62_Asia Brief - Mar 2014

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CONTENTS

Overviews Global Outlook

Regional Outlook

North Asia Japan

China

Hong Kong

Taiwan

South Korea

Southeast Asia IndonesiaMalaysia

Philippines

Singapore

Thailand

Vietnam

South Asia India

Australasia Australia

New Zealand

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CONFIDENTI L

Asia PacificExecutive BriefMarch 2014! #$% %&'(

Editor: Richard Martin ([email protected])Regional economist: Andrew Hordern ([email protected])Consulting economist: Kostas Panagiotou ([email protected])

This report summarises the current business environment analysis and short-term forecasts ofcountry 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 notguaranteed as to accuracy or completeness. The analysis and forecasts are subject to change withoutnotice. IMA Asia does not accept any liability arising from the use of this report. For more informationand press enquiries please contact [email protected].

Copyright 2014 IMA Asia. All rights reserved. Intended for recipient only and not for further distributionor web loading without the consent of IMA Asia.

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!"#!$ &'()*'')+ IMA Asia clients can also access a 14-page excelworkbook with data and charts that can be used for reports and presentations.

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by Adit Jain

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MA Indias in-company briefing presentations are designed to help decision-

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To know more and to request a tailored briefing for your organisation,

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Economics... interpreted for business

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Global outlook

A good globalrecovery in 2014

!that can

survive the oddbump

There are several ways of spotting a new global expansion, but one of the simplest is that itis marked by a rising growth trend that can survive a series of shocks such as a harshnorthern winter, a Ukraine crisis, or whatever happens next week. The world is in that zone.The high-frequency indicators that soar and crash with each weekly shock dont help in this

regard. It is best to watch the basics, particularly the quality of balance sheets of the fourmain actors in any economy (households, banks, corporates, and government), as well asaggregate national balance sheets. Good balance sheets support sustainable demandgrowth, while bad ones lead to recessions. In this regard the US has just reported that itscurrent account deficit dropped to 2.3% of GDP last year, its lowest level since 1997 and halfthe 6% peak of 2006. In aggregate this reflects that households, banks, corporates and thegovernment (due to sequestration) have rapidly deleveraged and are capable of sustaineddemand growth. Europe has done a poorer job, but also moved in the right direction(Greece recently reported its first current account surplus ever).

Strong balancesheets propelthe US recovery

We expect US GDP growth to lift from 1.9% in 2013 to 3% or better for 2014-16 thanks tostronger balance sheets for the four main economic actors. Consumer spending should lifttowards 3% growth in each of the next three years from 1.9% for 2013, while fixedinvestment growth lifts above 6%pa from 4.5% in 2013. Banks are well positioned to support

growth, as their aggregate core capital ratio has risen to 9.5%, the highest point in 25 years,while bank loan loss provisions have plunged to pre-GFC levels. Household balance sheetshave also improved with the share of all home mortgages underwater (the mortgage is worthmore than the house) sliding from a peak of 25% in 2011 to 10% at the end of 2013. Finallysequestration, which saw government demand fall for three straight years, has stopped. Forour Asia analysis the takeaways are an end to QE by late 2014, and a mild but steady lift inUS interest rates through 2015 that takes the 10-year bond back to 4-5% in 2016. Strongergrowth and rising interest rates will keep the US$ firm through the current expansion.

The Euro areacatches up

!with risingdemand in the

big 4

!but a strongEuro is a worry

The Euro area looks set to partly catch up with the US recovery, with the latest OECDcomposite leading indicator for the Euro area turning up sharply. The rebound is spreadacross the main markets of Germany, France, and Italy and mirrors a similar upturn outsidethe Euro area in the UK. Spain, the Euro areas 4

thbiggest economy, is reporting record

exports, a halving in government bond yields from their crisis peak, and a 40% jump in FDI

inflows to US$42bn last year. The European Commission is forecasting 1.2% growth for theEuro area this year, but we agree with Chancellor Merkel that 1.4% is more likely. Europeancompanies and the European Central Bank (ECB) would like a weaker Euro to boost profitsand stave off deflation. Both are likely to be disappointed. The Euro is up 5% in the lastyear, while its nominal effective exchange rate has risen 10% from its July 2012 low. ECBchief Mario Draghi has tried to talk the Euro down, but many investors see opportunities in aEuro area recovery and the absence of quantitative easing. Moreover, the macrofundamentals are likely to push the Euro higher. Despite Euro appreciation the trade andcurrent account surpluses have soared, while inflation and budget deficits have dropped.

Capital flowsback to EM inAsia

Quality journals have been reporting the end of the emerging market (EM) story, as GDPgrowth slumps, EM currencies slide, and MNCs are forced to slash over-ambitious growthplans. We see some of that in talking with clients, but the bigger story remains a stronginvestment commitment behind carefully evaluated opportunities. Moreover, we expectportfolio capital inflows to swing back to Asias EM markets this year.

IMA Asias forecasts 2011 2012 2013 2014 2015

World Real GDP growth, % 3.9 3.2 2.9 3.7 4.4- US 1.8 2.8 1.9 3.0 3.2- Euro area 1.5 -0.6 -0.4 1.4 1.6- Asia/Pacific (14) 4.5 4.4 4.3 4.3 4.5

- NICs (4) 4.0 1.8 2.6 3.2 3.5- Developing Asia (7) 8.2 6.9 6.6 6.4 6.6- ASEAN (6) 4.7 5.6 5.0 4.7 5.5

World goods & services trade volume, % growth 6.1 2.7 2.9 4.9 5.4Interest rates, US Fed target rate, year end, % 0.10 0.10 0.10 0.10 1.25Inflation, CPI, US, year avg., % 3.1 2.1 1.5 1.7 1.9Inflation, CPI, Euro area, % 2.7 1.9 1.1 1.7 1.7

Crude oil, avg of 3 spot crudes, US$ 104 105 104 101 95US$ / Euro 1, year average rate 1.39 1.29 1.33 1.30 1.29Yen / US$1, year average rate 80 80 98 104 106

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]

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industry analysisdemand estimationscenario planningmarket researchforecastingstrategymarket segmentationconsumer demographics

IMAIndias consulting practice carries out research and strategy assignments for

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From building long term scenarios for the agriculture and steel sectors to

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...IMAIndiahas consulted for some of the worlds most prominent companies

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Regional outlook

Summary of forecasts in this months Asia Brief

GDP (Expenditure), real growth, % 2011 2012 2013 2014 2015

Japan -0.5 1.4 1.6 0.9 0.9China 9.3 7.7 7.7 7.3 7.0Hong Kong 4.8 1.5 2.9 3.4 4.0

Taiwan 4.2 1.5 2.1 3.0 3.6South Korea 3.7 2.0 2.8 3.2 3.4Indonesia 6.5 6.3 5.8 5.6 5.6

Malaysia 5.1 5.6 4.7 5.0 5.6Philippines 3.6 6.8 7.2 6.5 5.5Singapore 6.0 1.9 4.1 4.5 5.0

Thailand 0.1 6.5 2.9 1.0 5.5Vietnam 6.2 5.2 5.4 6.0 6.0India (CY) 7.7 4.8 3.9 4.1 5.8

Australia 2.6 3.6 2.4 3.0 2.2New Zealand 1.2 2.9 2.5 3.8 3.6

Inflation, CPI year average, % 2011 2012 2013 2014 2015

Japan -0.3 0.0 0.3 1.8 1.1China 5.4 2.7 2.6 2.7 3.0Hong Kong (composite CPI) 5.3 4.1 4.4 3.8 3.6

Taiwan 1.4 1.9 0.8 1.1 2.0South Korea 4.0 2.2 1.3 1.8 2.5Indonesia 5.3 4.0 6.4 6.5 5.5

Malaysia 3.2 1.6 2.1 3.5 4.8Philippines 4.6 3.2 3.0 4.1 4.7

Singapore 5.2 4.6 2.4 2.4 2.9Thailand 3.8 3.0 2.2 2.2 3.0Vietnam 18.7 9.1 6.6 5.6 6.5India (CY CPI urban non-manual workers) 8.9 9.8 10.1 7.7 6.6


Exchange rate to US$1, year avg. 2011 2012 2013 2014 2015

Japan 80 80 98 104 106China 6.46 6.31 6.20 6.10 6.05Hong Kong 7.78 7.76 7.76 7.76 7.76

Taiwan 29.5 29.6 29.6 30.0 29.5South Korea 1,108 1,125 1,095 1,071 1,053Indonesia 8,776 9,384 10,460 11,475 11,875

Malaysia 3.06 3.09 3.15 3.33 3.40Philippines 43.3 42.2 42.4 45.5 46.0Singapore 1.26 1.25 1.25 1.28 1.31

Thailand 30.5 31.1 30.7 33.4 34.4Vietnam 20,681 20,847 21,019 21,175 21,343India (FY) 46.6 53.4 58.5 61.1 62.8


Sources: CEIC, central banks, and national statistics offices. Forecasts are by IMA Asia.

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Regional outlook

Political & policy issues to watch

The differencethat might be

made

!by Modi &Jokowi

!a lift forcurrencies &stocks

!but not forGDP in 2014

Two of Asias most important emerging markets India and Indonesia - are set to gain newleaders (by May and October respectively) who will be elected based on a promise of more

effective and less corrupt government. The elections will be as free and fair as any in theWest and voters will elect Joko Widodo (Jokowi) in Indonesia and Narendra Modi in Indiaover opponents from traditional ruling families, as well as those who simply promise bighandouts. By any measure this is a political revolution, but one within stable politicalsystems and that bodes well for both countries. Jokowi and Modi will have an immediateimpact via a lift in sentiment that both countries sorely need. The prospect of their victorieshas already triggered capital inflows that are lifting stocks and currencies (we are cautiousabout how long the currencies will stay up see below). Beyond that it gets tough and theirtrack records as capable leaders at the city and state level is no guarantee of success. Bothhead parties stuffed with old style politicians who will view it as their turn at the public trough.Both face entrenched vested interests in bureaucracies and local businesses with no wishfor change. Our forecasts in this months Asia Brief show both markets as surprisingly weakthis year. We must wait to see if both do actually win and then we must wait a year or moreto see if they can deliver the more effective government they have promised.

Thailand stuckin no mans land

Thailand is an example of what happens when political systems break down. Electionsmean nothing, so there is no end to a debilitating political crisis that saps growth. The Thaicourts, who appear to favour the anti-Thaksin forces, may now try their hand at forcing PMYinglucks elected government from office. It remains far from clear how an effective andstable government might be established and that will undermine the economy this year.

Is a China crisisimminent?

!it started ayear ago

Companies are right to ask if China is about to topple into a financial crisis that would tip itseconomy into a multi-year recession. Weve argued for years that China will skirt such acrisis as it has the money, the control (it owns the banks and the big debtors), and a plan formanaging its way around such a mess. Wed like to amend that view. China is already in afinancial crisis and has been for a year or more. We failed to notice the start as it wasntheralded by a crash in property prices as in the West. But most of the other features of acrisis have emerged and will continue to emerge this year including the collapse of over-leveraged businesses and a big reform program to de-risk the finance sector.

Outlook for the market

Can Asia growwithout strongexport growth?

Exports have played a central role in the Asian growth story, yet as we look forward thatengine will be far less powerful. For the six years to 2008 Asias exports grew at 18%pa yetfor 2012 and 2013 growth was just 2%pa. A weak export recovery is expected in 2014 and2015 and for the final five years of this decade export growth will be half the 18% pace setfor 2002-08. The answer, of course, is that Asia must foster its domestic engines of growthand corporate plans for the tail-end of this decade will need to focus on high growthopportunities in this area. China leads this story yet Asias other big export manufacturers Japan, Korea, and Taiwan struggle with the transition, although this months Asia Briefnotes that President Park in Korea has got the message.

The limits ongrowth in India& Indonesia

!and the riskof devaluations

India and Indonesia will get new (and possibly better) political leaders this year and theyhave already got more capable and independent central bank heads, which will lower somebut not all macro risks. Both economies suffer from a failure of reform that has hobbled theirprivate sectors through red tape, corruption, and (in India) a balance sheet crisis for over-leveraged industrial firms. None of these problems can be solved quickly and this monthweve trimmed our forecasts for both. As domestic demand recovers in 2015 theyll againface the problems of under-investment in local infrastructure and supply capacity, whichmeans another blow-out in the trade and current account deficits and continued weakcurrencies to the end of the decade, despite brief appreciation in 2014.

Asias outlookisnt hamperedby rising interest

rates

Stable or weak global energy prices are a giant plus for Asia, which is the worlds mostenergy dependent region. Moreover the surge in factory pay that ignited across SE Asia in2012 appears to have abated in 2013, as exports stalled. A rise in food prices needs

watching, but the overall trend is for low inflation with interest rates being kept near recordlows, or small rises that shouldnt knock over demand recoveries in 2015.

!or by bigcurrency falls

Asias new wave of more independent central bankers is part of the low inflation story andthat also means more stable currencies or smaller depreciations for India and Indonesia.

Richard Martin, IMA Asia Email: [email protected]

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Japan


Partial successfor PM Abes

recovery plans

!may endwith the Aprilsales tax hike

PM Abes main goal is lifting growth and inflation and he is likely to be partially successfulin the short-term, although long-term success is unlikely without major reforms (his third

policy arrow, which he has been reluctant to fire). Since taking office in late 2012, hispolicies have helped growth lift to 1.6% in 2013 while inflation rose to 1.4%yoy in January.A move to quantitative easing (QE) from last March was crucial, as this led to a weakerYen, which pushed up inflation and boosted profits for Japans big exporters. A decision tolift the sales tax from 5% to 8% on April 1 has also helped, as consumers bought forwardpurchases of houses, cars, and other durables, which helped lift GDP over 2H13. But thiswill also see sales fall from April 1, undermining growth in 2014 (see below).

Watch for asmall wage liftby big firms

!but notSMEs

Two other big initiatives are about to hit the economy. Abe has called on Japanesecompanies to lift wages in the annual spring wage round, and dozens of major firms havecommitted to doing so (Toyota has promised a 2.9%yoy lift in pay). Yet smaller firms areunlikely to follow, as their margins have been squeezed over the last year by a falling Yenand rising prices without the benefit of offshore earnings. To help companies, Abe hasbought forward the end to an extra tax on corporate profits for rebuilding after Fukushima,

so the corporate tax rate will drop in April to 35.64% from 38.01%.

Less growth &more risk

!unless Abecan switch onnuclear plants

January saw the current account plunge to a record deficit for the last three decadesfollowing years of mostly strong surpluses. This raises macro risk and will undermine GDPgrowth (as the underlying trade deficit in GDP subtracts from growth). The main culprit is asurge in thermal energy imports, as the nuclear power stations that normally supply 30% ofelectricity are all closed. PM Abe aims to restart several of the 48 operable reactors assoon as safety checks and some tricky local community consultations are completed. Anew energy plan released in February returns nuclear power to a central place.


2014 growth

!almost all inQ1 followed by amild recession

Most of the 0.9% growth we expect this year will occur in Q114 (our forecast has beentrimmed from 1.1% last month). With a GST rise looming on April 1, real growth inconsumer spending jumped to 2.3%yoy in 2H13 from 1.6%yoy in 1H13, while fixedinvestment rose by 5.7%yoy after a small fall in 1H13. Growth will still be positive for bothin Q114, but we expect both to fall for the next three quarters of 2014, cutting full yearconsumer growth to zero after 2% in 2013, while fixed investment growth may contractslightly after 2.7% growth in 2013. Real consumer growth should return to 0.5-1.0% in2015 although fixed investment may still fall.

But prices willedge up as salesvolumes fall

Companies will, for the first time in a decade, face a positive gap between volume (real)and current price growth that signals higher prices will lift sales value while volumes arestatic or falling. Current growth in consumer spending will likely lift by 1.4%, suggestingretail sales growth of 1.5% in 2014 from 1% last year.

Oddly weak

exports

!export firmsshould lift workfrom Q2

Exports have been very poor despite a weak Yen, with the US$ value of shipments down

10.5% in 2013, which pulled industrial production down by 0.8%. The export fall wasacross all regions, with China down 10%, US down 6%, and the EU down 12%. The fallwas also across all categories, with chemicals down 3.5%, iron and steel down 11%,computers down 12%, ICs down 11%, and vehicles down 8%. It seems that Japansexporters have held back on lifting overtime and hiring more workers. We expect this trendto ease in Q214, with full 2014 exports rising 1.4% and industrial production up by 1.8%.Private machinery orders (x-ships) should grow by 6-8% in 2014 from 5.8% in 2013.

Japans own QEkeeps the Yenweak & inflationat 1%+

As US QE tapers down over 2014, Japans own QE program is expected to continue andwill keep the Yen on a mild downward path. This will help keep inflation above 1%yoy bypushing up import prices and encouraging households and firms to spend. The Bank ofJapan would have to increase its QE to lift inflation towards the 2% goal set by PM Abe. Areturn to nuclear power would help contain the fast rise in energy costs.

2011 2012 2013 2014 2015GDP, real growth (2005p), % -0.5 1.4 1.6 0.9 0.9CPI, year average, % -0.3 0.0 0.3 1.8 1.1Overnight call rate, year end, % 0.08 0.08 0.07 0.06 0.06Yen to US$1, year average 80 80 98 104 106

Sources: 2011-2013 data from the BOJ and government sources; 2014-2015 forecasts by IMA Asia

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China


China preparesfor much-needed

reforms

China is undertaking reforms designed to create a more sustainable, consumption-ledeconomy. At the National Peoples Congress in March, the government vowed to reduce

production in sectors with overcapacity, slow investment growth, restructure state-ownedenterprises (SOEs), and open up the financial sector. While most of the reforms will slowthe economy, a new urbanisation plan will support growth.

But theres nogain without pain

!apparent incredit shortages

China is trying to engineer a soft landing, after a corporate and local government debtsurge created overcapacity and non-performing loans (NPLs) in some sectors. While theauthorities have tried to remove overcapacity by restricting credit, it has created twoproblems. Firstly, rising defaults have put pressure on the financial sector. Secondly, tightliquidity has impacted on all business sectors, slowing activity. The authorities will likelyrespond to these problems by allowing banks to move NPLs to asset managementcompanies, cutting the reserve requirement ratio (RRR, currently at a high 20%) to easecredit access, and asking the banks to limit loans to sectors with overcapacity.

Environmental &

social issues alsoneed watching

Chinas political stability depends on the government managing social issues as well as

economic ones. In February, the Kunming terrorist attack and extremely high pollutionlevels raised concerns within Chinas increasingly internet-savvy population. While Chinahas vowed to stamp out terrorism and lower pollution, these issues need watching.


2014 GDP forecastlowered

Weve lowered our GDP forecast for 2014 to 7.3% from 7.5%, after China experienced aslow start to 2014. Tight credit conditions have affected businesses, cutting the HSBCpurchasing managers index to 48.5 in February from 50.5 in December. The PeoplesBank of China is expected to ease credit conditions in Q214, which should allow theeconomy to firm over the rest of 2014. However, restructuring and the inevitabledisruptions caused by financial reforms will limit growth to 7.0% in 2015.

Manufacturing tolift from Q214

Chinese manufacturing had a tough first two months of 2014, with industrial value-addedgrowth easing to 8.6%yoy from 9.7%. State-owned enterprises, who are heavily exposedto sectors with overcapacity, were the worst affected, with growth slowing to 4.4%yoy from6.9%. In contrast, foreign firms were relatively resilient, rising 7.8%yoy from 8.3%. Easingcredit conditions and stronger global demand are expected to help manufacturing fromQ214. However, measures to remove overcapacity will slow some sectors, and limit totalmanufacturing growth to 7.2%pa in 2014 and 2015 from 7.6% in 2013.

Consumers trimspending ondurables

Soft economic conditions caused consumers to trim spending in the first two months of2014, with retail sales growth slowing to 11.8%yoy from 13.1% in 2013. Consumers cutback on durable purchases, including appliances (7%yoy from 14% in 2013), furniture(12%yoy from 20%) and clothing (9%yoy from 13%). Meanwhile, the crackdown on publicextravagance held catering growth to 10%yoy from 14% in 2012. These factors will likelylimit consumer growth to 6.8% in 2014 and 7.0% in 2015 from 7.8% in 2013.

Constructionshould gain fromthe urbanisationplan

Tight credit conditions for the property sector are expected to slow construction growth to7.5% in 2014 and 6.8% in 2015 from 9-10%pa over 2011-13. Amid this weakness, Chinasurbanisation plan is expected to support growth. While a government goal of spendingYuan 1tr on upgrading shantytowns in 2014 (equal to 25% of 2013 construction) will not befully achieved, upgrading will give a modest boost to the sector. Urbanisation will also leadto more civil works, as cities upgrade their facilities to deal with larger populations.

A limit to Yuanweakness

The Yuan has fallen 2.5% against the US$ since mid-January, the currencys biggest dropin the past decade. The Yuan is expected to resume a mild appreciation path in Q214, asfurther falls would destabilise the financial sector. The widening of the Yuans daily band to2% from 1% in March is a positive step towards the liberalisation of the currency.

2011 2012 2013 2014 2015

GDP, real growth, % 9.3 7.7 7.7 7.3 7.0CPI, year average, % 5.4 2.7 2.6 2.7 3.0PBOC 1-year loan, at Dec., % 6.56 6.00 6.00 6.00 6.00Yuan to US$1, year average 6.46 6.31 6.20 6.10 6.05Sources: 2011-13 data from CEIC and government agencies; 2014-15 forecasts by IMA Asia.

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Hong Kong


Faction fights

!main one isthe 2017 election

!if unresolvedcould lead toprotests

Entering the 2n

year of his five-year term, Chief Executive CY Leung is facing adeteriorating HK political situation, with more concern about Beijings expanding

encroachment in several areas. The pro-democracy factions have challenged thegovernment over a range of issues, including mainland tourist numbers (40.75m in 2013,up 16+% from 2012), mainland mothers giving birth in HK, and reduced press freedom.The main issue over the rest of Leungs first term will likely be the restrictions on promiseduniversal suffrage in selecting the next Chief Executive in 2017, which looked to bestronger in the wake of this months National Peoples Congress meeting. Withcompromise seeming increasingly remote, large-scale protests to blockade the centralbusiness district later this year appear more likely.

Ageing populationlimits growth

!govt needs toboost migration

The HK governments annual economic report forecasts GDP growth of 3-4% in 2014 and3.5%pa in 2015 to 2018, based on solid expansion from China combined with HKsproductivity gains and expanding infrastructure. The ageing population, which is alreadycausing low-end labour shortages, is seen as the major barrier to faster growth and athreat to sustaining a budget surplus. Government attempts to increase the labour supply

through migration have been hotly rejected by both pro-Beijing and pro-democracy unions.

Offshore Yuanmarket helpsfinancial sector

HK remains the leading player in the offshore Yuan market. HKs Yuan deposits andoutstanding certificates of deposit exceeded Yuan 1tr at the end of 2013, equal to 70% ofoffshore liquidity, while trade settlement in 2013 reached Yuan 3.8tr, up 45%. Thecontinued development of HKs Yuan services is a plus for financial sector growth.


HK likely to meetchallenges

!growth to rise

HK faces economic challenges in 2014. Falling property prices are expected to slowconstruction, while likely limitations on mainland tourist numbers could ease visitorspending. However, recent signs suggest HK can overcome these challenges. A rise inlocal demand has boosted business sentiment, with the purchasing managers indexreaching a 35-month high of 53.3 in February. Overall, GDP growth is expected to reach

3.4% in 2014 and 4.0% in 2015 from 2.9% in 2013.

Gradual exportrecovery

!but Q1softened by China

Exports will likely stay soft in Q114, as tight credit conditions in China, accounting for halfof overseas sales, limits demand. An early Chinese New Year in 2014 caused HK exportsto fall 0.4%yoy in January from 4.8%yoy growth in Q413. However, a lift in Chinesedemand from Q214, combined with a gradual recovery in developed markets, is expectedto raise export growth to 6.1% in 2014 and 7.0% in 2015 from 3.6% in 2013.

Falling propertyprices to slowconstruction in2014

HKs property sector has eased since mid-2013. Rental growth has flattened out across allmajor sectors, while prices have fallen 3% for retail buildings and 1% for office andresidential buildings. Overall, housing prices are expected to fall 20% by mid-2015. Thiswill likely push private construction down 3% in 2014, after a 5% fall in 2013. In 2015,Leung is expected to roll out his long-term house building plan, which should encouragedevelopers to boost construction.

Local demand toreplace touristspending

HKs consumer sector is expected to change over 2014. In 2013, consumer spending rose4.2%. Soft local demand was supported by tourist spending, with 17% growth in mainlandtourist arrivals boosting jewellery (+23%) and clothing (+8%) sales. In 2014, growth isexpected to ease to 3.9%. Lower tourist arrivals should be partly balanced by domesticspending, as the tight labour market boosts wages.

Housing pricefalls to lowerinflation

The Chinese New Year helped push up inflation to 4.6%yoy in January from 4.3%yoy inQ413. This price rise is expected to be temporary, with falling house prices reducinginflation to 3.6-3.8%pa in 2013 and 2014. Interest rates will be flat in 2014, before rising in2015, as the HK$-US$ link forces HK to match likely US rate hikes.

2011 2012 2013 2014 2015GDP, real growth, % 4.8 1.5 2.9 3.4 4.0

Composite CPI (04/05), year average, % 5.3 4.1 4.4 3.8 3.6Discount window base rate, % year end 0.50 0.50 0.50 0.50 1.50HK$ to US$1, year average 7.78 7.76 7.76 7.76 7.76Sources: 2011-2013 from Censtat, HKMA, and CEIC; 2014-2015 by IMA Asia.

Dr Mark Michelson, Chairman, Asia CEO Forum (Hong Kong)

Tel: (852) 2530-1115 Fax: (852) 2530-1125 Email: [email protected]

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Taiwan


The ruling KMTshould do well in

2014 local polls

!but the 2016presidential raceis wide open

President Ma Ying-Jeous KMT party is well placed going into local elections in November.Strong candidates should ensure the party retains three of the five mayoral posts in the

major municipalities. However, this wont confirm a KMT victory in the 2016 presidentialelection. Across Taiwan, the KMT faces public concern over encroachment by mainlandChina, rising utility costs, and risks in commissioning a 4th nuclear power plant. Inaddition, popular DPP leader Tsai Ying-Wen may run again, which would boost theoppositions chances. While prior DPP administrations have shunned commercial ties withChina, it is not yet clear whether a new DPP government would follow that course.

The domesticbattle over FTAs

President Ma believes Taiwans neighbours, particularly Korea and Singapore, havedeveloped an edge over the island by signing more free trade agreements (FTAs). Mawants to catch up, with possible deals with India, Indonesia, and Australia. Such dealsshould have an easier passage than the China services pact, which was agreed to lastyear but faces student protests in the legislature.

Lifting some taxes

to trim public debt

Taiwans fiscal position has recently been hurt by persistent budget deficits, which have

lifted public debt to 41% of GDP in 2013 from 13% in 1993. In March, the KMT announcedplans to curb debt growth by lifting income taxes on very high income earners (overUS$329,000) and on banks and insurers (to 5% from 2%). It is uncertain, however,whether the KMT can get the enabling bills passed by a hostile legislature.


A lift in the 2014forecast

Taiwans export dependent economy is in recovery. While Chinese demand is soft, firmingdemand from developed markets has flowed into the economy, boosting consumerconfidence to a 2-year high in February. Taiwan forecasting agency (DGBAS) has lifted its2014 GDP forecast to 2.82% from 2.59%. We also expect stronger growth, with mainlanddemand for Taiwanese goods to gradually recover.

!as exportdemand rises

Export growth slowed in the first two months of 2014, rising just 0.4%yoy after a 1.8%yoylift in Q413 (US$ basis). This slowdown was attributable to a 3%yoy decline in exports toChina, down from a 1%yoy rise in Q4. Developed markets exports firmed, led by a4.7%yoy rise in the US and a 2.9%yoy lift to Europe. Chinese demand is expected to buildover 1H14, helping to lift export growth to 5-6%yoy in 2H14 and 2015.

A brief dip forconstruction

!before a2H14 recovery

Investment is expected to ease to 1.9% in 2014 and 3.0% in 2015 from a 5.3% rise in2013. Plant and equipment growth is expected to slow to 3-4%pa in 2014 and 2015 afterthe installation of new chip-making machinery lifted capex by 12% in 2013. Constructioninvestment will likely drop 2-3%yoy in 1H14, due to the completion of several projects inlate 2013. The governments US$7bn civil works plan will likely boost construction growthto 1%yoy in 2H14 and 2-3% in 2015. Some of the plans build-own-transfer projects maynot go ahead due to limited private sector interest.

Manufacturingboosted by chipmakers

The HSBC purchasing managers index posted a healthy 54.7 in February, reflectingstrong export demand from Europe and the US. Leading chip-makers TSMC and UMC willbenefit in 2014 and 2015 from strong demand for tablet devices and the production of thenew iPhone. This will help lift manufacturing growth to 3-4%pa in 2014 from 2.0% in 2013.

Low inflation anda mostly steadyNT$

Despite a surge in pork prices, overall inflation remained low in the first two months of2014, falling to 0.3%yoy from 0.4%yoy in Q413. While prices are expected to graduallyrise over 2014 as local demand firms, no interest rate rises are likely until 2015. While lowinterest rates and US QE tapering have pushed down the NT$ 3% against the US$ sinceOctober, further declines are unlikely, with a mild lift to the currency expected in 2015.

2011 2012 2013 2014 2015GDP, real growth, % 4.2 1.5 2.1 3.0 3.6CPI, year average, % 1.4 1.9 0.8 1.1 2.0

Official discount rate, year end, % 1.88 1.88 1.88 1.88 2.00NT$ to US$1, year average 29.5 29.6 29.6 30.0 29.5

Sources: 2011-2013 government data and CEIC; 2014-2015 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]

5/21/2018 62_Asia Brief - Mar 2014

11/21




South Korea


A good first yearfor Pres. Park

!but politicalchallenges willgrowth in 2014

President Park Geun-hye made good progress in the first year of her single 5-year term.Tensions with North Korea were reduced, a growth plan focused on domestic drivers was

announced, and unaffordable pre-election spending promises were ditched without a publicfurore. However, plenty of political challenges lie ahead and could distract her government.Complaints over the intelligence services role in her 2012 election win could force some ofher aides to resign. Unusually smooth sailing in the legislature could also come to an end iftwo major opposition parties (the Democratic party and Ahn Cheol-soos New PoliticsParty) merge in April. The merged opposition party would aim to win seats from the rulingSaenuri party in local and regional elections in June.

A plan to focus ondomestic growth

!as exportswill be weak

Parks new economic plan was unveiled in February. It aims to lift GDP growth to 4%pa by2017 from 2.8% in 2013, boost the employment ratio for 15-64 year olds to 70% (from64.4%), and lift GDP/capita over US$40,000 (from US$24,470 today). The plan is likely tobe partially successful. Some policies, such as boosting the female participation rate, willbe quite easy to do. Others, including public sector reforms, housing affordability, andmarket deregulation, will be resisted by special interest groups. If Park shows that she can

push through the tougher reforms, we will likely lift our GDP forecast in early 2015.

Less support forfinancial reforms

Financial reform may be about to slow down with the appointment of an outspokenconservative as central bank head in April. The new man, Lee Ju-yeol, is expected tohinder planned reforms to the financial system by Deputy Prime Minister Hyun Oh-seok.


A mild 2014recovery

Korea has had a weak start to 2014. Export growth slowed to 0.6%yoy for the first twomonths of 2014 from a 4.7%yoy lift in Q413 (US$ basis), while the purchasing managersindex fell to 49.8 in February from 50.9 in January. However, firms have reported a lift inglobal orders, which should nudge up exports from Q214 and help full year GDP growthreach 3.2% in 2014 and 3.4% in 2015 from 2.8% in 2013.

Limited upside forconsumers

!despite goodwage growth

A mild consumer recovery should emerge this year. A mild lif t in export manufacturing andsolid wage growth will help consumer sentiment. However, the upside is limited by highlevels of household debt (165% of disposable income versus 109% in the US) and a softresidential property market. These two exposures debt and property prices - are tightlylinked in household balance sheets. That limits the lift in real growth in consumer spendingto 2.3% this year and 2.6% next year from 1.8%pa over 2012 and 2013. This is down from3.1%pa over 2001-11.

Construction willdrop after a briefsurge

Construction likely grew 1%yoy in Q114. A mild lift in housing prices (+1%yoy since inAugust) led to 31%yoy rise in Q413 construction orders and that is flowing into theeconomy now. However, this increase is likely to be brief. An ageing population and ahigh base a year ago suggest that construction GDP will fall at a 2.5%yoy pace over thefinal three quarters of 2014. A 1% fall is also likely in 2015 as interest rate edge up.

Manufacturingstarts to moveoffshore

The weak export recovery will limit manufacturing growth to 3.4% this year and 3.8% nextyear from 3.0% for 2013. The offshoring of factories by firms to lower operating costs willcontinue over this period.

A lift in inflation &interest rates by2015

Inflation rose by a mild 1.1%yoy in the first two months of 2014, but is expected to lift toover 2%yoy by Q414. New central bank governor Lee will likely favour a hawkishinflationary stance, with 75bp of interest rate rises expected over the next two years. USQE tapering and currency manipulation will likely keep the Won at around 1,070 to the US$for the rest of 2014, before a mild rise next year.

2011 2012 2013 2014 2015GDP growth, % 3.7 2.0 2.8 3.2 3.4CPI, year average, % 4.0 2.2 1.3 1.8 2.5

BOK Overnight call rate, year end, % 3.25 2.75 2.50 2.75 3.25Won to US$1, year average 1,108 1,125 1,095 1,071 1,053Sources: 2011-2013 government data (NSO, BOK) and CEIC; 2014-2015 forecasts by IMA Asia.


Tony Michell, Managing Director, Korea Associates Business Consultancy Ltd

Tel: (82 2) 335 7854/2614 Fax: (82 2) 323 4262 Email: [email protected]

5/21/2018 62_Asia Brief - Mar 2014

12/21




Indonesia


Jokowi will run

!and looks setto be the nextpresident

The confirmation that popular Jakarta governor Joko Widodo (Jokowi) will run in the July9 presidential race brings some clarity to Indonesias political outlook. PDI-P, Jokowis

party, will be boosted and should receive more than the 25% of the votes or 20% of theseats in the April 9 legislative poll needed to nominate a presidential candidate. Thatwould also give it a free hand in choosing a vice presidential candidate and provide it witha stronger position in the legislature. Golkar may also cross the 25%/20% hurdle, but otherparties will likely need to form coalitions. Jokowi might also exceed 50% in the first roundof the presidential poll, removing the need for a run-off in September (the nextadministration will not take office until October 20). As expected, the stock market hasjumped and the currency risen on Jokowis nomination as he is widely seen as standing foreffective government with less corruption.

The mineralexport ban looksset to stay

!unfortunately

Indonesias three main political parties PDI-P, Golkar, and Gerindra have confirmedtheyll stick with the governments January decision to ban the export of unprocessedminerals. The ban has seen Freeport-McMoRan cut copper output by 60%, while overallmineral exports (equalling 3% of overall exports) fell 35%yoy in January. As China is the

main buyer for most production, some Chinese firms may invest in local processing.However, the latest ranking of countries for mining policy attractiveness from the FraserInstitute puts Indonesia as last on a list of 96 jurisdictions (below the Congo).


A soft landing in1H14

!with limitedupside in 2H14

Indonesias economy has slowed since Q413, as local demand has faced a 175 basispoint rise in the policy rate since August (now 7.50%) set by Bank Indonesia and exportshave edged up just 0.7%yoy for the three months to January. GDP growth of 5.7%yoy inQ413 may drop towards 5.5%yoy for a few quarters, despite a boost from election relatedspending (some 19,699 seats will be contested at the national, provincial, and district levelin April). While a Jokowi win is a plus for business and consumer sentiment, the lift to localdemand would again widen the current account deficit, keeping GDP growth below 6%.

Strong retail salesbut consumercredit purchasesease

!the paceshould lift in2H14

Rising consumer demand has been the bedrock of Indonesias growth, with compoundannual real growth of 4.7% for the decade to 2013 (vehicle sales over the same periodgrew 13%pa to 1.2m units, while mobile phone subscribers grew 30%pa to reach 131m).Current consumer trends are mixed. Retail sales minus inflation surged by 20%yoy foreach of the three months to February, well above the 10-12%yoy pace of the previous twoyears. However, motorcycle sales fell 10.3%yoy, as higher interest rates hit while vehiclesales, which are less sensitive to rates and reflect demand from more affluent consumers,continued at a robust 7%yoy. Overall we expect real growth in consumer demand to lift to5.6% this year and 5.8% next year from 5.3% in 2012 and 2013.

Business capexstalls but shouldrecover in 2H14

Higher interest rates also slowed real growth in fixed investment to 4.7% in 2013 from9.7% in 2012. Capex for construction stayed in a 6-8%yoy growth range, but plant &equipment capex slumped to 0.2% from 12.7% in 2012. This year we expect capex to

grow a modest 5.4% before lifting by 7-8% in 2015.

Inflation eases &the Rupiah rises

!as capitalflows back toIndonesia

Bank Indonesias rate hikes helped cap inflation faster than expected following a 44% fuelprice hike in mid-2013 as subsidies were cut. February inflation eased to 7.7%yoy, with agradual fall expected to continue despite strong election spending. Foreign capital, whichexited last year, is returning with $1.7bn entering the stock market for the year to mid-March. This has seen the Rupiah climb from a low of 12,180 in late January to 11,299.But against a background of continued QE tapering in the US the Rupiah is likely to returnto a 3% annual depreciation path in late 2014, given continued concerns over inflation andthe current account deficit. Its too soon to bet on Jokowi fixing these problems.

2011 2012 2013 2014 2015GDP, real growth, % 6.5 6.3 5.8 5.6 5.6CPI, year average, (2007=100), % 5.3 4.0 6.4 6.5 5.5

Central bank policy rate (O/N rate) at Dec % 6.00 5.75 7.50 7.50 6.75Rupiah to US$1, year average 8,776 9,384 10,460 11,475 11,875Sources: 2011-2013 government data (BPS, BI) and CEIC; 2014-2015 forecasts by IMA Asia


James Castle, Chairman, CastleAsia


5/21/2018 62_Asia Brief - Mar 2014

13/21




Malaysia


Malaysia movingaway from

politicalliberalisationafter 2013 election

The result of the May 2013 election reversed Malaysias slow march towards politicalliberalisation and greater racial/religious inclusion. The UMNO party-led coalition, which

has ruled the country since 1959, lost the popular vote but won a parliamentary majority,thanks to favourable gerrymandering of seats. Shaken by its abandonment by the ethnicChinese minority (about 25% of the population), and many urban Malays, UMNO wentdefensive. It hardened its stance on divisive racial and religious issues, and pulled back onsome earlier moves towards liberalisation, such as reintroducing preventive detentionwithout trial. Having lost hope of regaining the Chinese and Indian minority voters, UMNOis trying to recapture the Malays who voted for the opposition in 2013. This may not beeasy, as the effectiveness of autocratic policies and its stronghold on traditional mediahave been considerably weakened by the spread of the internet and social media.

UMNO returningto Mathahirsautocratic ways

Despite increased public awareness about the ruling coalitions deepseated corruption,UNMO is still able to use nominally independent institutions, such as the ElectionCommission and the judiciary, to block the opposition. In early March, a court preventedthe candidacy of popular opposition leader Anwar Ibrahim in the upcoming Kajang by-

election, by overturning a previous court ruling of innocence and convicting him forsodomy. By winning the Kajang seat, Anwar could become the governor of Selangor,Malaysias richest and most populous state, thus improving the oppositions chances ofgaining power in the next general election. Around the same time, Karpal Singh, anothersenior opposition politician, was sentenced for sedition under an outdated colonial era lawthat PM Najib Razak promised to repeal during his current term in office.

Highly gearedhouseholds a toppolicy concern forBank Negara

Malaysian households have been supporting their record breaking consumption growth(7.5%pa since 2003) with heavy borrowing. This lifted their debt-to-GDP ratio to 86.8%,making households vulnerable to falling asset prices and/or rising interest rates. In itslatest annual report, Bank Negara singled out asset prices as a key area of policy concern.They aim to reduce this risk by micro-prudential measures to curb large price fluctuations.


Modest growthpickup, asdomestic demandcools and exportsturn up

Malaysias GDP rose by a solid 4.7% in 2013, from 5.6% in 2012, as strong domesticdemand countered the impact of falling net exports. However, the pace of domesticactivity eased in the final months of 2013, with over-geared consumers pulling back andresidential construction slowing down. Consumer sentiment darkened considerably sincemid-2013, while the 4-quarter rolling sum of housing approvals fell 24.5% in Q413 from amulti-year peak in Q412. While these trends are set to continue to 2015, firming globaldemand has lifted export growth to 3.3%yoy in January and 5%yoy in Q413, after a1.2%yoy fall in the previous nine months (US$ basis). In addition, the implementation ofthe governments US$444bn multi-project investment program will spur construction.These positive factors are expected to lift GDP growth to 5.0% in 2014 and 5.6% in 2015.

Inflation andinterest rates onthe rise, with theM$ staying weak

Inflation edged up to 3.4%yoy in January from 3.0%yoy in Q413 and 2.1% in full 2013.The rise was driven by higher electricity tariffs and cuts of state subsidies on food & fuel.The introduction of a 6% goods & services tax in April 2015 will give another boost toprices. The central bank will likely lift interest rates if these one-off price hikes threaten tospark an inflationary spiral. Interest rate swap markets have factored in two rate rises inthe next 12 months to 3.44% from the current 3.00%. The weakening M$ is also adding toinflationary pressures. It is down nearly 11% on the US$ since May 2013, and likely tostay soft, as the US Fed steps up its monetary tightening in 2014-15.

2011 2012 2013 2014 2015GDP, real growth, % 5.1 5.6 4.7 5.0 5.6CPI, year average (2010=100), % 3.2 1.6 2.1 3.5 4.8Central bank overnight policy rate, Dec, % 3.00 3.00 3.00 3.25 3.50Ringgit to US$1, year average 3.06 3.09 3.15 3.33 3.40

Sources: 2011-2013 government, Bank Negara, & CEIC; 2014-2015 forecasts by IMA Asia.


Datuk Paddy Bowie, Managing Director, Paddy Schubert Sdn. Bhd.


5/21/2018 62_Asia Brief - Mar 2014

14/21




Philippines


Vice PresidentBinay a leading

candidate for the2016 presidentialpoll

Less than two and a half years are left in President Aquinos single six-year term, andpoliticians are starting to line up for the mid-2016 presidential contest. Vice President

Jejomar Binay is the strongest likely candidate so far. He plans to abandon his PDP-Laban party and form a new one in June, from where he can launch his presidentialcampaign. In the 2010 election, Binay was running mate of disgraced ex-President JosephEstrada, who is now mayor of Manila. A Pulse Asia survey revealed in January a very highapproval rating for Binay (80%), higher than that of the still very popular Aquino (74%).Aquino is expected to endorse a candidate from his own Liberal party. This will not mattermuch, as personalities are far more important than political parties in the Philippines.

No new reformslikely in Aquinosremaining term

For the remaining of his term, Pr. Aquino will try to consolidate his considerable reforms,rather than initiate new ones. Politicians would be too distracted by the upcoming electionsand the ramifications of the pork-barrel scandal, involving lawmakers from both sides ofpolitics, to pass significant new legislation. Since coming to office in mid-2010, Pr. Aquinoignited a strong anti-corruption campaign, strengthened the judiciary, lifted tax revenuesthat helped put public finances on a sustainable path, gained credit rating upgrades to

investment status for Philippine debt, clashed with the powerful Catholic Church onpopulation control legislation, attracted large foreign investor interest to the Philippines,and signed a peace deal with Muslim separatists in the southern island of Mindanao.

Tacking Customscorruption couldbe Aquinos lastmajor reform

There is a lot left to be done by the next administration to sustainably lift countrys growthpotential and close the economic gap with its ASEAN neighbours. Despite exceptionallystrong GDP growth since 2010, poverty and unemployment remain stubbornly high, forcingabout 10m Filipinos to work abroad. A problem that Aquino will try to tackle before leavingoffice is the highly-corrupt Customs Bureau. Global Financial Integrity, a US think-tank,estimates that smuggling has cost Filipino taxpayers at least US$23bn (about 10% annualGDP) since 1990. Recovering the money lost through unlawful trade transactions, couldfinance the budget deficit (estimated at 0.8% of GDP in 2013), lower government fundingcosts and lift the Philippines credit rating further up the investment-grade scale.


Growth to settle atmore sustainablepath, after 2012-13surge

Over 2012-13, the Philippiness GDP grew a lot quicker that its ASEAN neighbours (7%pa)as domestic spending powered ahead, led by strong investment growth (11%pa). Solidprivate and government consumption demand also helped (6% and 10% respectively).While investment growth is expected to slow to 8%pa in 2014-15, this, combined with amore vibrant world economy, should prove sufficient to deliver healthy GDP growth of 6.5%in 2014 and 5.5% in 2015.

Manilla housingoversupply slowsbuilding

Construction growth is expected to slow to 7% in 2014 and 10% in 2015 from 30%yoy inQ412-Q113. Building permits are declining in Metro Manilla, due to an emergingoversupply of residential units. Non-residential building will support growth.

Rising inflationand interest rates,with the Pesostaying soft

Headline inflation edged up to just over 4%yoy in the three months to February from arecent low of 2.1%yoy in August 2013. Core-CPI also moved above 3%yoy from 1.9%yoyover the same period, suggesting that inflationary pressures have started to build in thefast expanding economy. An additional inflationary source has been the Pesos 10%decline against the US$ since May 2013. We expect the central bank to lift its policyinterest rate to 4.5% by end-2015 from the current record low of 3.5%. The Peso is likelyto remain soft into 2015 in response to monetary tightening in the US, overshadowing theimpact of rising Filipino interest rates.

2011 2012 2013 2014 2015GDP growth, % 3.6 6.8 7.2 6.5 5.5CPI, annual average, % 4.6 3.2 3.0 4.1 4.7Central bank reverse rep. rate, year end 4.50 3.50 3.50 4.00 4.50

Peso to US$1, annual average 43.3 42.2 42.4 45.5 46.0Sources: 2011-2013 BSP data and CEIC; 2014-2015 forecasts by IMA Asia.


Peter Wallace, Managing Director, The Wallace Business Forum

Tel: (63 2) 810 9606 Fax 810 9610 Email: [email protected]

5/21/2018 62_Asia Brief - Mar 2014

15/21




Singapore


The budget helpsSMEs & the

elderly

!but not thosewho smoke, drink,& gamble

The governments FY2014 budget, announced in late February, expects a small deficitequal to 0.3% of GDP in FY14 after an estimated surplus of 1.1% of GDP in the year to

March 2014. The finance minister expects public spending to grow twice as fast asrevenue (8.3% versus 4.1%) in FY14 with a focus on social spending and steps to helpsmall and medium enterprises (SMEs) cope with a chronically tight labour market. Thegovernment will spend S$9bn (US$7bn) on health care and other benefits for the elderly,with those over 65 expected to triple to 900,000 by 2030. Tobacco taxes were lifted 10%,and those on liquor by 25%. Lottery betting duties were also raised to 30% from 25%.

Abrupt labourmarket tightening

!great forproductivity butfew like it

The authorities will spend S$3.6bn (US$2.8bn) to help SMEs lift productivity and navigatethe transition to an increasingly expensive labour market. Labour shortages have beenexacerbated by the tightening of the governments previously liberal immigration policy, inresponse to growing local unhappiness with foreign workers. Companies have beenresponding to the tight labour market by restructuring production or shifting operations toneighbouring countries with lower cost structures. This helped lift productivity in 2013,after six quarters of weak productivity growth. However, 65% of firms in a recent survey

believe that the current pace of economic restructuring is too fast.

Higher taxes

!or tell GIC &Temasek to step itup

A rapidly ageing population wil l put increasing demand on the countrys substantial f iscalreserves, which are managed by two sovereign wealth funds, GIC and Temasek. In aworld where safe investments pay little, this could nudge both towards investmentstrategies with a higher risk profile. Its either that or Singapore has to say goodbye to itsimmensely attractive low taxes for corporates and individuals.


A global recoverycould trigger ajump in GDP

GDP growth accelerated to 4.1% in 2013 from 1.9% in 2012, despite a steep slowdown indomestic demand (to 1.9% from 4.8% in 2012), accompanied by a 2.6% drop in fixedinvestment. This apparent discrepancy underscores Singapores extreme sensitivity toexternal demand, with exports and imports each accounting for a massive 200% of GDP.An 8% upswing of net exports from a 13.8% decline in 2012 was enough to double thepace of GDP expansion in 2013, amid sluggish domestic activity. This dynamic willcontinue to play out in 2014, even though Singapores export manufacturing capacity maybe somewhat constrained by growing labour shortages. We expect GDP growth tooutpace domestic demand growth thanks to a stronger world economy that liftsSingapores exports. A more balanced configuration between domestic and externaldemand should boost GDP growth to 5% in 2015.

Manufacturing isbig but lessimportant everyyear

Export growth rose to 4.4%yoy for Jan-Feb 2014 from 3.7%yoy in Q413 (US$ basis).However, this masks much weaker performance of non-oil domestic exports (NODX),which fell 0.6%yoy, although this was better than a much steeper 4.2%yoy drop in Q413.The NODX share in total exports has slipped to a multiyear low of 31% from 48% in 2000,

reflecting the rise of the oil & gas sector and re-exports at the expense of exportmanufacturing. This trend will continue, with ambitious plans to turn Singapore into aregional LNG distribution hub and nearly double the size of its sea port.

A stable or risingS$ as coreinflation edges up

Headline inflation eased to 1.4%yoy in January from 2.4% in 2013, reflecting globaldisinflation trends. However, the Singapores central bank, the MAS, is concerned aboutthe tight job market and the accelerating core-CPI (2.2%yoy in January from 1.7% in full2013). The central bank is unlikely to relax its current moderately tight monetary settings,which has confined the S$ within a narrow 1.2-1.3 range against the US$ since May 2011.The S$ is expected to remain in this range for most of 2014-15.

2011 2012 2013 2014 2015GDP, real growth, % 6.0 1.9 4.1 4.5 5.0CPI, year average, % 5.2 4.6 2.4 2.4 2.9

3 month interbank interest rate, Dec, % 0.38 0.38 0.40 0.55 1.00S$ to US$1, year average 1.26 1.25 1.25 1.28 1.31

Sources: 2011-2013 government data and CEIC; forecasts for 2014-2015 by IMA Asia.

5/21/2018 62_Asia Brief - Mar 2014

16/21




Thailand


Stuck in a politicalstalemate

!as the anti-Thaksin forcesturn to the courtsfor help

Thailands political stalemate continues after the failed February 2 snap election, whichwas boycotted and disrupted by the opposition. The two sides of the conflict are self-exiled

ex-PM Thaksin, the real power behind the government headed by his sister, PM YingluckShinawatra, and the Thai urban elite, which includes royalists, the army, and the judiciary.Thaksins enemies want to force the rest of the Thaksin clan into exile and take over theirremaining assets. However, Thaksins populist policies, such as the fiscally unsustainablerice price support scheme, make it almost impossible for his party to lose elections.Hence, the Thai establishment seems to have opted for a judicial solution, with PMYingluck facing a series of legal challenges. The Constitutional Court is considering apetition to annul the results of the February election. The same court ruled in early-Marchthat government plans to raise off-budget US$62bn for transport infrastructure spendingwas unconstitutional. The opposition aims to use this ruling to impeach the PM and hercabinet. Yingluck could also face impeachment from charges brought by the Anti-Corruption Commission relating to the corruption-ridden rice price support program.

Bringing a plunge

in businesssentiment

!& a halt tomajor projects

!the potentialfor confrontationsremains

The escalating political crisis has paralysed the Thai economy. Heightened uncertainty

about the timing and form of a political resolution has greatly depressed business andconsumer sentiment. The caretaker government of the last four months is unable to makeany spending initiatives, while about 400 large proposed projects have stalled at the Boardof Investment. Six independent organisations, including the Election Commission, NationalHuman Rights Commission, and the Auditor-Generals Office, are trying to break thedeadlock by asking the two sides to nominate representatives who would negotiate aresolution. However, chances of an early resolution are slim. In anticipation of a judicialcoup against the government, the Thaksin camp has started mobilising its red shirtsupporters. It appointed a new red shirt leader, and is organising armed militia in thecountrys north-east. The military is unlikely to tolerate this development, with its chiefPrayuth Chan-ocha issuing a stern warning against likely red-shirt violence. In contrast, aCivil Court ruled that the authorities cannot use force to remove (admittedly peaceful) anti-government demonstrators from their protest sites in Bangkok.


Weve cut our2014 forecast to1%

Thai GDP growth has experienced unusually large volatility since 2008, with the currentpolitical crisis producing another large swing on the downside. We have revised our 2014growth forecast down to 1.0% from 2.5%. We expect the year-on-year decline ofconsumption and investment that started in Q313 to spill over into 1H14. Using a workingassumption of a functioning government in place by mid-2014, we factor in a gradualrecovery in 2H14, which accelerates thereafter to lift GDP growth to 5.5% in 2015.

If political stabilityreturns a recoverycould be fast

Weak US$ export growth and a steep fall in imports (-15.5%yoy in January, and -7.9%yoyin Q413, driven by falling domestic demand), helped to narrow the 12-month rolling tradedeficit to US$19bn from $28bn in February 2013. The improving external balance willprovide some cushion to the economy, until domestic spending turns around. The

recovery could be swift once political stability returns. A lot of suppressed demand couldbe unleashed by consumers, businesses, the government, and the tourist industry.

Interest rate cutsand a soft Baht

With fiscal policy incapacitated, the Bank of Thailand decided to cut its policy interest rateto 2.00% from 2.25% in early-March. With inflation hovering below 2%yoy and theeconomy in decline, monetary easing is appropriate, but not terribly effective, as long assentiment remains depressed. The Baht has fallen 11.4% on the US$ since April 2013,broadly in line with the pullback of other SE Asian currencies. We expect it to remain weakas long as Thailands political uncertainty persists.

2011 2012 2013 2014 2015GDP, real growth, % 0.1 6.5 2.9 1.0 5.5CPI (2002 index), year average, % 3.8 3.0 2.2 2.2 3.0Central bank, policy rate, year end, % 3.25 2.75 2.25 2.00 2.75

Baht to US$1, year average 30.5 31.1 30.7 33.4 34.4Source: 2011-2013 data from the IMF and CEIC; 2014-2015 forecasts by IMA Asia.


Christopher Bruton, Consultant, Dataconsult Ltd

Tel: (66 2) 233 5606/7 Fax: (66 2) 236 8143 Email: [email protected]

5/21/2018 62_Asia Brief - Mar 2014

17/21




Vietnam


Digging the banksout of debt

!its a deephole & progress isslow

In February, credit rating agency Moodys estimated that non-performing loans (NPLs)amount to at least 15% of total loans held by Vietnamese banks. This is a lot higher than

the 3.6% reported by the central bank, as at end-2013. The authorities acknowledge thattheir figures greatly understate the size of bad debt, which is a by-product of Vietnams pre-2011 debt-fuelled domestic boom. They expect banks to adopt an international (morestringent) reporting method by mid-2014, which could lift the NPL estimate to 9%.Whatever the true figure, NPLs have become large enough to constrain the bankscapacity to lend. Credit growth eased to single digits in 2012 from 35.4%pa in 2005-10,but edged up to 12.5% in 2013. The authorities target credit growth of 12-14% in 2014, asbank balance sheets are being restructured with mergers, foreign investor participation,and sale of NPLs to VAMC, a state-owned asset management company. Banks offloadedUS$1.9bn of bad debt to the VAMC in 2013, and plan to sell another US$5-7bn in 2014.

This has to meanSOE reform

!but theres nogood plan for thatyet

Most of the banks unserviceable debt belongs to Vietnams state-owned enterprises(SOEs), which expanded greatly in the second half of the 2000 decade. So far, thegovernment has been slow at restructuring the SOEs, and plans for extensive partial

privatisation to speed the process up look unworkable. This includes the proposal for 432SOEs to list up to 35% of their stock on the local stock exchange while also divesting non-core businesses. Few investors would be interested in such hopeless duds, and Vietnamdoesnt have the skills or market excitement to dress them up. So for now theyll remain adrain on the economy. Rapid growth in the foreign-owned export manufacturing may helpalleviate but not solve the problem by providing new jobs for better SOE staff.


Faster and morebalanced growthin 2014 & 2015

Vietnams relatively slow growth of 5.3%pa in 2012-13 (compared to 6.8%pa in theprevious ten years) mostly reflects a domestic downturn brought about by a severe fiscaland monetary tightening. GDP growth would have been much slower in the absence of thestrong boost from foreign direct investment (FDI) that lifted manufacturing, exports, andemployment. Growth is set to become more evenly distributed between the foreign-ownedand the domestic sectors of the economy, as the domestic demand starts to recover on theback of a turnaround of the real estate/construction sector. The latter was the epicenter ofthe domestic downturn, with residential property prices having declined 30-40%. Theexternal sector will continue to support growth, as global demand strengthens, andadditional FDI-led manufacturing capacity comes on stream. We expect these factors topush GDP growth towards 6%pa in 2014-15.

FDIs surge easesin early 2014

!hinting at ashift in focus

In the last two years, Vietnams export growth has greatly outpaced that of other Asiancountries (up 16.5% in 2013 and 20% in 2012) against a background of sluggish globaldemand. FDI was the main enabler of its export outperformance, with approvals soaring54.5% and disbursements up 9.9% in 2013. FDI disbursements increased 6.7%ytd inFebruary, but approvals plunged 62.5%ytd. The steep decline of FDI approvals in early-

2014 needs watching, but it may reflect a policy shift towards a more discriminatingapproval processes, with more emphasis on environmentally sound and energy efficientprojects. Moreover, foreign direct investors are starting to branch out from exportmanufacturing into the utilities and infrastructure sectors.

Big gains incutting inflation &supporting theDong

Vietnam was able to consolidate the macro-economic gains that resulted from its post-2011 domestic downturn. Inflation fell to 4.7%yoy in February from a 23%yoy high inAugust 2011, and the trade balance improved dramatically from a massive 2008 deficit. Ifsustained, this improvement could make room for lower interest rates (currently at 6.5%from 15% in early-2011) and prolong the stability of the Dong. The latter has beenhovering at around 20,940 against the US$ since October 2011.

2011 2012 2013 2014 2015

GDP, real growth, % 6.2 5.2 5.4 6.0 6.0

CPI, yoy, % (2005=100 from 2007) 18.7 9.1 6.6 5.6 6.5Central bank refinancing rate, year end, % 15.00 9.00 7.00 6.00 6.50Dong to US$1, year average 20,681 20,847 21,019 21,175 21,343

Source: 2011-2013 data from the IMF and CEIC; 2014-2015 forecasts by IMA Asia.

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India


Mr Modi looks setto be the next PM

!but howmuch power willhe trade foroffice?

India will have a new government by the end of May and it is likely to be led by NarendraModi of the BJP. The key issues to watch will be the strength of the mandate won by Mr

Modi and how wide he has to reach to construct a majority. More than his apparent abilitiesas a manager these simple numbers will determine how effective his government will be.Opinion polls suggest that the BJP will be the single largest party in the 545-seat lowerhouse of Parliament with around 200 seats, while its coalition, the NDA, will likely win 229seats. This leaves it 43 seats shy of a majority for which it will have to bargain with smaller,regional parties. The current ruling coalition the UPA headed by the Congress Party islikely to collapse to 126 seats. A third grouping of regional parties that excludes the BJPand Congress may win 70-100 seats, depending on the alliances they are able to form.

Pushing reformlegislation will becritical to Indiassuccess

If Mr Modi gets a strong mandate and a small group of reliable coalition partners, his broadpromise of better government has a good chance to succeed. He will face opposition fromthe bureaucracy, various entrenched interests and state Governments, many of which arerun by non-BJP parties and he will have to focus on accelerating the pace of reformlegislation in Parliament, which ground to a halt under the outgoing Congress-led

government. That is possible as the Congresss legislative effort was undermined by adeeply divided leadership which should not be the case under Mr Modi.


A weak 2014recovery

!as Indiastruggles withweak capex

!& weakconsumers

India has struggled over the last two years with a collapse in corporate demand as majorfirms with over-leveraged balance sheets ran short of capital and slashed orders, projects,and inventory. Fixed investment, which surged 17.5% in 2010 and by 9.3% in 2011,slipped to 2.4% growth in 2012 and zero growth in 2013. Recovering from this mess willtake at least a year, as local firms reluctantly sell assets to fix their balance sheets (weexpect fixed investment to rise 1.3% this year and then 4.2% in 2015). We had hoped thata good monsoon would lift consumer spending in early 2014, but Indias consumers havealso pulled back in the face of higher interest rates and weaker job security. This too willtake a year to correct. The main impetus to growth in 2014 will come from a sharpreduction in the trade and current account deficits, as imports fell 4.5% last year (US$basis) while exports lifted by 5.1%. This year we expect exports to lift by 8% while importsare barely positive (reflecting the weak local demand recovery). This will allow the currentaccount deficit to drop to 2% of GDP, after almost halving to 2.6% of GDP in calendar 2013from a worrying 5% in 2012.

!although low-income familiescontinue to spend

Two wheeler sales, a quick measure for low-income demand, are up 7.4%yoy for February(using a 3-month moving average), suggesting steady demand at the broad base of Indiasemerging middle class. Moving up into wealthier urban households, however, the picture isdifferent with passenger vehicle sales sliding for four months and a 4.7%yoy (3mma) fallfor February. These households are likely suffering from a mix of caution on weaker jobsecurity and a cash squeeze. Real growth in consumer spending is expected to reach3.5% this year and 4.8% next year from 2.8% in 2013.

The BJP will liftthe stock market& (briefly) theRupee

A strong BJP victory will not be a game changer for the economy in the short-term, but itwill help as an inflow of foreign capital attracted by his promise of better government hasstarted and this will lift the stock market and help local firms obtain finance. The Rupee hasalso gained ground from 62 to US$1 for February and may break through 60 in the nextmonth. This too will alleviate pressure on local firms with offshore borrowings. However, itis too early to suggest the emergence of a firmer Rupee trend into 2015.

Fiscal year starting 1 April 2010-11 2011-12 2012-13 2013-14 2014-15GDP, real growth, % 8.4 6.5 5.0 4.5 5.0Inflation - WPI, year average, % 9.6 8.9 7.3 6.5 5.5Inflation - CPI, industrial workers, yr avg, % 10.5 8.4 10.0 9.0 7.5RBI lending (repo) rate, year end, % 7.25 8.5 7.5 8.0 7.5Rupee to US$1, RBI Ref Rate, yr end 44.7 51.2 54.5 61.0 59.2

Sources: 2011-2013 data from the government (NCI, RBI) and CEIC. 2014-2015 forecasts by IMA Asia with guidance from IMA India.

Companies seeking local advice and forecasts should contact:

Adit Jain, Chairman, IMA India


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Australia


PM Abbott pushesfor productivity

!with fewersubsidies forindustry

Since taking office last year PM Abbott has pushed economic and social policy in aconservative direction. In addition to his pre-election commitment to remove the carbon

and mining taxes imposed by the prior Labor government, he has ordered a major reviewof the labour market and unions. Hes also taken a harder line than recent governments inrejecting subsidies for Australias three car makers (who will now close all operations by2017) as well as food maker SPC Ardoma and Qantas. While this involve some painfulindustrial restructuring, the goal is to lift national productivity while limiting public debt. Thisshould play well in Western Australia, Australias most conservative state, which goes tothe polls for a half-Senate by-election on April 5. Abbott needs a good result to strengthenhis weak legislative position in the federal Senate from July 1.

Scope to managethe resourceboom risks

The IMF concluded its review of Australia in February. It found that the economy isvulnerable in the short-term, as the mining sector swings from a decade-long investmentboom (now fading) to its production phase. The IMF argues the risks can be contained bykeeping monetary policy loose and lifting fiscal spending when necessary. Australias low-debt government has scope to do so.


Growth lifts in2014 but hitsheadwinds in 2015

Australias economy is expected to l ift in 2014, with stronger global demand and housingconstruction boosting GDP growth to 3.0% from 2.4% in 2013. In 2015, however, growthwill likely slow, as the downturn in mining investment is expected to see private sectorcapex (excluding the housing sector) fall by 6%. Meanwhile, the closure of the three carmakers by 2017 will see manufacturing and related capex contract.

A lot depends onChinas iron oredemand

Chinas decision to close inefficient steel factories is likely to hit Australias export earningsas the US$43bn of iron ore exported to China in FY2012-13 accounted for 17% of totalmerchandise exports. Closing weak steel mills plus an unwinding of financial deals thatused iron ore as collateral saw the iron ore price fall below US$105 per tonne in early

March from US$135 in December 2013. Chinas tough financial reforms this year mayfurther undermine iron ore prices, before continued underlying demand for housing andinfrastructure kick in to support demand and prices.

Capex for housingand highways lifts

Housing investment is expected to rise by 4.4%pa over 2014 and 2015. Strong houseprice growth in Sydney (+14%yoy in February), Melbourne (+10%yoy), and Perth (+8%yoy)has encouraged developers, with 179,000 building approvals in the 12 months to January,up from the 152,000 average of the previous five years. Non-mining related infrastructurebuilding will also strengthen, driven by the governments $11bn national highways plan.But as noted this will cushion, but not offset, the fall in mining capex.

Retail lifts in early2014

.. but may fadeagain in 2015

Consumer demand should lift by 2.5% in 2014, up from 2.0% real growth in 2013. Retailspending (measured in current prices) grew 6.2%yoy in January, up from a 3.2% rise in2013. Food and restaurant spending leapt 8%yoy from 4.4% in 2013, while stronger

housing demand pushed up household goods by 3.9%yoy from 2.2%. However, consumergrowth is expected to ease to 2.2% in 2015, as the ending of the mining investment boomslows wage growth for some workers, while unemployment rises due to car sector lay-offs.

Low inflation withfew rate hikes anda weaker A$

Inflation should stay within the Reserve Banks target 2-3% range over 2014 and 2015. Atmost a slow lift in interest rates from late 2014 is possible if inflation moves to the top of thetarget band. QE tapering in the US and stable interest rates in Australia are expected to letthe $A slip to around 80-85 US cents in 2015-16. But after that a surge in mining exports,which will slash the current account deficit, will likely lift the currency.

Year ending December 31 2011 2012 2013 2014 2015GDP, real growth, % 2.6 3.6 2.4 3.0 2.2CPI, year average, % 3.3 1.8 2.4 3.0 2.9RBA cash rate, year end, % 4.25 3.00 2.50 2.75 3.25

A$1 = US$, year average 1.04 1.04 0.96 0.87 0.83US$1 = A$, year average 0.96 0.96 1.04 1.16 1.20

Source: 2011-2013 data from the ABS; 2014-2015 forecasts by IMA Asia.

Andrew Hordern, Regional Economist, IMA Asia

Tel: +61-2-9252 4336 Email: [email protected]

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New Zealand


PM Key is set towin a 3

rdterm

NZ will go to the polls on September 20, with PM John Key likely to win a third 3-year term.Keys Nationals lead the combined Labour/Green opposition 51% to 43% in polls, despite

public unease over the governments partial sale of several state owned firms. Labour hasbeen hurt by weak leadership by David Cuncliffe, along with his involvement in a secrettrust to collect political donations. Labours effort to regain ground with populist policies hasfailed to rebuild voter support. By contrast, PM Keys promises to lift education spendingand to hold a referendum on the national flag, are gaining popular support.

Mild fiscaltightening

Lower than expect GST and corporate tax receipts in 2H13 led to a budget deficit ofNZ$1.8 billion, $380 million higher than forecast. But this is still down 44%yoy, in line witha government commitment to achieve a budget surplus in 2014/15 from a deficit of 4.9% ofGDP in 2010/11. While that goal may be unreachable, the falling deficit and moderate netdebt (just 30% of GDP) are essential to stability in a small, trade-dependent economy.

!plus tightermonetary policy

The NZ central bank has to follow a similar discipline on monetary policy and in March itraised its policy rate by 25bp to 2.75% as the economy gathered speed and concerns over

inflation emerged. With the upturn set to accelerate, we expect the Reserve Bank to raiseinterest rates by a further 200bp by the end of 2016, which will keep the NZ$ firm.


Domestic demandis strong

GDP growth eased to 2.3%yoy in Q413 from 2.8%yoy in Q313. Local demand actuallyrose on a construction boom, but a surge in imports of construction materials weakened thetrade account and thereby the GDP calculation. The construction boom, along with higherdairy prices, has fed into a strong lift in consumer spending. Together with low base effectsfrom last years drought, this should lift GDP by 4.5%yoy in 1H14. The removal of thebase effect will then lower growth to 3-4%yoy to 2016.

!and exportsare rising

Better global demand and the Chinese New Year Holiday helped lift exports by 20%yoy inJanuary (US$ basis). NZs large agricultural products drove growth, with strong rises indairy (+54%yoy), meat (+10%yoy), and wood (+31%yoy). Low base effects from last yearsdrought are expected to lift exports by 15%yoy in 1H14, before growth slows to 10%yoy in2H14 and a more sustainable 3% in 2015.

With consumersentiment at a 9year high

Strong export demand has flowed through to households, lifting sentiment to a 9-year high.This helped to boost consumption by 3.7%yoy in Q413, up from 3.2%yoy growth in Q1-313. High consumer confidence encouraged spending on durables (9%yoy), while vehiclesales rose 8%yoy. Over 2014 and 2015, consumer growth is expected to reach a high3.5%pa. While households will face rising mortgage costs from rising interest rates, higherwages and increased job security will encourage them to keep spending.

High levels ofconstruction work

Rebuilding after the Canterbury earthquake helped lift construction by 12.6% in 2013, inline with 12.2% growth in 2012. Housing investment drove the sector, rising 17.4%.

Building demand remained strong in January, with housing consents up by 24%yoy and isexpected to remain strong through the forecast period. But high base effects after twostrong years will likely ease construction GDP growth to 6.5% in 2014 and 5.5% in 2015.

Rising inflation,interest rates, anda NZ$

Strong consumer demand and capacity constraints in the housing sector are expected togradually lift inflation to 2.6% in 2014 and 3.2% in 2015 from 1.6%yoy in Q413. This willforce the Reserve Bank to continue raising interest rates. Higher interest rates will supportthe $NZ at around its current 85 US cent level.

Calendar years 2011 2012 2013 2014 2015GDP(Expenditure), real growth, % 1.2 2.9 2.5 3.8 3.6GDP(Production), real growth, % 1.9 2.6 2.7 3.6 3.5CPI, year average, % 4.0 1.1 1.1 2.6 3.2Official cash rate, year end, % 2.50 2.50 2.50 3.50 4.25

NZ$1 = US$, year average 0.79 0.81 0.82 0.85 0.83US$1 = NZ$, year average 1.26 1.23 1.22 1.18 1.20NZ$1 = A$. year average 1.32 1.28 1.17 1.02 1.00

Source: 2011-2013 data from Statistics NZ; 2014-2015 forecasts by IMA Asia.

Andrew Hordern, Regional Economist, IMA Asia

Tel: +61-2-9252 4336 Email: [email protected]

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Asia Brief contributors

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

Asia &Global

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

Australia Sydney: Katie Tucker, Client Support Manager, IMA Asia !Web: www.imaasia.comTel: (61 2) 9252 4336 !Fax: (61 2) 9252 4339 !Email: [email protected]

China Shanghai: James Loudon, China Representative, IMA AsiaTel: (86) 186 2153 7602 ! Email:[email protected]

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

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

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

Japan Canberra: Chris Nailer, Associate Director, IMA Asia & Director MBA program, ANUTel: (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) LtdTel: (92 21) 565 6113 !Fax: (92 21) 565 6112 !Email: [email protected]

Philippines Manila: Peter Wallace, President, The Wallace Business Forum !Web: www.dataphil.comTel: (63 2) 810 9606 !Fax 810 9610 !Email: [email protected]

South Korea Seoul: Tony Michell, Managing Director, Korea Associates Business ConsultancyTel: (82 2) 335 2614 !Fax: (82 2) 323 4262 !Web: www.kabcltd.comEmail: [email protected]

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

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

Thailand Bangkok: Christopher Bruton, Managing Director, Dataconsult LtdTel: (66 2) 23

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62_Asia Brief - Mar 2014