South-east Asian port efficiency challenges loom

Subject Port and shipping infrastructure in South-east Asia. Significance South-east Asia is likely to experience a recovery in freight shipping this year, after cargo traffic volumes grew in the fourth quarter of 2016. However, this rebound will put further pressure on congested ports and the region’s logistical capability. Impacts Port congestion should ease as more capacity comes online, but secondary gateways will see little improvement. Regulatory reforms are lagging expansion plans, depriving the industry of much-needed investment. More investment will be needed in road and rail networks to link ports to supply chains.

Subject Crowdfunding in South-east Asia. Significance Regulatory reforms have made possible a range of alternative financing initiatives that raised almost 84 million dollars for small businesses in the past three years from South-east Asian platforms alone. Crowdfunding is the fastest-growing segment, though amounts are still small. Impacts Further industry-specific regulatory reforms will be required to support South-east Asian crowdfunding. Facing competition, more banks will be forced to offer online crowdfunding-related products. However, low product returns could be a disincentive to large investor interest in crowdfunding.


Subject Impact of the COVID-19 outbreak on South-east Asia. Significance South-east Asia is uniquely exposed to the economic risks associated with COVID-19 because the region’s supply chains, labour flows and tourism industries are heavily reliant on China, where the virus originated and has had the greatest impact. Meanwhile, the threat to public health from the spread of the virus brings political risks for the region’s governments. Impacts Countries with weak healthcare systems, such as Myanmar and Laos, would struggle to deal with severe COVID-19 outbreaks. South-east Asian governments will put in place more expansive travel bans and stricter quarantine measures as the virus spreads. Across the region, mitigation packages put together by governments in response to COVID-19 will drive deficit spending this year.


Subject COVID-19 situation in South-east Asia. Significance South-east Asia has less than 12,000 active cases of COVID-19 and less than 600 deaths have been recorded from the disease in the region. These numbers appear relatively small, but they probably reflect a lack of testing in most of the region’s countries. Many South-east Asian governments are bracing for intensifying outbreaks. Impacts Some of South-east Asia’s state-owned enterprises face insolvency. The region’s supply chains and labour flows will likely remain paralysed for months. Emergency powers could remain in place in certain South-east Asian countries for over a year and be exploited by authoritarian governments.


Significance It is the only country in South-east Asia with a large-scale nuclear plant, although this was never loaded with fuel. Other countries in the region have tentative plans to develop nuclear power programmes. Impacts The current absence of nuclear power programmes will help avert the diversion of capital from renewable energy development in the region. South-east Asian countries with small, non-power reactors, built for research, will try to maintain these facilities. Across the region, the need for electricity grid investment will increase as more decentralised generation sources are deployed.


Subject The outlook for Indian naval engagement with South-east Asian countries and ASEAN. Significance At the ASEAN summit in mid-November, India's Prime Minister Narendra Modi underlined India's 'Look East' policy, pledging to cultivate diplomatic, economic and security relationships with South-east Asia. One manifestation of Delhi's willingness to undertake a more strategic regional role is the Indian navy's growing portfolio of partnerships with South-east Asian navies. Amid concerns over China's maritime assertiveness, India's navy has been welcomed in the region as a security partner. Impacts India will avoid South-east Asian undertakings that may provoke China. Delhi will need to define 'Look East' policies concretely to convince South-east Asia fully of Indian strategic utility. Modi will expand bilateral naval exercises, humanitarian aid and counter-piracy/smuggling efforts in South-east Asia.


Subject Prospects for South-east Asia in the fourth quarter. Significance South-east Asia's growth outlook is weakening as unease over the region's dependence on the slowing Chinese economy and growing debt burden is undermining business and consumer confidence. Politically, the fourth quarter will see two bellwether elections.


Subject South-east Asian tax bases. Significance Indonesia's tax amnesty programme enters its third phase in 2017. The amnesty will generate short-term revenue, but it is not a solution to a wider problem of limited tax bases found across the ASEAN core economies of Indonesia, Malaysia, the Philippines, Singapore and Thailand. Impacts Bilateral tax treaties may change following OECD reforms, even if South-east Asian states are not party to the initiatives. Compliance costs for country-by-country reporting for multinational companies under the OECD initiatives could be substantial. More efficient tax collection and wider tax bases could benefit ASEAN states' development such as infrastructure.


Subject Online radicalisation. Significance On May 25, the Indonesian parliament unanimously passed stringent anti-terrorism laws allowing the military to be directly involved in counterterrorism operations. The vote followed a string of suicide bombings attributed to local jihadist networks that have pledged allegiance to Islamic State (IS). Jakarta joins other South-east Asian governments -- notably those of Malaysia, the Philippines and Singapore -- in attempting to counter a new push in the region by IS, as it loses territory in Iraq and Syria. Impacts Rising anti-Shia sentiment in the region, a by-product of increased Saudi influence, will likely give IS new issues to exploit. The Rohingya crisis gives IS a regional boost, especially in terms of operations in Myanmar and more likely in Yangon than Rakhine State. Non-ideological, low-wage overseas workers, particularly from the Philippines and Indonesia, are most susceptible to IS.


Significance Inbound and outbound Asian tourism has exploded over the last 20 years, especially in East and South East Asia. However, the sector faces challenges. Impacts Supporting tourism, Asia hosts three Olympics in a row -- South Korea 2018 (winter games), Tokyo 2020 (summer) and Beijing 2022 (winter). Tourism is a key source of exports and dollars; if Cambodia is hit by sanctions after its disputed election, tourism could cushion GDP. In ten years the UN sees India's population overtaking China's, making Indian travellers key to East and South-east Asian tourism.


Subject South-east Asian defence budgets. Significance The pressure of responding to the COVID-19 pandemic is prompting many South-east Asian governments to cut defence spending and postpone or cancel new arms acquisitions. Meanwhile, China and the United States continue to vie for influence in the region. Impacts Piracy attacks will increase across the region as socio-economic distress rises and budgets for navies and coast guards fall. ASEAN unity will fracture as tensions among member states increase. Economic problems will cause political instability across South-east Asia, possibly even leading to military coups in certain countries.


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