Logo of Phnom Penh Post newspaper Phnom Penh Post - Southeast Asian economy gets lift from US-China tensions

Southeast Asian economy gets lift from US-China tensions

Content image - Phnom Penh Post
Indonesia said realised foreign direct investment (FDI) jumped 13 per cent during the first three months to March to $7.7 billion from a year earlier. AFP

Southeast Asian economy gets lift from US-China tensions

When the US Department of Commerce signalled in late 2019 that it was levelling anti-dumping duties on Chinese-made bed frames, nightstands and other bedroom furniture, one Indonesian furniture maker saw an opening.

Integra Group of Sidoarjo, East Java, doubled down on expansion plans, bringing to nearly 500 billion rupiah ($34.6 million) the amount it was spending over two years on equipment like wood veneer laser cutters, saws and computer-controlled routers that can etch patterns into a wooden panel within minutes.

Now, with Chinese-made furniture facing US countervailing duties of up to 200 per cent, Integra's orders have ballooned.

During the first two months of the year, new and existing customers, including Swedish home furnishing giant Ikea and US retailers such as Target and Costco, have peppered the company with 1.8 trillion rupiah in orders, eager to avoid steep mark-ups in the showroom.

"We saw the potential for our business so we expanded capacity," Wendy Chandra, Integra's corporate secretary, told The Sunday Times. "Our big buyers and new buyers keep coming to us."

Thrown into the deep freeze with the start of the Covid-19 pandemic just over a year ago, the region's economy is on the move again.

Investors and analysts say it is getting a lift from unresolved Sino-US trade tensions.

On April 28, the Asian Development Bank said it expects Southeast Asia's gross domestic product (GDP) to grow 4.4 per cent this year, accelerating to 5.1 per cent in 2022.

Indonesia also said on April 28 that realised foreign direct investment (FDI) jumped 13 per cent during the first three months to March to $7.7 billion from a year earlier.

In Vietnam, pledges of foreign capital rose more than 18 per cent to $10.1 billion during the same period.

In Malaysia, which saw FDI crater by two-thirds last year, and in Thailand, where it halved, there are also promising signs of a turnaround.

Microsoft said it would invest $1 billion over five years to build data centres in alliances with Malaysian local businesses and government agencies.

In Thailand, exports climbed nearly eight per cent in the first quarter, setting aside highly volatile items like oil and gold and taking into account an uptick in imports.

Naris Sathapholdeja, head of analytics at Thailand's TMB Bank, reckons capital inflows may total $4 billion during the first three months of the year – a U-turn compared with a deficit of $7.3 billion at the end of last year; the most since at least 2005, according to the Bank of Thailand's online data.

"Reflecting the trade tensions and the improving investment climate in member economies, more relocation investments are expected to move to ASEAN," said think-tank ASEAN Plus Three Macroeconomic Research Organisation (Amro) in an April 7 report. ASEAN+3 includes China, Japan and South Korea.

Starting in 2017, there was a sudden surge in the numbers of China-based investors relocating operations into ASEAN and big Asian economies such as Japan and South Korea, as some Chinese investors and foreign-owned companies attempted to side step trade frictions between China and the US.

Of 33 announcements about operations relocating to Asia, 14 were slated to go to ASEAN countries, the April 7 report said.

Late last year, Indonesia unveiled a memorandum of understanding with South Korea's LG Energy for investments worth nearly $10 billion to make batteries for use in electric vehicles in Batang, Central Java.

In July, Indonesia's Investment Coordinating Board announced $850 million in mid-sized deals that would see seven companies, including Japan's Panasonic and auto parts giant Denso, move factories from China to a 4,000ha Batang industrial park.

To be sure, because of its massive market, supply of trained labour and well-developed domestic supplier base, China is still attracting investment.

The Amro report said of the 33 projects headed for Asia last year, nine were slated for China.

Amro chief economist Khor Hoe Ee, who co-wrote the report, told The Sunday Times that labour-intensive businesses, including electronics, textiles and furniture, will be among the businesses most likely to shift their operations because they were less able to cope with steeper tariffs or geo-political shocks.

Reforms, such as Indonesia's so-called omnibus labour and investment laws, which promise to shrink the time it takes to secure approval for projects while making it easier to contain wage hikes, will give economies an edge over their neighbours as investment picks up.

"There's a lot of potential for companies to move out of China and into ASEAN," Dr Khor said. "Countries are positioning themselves to attract investment."



  • Joy as Koh Ker Temple registered by UNESCO

    Cambodia's Koh Ker Temple archaeological site has been officially added to UNESCO’s World Heritage List, during the 45th session of the World Heritage Committee held in Riyadh, Saudi Arabia, on September 17. The ancient temple, also known as Lingapura or Chok Gargyar, is located in

  • Ream base allegations must end, urges official

    A senior government official urges an end to the allegations and suspicions surrounding the development of Cambodia’s Ream Naval Base, now that Prime Minister Hun Manet has addressed the issue on the floor of the 78th UN General Assembly (UNGA 78). Jean-Francois Tain, a geopolitical

  • Cambodia set to celebrate Koh Ker UNESCO listing

    To celebrate the inscription of the Koh Ker archaeological site on UNESCO’s World Heritage List, the Ministry of Cults and Religion has appealed to pagodas and places of worship to celebrate the achievement by ringing bells, shaking rattles and banging gongs on September 20. Venerable

  • CP denied registration documents by ministry

    The Ministry of Interior will not reissue registration documents to the Candlelight Party (CP). Following a September 21 meeting between ministry secretary of state Bun Honn and CP representatives, the ministry cited the fact that there is no relevant law which would authorise it to do

  • Cambodian diaspora laud Manet’s UN Assembly visit

    Members of the Cambodian diaspora are rallying in support of Prime Minister Hun Manet’s forthcoming visit to the 78th UN General Assembly (UNGA 78) in the US’ New York City this week. Their move is an apparent response to a recent call by self-exiled former

  • PM to open new Siem Reap int’l airport December 1

    Prime Minister Hun Manet and Chinese leaders would jointly participate in the official opening of the new Chinese-invested Siem Reap-Angkor International Airport on December 1. The airport symbolises a new page in the history of Cambodian aviation, which will be able to welcome long-distance flights to