0.4% in 2016. We’ll need to watch whether the government sticks with a sales tax hike to 10% from 8% in October 2019, as that will undoubtedly pull some demand into 2019 from 2020.

A mild rise for the Yen despite continued QE

Inflation has been steady at 0.4%yoy for the four months to July with only a mild increase likely into 2018. Despite the recent jump in GDP growth (see above), BOJ governor Kuroda has committed to continued easing, as he doubts the Q2’17 growth rate is sustainable. Even with continued monetary easing, the Yen has been rising on a sliding US$. Moreover, heightened North Korea risk has accentuated the Yen’s safe haven status for Japanese investors, with a rise to 108 against the US$ likely over the next year.

2014 2015 2016 2017 2018 GDP, real growth (2005p), % 0.3 1.1 1.0 1.7 1.3 CPI, year average, % 2.8 0.8 -0.2 0.4 0.6 Overnight call rate, year end, % 0.07 0.04 -0.06 -0.06 -0.06 Yen to US$1, year average 106 121 109 111 108

Sources: 2014-2016 data from the BOJ and government sources; 2017-2018 estimates by IMA Asia



China Political & policy issues to watch President Xi dominates … and so does his vision for China

President Xi Jinping continues to rewrite China’s leadership rules without constraint from the consensus leadership or factional balancing apparent under prior leaders. He has swept his supporters into key party and government posts at all levels over the last year. That has allowed him to push an array of policy initiatives that have put China on a new course well before this autumn’s 19th Party Congress, from which he is certain to emerge with a second five-year term. His team should dominate in appointments to the Politburo and its powerful Standing Committee at that meeting. Aligning with how Xi’s China works will be fundamental to the success of both foreign and local players in China.

A Party-led economy that pays attention to market forces

A central plank of Xi’s China is the creation of a successful, Party-led economy, rather than a mixed economy tending towards freer markets and rule by law (the working assumption prior to Xi’s first term). Rather than winding down state-owned enterprises (SOEs), they are being strengthened with mergers, and placed under tighter Party control. China’s property and ecommerce giants in the private sector have been forcefully reminded that everyone is under the Party’s control. While market signals are carefully watched, it is Beijing’s directives, rather than the market forces, that will be used to resolve a mountain of bad corporate debt and to restructure China’s industrial base. Contrary to expectations, there’s room for foreign firms to grow in China, if they align with Xi’s priorities.

Outlook for the market 2017’s surprise – stronger current growth … which makes many things easier

China has done better in 2017 than we expected. Real growth was stronger at 6.9%yoy in 1H’17 thanks to a brief stimulus for the housing and auto sectors, and a lift in infrastructure work. That revived the industrial sector, and together with rising commodity prices, allowed firms to lift prices (producer prices swung from a 5.9% fall in 2015 to 5.5% growth in 2016 and 1H’17). As a result, current GDP growth jumped to 11.4%yoy for 1H’17 from 7-8% in 2015 and 2016. Strong current price growth boosted industrial profits, which helped firms deal with debt. It also opened the way for a firmer push on industrial restructuring (mostly by tighter enforcement of regulations) and a clamp down on risky financial products.

Yet real growth has to cool

We lifted our 2017 GDP growth forecast to 6.7% last month, implying a mild slowdown in 2H’17. We still expect growth to gradually ebb over the next five years, as stimulus measures ease. China faces demographic headwinds, including a declining labour force and rapid ageing. Economic rebalancing (from capex to consumer driven, and from industrial to services) also imply cooler growth, as does the process of debt resolution.

Consumers take the lead

Consumers are set to replace capex as China’s main driver. This year, they’ll both contribute 43% to GDP growth in a major realignment from the 2000 decade (53% from capex and 33% from consumer). From 2018, consumers should consistently lead growth based on real growth of around 7%pa over 2017-2019, easing to 6.0-6.5% for 2020-22. The transition is on track this year with retail sales up 10.4%yoy in July, unchanged from pace of 1H’17 and 2016, thanks to stable employment, a 30% surge in consumer lending, and increased government transfers to poorer households.

… allowing capex growth to ease

Meanwhile, tweaking of various stimulus measures to sustain real GDP growth has likely kept real growth in fixed investment in 2016 and 2017 close to the 6.8% pace set over 2014 and 2015. Growth should drop below 6% in 2018, and ease further towards 5% at the end of the decade.

Low inflation … and a firm Yuan

Muted food inflation, intense competition, and slower wage growth should keep inflation under 2% in 2017 and in a 2.0-2.5% range in 2018. While the central bank’s recent interest rate signals are confusing, the overall aim remains strong loan growth. Meanwhile, tight capital controls have halted the Yuan’s slide and, in common with the rest of Asia, China’s currency is edging up on a falling US$ - a trend which should continue into 2018.

2014 2015 2016 2017 2018 GDP, real growth, % 7.3 6.9 6.7 6.7 6.4 CPI, year average, % 2.0 1.4 2.0 1.6 2.3 PBOC 1-year loan, at Dec., % 5.60 4.35 4.35 4.35 4.35 Yuan to US$1, year average 6.16 6.28 6.64 6.87 6.65 Sources: 2014-16 data from CEIC and government agencies; 2017-18 forecasts by IMA Asia

Matthew Li, China Economist, IMA Asia Tel: (86 21) 2230-1795 ♦ Mobile: (86) 15618948872 ♦ Email: [email protected]



Hong Kong Political & policy issues to watch Escalating political tension … Legco battle continues

Political tension is rising in HK after the removal of six pan-democrat lawmakers, delays in scheduling by-elections to replace them, and the jailing of three leaders of the 2014-15 Occupy Central protests – including one of those removed from Legco. The six-month prison sentences, which came after the HK government appealed earlier lighter penalties, will prevent any of the convicted activists – now populist politicians - from seeking office for five years. Just as Chinese President Xi Jinping is tightening his grip over China, he is also tightening Beijing’s hold over HK. Unsurprisingly, the jailing of the student leaders triggered another big protest, with over 100,000 demonstrators. Poor politics likely means more delays for major bills when Legco resumes after new Chief Executive Carrie Lam’s first Policy Address on 11 October. The remaining pan-democrat legislators have pledged to block every bill in Legco debates.

Difficult to resolve the growing gap

In this heated contest, HK’s new chief executive, Carrie Lam, will find it hard to close the gap between Beijing’s demand for political obedience and a HK “localist” demand for greater autonomy. An immediate challenge for her administration is to finalise the co-location arrangements for HK-China immigration facilities at the West Kowloon high-speed rail station, reflecting extensive distrust of Beijing within the SAR.

Outlook for the market A strong H1 … raised the GDP forecast

GDP growth has accelerated with a 4.3%yoy surge in Q1’17, followed by a strong 3.8%yoy lift in Q2’17, thanks to the global trade recovery, a robust mainland economy, and a pickup in fixed investment. We’ve lifted our 2017 growth forecast to 3.4% (from 3.2%) and that of 2018 to 3.3% (from 3.1%), as the global demand outlook improves and global risks ease. The government has also raised its 2017 growth forecast to 3-4% (previously 2-3%).

Resilient local demand … but lacklustre tourist spending

Real growth in local consumer spending accelerated to 5.3%yoy in Q2’17 from 3.7%yoy in Q1’17 and 1.8% in full 2016, underpinned by stable employment and the wealth effect from rising housing and stock markets. We’ve lifted our forecast for household spending growth to 3.5-4.0%pa over 2017-18. Meanwhile, retail sales fell by 1%yoy in the first seven months of 2017 due to fewer mainland tourists and lower spending per tourist. Firm local consumer demand and weak tourist spending looks like the new normal for HK.

Investment boom over 2017-18

Robust property construction and a rise in machine & equipment capex lifted fixed investment growth to 8%yoy in Q2’17 from 5.9%yoy in Q1’17 and -0.5% in full 2016. Strong housing demand, the administration’s ambitious home completion target (20K+ units a year through 2018), and industrial restocking should lift capex growth to 5.5-6.0%pa over 2017-18, well above the 2.4%pa pace for the decade to 2016. Meanwhile, the outlook for civil works, which contributed 17% of HK’s fixed investment in 2016, is less certain, given the risk of legislative gridlock and delay in Legco bills.

Still strong intra-Asia trade

HK’s exports were up 8.5%ytd by July after marginal falls over the prior two years. Most of HK’s exports are transhipments, and July’s data shows strong re-export growth to markets such as China (up 8.8%yoy), Japan (up 9%), and Taiwan (up 23.5%). While in full 2017 export growth is likely to be around 7%, we are cautious about 2018 and expect it to ease to 3-4%.

A weak HK$ for now

Inflation (minus abnormal factors) was running at 2%yoy in Q2’17 and it may edge higher over the next year due to strong growth in rental prices. Since the start of 2017, the HK$ has been pushed from 7.75 to 7.80 against the US$, which is the mid-point of its fixed trading band. If the HK$ moves out to 7.83, the HK Monetary Authority will intervene to tighten liquidity to support its peg to the US$, which will put pressure on local banks to raise mortgage rates.

2014 2015 2016 2017 2018 GDP, real growth, % 2.8 2.4 1.9 3.4 3.3 Composite CPI (04/05), year average, % 4.5 3.0 2.4 1.7 2.2 Discount window base rate, % year end 0.50 0.75 1.00 1.50 2.00 HK$ to US$1, year average 7.75 7.75 7.76 7.80 7.80 Sources: 2014-2016 from Censtat, HKMA, and CEIC; 2017-2018 estimates by IMA Asia.

Dr Mark Michelson, Chairman, Asia CEO Forum (Hong Kong) Tel: (852) 2530-1115 ♦ Fax: (852) 2530-1125 ♦ Email: [email protected]



Taiwan Political & policy issues to watch A tough first year for President Tsai … with a plunge in support

According to a late August opinion poll, President Tsai Ing-Wen’s approval rating has dropped to 24%. Support for her has fallen for several reasons: a massive power blackout in mid-August that raised questions over her government’s plan to shut down nuclear power plants; many worry that China will retaliate over her administration’s unwillingness to toe Beijing’s line on cross-strait policy; and finally, a constant legislative battle has slowed passage of promised reform bills. In an effort to regain ground, Tsai has signalled her interest in better relations with China. However, her room to manoeuvre on cross-strait policy is limited by her party and its core voters. At a minimum, she should be able to prevent a worsening in relations with China.

The battle to pass infrastructure bills

One of the key areas where policy is stalled is an increase in infrastructure spending. Battles in the legislature have seen Tsai’s initial plan for NT$882bn (US$29bn) in spending over eight years halved to NT$420bn (US$14bn) over four years. The opposition KMT has particularly sought to block potentially unprofitable light rail projects that account for most of the spending. Fixed investment for construction has fallen over the last two years, and we currently expect a modest recovery to 0.2% growth this year and around 4% next year. But if Tsai’s infrastructure plan dies in the legislature, we’ll have to cut our 2018 forecast for construction capex.

Outlook for the market Mild but steady growth into 2018 … as strong exports offset weaker capex

GDP growth slowed to 2.1%yoy in Q2’17 from 2.7%yoy in Q1’17, mostly due to weaker trade and industrial growth in April and May. Meanwhile, the surge in plant and equipment capex over the three quarters to Q1’17, cooled off in Q2’17, as factory owners judge expanded or upgraded capacity to be sufficient for likely demand over the next year. Strong export growth should remain a key driver over the second half of 2017, which is reflected in surveys of business expectations. Overall, this should boost GDP growth to 2.3% in 2017 and 2.1% in 2018 from 1.5% last year.

Taiwan makes what the world wants … which is good for industrial growth

July export growth (US$ basis) was stronger than we expected at 12.5%yoy, indicating that the rebound that started in Q4’16 with an 11.7%yoy rise has continued unabated. July data for new export orders was also strong and together with a rising PMI, that points to good export growth into Q4’17. Driving that is strong global demand for the type of new business and consumer electronic products at which Taiwan excels. Export growth will likely slow to 6% next year from 10% this year and an average annual fall of 2% over the prior four years. That’s sufficient to lift the industrial production index by 3.5% this year and 2.5% next year, after average growth of 1.9%pa over the prior four years.

But, no lift for consumers … breaking a decades old pattern

Despite the surge in export manufacturing, real growth in consumer spending has remained at 2%yoy in Q2’17, in line with a 2%pa average for the decade to 2016. While unemployment is stable at 3.8%, wage growth is minimal. The increasing capital intensity of manufacturing in Taiwan, and a rise in offshoring, both contribute to weak wage growth. Retail sales slumped by 1.7%yoy in July after a 1.9% decline in June. A decline in tourism is also a factor here, with total arrivals down 1.9%yoy following a 13%yoy plunge in Chinese tourists in July due to ongoing cross-strait tensions. Real growth in consumer spending is expected to remain around 2% in 2017 and 2018.

Low inflation … & a halt to the NT$’s rise

CPI inflation was 0.8%yoy in July, which is in line with the 0.7%yoy set in H1’17. Inflation is expected to stay around 1% in 2H’17 before a small uptick to 1.2% in 2018. The NT$ is under appreciation pressure due to Taiwan’s low inflation and big trade surplus. The NT$ is up some 7%ytd on a sliding US$, but the central bank is now intervening to stabilize it at around 30 to the US$.

2014 2015 2016 2017 2018 GDP, real growth, % 4.0 0.7 1.5 2.3 2.1 CPI, year average, % 1.2 -0.3 1.4 0.9 1.2 Official discount rate, year-end, % 1.88 1.63 1.38 1.38 1.38 NT$ to US$1, year average 30.4 31.9 32.3 30.5 29.6 Sources: 2014-2016 government data and CEIC; 2017-2018 forecasts by IMA Asia. The above forecast is by IMA Asia. Companies seeking local advice and forecasts should contact:

Michael Boyden, Managing Director, Taiwan Asia Strategy Consulting Tel: (886 2) 8789 0978♦ Fax: (886 2) 8789 0877 ♦ Email: [email protected]




South Korea Political & policy issues to watch Korea’s new president pushes a populist agenda … but faces opposition in the legislature

A 5-year jail term for Samsung boss Jay Y. Lee underscores a big realignment in Korea’s business-politics culture. President Moon Jae-in aims to reduce the control of founding families over Korea’s chaebols (conglomerates) and to end their indirect sway over politics. Moon, who came to office in May for a single 5-year term, wants to shift the balance of power from big business towards workers and the state. His plan involves increasing government spending, raising public sector employment by 810,000 in the next five years, getting employers to turn their contract workers into (higher paid) full-time employees, lifting the minimum hourly wage from 7,530 won (US$6.70) currently to 10,000 won (US$8.90) by 2020, lifting corporate taxes, and cutting investment and research tax credits for large companies. Parts of Moon’s legislative agenda could be blocked or diluted at the National Assembly, where his Democratic Party only controls 40% of the seats.

Fiscal stimulus planned for 2018

The 2018 budget embodies Moon’s agenda with a 4.6% lift in spending heavily tilted towards job creation, education, defence, and welfare, while big cuts were made to infrastructure spending. We’ll see how much of the budget gets passed by December.

North Korea risk is a buying opportunity?

Some of Moon’s reforms will lead to higher production costs. However, investors are excited about the prospect of increased corporate transparency and attention to the interests of minority shareholders. Undeterred by recent tensions with North Korea, foreign investors have been keen buyers of small and medium cap equities on the local stock market. Yet the path of chaebol reform will be difficult, as the conglomerates will strenuously resist change with the help of powerful allies in the National Assembly.

Outlook for the market 2017 started with a surge in local demand but growth to ease in 2018

Domestic spending surged by 4.8%yoy in 1H’17 from 3.6% in full 2016, as fixed investment growth jumped by 10.2%yoy from 5.2% for full 2016. By contrast, 1H’17 GDP growth stayed in line with last year’s 2.8% pace, as strong domestic demand lifted import volume growth well above that of exports (8.2%yoy versus 1.8%yoy). We expect the growth gap between imports and exports to narrow in the coming quarters, as fixed investment growth subsides. This should sustain GDP growth of 2.9% in 2017 and 2.7% in 2018.

Capex growth to slow

The recent surge in real capex growth for construction and machinery & equipment (M&E) is likely to soften. M&E capex reflects an upswing of the global electronics cycle, and such cycles are relatively short. Meanwhile, residential construction faces stringent measures aimed at curbing home price inflation. We expect capex growth to ease to 3.8% in 2018 from an estimated 8.4% in 2017.

Timid consumers should gain from Moon’s policies

Private consumption grew 2.1%yoy in 1H’17, below the 2.5% pace set in 2016. Despite a strong rebound in consumer confidence, car sales fell 10.3%yoy in Q2’17 after a timid 1.2%yoy rise in Q1’17. Personal finances have been constrained by record-high household debt (93% of GDP in 2016 from 70.4% in 2006) and a slow-growth job market (1.6%pa since 2011). President Moon’s goal of lifting workers’ pay and increasing public sector hiring should nudge consumption growth up to 2.7% in 2018 from 2.3% in 2017.

A firm Won and low inflation

Inflation rose 2%ytd by July, but lingering excess capacity and a soft job market should help keep the BOK’s policy interest rate at its current record low of 1.25% well into 2018. Narrowing interest rate differentials with the US and heightened geopolitical tensions did not prevent the Won from rising 7.3% against the US$ since the start of 2017. More Won gains are likely on the back of the greenback’s broad-based retreat.

2014 2015 2016 2017 2018 GDP growth, % 3.3 2.8 2.8 2.9 2.7 CPI, year average, % 1.3 0.7 1.0 2.1 2.5 BOK Base rate, year-end, % 2.00 1.50 1.25 1.25 1.75 Won to US$1, year average 1,053 1,131 1,160 1,126 1,083 Sources: 2014-2016 government data (NSO, BOK) and CEIC; 2017-2018 forecasts by IMA Asia. The above forecast is by IMA Asia. Companies seeking local advice and forecasts should contact:

Tony Michell, Managing Director, Korea Associates Business Consultancy Ltd Tel: (82 2) 335 7854/2614 ♦ Fax: (82 2) 323 4262 ♦ Email: [email protected]



Indonesia Political & policy issues to watch The political focus shifts to the 2019 elections … Jokowi gains a key media ally

Early manoeuvring for the 2019 elections has begun, and with a 20% support threshold set for presidential contenders under a new election law, prospective candidates are looking for allies. That includes a much-hyped meeting between former president SBY and Gerindra leader (and 2014 race loser) Prabowo Subianto. It’s unclear if they can combine, yet that would open the door to a Gerindra-PD axis and a potential run by SBY’s son, Agus Yudhoyono. Meanwhile, media magnate Hary Tanoesoedibjo’s surprise declaration of support for President Jokowi could be a game changer, as his TV stations dominate the airwaves with more than one-third of the national viewership. Until now, they’ve backed Prabowo and slammed Jokowi. Tanoe’s move may be simple opportunism, as he is facing legal problems, and he may hope that President Jokowi can help. A second 5-year term for President Jokowi is the best chance Indonesia has for mildly pro-reform government.

A mild fiscal stimulus for 2018

The 2018 budget, announced in mid-August, is an election budget with a 5% lift in spending. The 2018 GDP growth target has been set at 5.4% with 2017 revised down to 5.2%. That’s well below the 7% growth target Jokowi campaign on in the 2014 elections, and reflects the large political and bureaucratic barriers to change in Indonesia. In an effort to break that log jam, Jokowi has ordered his ministers to give priority to private investors in awarding some US$450bn in infrastructure projects to 2019 instead of handing them over to inefficient state-owned enterprises (SOEs).

At last a deal on the Grasberg mine … another plus for 2018

Finance Minister Sri Mulyani has struck a deal with Freeport McMoRan boss Richard Adkerson over the long-disputed future of the giant Grasberg copper mine. Freeport will sell 51% to Indonesia (but retain control over operations and governance), build a second local smelter, accept a new regulatory framework, and spend some US$17-20bn to 2031. In return, the government will lift a ban on copper concentrate exports and grant Freeport two 10-year permit extensions to 2041. Both sides hope to reach final agreement on details by end-2017, which is a plus for the economy and government finances in 2018.

Outlook for the market Local headwinds stopped growth lifting in 1H’17 … but should ease in 2H’17

Growth in 1H’17 was flat on last year’s 5.0% pace, as domestic headwinds offset the boost that Indonesia should have got from better exports and rising commodity prices. The headwinds include a jump in political uncertainty during the unexpectedly divisive Jakarta elections last November, a series of electricity rate hikes over the last six months, bad mining policy that crimped both exports and investment, and the usual red tape snarling projects and deterring investment. As a result, there was no growth in government consumption spending in 1H’17, and plant & equipment capex fell. That offset steady consumer demand, up 4.9%yoy in 1H’17 and in line with 5.0% growth over 2015 and 2016. Given Jokowi’s plan to cut red tape, launch projects, and lift investment, we expect a mild lift through 2H’17 to take full 2017 growth to 5.4%, with 5.6% likely in 2018.

Patches of weak consumer demand should fade

While the GDP measure for real growth in consumer demand was steady around 5%, some sectors were noticeably weak in 1H’17. Retail sales growth halved to 5% from 11% in full 2016, vehicle sales slumped to 0.3%yoy from 5% in 2016, and motorcycle sales fell 8.9%yoy in 1H’17 (after an 8.5% fall in 2016). All these measures should gradually improve over the next 18 months, as local headwinds subside.

Mild inflation, rate cuts and a stable Rupiah

With inflation steady near 4%yoy since January, and the Rupiah up some 2.5% this year on the US$, Bank Indonesia found room to cut its policy rate to 4.50% from 4.75% in August. One more cut is possible before end 2017, which could be followed by a rate hike in 2018, as growth picks up. The Rupiah’s 2017 gain on a falling US$ will likely reverse in 2018 to account for Indonesia’s higher inflation rate (about double the US rate).

2014 2015 2016 2017 2018 GDP, real growth, % 5.0 4.9 5.0 5.4 5.6 CPI, year average, (2012=100), % 6.4 6.4 3.5 3.8 3.8 Central bank rate (7-day RR) at Dec % - 6.25 4.75 4.25 4.50 Rupiah to US$1, year average 11,868 13,389 13,308 13,262 13,388 Sources: 2014-2016 government data (BPS, BI) and CEIC; 2017-2018 forecasts by IMA Asia

The above forecast is by IMA Asia. Companies seeking local advice and forecasts should contact:

James Castle, Chairman, CastleAsia Tel: (62 21) 2902 1641 ♦ Fax: (62 21) 2902 1648 ♦ Email: [email protected]




Malaysia Political & policy issues to watch Malaysia is in election mode … which shifts priorities in public spending … and puts a question mark over projects

Even though an election is not due until August next year, PM Najib Razak has swung UMNO (the ruling party) and the government into election mode, and he could call the poll as early as late 2017. That’s having an impact on the market, as the government diverts spending into areas where UMNO must win votes, while cutting back on other areas (like hospitals). Having ruled Malaysia since independence in the late1950’s, the UMNO-led coalition has a huge incumbent advantage. Even so, it could lose to the poorly-organised Pakatan Harapan opposition coalition if disgruntled voters decide to punish it for corruption scandals (like 1MDB and FELDA), unaffordable housing, and the rising cost of living after consumption subsidies were cut. PM Najib has stepped up public housing construction and unearthed decades-old scandals involving opposition leaders, ex-PM Mahathir, and ex-DPM Anwar, to ensure he retains office. While the KL consensus is he’ll win, it’s by no means certain, and that puts a question mark over some big projects and deals.

Little macro risk Fortunately, Malaysia’s fiscal position is sound thanks to conservative fiscal policy, which has included introduction of a 6% GST from April 2015, phasing out of all energy subsidies over 2010-15, and cuts to subsidies for sugar and housing for civil servants. That has helped cut reliance on oil and gas revenues from a peak of 41% of all government income to around 20% today. All three of the main rating agencies have affirmed a stable outlook.

Outlook for the market Strong domestic activity boosts growth

GDP growth edged up to 5.7%yoy in 1H’17 from 4.4%yoy in 2H’16, as domestic demand growth surged to 6.7%yoy from 3.9%yoy on the back of stronger consumption and investment spending. The surge in local demand saw import volumes grow by 11.8%yoy in 1H’17, which overshadowed an otherwise good 9.7%yoy rise in export volume. As a result, the net export contribution to GDP growth fell, and GDP growth came in below domestic demand growth. We’ve lifted our 2017 GDP growth forecast to 5.2% from 4.8%, while 2018 gets a slight trim to 4.3% from 4.5% after a strong 2017.

A 2017 boost for consumers … but a pull back on debt

Real growth in consumer spending rose to 6.9%yoy in 1H’17 from 6.2%yoy in 2H’16, as household finances improved, partly thanks to a 15% rise in cash transfers to lower-income groups (7m recipients) under the 1 Malaysia Peoples’ Aid program. A lift in employment growth to 2.1%yoy in June from 0.2%yoy in April 2016 also helped. Yet, despite improved earnings, consumers are pulling back on debt, with growth in household credit slowing to 5%yoy in June from a 14%yoy peak in November 2010. We expect consumption real growth to ease to 5.0% in 2018 from an estimated 6.6% in 2017.

Infrastructure and public housing to drive capex growth

A 13%yoy surge in machinery & equipment capex lifted total capex growth to 7%yoy in 1H’17 from 2.2%yoy in 2H’16. Several big infrastructure projects (mostly railways and highways) and increased public housing construction should keep fixed investment growing at 5.5% in 2017 and 3.6% in 2018. However, a glut of unsold residential units (106,394 in Q1’17 from 66,237 in Q4’15) will reduce private housing activity. Rising oversupply is also evident in the retail and office segments of the property market. A 1.2%yoy fall of US$-based capital goods imports in Q2’17 after a 34%yoy surge in Q1’17 also needs watching, as capital goods imports correlate well with capex spending.

Watch for the M$ rise to continue

Consumers have been complaining about higher costs for several years and the CPI at last backed them up with 4.1%yoy rise in 1H’17. A strong M$, up 5% on the US$ since the start of the year, should help contain inflation and allow Bank Negara to put off a lift in its policy rate until late 2018. The M$ still looks undervalued on the US$ (based on long-term inflation differentials), so there’s room for further Ringgit appreciation on a weak US$.

2014 2015 2016 2017 2018 GDP, real growth, % 6.0 5.0 4.2 5.2 4.3 CPI, year average (2010=100), % 3.2 2.1 2.1 3.9 3.6 Central bank overnight policy rate, Dec, % 3.25 3.25 3.00 3.00 3.50 Ringgit to US$1, year average 3.27 3.90 4.14 4.34 4.24 Sources: 2014-2016 data from government, Bank Negara, & CEIC; 2017-2018 forecasts by IMA Asia.

The above forecast is by IMA Asia. Companies seeking local advice and forecasts should contact: Datuk Paddy Bowie, Managing Director, Paddy Schubert Sdn. Bhd. Tel: (60 3) 2078 4031 ♦ Fax: (60 3) 2078 7034 ♦ Email: [email protected]




Philippines Political & policy issues to watch A tough year ahead for Pres. Duterte … can he retain support?

President Duterte, who is one year into his single 6-year term, faces a make-or-break year ahead, as he attempts to turn populist campaign rhetoric into a sustained improvement in Filipino lives. If he fails, the positive Philippines business story and a 6%+ growth rate are both likely to fade in 2018. His violent anti-drugs campaign, with over 3,000 extra-judicial killings, has been popular until the recent police shooting of a 17-year old student. Some think this marks a turning point in Duterte’s 80%+ approval rating, which is critical to his strong support in both houses of Congress. As it is, Duterte is struggling to get Congress to pass the first of his major tax reform bills without watering down the revenue raising measures (including a lift in the petroleum excise tax and a wider VAT net), which are needed to help finance a massive infrastructure program. The finance ministry’s challenges have been made even bigger by Duterte’s unexpected order to grant free tuition in state universities and colleges.

Infrastructure is set to dominate the policy agenda … and the country’s risk profile

President Duterte’s goal is to lift infrastructure spending to 5.4% of GDP under a major program launched earlier this year. Roads, rail, ports, airports, and water are covered, with power supply taking a central position with estimated spending of US$135bn over the next few decades. Japan and China are both competing to fund projects, and Duterte has promised a rapid approval process. All that suggests the country is entering a major construction boom, and that means three risks that need watching. First, if the government is to keep to its target of a budget deficit capped at 3% of GDP it must get its tax reform bills passed in full, and it’s unclear if that will happen (see above). Second, imports of capital goods for the projects could trigger a big current account deficit, which would further weaken Asia’s weakest currency this year (see below). Finally, approval and implementation risk needs watching, as the country lacks skilled managers in both the public and private sector for managing such a massive workload.

Outlook for the market The 2016 surge in local demand is cooling … which is welcome

The Philippines has been riding a surge in domestic demand, which jumped 11.3% in 2016, while a rising trade deficit pulled GDP growth down to 6.9%. This is well beyond the country’s capacity, whether measuring power availability, port and road congestion, skills, or the trade and current account deficits. Fortunately, domestic demand growth has cooled to 7.2%yoy for 1H’16, while GDP growth eased to 6.4%yoy. Central to the slowdown in 1H’17 is a slip in capex growth to 12.1%yoy from 25.2% for full 2016. Capex growth should remain around 10-12% for the next few years. Milder growth is welcome, as it will help keep inflation and the current account deficit in check. Given a firm consumer sector and Duterte’s big infrastructure program, we expect domestic demand growth to stay around 7.5%pa through the next few years, with GDP growth of 6.5%pa.

Steady consumer growth near 6%

Consumers are benefiting from better employment conditions. The unemployment rate fell to 5.5% last year from a two-decade average of 8.7%. Pushing it lower may be harder because of poor education. Average daily basic pay growth jumped by 8.7%yoy in Q3’16 (the latest data) from 4.5%pa over the prior six years. Household spending real growth slowed to 5.8% in 1H’17 from an unusually strong 7% in 2016, and we expect growth of around 6%pa in 2017-18. OFW remittances, always a key factor, grew 4.7%yoy in 1H’17 from 5.1% growth in 2016. Growth in new vehicle sales cooled to 24%ytd for the first seven months of from 31% last year, and should stay in a 10-20%pa range for the next few years.

A lift in inflation and interest rates

+ a weak Peso

Despite surging local demand and a weak Peso, inflation has stayed in a 2.5-3.0%yoy band for the year to July. It will likely trend higher over the next year, requiring slightly higher interest rates. That should slow the 3.5% slide of the Peso in the first seven months of this year to around 1-2% in 2018 on a broadly weak US$.

2014 2015 2016 2017 2018 GDP growth, % 6.1 6.1 6.9 6.5 6.2 CPI, annual average, % 4.1 1.4 1.8 3.4 4.3 Central bank reverse rep. rate, year end 4.00 4.00 3.00 3.75 4.50 Peso to US$1, annual average 44.4 45.5 47.5 50.0 50.8 Sources: 2014-2016 data from BSP and CEIC; 2017-2018 forecasts by IMA Asia.


Peter Wallace, Managing Director, The Wallace Business Forum Tel: (63 2) 810 9606 ♦ Fax 810 9610 ♦ Email: [email protected]




Singapore Political & policy issues to watch Stable politics … despite a Lee family spat … a new party-line president on Sept 23

Geopolitics will be more of a challenge to Singapore over the next few years than domestic politics. On the latter front, it remains mostly smooth sailing for the dominant PAP, which has ruled Singapore since independence some 52 years ago. A public spat within PM Lee’s family is no more than that. September 23 will see the election of a new president with the PAP’s candidate, Mdm. Halimah Yacob, who has just stepped down as the speaker in parliament, set for an easy win. While the position is largely ceremonial, the PAP likes to ensure a safe pair of hands so the post doesn’t become a platform for alternative commentary. This will be the first election reserved for ethnic Malay candidates following a review of the constitution. Having a Malay Muslim woman as president signals a commitment to a multi-racial society, which reflects Singapore’s balancing act between its two large Muslim neighbours, Indonesia and Malaysia.

Tricky relations with China … will require some policy adjustments

Singapore’s balancing act with China is becoming complicated, although it has always been a leading proponent of engagement with China. Two areas need watching. First, Singapore is America’s strongest supporter in ASEAN, and it has also been – quietly – one of the strongest proponents of a firm ASEAN stand against China’s territorial grab in the South China Sea. That’s annoyed China. Second, China’s massive infrastructure plans for SE Asia (under One Belt, One Road) are mostly beneficial to ASEAN except for Singapore, which will likely find its role as a regional shipping and logistics hub reduced. While neither point is likely to become a major issue, Singapore can be expected to take the “China factor” into account in adjusting its foreign policy and growth plans.

Outlook for the market The economy … if its feels flat it’s because it is flat

The global trade recovery lifted GDP growth to 2.7%yoy in 1H’17, but most companies selling in Singapore wouldn’t have noticed that, as domestic demand fell 1.4%yoy after a weak 2016 expansion of just 0.4%. The government has the financial resources to fix that with a big stimulus, but it has chosen not to, as fixed investment is already running at very high levels, and its real estate policy is focused on avoiding an asset price bubble and ensuring affordable housing. Local demand should end 2017 just mildly up (0.4%) before a return to 2-3% growth in 2018-19. So, firms selling in the local market are unlikely to see much demand growth until next year.

Capex is falling … in construction … & for plant & equipment

The biggest pull back – from a very high level – has been in fixed investment, which fell 5.6%yoy in 1H’17 after a 2.5% fall last year. That was led by a 14.5%yoy fall in capex for residential buildings. Despite an array of major projects underway, capex on civil works also fell 8.7%yoy in 1H’17. The overall fall in capex for construction and works in 2017 is likely to be close to last year’s 3.5%, with a return to weak growth of 2-3% likely next year. Plant and equipment capex also fell 7.2%yoy in 1H’17, suggesting that full 2017 will be the fifth straight year with negative capex growth in this area. Total fixed investment should return to 2-3% growth in 2018, after a 2% fall this year.

Consumer demand is also down … as foreign workers exit

Consumers have also pulled back, with spending falling 0.3%yoy in 1H’17 after just 0.6% growth in 2016. In current prices, retail sales growth has slowed from 4.4% in 2015 to 2.2% in 2016, and just 1.2%yoy in 1H’17. As sales volume rose 1.6%yoy in 1H’17, prices are clearly under pressure. Unemployment isn’t the problem, as it is steady at a low 2.2% for residents in Q2’17. Rather, the issue appears to be a thinning out of the foreign labour force, which saw total employment drop 0.4%yoy at Q2’17. That trend isn’t likely to reverse in the near term, so we don’t expect any real growth in consumer spending in 2017, before a recovery to around 1.5% next year.

A strong S$ Despite soft economic growth, the S$ is up 7% on a weak US$ so far this year. The MAS guides the currency as its primary tool for controlling inflation, yet the S$ looks to be under appreciation pressure, as funds exit a weakening US market in search for secure growth opportunities elsewhere. Still, at 1.36 on the US$ in late August, the S$ is well below its August 2011 all-time high of 1.21. A mild appreciation should continue into 2018.

2014 2015 2016 2017 2018 GDP, real growth, % 3.6 1.9 2.0 2.7 2.7 CPI, year average, % 1.0 -0.5 -0.5 1.1 1.5 3-month interbank interest rate, Dec, % 0.46 1.19 0.97 1.10 1.20 S$ to US$1, year average 1.27 1.37 1.38 1.39 1.35 Sources: 2014-2016 data from government, MAS and CEIC; forecasts for 2017-2018 by IMA Asia



Thailand Political & policy issues to watch The military gains an edge in the 2018 poll contest … as Yingluck flees

The flight of ex-PM Yingluck Shinawatra to Dubai to join her elder brother, ex-PM Thaksin Shinawatra, in exile changes the political outlook. If she had stayed, and the court had found her guilty over the failed rice price support scheme (with a 10-year jail sentence), then she could have become a high-profile martyr, and a focal point for agitation against the military government that deposed her. If found not guilty, she would have been free to lead the pro-Thaksin forces in the 2018 elections, with a reasonable chance of winning. With no one left to carry the Thaksin banner next year, and most other parties and politicians cowed, it will be easier for pro-military parties to win.

A clampdown on political debate … has an impact on commerce

The military’s steady tightening of control over society is spilling over into commerce, and companies will need to watch the impact. A revised Computer Crime Act can make Facebook postings a crime, while a Cyber Security Bill will allow the government to monitor computer systems. Police have also been given new powers to enforce alcohol laws, and that includes any social media mention of alcohol. A June clampdown on migrant workers has also hurt labour-intensive sectors like food processing, garments, and construction.

Policy is focused on an investment revival … & a recovery in FDI inflows

For a successful transition from PM Prayut’s coup-installed government to a military-guided government via the upcoming 2018 election, a revival in growth is essential. The authorities aim to achieve that with a major revitalisation program for Thailand’s large industrial base, backed by new infrastructure, and an array of incentives aimed at reversing a multi-year decline in both local and foreign direct investment (FDI). Net FDI inflows plunged from US$9bn in 2015 to just US$1.7bn last year, but recovered to US$4.1bn in the first five months of 2017. A large Japanese business delegation arrives in September, and Prayut will hope to win support for industrial expansion in the Eastern Economic Corridor.

Outlook for the market GDP lifts thanks to consumers and exports … but capex and manufacturing slump

Q2’17 GDP growth was stronger than expected at 3.7%yoy thanks to firm consumer demand and a lift in exports. Yet the outlook depends of what happens to fixed investment and manufacturing. In 1H’17, capex real growth slowed to 1.1%yoy from 2.8% in 2016 and 4.4% in 2015. Real growth in manufacturing has also slumped, averaging 1.9%pa since 2008 (and just 1.2%yoy in 1H’17) after expanding 6.1%pa during 1991-2007. We remain encouraged by the government’s investment and industry revitalisation effort, with better fixed investment growth expected in 2H’17, which should take full year capex growth back to 2%, with a 4-5% increase likely in 2018. Manufacturing real growth was a weak 1%yoy in 1H’17, but should finish this year up 1.5%, with 2.5% likely in 2018. Accordingly, we’ve cut our GDP forecasts from July to reflect a slower recovery building into 2018.

Waiting for a manufacturing revival

Whether the manufacturing sector can be revived is central to Thailand’s growth challenge, as export manufacturing drove growth for the two decades to 2008. Yet, since then industrial expansion has stalled due to weak local demand and an apparent loss of export competitiveness, particularly in two big sectors, automotive and electronics.

New lending limits will cool growth in consumer demand

Consumer real growth of 3.1%yoy in 1H’17 matched the full 2016 pace. Growth is expected to ease to around 2.8% for full 2017 and 2018, as new limits on consumer lending come into effect on September 1. While the labour market is tight, the problem is weak wage growth (under 1%pa), and that has encouraged consumers to use debt to maintain spending (household debt reached 79% of GDP in Q1’17 – high for ASEAN).

Little inflation and a fast-rising Baht

Inflation was slightly positive in July (up 0.2%yoy) after falling in the two prior months. A small lift is likely in 2018, as construction accelerates. The Baht has been Asia’s fastest rising currency on a weak US$, up 7.5%ytd. A surging current account surplus and a gradual investment and growth revival should keep the Baht on an upward path in 2018.

2014 2015 2016 2017 2018 GDP, real growth, % 0.9 2.9 3.2 3.3 3.3 CPI (2002 index), year average, % 1.9 -0.9 0.2 0.7 1.4 Central bank, policy rate, year end, % 2.00 1.50 1.50 1.50 1.75 Baht to US$1, year average 32.5 34.2 35.3 34.2 33.9 Source: 2014-2016 data from BOT and CEIC; 2017-2018 forecasts by IMA Asia.


Christopher Bruton, Consultant, Dataconsult Ltd Tel: (66 2) 233 5606/7 ♦ Fax: (66 2) 236 8143 ♦ Email: [email protected]




Vietnam Political & policy issues to watch Stable politics … + a crack-down on dissent & corruption

Political leadership and policies should remain stable following a leadership reshuffle in early 2016 that saw the powerful general secretary role in the Communist Party stay with Nguyen Phu Trong, while Tran Dai Quang (former public security minister) was made state president, and Nguyen Xuan Phuc was made prime minister with oversight of economic policy. Looking back from August 2017, it seems party conservatives strengthened their position, leading to a crackdown on political debate and corruption over the last 18 months. That has already seen a few prominent figures fall, and more may do so. However, economic policy has continued down a pro-market path.

Finding the money for growth

… watch for PPP and BOT projects

… + real estate tied to urban rail

… and Sabeco’s sale

Financing growth is shaping up as the biggest policy challenge for the next few years. At the end of June, Vietnam graduated from concessional funding by multilaterals, such as the World Bank. Coincidentally, there are reports of Hanoi scrambling to find funds for its share of financing of the HCM metro railway being built by Sumitomo and others. Part of the problem is that the government is very close to a self-imposed debt cap of 65% of GDP. Private sector funding is one option under PPP and BOT schemes, with an 1,800km railway from Hanoi to HCM in focus (at a mooted $13bn). Local real estate giant Vingroup has also signed an MOU with Hanoi for a US$5bn local rail system that includes real estate development rights. Finally, the first tranche of state owned brewer Sabeco (with a 40% market share) is expected to be sold in Q4’17, with strong competition to buy from Heineken, Carlsberg, Anheuser-Busch, and Asahi.

Learning to obey China

Geopolitical risk with China, particularly over drilling in the South China Sea, worries some firms. Yet, Vietnam’s new leaders appear much more cautious in handling China. In June, Beijing made the unusual threat of military action over a drilling contract awarded by Hanoi to the Spanish company, Repsol. Vietnam immediately cancelled the contract. Vietnam had tried to counterbalance China over the last decade with better US ties, but that strategy collapsed with a swing to populist foreign policy under President Trump.

Outlook for the market Steady growth across the economy … supported by strong exports and FDI

Vietnam is on track for steady growth in 2017 and 2018 that will be close to the 6.2% pace set in 2016. There was little change in the pace of growth in 1H’17, with GDP up 5.9%yoy, manufacturing up 10.9% (from 11.9% in full 2016), construction growing 9%yoy (10% in 2016), and a 7%yoy rise in services matching the 2016 result. Underlying that are two key drivers. Exports surged 18%ytd by August from 9% for full 2016. Implemented foreign direct investment (FDI) reached US$10.3bn by August, and is on track to break the annual US$15.8bn record of 2016. With strong growth across the domestic market, registered FDI, which has an industry breakout, has broadened with the share going to manufacturing dropping from around 60% over the last two years to 35% for the year to August.

Capex growth of close to 10%pa to 2018

Enough FDI has flowed into the manufacturing sector to ensure export growth of 16% this year and 12-15% next year from 8-9%pa over 2015-16. Provided Hanoi sorts out how it will fund infrastructure (see above), that should keep fixed investment growth close to the 9.9% rate reported in 2016 over the next two years. The industrial production measure for concrete was up 12.4%ytd by August, after rising 11.7% in full 2016.

Consumer growth of 7%pa

Real growth in consumer spending in 2017 and 2018 is expected to stay close to the 7.3% rate reported for 2016. Retail sales growth for the first eight months was 10.3%ytd, in line with the 10.2% reported for 2016. That vehicle sales to July fell 2.3%ytd simply reflects buyers holding back in anticipation of zero duties on imported ASEAN vehicles from 2018.

Moderate inflation and a 2-3%pa fall for the Dong

Inflation edged up to 3.4%yoy in August and is likely to trend higher into 2018, as the economy is growing at capacity. Higher inflation and a swing to modest current account deficits is likely to keep the Dong on a 2-3% annual depreciation path on the US$ over 2017 and 2018.

2014 2015 2016 2017 2018 GDP, real growth, % 6.0 6.7 6.2 6.3 6.3 CPI, yoy, % (2005=100 from 2007) 4.1 0.6 2.7 3.9 4.0 Central bank refinancing rate, year-end, % 6.50 6.50 6.50 6.25 6.25 Dong to US$1, year average 21,148 21,677 21,932 22,496 23,203 Source: 2014-2016 data from the IMF and CEIC; 2017-2018 forecasts by IMA Asia



India Political & policy issues to watch PM Modi is on track to win a 2nd term in 2019 … after which he should gain upper house control

PM Modi, who started his first 5-year term in May 2014 facing an upper house controlled by the opposition Indian National Congress (INC), has steadily improved his position. His BJP now rules - or is in coalition government - in 18 of India’s 29 states. While that’s shifted political momentum in Modi’s favour, he is unlikely to gain a federal upper house majority until after 2019, due to the 6-year term for upper house legislators, who are elected by the state legislators. Meanwhile, he can continue to improve his position by gaining ground in elections in southern states in 2018 where the BJP has traditionally been weak. Karnataka is the biggest prize, as it is one of the last INC strongholds (nationwide support for INC has collapsed to 8% and it holds sway in just eight states). If the INC lost Karnataka in next spring’s election, it would be a fatal blow. Other polls to watch in the south are Andhra Pradesh, Kerala, Telangana and Tamil Nadu. The BJP should win a second term in the 2019 federal election and gain control over the upper house soon after.

A good start to the GST

GST implementation dominates the policy outlook. The latest reports indicate that collection targets set for July, the first month of operation, were slightly exceeded, although one third of those registered have not yet paid any tax. Teething problems with the online GST network are likely the main problem.

A new industry policy in October

A new industry policy that covers developments like AI will be announced in October. The focus will be on moving up the value chain and facilitating technology transfer with the help of stronger inflows of foreign direct investment (FDI).

Outlook for the market A weak 2017 due to demonetisation & the GST … with a mild 2018 recovery

We’ve nudged up our growth forecasts this month on a better global growth outlook and a better start to the GST than we were expecting. However, there is a risk that GST teething problems over the next few quarters may undermine cash flows and deter spending. It’s also clear that consumers were hit hard by last November’s demonetisation and are still recovering. GDP growth likely slipped below 6%yoy in Q2’17 due to a big stock rundown, following a weak 6.1%yoy lift in Q1’17. Growth should return to 6%+ from the September quarter with a steady uptrend returning to 7%yoy by late 2018.

Stock gyrations hit growth … a weak consumer demand should recover in 2018

One negative apparent for the June quarter was a stock rundown across the consumer sector, with many of India’s big FMCG firms reporting weak or falling sales and profits, as their channel partners sought to minimize lost GST offset opportunities on pre-GST stock. That problem will disappear quickly, as new stock intake from July 1 should be covered by GST. July auto sales show the demand gyrations. Passenger vehicle sales fell 5.9%yoy in June, but then jumped 13.6%yoy in July as the tax burden on midsize and larger cars fell under the GST and dealers slashed prices (however, the government will now lift the tax on such vehicles). Commercial vehicle sales plunged 12.5%yoy for the June quarter (the first fall in 11 quarters) before climbing 5.7%yoy in July. We think real consumer growth slowed to 6% this year from an unusually strong 9% last year (the decade average to 2015 was 7.5%). Next year, we expect a return to 7% growth.

A weak industry sector also hopes to recover

India has released a new – and apparently more accurate - industrial production index (IPI, 2011-12 base year), which shows 2016 manufacturing output up 5.1% (the old index showed a fall of 0.6%). However, the new IPI shows growth slumping to 1.8%yoy for the June quarter. For 2017, we expect 2.5% growth with 4-5% in 2018.

Help from lower interest rates and a steadier Rupee

July CPI inflation of 2.4%yoy was in line with a declining trend over the last year, which allowed the RBI to make its first policy cut (of 25bp to 6%) in over two years. Another rate cut is likely before end 2017 to help revive local demand. The year average rate for the Rupee is set to climb 3.3% on a weak US$, but 2018 should see a return to a 1-2% fall.

Calendar year starting January 2014 2015 2016 2017 2018 GDP (MP, 2011-12), real growth, % 7.0 7.5 7.9 6.3 6.9 Inflation - CPI, % 6.7 4.9 5.0 3.4 4.9 RBI repo rate, December, % 8.00 6.75 6.25 5.75 6.25 Rupee to US$1, year average 61.0 64.1 67.2 64.9 65.5 Sources: 2014-2016 data from the government (NCI, RBI) and CEIC. 2017-2018 forecasts by IMA Asia with guidance from IMA India.

The above forecast is by IMA Asia. Companies seeking local advice and forecasts should contact: Adit Jain, Chairman, IMA India Tel: (91 124) 459 1200 ♦ Fax: (91 124) 459 1250 ♦ Email: [email protected]




Australia Political & policy issues to watch Political risk is high … as PM Turnbull has a 1-seat majority

Political risk (from stalled policy making or an abrupt change in government) will remain high in Australia until late 2017, as the country waits for a High Court ruling on the mostly accidental dual nationality of some government MPs, which could disqualify them from office. This would be the outcome of almost half the population being born to a parent not born in Australia. An adverse finding could tumble PM Turnbull’s government from office, as it has a single seat majority and the opposition Labor party, which is consistently ahead in the polls, would win one or more of the ensuing by-elections. The next general election is not due until 2019 but could be called in late 2018, with opinion polls pointing to a change in government.

Watch for a change in government … with Labor promising less inequality

PM Turnbull is also under attack by the right wing of his own Liberal party, which wants pay cuts for weekend workers, reduced environmental protection, and a “No” vote in a plebiscite later this year on same-sex marriage. Ex-PM Tony Abbot, who leads the right wing camp, could try to depose Turnbull in a party room vote at any time. Yet, opinion polls show that the right-wing positions he champions are generally unpopular, so a change in leader would do little to help the current government retain office. Labor, led by Bill Shorten, is campaigning on reducing social inequality by raising taxes on business, high income earners, and property investors. The bigger issue is that weak governments and constant leadership changes have undermined all policy making, most notably for the energy sector.

Outlook for the market Four years of weak local demand … a mild lift in local demand into 2018

While Australia has averaged 2.4%pa growth over the four years to 2016, domestic demand growth has been a much weaker 1.4%pa. A surge in export volumes – up 6.7%pa over the four years – accounts for the growth gap. Fixed investment has been the key weakness, down 2.2%pa since 2013, as a decade-long surge in mining capex went into retreat from 2H’13. Consumer demand held up well, with 2.5%pa growth over the last four years, but rising debt rather than wages supported growth, with consumers shifting FMCG purchases to low cost house brands. Meanwhile, a surge in home prices made established owners wealthier and new owners cash poor. Quite a few of these trends will gradually reverse in the next 18 months, with domestic demand growth likely to rise to around 2.2% this year and next, while GDP growth stays close to 2.5%.

Non-residential construction to lift capex from a long slump

A housing boom that helped cushion the impact of the fall in mining investment is now running out of steam. After a huge run up from 2011, dwelling approvals fell 14% in Q2’17 from their Q3’16 peak, as oversupply started emerging in the housing market. However, there are signs of life in the non-residential construction sector (mostly mining and infrastructure work). The latter contributed to a 6.9%yoy increase in construction spending in Q2’17, after 11 declining quarters. This combination of factors is likely to lift capex real growth by 1.2% in 2017 and 1.6% in 2018 from -2.6% in 2016.

Better growth in jobs and wages will help consumers

Private consumption has been growing in line with GDP (2.6%pa) since 2011, despite a steady decline in wage growth. Consumers increased borrowings and dipped into their savings, driving household debt to a record 190% of income and the household savings ratio to a multi-year low 4.7% of income. Fortunately, employment growth has picked up in recent months (2%yoy in July from 1%yoy in January) on the back of rising full-time jobs. Mining jobs are also starting to come back. The improving jobs market should cushion household budgets from the impact of the cooling housing market, and sustain consumption growth at 2.4% in both 2017 and 2018 from 2.6% in 2016.

Low inflation and a rising A$

Inflation eased to 1.9%yoy in Q2’17 from 2.1%yoy in Q1’17. Together with a cooling housing market and over-leveraged households, that makes a strong case for the RBA to keep its policy interest rate at the current record low of 1.5% well into the next year. The A$ has made a reluctant recovery to 80 US cents from a multi-year low of 68 US cents in January 2016. More gains are likely for the A$, as global economic growth lifts, and the US$ continues to fall against its trade-weighted index.

Year ending December 31 2014 2015 2016 2017 2018 GDP, real growth, % 2.8 2.4 2.5 2.5 2.6 CPI, year average, % 2.5 1.5 1.3 2.1 2.3 RBA cash rate, year-end, % 2.50 2.00 1.50 1.50 2.00 A$1 = US$, year average 1.11 1.33 1.35 1.29 1.23 US$1 = A$, year average 0.90 0.75 0.74 0.78 0.81 Source: 2014-2016 data from the ABS, RBA and CEIC; 2017-2018 forecasts by IMA Asia



New Zealand Political & policy issues to watch Watch for a change in government on September 23rd

The opposition Labour Party’s decision to make 37-year old Jacinda Ardern its new leader has transformed the race for the September 23rd election. According to a mid-August opinion poll, Labour’s approval rating jumped 13 points to 37%, mostly at the expense of its potential allies, the Greens (now at 4%). The nationalist NZ First party scored 10%, while support for the ruling National party eased 3 points to 44%. In NZ’s proportional representation system, this will make the anti-immigration, anti-foreign investment NZ First party a king maker in the new parliament. It is more likely to side with Labour, as its social agenda has less in common with the Nationals, who favour high immigration and open borders to trade and investment. A minority Labour government relying on NZ First support could result in more interventionist policy settings (see below).

As Labour goes for populist policies

While a large majority (60-65%) of voters thinks that NZ is moving broadly in the right direction under the Nationals, who have been in power since 2008, Kiwis are starting to pay more attention to rising inequality, poverty, worsening housing affordability, and homelessness. These are the key themes of the Labour campaign under Ardern. She promises a crackdown on immigration, banning property sales to foreign non-residents, changes in the holding period for capital gains tax eligibility, building 100,000 public housing units in the next ten years, and increased public spending on education, health and welfare. The Nationals, under PM Bill English are offering continuing budget surpluses, modest personal tax cuts, a big increase in infrastructure development, and new trade agreements with foreign trading partners.

Outlook for the market Domestic demand growth will slow … while a lift in net exports supports GDP

Strong migrant inflows and rapid housing construction made NZ one of the OECD’s fastest growing economies in recent years. However, both growth engines are now losing steam. Net migration hit a record high of 72,500 in the year to July, but its growth has slowed to 5.2%yoy from the 44.7%yoy surge reported in July 2015. That’s a factor in a cooling housing market, with the value of residential building approvals up 5.3% for the year to July from a 19%yoy rise for the year to July 2016. Signs of a cooling residential market are also evident in softer house price inflation and falling transactions. These trends should see domestic spending growth slow to 4.1% in 2017 and 3.0% in 2018. We expect rising net exports to offset the impact of weaker local demand, allowing GDP growth to stay around 3% in both 2017 and 2018 from 3.6% in 2016.

Watch for strong consumer demand to ease

Rising asset prices and a firm job market helped lift real growth in consumer demand to a multi-year high of 5.0%yoy in Q1’17 from 4.1% in full 2016. However, house price appreciation is slowing (3.4%yoy in July from a 13.2%yoy surge in November 2016), while employment growth eased to 3.1%yoy in Q2’17 from 4.6% in full 2016. A cooling housing market will hurt consumer sentiment, as household debt is at a record high 125% of disposable income. The likely result will be slower consumer demand growth of 3.6% in 2018 after a strong 4.4% in 2017.

Capex growth will also ease as construction cools

Fixed investment grew 5.4%yoy in Q1’17 in line with the 5.5% growth of full 2016, as a 14.4% surge in plant & equipment capex helped offset the impact weaker growth in construction capex. Residential construction growth eased to 4%yoy from 11% in 2016, while non-residential activity fell 0.3%yoy after a 12% rise over the same period. We expect construction growth to continue losing steam, while plant & equipment capex is unlikely to sustain its recent double-digit expansion. This will likely trim fixed investment growth to 2.1% in 2018 from 4.5% in 2017.

A firm NZ$ on modest inflation

Modest inflation (1.7%yoy in Q2’17 from 2.2%yoy in Q1’17) and a cooling housing market will prompt the RBNZ to keep its policy interest rate steady at 1.75% into 2018. We expect the NZ$ to remain on the mild uptrend it has established on the US$ since mid-2015.

Calendar years 2014 2015 2016 2017 2018 GDP(Expenditure), real growth, % 2.8 3.2 3.6 3.0 3.0 GDP(Production), real growth, % 3.8 2.4 3.1 3.1 3.0 CPI, year average, % 1.2 0.3 0.6 2.1 2.5 Official cash rate, year end, % 3.50 2.50 1.75 1.75 1.75 NZ$1 = US$, year average 0.83 0.70 0.70 0.73 0.76 US$1 = NZ$, year average 1.20 1.43 1.43 1.37 1.31 NZ$1 = A$, year average 1.09 1.07 1.07 1.06 1.05 Source: 2014-2016 data from Statistics NZ and NZRB; 2017-2018 forecasts by IMA Asia



Asia Brief contributors The Asia Pacific Executive Brief is produced by a unique network of in-country experts who run briefing and advisory programs that are designed to help senior executives monitor and anticipate critical business developments through timely insights and analysis. Further information on the markets and the peer group briefing programs is available from the Country Directors listed below. Asia & Global

Singapore: Richard Martin, Managing Director, IMA Asia ♦ Web: www.imaasia.com Mob: (65) 9023 9642 ♦ Email: [email protected]

Australia

Sydney: Richard Martin, Managing Director, IMA Asia ♦ Web: www.imaasia.com Tel: (61 2) 9252 4336 ♦ Fax: (61 2) 9252 4339 ♦ Email: [email protected]

China

Shanghai: James Loudon, China Representative, IMA Asia Tel: (86) 186 2153 7602 ♦ Email: [email protected]

Hong Kong Hong Kong: Mark Michelson, Chairman, Asia CEO Forum, Hong Kong Tel: (852) 2530 1115 ♦ Fax: (852) 2530 1125 ♦ Email: [email protected]

India New Delhi: Adit Jain, Chairman, IMA India ♦ Web: www.ima-india.com Tel: (91124) 459 1251 ♦ Fax: (91124) 459 1250 ♦ Email: [email protected]

Indonesia Jakarta: James Castle, Chairman, CastleAsia♦ Web: www.castleasia.com Tel: (62 21) 2902 1641 ♦ Fax: (62 21) 2902 1648 ♦ Email: [email protected]

Japan Canberra: Chris Nailer, Associate Director, IMA Asia & Director MBA program, ANU Tel: (61 2) 9252 4336 ♦ Fax: (61 2) 9252 4339 ♦ Email: [email protected]

Malaysia Kuala Lumpur: Datuk Paddy Bowie, Managing Director, Paddy Schubert Sdn. Bhd. Tel: (60 3) 2078 4031 ♦ Fax: (60 3) 2078 7034 ♦ Email: [email protected]

Pakistan Karachi: Babar Ayaz, Managing Director, Mediators (Pvt) Ltd Tel: (92 21) 565 6113 ♦ Fax: (92 21) 565 6112 ♦ Email: [email protected]

Philippines Manila: Peter Wallace, President, The Wallace Business Forum ♦ Fax: (63 2) 810 9610 ♦ Web: www.wallacebusinessforum.com Tel: (63 2) 810 9606 ♦ Email: [email protected]

South Korea

Seoul: Tony Michell, Managing Director, Korea Associates Business Consultancy Tel: (82 2) 335 2614 ♦ Fax: (82 2) 323 4262 ♦ Web: www.kabcltd.com Email: [email protected]

Singapore Singapore: Richard Martin, Managing Director, IMA Asia ♦ Web: www.imaasia.com Tel: (65) 6332 0166 ♦ Fax: (65) 6332 0170 ♦ Email: [email protected]

Taiwan Taipei: Michael Boyden, Managing Director, TASC Taiwan Asia Strategy Consulting Tel: (886 2) 8789 0978 ♦ Email: [email protected] ♦ Web: www.tasc-taiwanasia.com

Thailand

Bangkok: Christopher Bruton, Managing Director, Dataconsult Ltd Tel: (66 2) 233 5606/7 ♦ Fax: (66 2) 236 8143 ♦ Email: [email protected]

Vietnam

Bangkok: Christopher Bruton, Managing Director, Dataconsult Ltd Tel: (66 2) 233 5606/7 ♦ Fax: (66 2) 236 8143 ♦ Email: [email protected]

http://www.imaasia.com/





http://www.ima-india.com/


http://www.castleasia.com/





http://www.wallacebusinessforum.com/




http://www.tasc-taiwanasia.com/



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