Prabowo’s China visit; Asean currencies’ further retreat

This week in Asean: 

• Indonesia: President-elect Prabowo met China’s President Xi Jinping in Beijing
• Thailand: Plans to raise 2025 fiscal deficit to fund US$14 billion cash handout plan
• Vietnam: Q1 growth at highest level since 2020
• Laos: Hosts the 11th Asean Finance Ministers’ and Central Bank Governors’ Meeting

Dear BT reader,

Hope you have had a good Easter break just as we did.

The world is picking up pace after the long weekend. Indonesia’s President-elect Prabowo Subianto visited China’s President Xi Jinping on Apr 1 in Beijing, in his first overseas trip following the General Election Commission’s official announcement of his victory on Mar 20.

The rare pre-inauguration visit to China has been seen as a prompt effort to continue engagement and seek Chinese investments in the infrastructure and security sectors, which have been the focus of outgoing President Joko Widodo for the past decade. Indonesia’s stance towards China will likely remain steady under the leadership of Prabowo, who is set to officially take office on Oct 20.

Beijing and Jakarta have experienced fewer diplomatic flashpoints than China’s relationships with the Philippines or Vietnam, with whom tensions over territorial disputes in the South China Sea continue to simmer. For example, the Jakarta-Bandung High-Speed Railway (HSR), which was built under Jokowi’s presidency and began operation in October 2023, highlights the close cooperation between the two countries.

However, the extension of the HSR to Indonesia’s second-biggest city, Surabaya, is facing some pushback. While the proposal is still under discussion with China’s state-owned China Railway Group, the Indonesian government has stated that it is no longer on the country’s national strategic list of projects due to challenges like hefty costs and land issues, among others. 

Yet another hurdle facing the president-elect will be assembling his new Cabinet, which will be crucial for establishing public confidence in his leadership after a decade of Jokowi’s rule. Analysts emphasise that the first year of Prabowo’s presidency is critical for maintaining Indonesia’s sovereign credit ratings, given how his expensive campaign promises, such as a social assistance programme, may burn a hole in the country’s pocket. Read this piece by our Indonesia correspondent Elisa Valenta to find out more. 

Another Asean member facing political changes is Vietnam. Despite having two presidents – Nguyen Xuan Phuc followed by Vo Van Thuong – ousted in just over a year, the country’s economic policies remain largely stable given that the presidency is more of a ceremonial role and holds limited political influence.

As investors breathed sighs of relief, news also came that Vietnam’s growth in the first quarter reached 5.66 per cent, the highest recorded since 2020. This growth was achieved despite global economic turmoil and has largely been attributed to improvements in the country’s services and manufacturing sectors. Our Vietnam correspondent, Jamille Tran, takes a deeper look at the export-reliant country’s economic performance.

By contrast, the exchange rate of the Vietnamese Dong against the US Dollar has hit a new low, marking another instance of Asean currencies being impacted by the strong US Dollar. Our journalist, Goh Ruoxue, spoke to analysts about Asean currencies’ performance trajectories so far in 2024 and their second-quarter expectations. Here is her updated piece on the latest currency movements against the buoyed US Dollar. 

Check out the sections below for more hand-picked Asean news. See you again next week!

Trending

The 11th Asean Finance Ministers’ and Central Bank Governors’ Meeting (AFMGM) will take place in Luang Prabang, Laos, from Apr 4 to 5. The AFMGM will discuss ways to enhance the region’s monetary and financial cooperation, targeting the implementation of the Asean Economic Community Blueprint 2025 and beyond.

Asean in Brief

• Asean currencies hammered again as rosy data further buoys US dollar Currencies across Asean heralded in the first month of Q2 by sliding even further against the US dollar, with some slumping to their nadir and others dropping to multi-year lows, as recent data signalled bright prospects for the world’s largest economy. Read more
• Indonesia’s Jakarta-Bandung high-speed rail extension to Surabaya not a priority: official Indonesia is considering extending its Jakarta-Bandung high-speed rail to the country’s second-biggest city, Surabaya. However, the plan may face significant challenges ranging from hefty costs to land issues. Read more
• Taiwan’s Delta Electronics banks on expanded EV production in Thailand amid slowing market Delta Electronics – the largest manufacturer of electric-vehicle power electronics products in Thailand – has launched a new research and development centre and another plant largely dedicated to expanding its EV business. Read more
• Thailand’s shift to promote electric commercial vehicles a boon for local assembly A new scheme by the Thai government that gives domestic bus and truck fleet operators incentives to encourage them to switch to electric vehicles is picking up some steam. Read more
• Thailand to widen 2025 budget deficit as it reworks handout plan According to a senior official, Thailand plans to raise the fiscal deficit estimate for next fiscal year to stimulate a sluggish economy – the clearest signal yet that the government is veering towards funding a US$14 billion cash handout programme through the state Budget. Read more
• Vietnam set to re-auction controversial southern land parcels that fetched US$100,000 per sq m in 2021 Developers in Vietnam are gearing up to vie for prime land in the country’s southern hub as plans to re-auction these plots are set for this year. Read more
• Vietnam biotech firm Gene Solutions set to raise US$70 million to chase big dreams in the region Vietnamese biotech company Gene Solutions is poised to raise some US$70 million in Series C funding soon, with a share sale planned in two years. Read more
• Malaysia’s Exchange 106 commands highest office rents in Kuala Lumpur The second-tallest building in Malaysia – the Exchange 106 skyscraper in the heart of the new Tun Razak Exchange financial and business hub – is seeing some sky-high rents these days. Read more