Regulatory gaps take wind out Vietnam’s sails; Ships steer clear of Singapore on port congestion

This week in Asean: 

• Malaysia: Eyes RM500 billion semicon investment 
• Indonesia: Dual citizenship a game changer, say analysts 
• Philippines: Finance minister suggests rate cuts of 150 bps

Dear BT reader,

What a tough couple of months it’s been for Vietnam. 

As we approach the mid-year mark, the dong continues to tank against the greenback, slumping to a record low last week and triggering the central bank to signal that it stands ready to defend the beleaguered currency. Inflation in May reached a 16-month high and the country ran up its first trade deficit on goods in two years. 

All this follows hot on the heels of news that the country forfeited billions in foreign aid on administrative paralysis as well as revelations of more top-rank resignations. Earlier in April, we saw the handing out of a death sentence to a real estate tycoon for embezzlement, while March bore witness to a presidential resignation, leaving the country to name its third leader in a year.

However, despite the choppy waters, Vietnam is staying afloat. Pledged foreign direct investment (FDI) grew 2 per cent from the year before in the first five months of 2024, reports our Vietnam correspondent Jamille Tran, who spoke to analysts to uncover just how much impact the recent political developments have made on foreign investor confidence. 

Across South-east Asia, if foreign investors were moths, Malaysia would be the flame. 

Google recently revealed its commitment to invest US$2 billion for its first data centre and Cloud region in the nation, an announcement that comes on the back of Microsoft’s earlier pledge of US$2.2 billion to build cloud and artificial intelligence infrastructure in the country. In March last year, Amazon Web Services said it would invest US$6 billion by 2037 to boost its cloud infrastructure in Malaysia. 

The nation, which aspires to become a data centre hub in South-east and wider Asia, also revealed on May 28 its target to attract at least RM500 billion (S$143.5 billion) in investment for its semiconductor industry. Our Malaysia correspondent Tan Ai Leng reports that the government has allocated RM25 billion in fiscal support to drive its National Semiconductor Strategy. 

In some nautical news, port congestion across South-east Asia is coming to a head. While congestion in Malaysia’s Port Klang had earlier eased in favour of Singapore, liners are now steering clear of the Republic in order to keep to their sailing schedule, writes our senior correspondent Tay Peck Gek. It remains to be seen whether customers will make the switch to airfreight. 

We’ve got a strong lineup of stories this week, so keep scrolling for more good reads. Have a good weekend.

Trending

What I’m watching: The Philippine peso has traipsed past the key 58 threshold to register a fresh 18-month-low of 58.747 against the US dollar at 11.28am on Thursday (May 30), according to Bloomberg data, as US treasury yields inch upwards.

Why you should care: At its most recent May 16 policy meeting, the Philippine central bank kept its key policy rate steady for a fifth consecutive session and hinted that it could cut interest rates as early as in August. Its next meeting is scheduled for June 27.

Asean in Brief

• South-east Asia’s growth-dominated PE industry needs stronger IPO markets: Bain South-east Asia’s private equity industry is holding its head above water, but needs stronger stock markets to support exits via initial public offerings. Read more
• S-E Asia’s ESG funds record outflows in Q1 as investors shun regional equities Investment strategists told The Business Times that investors across the globe have generally been allocating their capital into money market and fixed income funds, whether they come with the sustainability label or not. Read more
• Indonesia’s dual citizenship push to combat brain drain, talent shortage: analysts Indonesia’s professional diaspora has cheered the prospect of dual citizenships as South-east Asia’s largest economy mulls the move to lure its citizens back home, although experts caution that this alone will not solve the country’s acute digital talent shortage. Read more
• Sarawak’s green goals Malaysia’s largest state, Sarawak, is blessed with abundant sunshine, land and hydroelectric-power potential and aims to become a clean-energy powerhouse – an ambition that has ramped up competition as nations in the region vie to become the hub for harnessing renewable energy. Read more
• Vietnam’s high-speed rail links with China: economic boon or bane? High-speed rail is generating buzz in Vietnam, as plans are being drawn up to start building two lines connecting the capital Hanoi to China before 2030. Read more
• Thai April factory output unexpectedly rises for first time in 19 months Thailand’s manufacturing production index unexpectedly rose 3.43 per cent in April from a year earlier, increasing for the first time in 19 months, helped by higher exports and tourism. Read more
• Philippine finance minister expects 150 bps of rate cuts in next 2 years The Philippines’ key policy rate, currently at a 17-year high of 6.5 per cent, could be reduced by as much as 150 basis points in the next two years on the back of an improving outlook for inflation, its finance minister said. Read more
• Indonesia probing Shopee, Lazada units for suspected anti-competition rule breaches The companies are Shopee Internasional Indonesia, and Ecart Webportal Indonesia, which oversee the domestic operations of Shopee and Lazada, respectively. Read more
• S-E Asia’s US$220 billion gas expansion plans may slow energy transition: GEM If all the planned projects go ahead, they could raise the region’s gas-fired power capacity to double the current level. Read more
• Asean tourism to China jumps after visa rules ease China is regaining its status as a hotspot for South-east Asian tourists lured by new visa-free entry programmes and easier access to the mainland’s cashless payment systems. Read more