Presentation - ASEAN Economic Community - Implicati

Deutsche Bank
DB Research
ASEAN Economic Community

Implications for Thailand & CLMV*
*Cambodia, Laos, Myanmar, Vietnam

Deutsche Bank
DB Research
Syetarn Hansakul
ASEAN April 2013
Agenda
Deutsche Bank
DB Research
Syetarn Hansakul
ASEAN April 2013
Thailand & CLMV as a bloc
Economic outlook by country
Thailand and CLMV

2012P Data
GDP size :
USD 592 billion (nominal)

USD 1.1 trillion (PPP)
GDP per capita:
USD 2466 (nominal)

USD 4629 (PPP)
Share of global GDP:
1.3%
Population:
240 million
Source: IMF
Myanmar
Vietnam
Laos
Thailand
Cambodia
Deutsche Bank
DB Research
Syetarn Hansakul
ASEAN April 2013
TH + CLMV growth: Historical perspective
1990-2000:
TH + CLMV annual average = 6.5%
2001-2012:
TH + CLMV annual average = 7.2%
Real GDP, % yoy
Real GDP, % yoy
15
16
14
10
12
10
8
0
6
4
-5
2
0
-10
-2
-15
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Thailand
Myanmar*
Source: IMF WEO
Deutsche Bank
DB Research
Cambodia
Vietnam
Laos
*Myanmar data from 1990-1999 unavailable
Syetarn Hansakul
ASEAN April 2013
-4
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Thailand
Myanmar
Cambodia
Vietnam
Laos
Source: IMF WEO
TH + CLMV in 2017
Per capita income to reach USD 3,275 from USD2,466
GDP per capita, nominal USD
12.000
10.000
8.000
6.000
4.000
2.000
0
2012F
TH+CLMV
2017F
China
India
Source: IMF WEO
Deutsche Bank
DB Research
Syetarn Hansakul
ASEAN April 2013
Governance indicators
Rule of law (2011)
Control of corruption (2011)
Percentile ranking (0 = lowest, 100= highest)
Thailand
Thailand
Vietnam
Vietnam
Lao PDR
Lao PDR
Cambodia
Cambodia
Myanmar
Myanmar
10
20
40
50
60
10
20
30
40
50
Source: World Bank
Source: World Bank
Deutsche Bank
DB Research
30
Syetarn Hansakul
ASEAN April 2013
Governance indicators
Regulatory quality (2011)
Government effectiveness (2011)
Thailand
Thailand
Cambodia
Vietnam
Vietnam
Cambodia
Lao PDR
Lao PDR
Myanmar
Myanmar
10
20
40
50
60
10
20
30
40
50
60
70
Source: World Bank
Source: World Bank
Deutsche Bank
DB Research
30
Syetarn Hansakul
ASEAN April 2013
Social indicators
Total life expectancy (2011)
Infant mortality rate (2011)
Years
Per 1000 births
Vietnam*
Myanmar
Thailand
Cambodia
Lao PDR
Lao PDR
Myanmar
Vietnam
Cambodia
Thailand
55
60
65
70
75
80
0
*Vietnam data 2010
20
30
40
50
60
Source: WDI
Source: WDI
Deutsche Bank
DB Research
10
Syetarn Hansakul
ASEAN April 2013
Social indicators
Gross tertiary school enrollment

(2011)
Total adult literacy rate (2010)

% >ages 15
%
Thailand*
Thailand
Vietnam
Vietnam*
Myanmar
Lao PDR
Cambodia*
Myanmar
Lao PDR*
Cambodia
0
20
40
60
80
100
*Thailand data: 2005; Cambodia: 2009; Lao: 2005
*Vietnam data 2010
Source: WDI
Source: WDI
Deutsche Bank
DB Research
Syetarn Hansakul
ASEAN April 2013
10
20
30
40
50
60
Agenda
Deutsche Bank
DB Research
Syetarn Hansakul
ASEAN April 2013
Thailand & CLMV as a bloc
Economic outlook by country
Thailand vs ASEAN-5* snapshot

*ASEAN-5 : Indonesia, Malaysia, Philippines, Thailand, Vietnam
Real GDP growth
Current account
% yoy
% of GDP
7,0
6,0
5,9
6,0
5,0
5,0
5,5
5,8
5,0
4,0
3,0
2,0
1,8
2
1,2
2,0
1,0
0,0
Thailand
ASEAN-5*
2012P
2013F
Thailand
2014F
2012P
ASEAN-5*
2013F
Source: Deutsche Bank, IMF WEO Oct 2012
CPI
Fiscal balance
% yoy (aop)
% of GDP
5,5
6
4,8
4,3
4
2,4
2,4
2,3
3,3
3,0
3,5
0
Thailand
2012P
ASEAN-5*
2013F
Deutsche Bank
DB Research
Syetarn Hansakul
ASEAN April 2013
2014F
0,0
-0,5
-1,0
-1,5
-2,0
-2,5
-3,0
-3,5
-4,0
2014F
-1,9
-2,9
-3,0
-3,5
-3,6
Thailand
2012P
-3,3
ASEAN-5*
2013F
2014F
10
Thailand: Investment revival to drive growth

Investment taking off
Infrastructure: Transport, Flood

prevention
Global demand upturn
Key facts (2012F)

Nominal GDP: USD 377 billion
Consumption resilient
Tight labour market
Pressures emerging on
trade/current accounts
Rice export issue
Rising import demand
Fiscal deficit & off budget spending
Population: 65 million
GDP per capita: USD 5,848
(nominal)
Source: IMF
Potential contingent liabilities
Governance issue
Increasingly important factor for FDI
Politics remains a wild card
Deutsche Bank
DB Research
Undercurrent from polarised society

Syetarn Hansakul
ASEAN April 2013
11
Cambodia snapshot
Real GDP growth
Current account
% yoy (*CLMV data calculated using simple average
% of GDP (*CLMV data calculated using simple average)
8
6,5
6,7
7,2
6,5
6,7
6,9
-2
-4
4
-6
-8
-7,1
2
-10
0
-8,9
-9,1
-9,7
-9,5
-8,8
-12
Cambodia
CLMV*
2012P
2013F
Cambodia
2014F
CLMV*
2012P
Source: IMF WEO Oct 2012
2013F
2014F
CPI
Fiscal balance
% yoy, aop (*CLMV data calculated using simple average)

0
4,4
4
-1
5,9
6
4,3
5,2
4,9
3,6
-2
-3
-4
-2,5
-2,0
-3,3
-4,3
-5
-4,9
-6
Cambodia
2012P
CLMV*
2013F
Deutsche Bank
DB Research
-3,9
Syetarn Hansakul
ASEAN April 2013
2014F
Cambodia
2012P
CLMV*
2013F
2014F
12
Cambodia: Positive growth outlook with diversification

challenges
Key economic sectors:
Key facts (2012F)
Textile
Tourism
Agriculture
Large need for infrastructure:
Electricity
Road/Transport
Telecom
Human development indicators

weaker than CMLV peers

GDP per capita: USD 934 (nominal)
Source: IMF
Life expectancy, Education
Governance and corruption WB

ranking weaker than CMLV peers
Only above Myanmar
Lower House election in Jul 2013
Deutsche Bank
DB Research
Political stability likely to continue

Syetarn Hansakul
ASEAN April 2013
13
Lao PDR snapshot

Real GDP growth
Current account
% yoy (*CLMV data calculated using simple average)
8,3
9
8
7
6
5
4
3
2
1
0
8,1
7,7
6,5
6,7
6,9
-5
-10
-8,9
-9,5
-8,8
-15
-20
-25
-21,9
-24,0
-23,9
-30
Lao
CLMV*
2012P
2013F
Lao
2014F
CLMV*
2012P
2013F
2014F
CPI
Fiscal balance
% of GDP (*CLMV data calculated using simple average
8
6
6,8
-1
5,9
5,1
4,8
5,2
4,9
-2
-3
-2,6
-2,6
-2,6
-4
-4,3
-5
-4,9
-6
Lao
2012P
CLMV*
2013F
Deutsche Bank
DB Research
-3,9
Syetarn Hansakul
ASEAN April 2013
2014F
Lao
2012P
CLMV*
2013F
2014F
14
Lao PDR: Small economy with high per capita income

among peers
Infrastructure projects to boost
investment and growth
Hydropower Xayaburi dam ($3.5 bn)
Railways
Key sectors
Hydropower
Mining (copper, gold)
Agriculture
Garment
Tourism
Large current account deficit
Persistent trade deficit due to large

import needs
Risks mitigated by foreign investment

inflows.
Key facts (2012F)

Nominal GDP: USD 9.3 billion
(nominal)
Source: IMF
Political stability to be maintained
Deutsche Bank
DB Research
Syetarn Hansakul
ASEAN April 2013
15
Myanmar snapshot
Real GDP growth
Current account
8
6,2
6,3
6,5
6,4
6,7
6,9
0
-2
-2,9
-4
4
-6
2
-4,0
-4,4
-8
-8,9
-10
Myanmar
CLMV*
2012P
2013F
Myanmar
2014F
2012P
2013F
-9,5
CLMV*
2014F
CPI
Fiscal balance

0
8
6
-8,8
6,5
5,8
5,9
5,1
5,2
4,9
-2
-4
4
-4,9
-6
2
-8
-10
Myanmar
2012P
CLMV*
2013F
Deutsche Bank
DB Research
Syetarn Hansakul
ASEAN April 2013
2014F
-8,6
-9,2
-3,9
-7,8
Myanmar
2012P
-4,3
CLMV*
2013F
2014F
16
Myanmar: Resource rich country opening up

2nd largest economy but poorest
among CMLV peers
Key sectors:
Oil and gas
Mining
Agriculture
Tourism
Poor state of infrastructure
Electricity
Road/Transport
Telecom
Key facts (2012F)

GDP per capita: USD 849 (nominal)
Source: IMF
Lifting of western nations sanctions

to boost trade and investment
But not all sanctions are lifted
Weak governance & human

development indicators compared
to CMLV peers
Deutsche Bank
DB Research
Syetarn Hansakul
ASEAN April 2013
17
Vietnam snapshot
Real GDP growth
Current account
8
7
6
5
4
3
2
1
0
6,5
5,0
5,2
6,8
5,8
Vietnam
2012P
6,6
6
4
2
0
-2
-4
-6
-8
-10
3,6
0,6
-0,5
-9,1
-8,1
CLMV*
2013F
-8,6
Vietnam
2014F
CLMV*
2012P
2013F
2014F
CPI
Fiscal balance
% yoy, aop (*CLMV data calculated using simple average
11,1
12
10
9,3
0
-1
9,2
6,0
6,7
-3
-4
-5
-4,5
-6
-7
Vietnam
2012P
CLMV*
2013F
Deutsche Bank
DB Research
-2
6,3
Syetarn Hansakul
ASEAN April 2013
2014F
-6,0
-5,3
-5,5
Vietnam
2012P
-4,2
-4,8
CLMV*
2013F
2014F
18
Vietnam: Untapped potential with large population

base and rising income
Largest & richest economy among
CMLV, but smallest and poorest
among ASEAN-5
Key sectors:
Oil & Gas
Mining & commodities
Agriculture/Agro industry
Manufacturing (textile, footwear,

Electronics)
Tourism
Prone to overheating during upturn
Legacy bad loans hangs over banking

sector
Impacts on contingent liabilities & public

sector finance
Key facts (2012F)

(nominal)
Source: IMF
Regulations/Institutions/Governance
need to be strengthened
Deutsche Bank
DB Research
Syetarn Hansakul
ASEAN April 2013
19
Agenda
Deutsche Bank
DB Research
Syetarn Hansakul
ASEAN April 2013
Thailand economic outlook
CLMV economic outlook
20
ASEAN Economic Community (AEC): Background
What is AEC
End goal of economic integration as espoused in Vision 2020
Part of the 3 pillars of the ASEAN Community
The other 2 pillars are Security Community & Socio-Cultural Community
Key accords
Declaration of ASEAN Concord II in 2003: Decision to establish AEC
AEC Blueprint in 2007: Stipulates vision, goals and strategic schedule
Master Plan on ASEAN Connectivity (MPAC) in 2010
ASEAN Trade in Goods Agreement (ATIGA) in 2010
Launch date
31 December 2015
Deutsche Bank
DB Research
Syetarn Hansakul
ASEAN April 2013
Page 21
ASEAN Economic Community (AEC) 4 pillars

Single market
and production
base
Free flow of
goods
Free flow of
services
Free flow of
investment
Freer flow of
capital
Free flow of
skilled labour
Priority
integration
sectors
Food, agriculture
and forestry
Deutsche Bank
DB Research
Syetarn Hansakul
ASEAN April 2013
Competitive
economic
region
Equitable
economic
development
Integration into
global
economy
Competition
policy
Consumer
protection
Intellectual
property rights
Infrastructure
development
Taxation
E-commerce
SME
development
Initiative for
ASEAN
Integration (IAI):
Coherent
approach
towards external
economic
relations
Enhanced
participation in
global supply
networks
Developed ASEAN
states to help less
developed ASEAN
states in 7 priority
projects
22
ASEAN Economic Community (AEC): Progress report
Single market
and production
base
ASEAN-6* have
applied 0 tariff on 99%
of goods
CLMV are trading
98.6% of goods at
0-5% tariff rate.
National Single
Windows implemented
in IDN, PHL, SGP, THA
Some progress in
services trade and
investment
liberalisation
ASEAN Exchange took
off: MYS, SGP, THA
Mutual recognition
Arrangements (MRAs)
for skilled professionals
in progress
Competitive
economic
region
Equitable
economic
development
Integration into
global
economy
Master Plan on ASEAN

Connectivity adopted in
2010
ASEAN Infrastructure
Fund established with
the ADB to promote
physical infrastructure.
Private-Public
partnership
encouraged for
infrastructure projects.
2nd phase of Initiative

for ASEAN Integration
(IAI) work plan (20092015): Developed
ASEAN states to help
less developed ASEAN
states in 7 priority
projects: infrastructure
development, human
resources
development, ICT
development, capacity
building, tourism,
poverty and quality of
life
ASEAN-China FTA
ASEAN-Korea FTA
Commencement of
ASEAN-CER
(Australia, New
Zealand) FTA
ASEAN-India trade in
goods agreement
* ASEAN-6: Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand

Deutsche Bank
DB Research
****
Syetarn Hansakul
ASEAN April 2013
23
AEC Scorecard: Used as a compliance tool to monitor

the progress of implementing AEC measures
ASEAN
Pillar I:
Pillar II:
Pillar III:
Economic Single Market Competitive
Equitable
Community Production
Economic
Economic
Base
Region
Development
68.2
66.5
69.2
66.7
Pillar IV:
Integration
into Global
Economy
85.7
Source: ASEAN Economic Community Scorecard, ASEAN Secretariat, 2012
Deutsche Bank
DB Research
Syetarn Hansakul
ASEAN April 2013
24
ASEAN state of development
HDI ranking (2011)
GDP per capita, USD (2011)

Singapore
Myanmar
Brunei Darussalam
Cambodia
Malaysia
Lao P.D.R.
Thailand
Vietnam
Indonesia
Indonesia
Philippines
Philippines
Vietnam
Thailand
Lao P.D.R.
Malaysia
Cambodia
Brunei Darussalam
Myanmar
Singapore
0
20.000
60.000
50
100
150
200
Source: HDI Report; Human development Index 0 = best, 100 = worst
Source: IMF WEO
Deutsche Bank
DB Research
40.000
Syetarn Hansakul
ASEAN April 2013
25
ASEAN attractiveness
Global Competitiveness Index

(2012-2013)
Ease of Doing Business (2012)

Singapore
Singapore
Thailand
Malaysia
Malaysia
Brunei Darussalam
Brunei Darussalam
Vietnam
Thailand
Indonesia
Indonesia
Philippines
Philippines
Cambodia
Vietnam
Lao P.D.R.
Cambodia
0
50
100
150
200
20
40
60
*Myanmar data not available. 0 = best, 100 worst.
*Myanmar and Lao data not available.0 = best, 100 = worst
Source: World Bank
Source: World Competitive Index 2012-2013
Deutsche Bank
DB Research
Syetarn Hansakul
ASEAN April 2013
80
100
26
ASEAN Economic Community (AEC):

Remaining challenges
ASEAN has no enforcement mechanism: progress based on consensus
and national own compliance
Large gap in development stages among member countries makes coordination in implementation difficult
Non-Tariff Barriers (NTBs) still exist and present obstacles to free trade
Domestic industry protection pressure
Lack of uniformity, enforceability, and transparency in investment
regulations
Competition policy (i.e. anti-monopoly law) far from being standardised
Lack of awareness/preparation outside government sector
Language barrier presents practical problems to free flow of labour
Assistance measures/Safety net for those who may be negatively impacted
Deutsche Bank
DB Research
Syetarn Hansakul
ASEAN April 2013
Page 27
ASEAN Economic Community (AEC) :

What to expect after the launch date
AEC
Implications
Not a magic pill to cure domestic

economic ills
The whole region is unlikely to
transform overnight into a smoothrunning economic community
But it will start to function more
efficiently as a bloc
Cost saving for MNCs: Less
bureaucratic red tape to deal with
More efficient for businesses that
can take advantage of regional
network, productivity gains
More work in progress after
launch date
Net positive impacts for trade &

investment and GDP growth for
the region
Main beneficiaries
Deutsche Bank
DB Research
Syetarn Hansakul
ASEAN April 2013
Companies with global or regional

presence
Educated workers; workers in lower
wage countries
Financial sector
Potential negative impacts

Unskilled workers in higher wage
countries
More competition could lead to tighter
margin
Bubble risks in country with sudden rise
in capital
28
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Deutsche Bank

ASEAN Economic Community

*Cambodia, Laos, Myanmar, Vietnam

Thailand & CLMV as a bloc

Economic outlook by country

ASEAN Economic Community

Thailand and CLMV

USD 592 billion (nominal)

GDP per capita:

USD 2466 (nominal)

Share of global GDP:

TH + CLMV growth: Historical perspective

Real GDP, % yoy

Real GDP, % yoy

*Myanmar data from 1990-1999 unavailable

Source: IMF WEO

Source: IMF WEO

Rule of law (2011)

Control of corruption (2011)

Percentile ranking (0 = lowest, 100= highest)

Percentile ranking (0 = lowest, 100= highest)

Source: World Bank

Source: World Bank

Regulatory quality (2011)

Government effectiveness (2011)

Percentile ranking (0 = lowest, 100= highest)

Percentile ranking (0 = lowest, 100= highest)

Source: World Bank

Source: World Bank

Total life expectancy (2011)

Infant mortality rate (2011)

Per 1000 births

*Vietnam data 2010

Gross tertiary school enrollment

Total adult literacy rate (2010)

*Thailand data: 2005; Cambodia: 2009; Lao: 2005

*Vietnam data 2010

Thailand & CLMV as a bloc

Economic outlook by country

ASEAN Economic Community

Thailand vs ASEAN-5* snapshot

Source: Deutsche Bank, IMF WEO Oct 2012

Source: Deutsche Bank, IMF WEO Oct 2012

Source: Deutsche Bank, IMF WEO Oct 2012

Source: Deutsche Bank, IMF WEO Oct 2012

Thailand: Investment revival to drive growth

Infrastructure: Transport, Flood

Global demand upturn

Key facts (2012F)

Tight labour market

Rice export issue

Rising import demand

Fiscal deficit & off budget spending

Potential contingent liabilities

Increasingly important factor for FDI

Politics remains a wild card

Undercurrent from polarised society

% yoy (*CLMV data calculated using simple average

% of GDP (*CLMV data calculated using simple average)

Source: IMF WEO Oct 2012

Source: IMF WEO Oct 2012

% yoy, aop (*CLMV data calculated using simple average)

% of GDP (*CLMV data calculated using simple average)