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CLMV Monitor by EIC

Outlook on the CLMV economy remains positive supported by public infrastructure projects, foreign direct investment, and a rebound in Asian exports early in 2017. The IMF maintains strong growth projections for the group in 2017 at around 7% with an upward revision for Vietnam, as the economy stands to benefit most from the recovery in advanced economies. Incoming FDIs in infrastructure with a shift towards manufacturing in some areas will help build foundations for further economic development. However, more exposed to external risks could make the economies more sensitive to global fluctuation via trade demand, currency movement, and foreign fund flow.

Cambodia more detail GDP growth forecast is maintained at 6. 9% for 2017

with strong exports and manufacturing investment in the first quarter of 2017.

Key risks are rapid credit growth especially in Microfinance institutions ( MFIs) and a potential disruption in external demand.

Laos more detail Growth in 2017 is expected at 6.8% driven by foreign-

funded infrastructure projects especially power plants. High public debt denominated in foreign currencies

poses a challenge in maintaining growth momentum.

Myanmar more detail IMF affirms Myanmar’s GDP growth projection at 7.5%

in 2017. Incoming FDIs are shifting towards non-commodity sectors like transport and telecom.

The National League for Democracy (NLD) has been losing support in recent elections after a year in power, due to conflicts with minorities and slow reforms.

Vietnam more detail The economy was dragged by contraction in mining in

the first quarter of 2017; expanding 5. 1% YOY, but growth is expected to rebound to 6.5% in 2017.

Key risks are widening trade deficit and rising NPLs.

Source: ADB, Bloomberg, CEIC, CIA, IMF, World Bank, Focus Economics, Capital Economics, and Press

Contact Person: Phacharaphot Nuntramas, Ph.D. ([email protected]) Thanapol Srithanpong, Ph.D. ([email protected]) Chutima Tontarawongsa, Ph.D. ([email protected]) Jiramon Sutheerachart ([email protected]) Kunyarak Naiyaraksaree ([email protected]) Economic Intelligence Center (EIC) EIC Online: www.scbeic.com

1 June 2017

mailto:[email protected]





http://www.scbeic.com/



Cambodia Monitor by EIC

Macroeconomic Update

Currencies

FX Last %MOM %YTD USDKHR 4069.0 0.59% -0.02% EURKHR 4548.7 3.32% 6.23% JPYKHR 36.7 1.27% 5.46% THBKHR 119.5 1.70% 5.75% as of May 31, 2017

Facts and Figures Population (2016 est.) 15.96 million Labor force (2016 est.) 6.64 million GDP (2016 est.) 19.37 USD billion GDP per capita (2016 est.) 1,230 USD GDP by sector (2016 est.) Agriculture: 26.7%, Industry: 29.8%, Services: 43.5% Top exports (2016) Textile 74%, Footwear 8%, Rubber 2%

Economic

outlook

The IMF maintains Cambodia’s GDP for 2017 at 6.9%, while slightly lowers 2018 forecast to 6.8%. Industrial, services and agriculture are all expected to rebound this year, growing 10.5%, 6.8%, and 0.8%, respectively. Key risks are rapid expansion of the domestic financial sector, driven by Microfinance Institution (MFI)’s lending, and a disruption in global trade demand.

Foreign Direct Investment increased by 34% in 2016. The manufacturing and tourism sectors were able to attract several investment projects. In particular, investments in the Special Economic Zone (SEZ) increased by 147%YOY, while those in other areas decreased by 26.5%YOY in 2016. However, there was a large drop in infrastructure and agriculture project.

Exports and imports surged in 2016. Exports increased 18%YOY, led by garment and footwear. Nearly 90% of exports were qualified for the Generalized System of Preference (GSP) and Most Favored Nation (MFN) schemes. The European Union (EU), Japan and China were Cambodia’s top export destinations in 2016. Meanwhile, imports grew by 16%YOY, mostly from imports of raw materials for the garment industry and imports of vehicles and fuel products from China, Thailand and Vietnam, respectively. Thus, trade deficit slightly improved to 10.2% of total trade from 11% in 2015.

Despite an increase in minimum wage by nearly 10% to USD 153 per month, labor-intensive industries, namely garment and footwear, maintained strong growth momentum and a high employment level in the first quarter. The sector, accounted for 74% of total exports, continued to grow as Cambodia received duty-free privileges on 27 registered travel goods exported to the U.S. since July 2016. However, once the competition in global market becomes more intensified, Cambodia might not be able to maintain healthy growth only in long term.

1 June 2017



Financial markets

The banking sector showed steady growth in 2016. Deposit rose by 21.8%YOY; while credit grew 20.5%YOY, down from 25.8% in 2015. Commercial banks enjoyed positive profit last year with ROA at 1.8% and ROE at 10%. MFIs had higher levels of ROA and ROE at 3.5% and 16.4%, respectively. Nevertheless, the Cambodian financial sector, especially MFIs, would face a noticeable slowdown in 2017 due to the implementation of 18% interest rate cap on all new and restructured microfinance loans starting April 1st.

Government &

Politics

Cambodia’s national debt grew to 31.6% of GDP in 2016. Approximately 60% of total loans were granted by foreign governments; while the rest was issued by international lending institutions. Infrastructure accounted of 73% of the total lending. The government believes that the current level of public debt is still manageable with the Kingdom’s increasing revenue mobilization. And there is more demand for infrastructure development in Cambodia so the government should diversify creditors.

Moody’s has maintained Cambodia’s sovereign debt rating at B2/stable. Positives are the Kingdom’s growth outlook and a stable external payment position. The rating was offset by a “very-low” score on government effectiveness, weak rules of law, and corruption. The report also raised some concerns over rapid private-sector credit growth, high level of dollarization and limited economic diversification.

The International Finance Corporation (IFC) launched “the Cambodia Corporate Governance Initiative” to enhance Cambodia’s private sector efficiency and attract more foreign investment. The IFC, along with the National Bank of Cambodia and the Securities and Exchange Commission of Cambodia, will form a working group to improve regulations and standards and to provide technical assistance to private companies to raise their governance quality.



Industry Update

Agriculture

China’s Ministry of Agriculture has granted 8 new export licenses to Cambodian rice exporters. This will increase the number of Cambodian rice exporters that can access the lucrative Chinese market from 26 to 34 companies. China is the top importer of Cambodia’s milled rice with 67,000 tons imported in the first quarter this year.

Cambodian farmers have expanded cassava cultivation despite falling prices. Cassava is the second largest crop in Cambodia. The total cassava plantation area grew by 34% last year from 574,000 hectares to 771,000 hectares.

Financial services

The National Bank of Cambodia entered an agreement with a Japanese tech startup Soramitsu to co-develop the Hyperledger Iroha, a blockchain-based payment system. This project aims to build a new payment infrastructure and offers a more secure, and speedy way to send and receive money.

Malaysian payment solution provider, PayAllZ, has partnered with Cambodia’s Hello Digital Co., Ltd. to offer several fintech products in Cambodia. These include mobile payment, e-wallet and loyalty program solutions, with the focus on Phnom Penh and Siem Reap markets.

E&E

SVI started a USD-60-million factory construction in Phnom Penh Special Economic Zone for production of industrial electronics and security cameras for exports, especially to Europe. Future expansion is also expected in the next 5 years. This is a small but significant trend for electronic producers to shift some production processes to a satellite plant in Cambodia linking with existing mother plants in Thailand.

Food &

Beverage

Health care

Cambodia Brewery Ltd. (CBL), a wholly-owned subsidiary of Heineken Asia-Pacific, has opened its 100-million-dollar second brewery plant on the eastern side of Phnom Penh since March 2017. This new site will triple the production capacity of the existing beer brands including Tiger, ABC, Anchor and Crown up to 100,000 cases per day or 3 million hectoliters per year. Also, it has been authorized to produce the iconic Heineken beer.

The Government of Myanmar and Cambodia have invited Thailand’s healthcare businesses to be a partner for improving healthcare system. Healthcare industry of Myanmar and Cambodia are continued growth. In 2016, Myanmar’s healthcare industry grew by 6% and Cambodia’s pharmaceutical market grew by 80%. Both government will revise investment policies regulations support the industry.



Logistics

Power & Utilities

Real estate

Telecom

Tourism

Wholesale &

Retail

The Japanese government has approved funding worth USD 200 million for a new Cambodia’s second deep-sea port worth. Located in a Southwestern coastal city of Sihanoukville, the port will provide modern amenities to support the growth of Cambodian trading as the number of containers are expected to almost doubled to over 700,000 TEUs by 2023. As planned, the project will begin construction in 2018 and be completed by 2023.

Sunseap, a Singaporean firm, is building Cambodia’s first utility scale solar project. The 10 MW, 9.2 MUSD plant, is located in the city of Bavet. Sunseap won the tender for the project last year and has signed a 20-year PPA agreement with Electricite Du Cambodge. The project is partly funded by the ADB and the Strategic Climate Fund.

The rise of millennials will help boost demand for Cambodia’s real estate investment. The millennials’ preference will increase demand for residential real estate in the future, despite the current oversupply in the market. There are several emerging trends at the regional level, especially in Phnom Penh, such as the rise of middle-class with changing spending and saving patterns (62% of APAC millennials no longer live with the parents). Real estate developers have been ramping up supply to support the incoming trends adding 25,544 units, which are mostly high-end projects.

A leading mobile operator, Smart Axiata, is setting up its first venture capital fund,

enabling Cambodian startups to have greater access to funding. The fund of around USD 5 million in size will invest in startups in various sectors such as FinTech and digital commerce. The fund will also provide consultation to startups on executing ideas in the market.

China overtook Vietnam to be the largest source of tourists to Cambodia in first quarter

of 2017, according to a Cambodian Tourism Ministry official. Roughly 270,000 Chinese tourists came to the Kingdom in the first quarter of 2017, up 26% over the same period last year, while the number of Vietnamese tourists to the country declined by 6% to 203,400. The country expects 1 million of Chinese visitors this year and plans to increase the number to 2 million by 2020.

Food passion co., ltd., operator of Bar B Q Plaza, Joom Zap Hut and Hot Star

restaurants, is partnering with the Express Food Group to expand its franchise in Southeast Asia, starting with Cambodia. The group plans to open 10 restaurants by 2022. After opening 2 branches at the central of Phnom Penh within 2017, the total number of branches will increase to 23 in all Southeast Asia (18 branches in Malaysia, 3 in Indonesia and 2 in Cambodia) with a target to reach 30.



Key Indicators Domestic Demand Share of GDP * Unit 2012 2013 2014 2015 2016 2017F Real GDP - % YOY 7.1 7.3 7.4 7.1 7.0 7.2 Household consumption 79% % YOY 10.4 4.6 5.8 4.5 5.9 - Government consumption 5% % YOY 7.8 5.7 5.2 2.4 4.4 - Fixed capital formation 21% % YOY 10.8 17.4 15.3 9.1 10.6 - Consumer price index % 4.9 2.5 4.7 1.0 2.9 3.5 Policy rate (end of period) % 1.34 1.33 1.34 1.42 1.42 - USDKHR (period average) - 4,032.5 4,040.2 4,066.1 4,077.8 -

* Share of 2016 GDP

External sector Unit 2012 2013 2014 2015 2016 YOY% Export USD mn 7,841 9,247 6,880 8,576 9,998 16.6 Import USD mn 7,064 9,220 10,262 11,215 11,477 2.3 Export from Thailand USD mn 3,778 4,256 4,525 4,958 4,659 -6.0 Foreign Direct Investment USD mn 1,835 1,872 1,720 1,701 2,279 34.0 Net TDI from Thailand USD mn 117 135 124 38 364 860.8 Visitor Arrivals Person mn 3.6 4.2 4.5 4.8 5.0 4.7

Note: 1) %YOY (year-on-year percentage change) of the YTD value 2) Exports and Imports are based on CEIC data. 3) FDI reflects foreign direct investment (net inflows). 4) Net TDI from Thailand reflects Thai direct investment abroad.

Source: ADB, Bloomberg, CEIC, CIA, IMF, World Bank, Harvard, MIT, Trademap, the Government of Cambodia, and the National Bank of Cambodia

Export by product Import by product

Export by country Import by country

Increase Decrease Stabilize



International Trade Tourism and Services

Foreign Direct Investment Foreign Reserves

Khmer Riel and Asia Dollar Index Public Debt and External Debt

Source: ADB, Bloomberg, CEIC, CIA, IMF, World Bank, Harvard, MIT, the Government of Cambodia, and the National Bank of Cambodia



Laos Monitor by EIC


Currencies

FX Last %MOM %YTD USDLAK 8213.5 0.18% 0.36% EURLAK 9182.5 2.74% 6.66% JPYLAK 74.0 0.67% 5.87% THBLAK 241.2 1.70% 5.57% as of May 31, 2017

Facts and Figures Population (2016 est.) 7.02 million Labor force (2016 est.) 3.5 million GDP (2016 est.) 13.79 USD billion GDP per capita (2016 est.) 1,925 USD GDP by sector (2016 est.) Agriculture: 21.3%, Industry: 32.5%, Services: 39.4% Top exports (2016) Electricity 25%, Copper 20%, Electrical product 6%

Economic Outlook

Financial markets

Government &

Politics

IMF forecasts Laos GDP growth in 2017 at 6.8% despite a higher target set by the Lao government at 7%. In 2016, Laos’ economy grew 7% mainly driven by growth in the industrial and services sectors. This year, Laos has potential to see a pick-up in growth supported by expanding demand from China, its major trade partner.

Incoming FDI mainly concentrates in construction of mega-infrastructure projects such as Laos-China railways and hydropower plants. This aligns with the government’s strategy to have 90 power plants in operation by 2020. The Lao government also agreed to fund the Vung Ang seaport development project in Ha Tinh province of Vietnam, with an aim to cut transportation costs and increase the accessibility of Laos’ goods to the trade routes.

Laos will receive support from the ADB to enhance employment system. This is to reduce skill mismatch between job market demand and skill development. The project will continue for 2 years from 2017-2019, with technical assistance of around USD 1.5 million provided by the Japanese government.

Undercapitalization of state-owned banks poses a risk to the banking system. According to the IMF, state-owned banks accounted for 45% of the banking-system asset. State-owned commercial banks saw an increase in non-performing loans, reaching 8.2% in 2014. They also faced sluggish profitability, but the privatization is initiated in some state-owned banks to solve the issue.

High public debt and external debt are key risks to Laos’ economy this year. As of 2016, public debt and external debt accounted for 78% and 98% of GDP, respectively. Construction of mega-infrastructure projects would also widen trade deficit in the coming years and cause a burden on low foreign reserves. However, the government of Laos plans to postpone some new development projects to reduce debt burden.

1 June 2017



Laws &

regulation

Singapore’s government funded the privatization and financial reform training in Laos. The training was a part of Singapore’s Initiative for ASEAN Integration (IAI), which manages training courses focusing on many areas such as public governance, urban management, IT skills and English language.

Laos’ new Investment Promotion Law was effective on April 19, 2017, aiming to improve clarity and ease of doing business in the country and to provide more investment incentives. Key changes include; o Maximum concession period given to foreign investors reduces from 99 to 50

years, but can be extended upon an agreement by the Laos government or National Assembly or the Provincial People’s Council.

o Several provisions of investment incentives are extended. Businesses operating in hardship areas (Area I), with underdeveloped infrastructure, will receive favorable profit tax exemption for 10 years and additional 5 years if investing in promoted sectors, namely agro-industry, education and human resource development, and medical services. In developed areas (Area II), businesses will enjoy 4 years of profit tax exemption and another 3 years, if investing in promoted sectors. The government of Laos also offers exemption of import tariff and value-added tax as well as land lease or concession fee incentives.

Industry Update

Agriculture

The Ministry of Agriculture and Forestry is promoting organic production by raising more understanding about organic agriculture among Laos’ farmers. The ministry will offer support to local farmers’ groups to shift from inorganic production methods to organic alternatives. The Japan International Cooperation Agency (JICA) has granted more than USD 4 million and provided machinery, equipment, and other necessary materials for the implementation of the project through mutual consultation with the Ministry.

Financial services

Laos and Vietnam agreed to encourage cross-border partnerships between commercial banks to boost investment and trade. The two governments also vowed to continue joint projects in cross-border trade payment and banking inspection.



Health care

Power & Utilities

Bangkok Chain Hospital (BCH) plans to open a 250-bed Kasemrad Hospital in Vientiane, the capital of Laos worth THB 1 billion after setting up a new subsidiary in Vientiane. The new hospital is expected to be completed in the fourth quarter of 2019.

Laos is expected to have as many as 90 hydropower plants in operation by 2020 despite environmental concerns related to the degradation of Mekong River. Electricity has become one of the main exports for Laos. The government has issued policies to promote cross-border electrical grid interconnection with neighboring countries as well as to charge ahead with construction of new dams. The 912 MW Pak Beng, the third project on the mainstream Mekong River, is expected to proceed with preliminary technical review underway.

Real estate

Tourism

Wholesale &

Retail

Singapore plans to support Laos’ development. Singapore is recognizing Laos as one of the fastest-growing economies in the region with real estate as a key sector. Singaporean companies with expertise in urban planning aim to be a part of Laos’ growth story, said Lee Hsien Loong, Singapore’s Prime Minister.

Laos’ tourism revenue dropped slightly to USD 724 million in 2016, from USD 725 million in 2015 due to a decrease in foreign tourist arrivals. The number of international visitors to the country decreased to 4.23 million foreign visitors in 2016, down 9.6% from 4.68 million foreigners in 2015.

BJC opens to partner with other suppliers to expand in CLMV. The company plans to open 5 retail stores in Laos and Cambodia within the next 3 years to be integrated into the same supply chain with Vietnam. However, investment in Myanmar is still under consideration.



Key Indicators Domestic Demand Share of GDP * Unit 2012 2013 2014 2015 2016 2017F Real GDP % YOY 8.0 7.9 8.0 7.5 7.6 7.5 Household consumption 62% % YOY 17.2 7.9 17.0 5.1 0.3 - Government consumption 14% % YOY 19.3 35.1 49.1 -1.2 7.9 - Fixed capital formation 33% % YOY 25.5 34.9 10.5 8.0 14.8 - Consumer price index % 7.7 4.7 6.7 2.4 0.9 3.2 Policy rate (end of period) % 5.0 5.0 5.0 5.0 4.5 4.25 USDLAK (period average) - 7,846.4 8,054.7 8,133.8 8,125.9 -

* Share of 2016 GDP

External sector Unit 2012 2013 2014 2015 2016 YOY% Export USD mn 3,035 3,567 4,380 3,813 4,462 17.0 Import USD mn 6,109 7,030 7,673 7,230 6,504 -10.0 Export from Thailand USD mn 3,588 3,758 4,033 4,237 3,994 -5.7 Foreign Direct Investment USD mn 294 427 913 1,204 997 -17.1 Net TDI from Thailand USD mn 249 206 284 464 404 -12.9 Visitor Arrivals Person mn 3.3 3.8 4.2 4.7 - 12.6


Sources: ADB, Bloomberg, CEIC, CIA, IMF, World Bank, Harvard, MIT, Trademap, the Government of Laos, and the Bank of the Lao PDR








Laos Kip and Asia Dollar Index Public Debt and External Debt

Sources: ADB, Bloomberg, CEIC, CIA, IMF, World Bank, Harvard, MIT, the Government of Laos, and the Bank of the Lao PDR



Myanmar Monitor by EIC


Currencies

FX Last %MOM %YTD USDMMK 1356.0 -0.11% -0.11% EURMMK 1515.8 2.90% 6.15% JPYMMK 12.2 0.85% 5.36% THBMMK 39.8 -1.95% 5.18% as of May 31, 2017

Facts and Figures Population (2016 est.) 56.89 million Labor force (2016 est.) 37.15 million GDP (2016 est.) 66.32 USD billion GDP per capita (2016 est.) 1,269 USD GDP by sector (2016 est.) Agriculture: 26.3%, Industry: 27.5%, Services: 46.2% Top exports (2016) Gas 28%, Textile 13%, Matpe 6%

Economic Outlook

The International Monetary Fund (IMF) maintains Myanmar’s GDP growth projection at 7.5% in 2017 and 7.6% in 2018, according to the World Economic Outlook in April 2017. Private and public investment in non-commodity sectors and infrastructure are key economic drivers this year. Economic imbalances persist, however, with rising inflation, increasing fiscal deficit, and widening current account deficit.

Foreign direct investment (FDI) in Myanmar dropped by 30%YOY in 2016 to a total amount of USD 6.6 billion. Among others, transport and telecommunication surpassed power, energy and oil & gas as the most attractive sectors.

The World Bank approved USD 200 million loan to establish a “First Macroeconomic Stability and Resilience Development Policy Operation”. The macroeconomic stability pillar aims to promote public debt management, while the fiscal resilience pillar focuses on increasing revenue mobilization, especially for the power sector, and facilitating effective management of public finance. This long-term loan offers Myanmar’s government a maturity of 38 years with 6 years of concession period and a zero-interest rate.

The Thilawa Special Economic Zone will be extended to Zone B with USD 1 billion. The construction of infrastructure in the new Zone will be completed by mid-2018, but investors can start their factory construction only after the infrastructure is ready.

Unclear implementation of the 12 policies announced by the government have affected Small and Medium Enterprises (SMEs) in Myanmar. SMEs in Myanmar have been struggling with starting business and gaining access to funding. A long process of approval from different government departments are required. Moreover, loans for SMEs cannot be approved without using collateral.

1 June 2017



Financial markets

Government &

Politics

Laws &

Regulations

The Central Bank of Myanmar received USD 100 million loan from the World Bank for “The Myanmar Financial Development Project”. The project aims to promote a strong and stable financial sector, to expand the banking sector and to improve financial products. It also plans to develop small-scale financial and insurance companies to support country’s rapid economic growth.

Myanmar’s government, led by Aung San Suu Kyi’s National League for Democracy (NLD), has retained strong support in Yangon but lost backing from ethnic minority groups in recent elections. According to the Union Election Commission, the NLD won 9 out of 19 seats in the national and regional parliaments. Even though the result did not threaten the NLD’s majority, it reflected the public’s view toward slow progress of reforms and development during one year in power. The government has also been criticized for the clearance operation in Rakhine state, involving Rohingya minority.

Myanmar Agriculture Development Bank (MADB), has now been moved to the Ministry of Planning and Finance (MOPF) for a better loan approval process. Before, MADB’s loan approval could be one month delayed for rainy season farming with a high interest rate of 10% – 15%, as it had to borrow capital from the Myanmar Economic Bank (MEB). Moving to the MOPF, the MADB will be able to cut these unnecessary processes and offer more loans to farmers in a timely manner. The ceiling for loan amount is also raised from MMK 20,000 to MMK 50,000 per acre for the upcoming season.

Rules under the new Myanmar Investment Law 2016 officially came into effect on Jan 1st, providing new procedures and investment promotion. o The Myanmar Investment Commission (MIC) has delegated power to state/ regional

governments to directly approve investment up to USD 5 million. o The MIC full permit is still required for 5 types of investment: 1) strategic investment, 2)

large capital intensive investment, 3) investment which have potential impact on environment and local community, 4) investment which use state-owned property, and 5) investment which is designated by the government to submit proposal.

o Investment incentives will no longer attach to the permit. Businesses have to submit for Tax Incentive and Land Rights Authorization applications for approval.

o Investment in Myanmar’s promoted sectors will receive corporate income tax exemption according to zoning basis, 7 years for Zone 1 (Less Developed Zone), 5 years for Zone 2 (Moderate Developed Zone) and 3 years for Zone 3 (Developed Regions).

o The MIC facilitates investment by providing One Stop Services and Investment Assistance Committee.



Industry Update

Agriculture

The Ministry of Agriculture launched the Myanmar Agricultural Development Support Project (ADSP), with support from the World Bank and the International Rice Research Institute. The ADSP is a seven-year-long project (2015-2021) that emphasizes on yield improvement for small rice farmers, particularly women, ethnic minorities, and other vulnerable groups in Myanmar. The project will transfer and develop climate-smart rice technologies and natural resource management options to relevant parties.

Financial services

The Myanmar Payment Union (MPU) has teamed up with UnionPay International (UPI) to implement a common UnionPay chip card, which meets the global standard and will be adopted by all financial institutions throughout the country.

Construction

Myanmar construction industry’s profitability has declined in early 2017. Almost 90% of the construction industry of Myanmar is led by SMEs. Although permission to build multi-story buildings has resumed, the pending period negatively impacted the market and contractors.

Food &

Beverage

Health care

Ampon Food Processing Co., Ltd., a major Thai coconut producer and exporter, is considering to expand its manufacturing base in Myanmar to increase supply of fresh coconut in the Thai market. The demand of coconut consumption has grown explosively for the past two years in line with health and wellness trend. The number of coconut plantations in Thailand has declined from 2.5 million rais in 2007 to around 1.3 million rais at present as growers switch to more popular crops such as palm oil and rubber. Currently, the coconut price in Malaysia, Vietnam and Myanmar is around THB 18 per piece which is about 50% cheaper than in Thailand.

The governments of Myanmar and Cambodia invite Thailand’s healthcare businesses to be a partner for improving healthcare system. The healthcare industry of Myanmar and Cambodia are continued growth. In 2016, Myanmar’s healthcare industry grew by 6% and Cambodia’s pharmaceutical market grew by 80%. Both government will revise investment policies regulations support the industry.

National Healthcare System Co., Ltd. (N Health), a healthcare business unit under Bangkok Dusit Medical Services (BDMS), has launched a medical laboratory center in Yangon, Myanmar. N Health joined with two local healthcare companies (Sea Lion Group and Bahosi Hospital) to develop a standard of medical care. N health Myanmar aims to support large hospitals such as high-end genetic tests and provides standardized analytical



Power & Utilities

Real estate

Telecom

Tourism

services for small and medium hospitals. Moreover, N Health plans to expand medical laboratory centers in Indonesia and Philippines.

Thonburi Healthcare Group (THG) invests THB 4 billion in building a 200-bed ARYU international hospital in Myanmar. The hospital will target the middle-to-upper income segment and is expected to be completed by the end of this year.

Foreign investment in power sector dropped by 14% in FY 2016-17. This was the first decline in FDI in five years. Myanmar’s power sector faces several challenges. Currently, only around 37% of the population have access to electricity and production is not sufficient to satisfy demand. The government entities are losing money from selling electricity below cost. In addition, large-scale projects, specifically coal and hydropower projects, are facing oppositions from local communities and environmentalists due to the lack of social and environmental regulations.

Residential property sector continues to face a slowdown due to confusion over a foreign law in Myanmar. The legislation, developed in January 2016, confused foreign buyers in the condominium market especially for the timing of implementation and lack of details. As a result, mid-tier condominium prices decreased by 41% from 2014 to 2016. The government has been working to improve clarification to attract buyers. The legislation which permits foreign purchasing property will be a game changer in the long term.

The entrance of Mytel, a newly-licensed operator, has brought a new wave of investment of over USD 2 billion. Mytel intends to build 5,000 base stations by early 2018. Following that, Mytel aims to double its base stations to cover around 90% of population by 2020. With the extensive infrastructure, the company hopes to achieve around 25% market share in 2021.

Myanmar will soon impose a tourist tax to fund the country’s tourism promotional activities. The new scheme will require tourists and business travelers to pay USD 1 each per night when they stay at hotels or guest houses. it will take about 6 months for the government to approve before it becomes law.

Yoma Strategic Holdings has partnered with the METRO group to launch a wholesale distribution system aiming to improve the supply chain in Myanmar. The supplier will offer various products to support domestic hotels, restaurants and independent retailers.



Wholesale &

Retail

Tokyo Dining City, a Japanese-style food court under the joint venture between City Mart Holdings and a Japanese trading firm, Sojitz Corp, opened their first outlet located in Yangon Central Business District (CBD).



Key Indicators Domestic Demand Share of GDP * Unit 2012 2013 2014 2015 2016 2017F Real GDP % YOY 5.6 7.3 7.3 8.4 8.0 7.3 Household consumption 58% % YOY 5.3 1.4 11.9 2.5 - - Government consumption 6% % YOY 16.3 90.7 12.8 33.8 - - Fixed capital formation 37% % YOY 71.8 14.9 6.4 18.3 - - Consumer price index % -1.1 4.7 6.3 6.1 8.5 8.3 Policy rate (end of period) % 12.0 10.0 10.0 10.0 10.0 10.0 USDMMK (period average) - 939.1 986.9 1,177.9 1,242.2 -

* Share of 2016 GDP

External sector Unit 2012 2013 2014 2015 2016 YOY% Export USD mn 9,837 11,411 18,033 12,378 11,044 -10.8 Import USD mn 7,438 9,144 10,761 10,833 10,397 -4.0 Export from Thailand USD mn 3,127 3,788 4,239 4,175 4,176 0.03 Foreign Direct Investment USD mn 1,334 2,255 2,175 4,084 - 87.8 Net TDI from Thailand USD mn 334 751 406 744 524 -29.6 Visitor Arrivals Person mn 7.9 20.3 30.8 46.8 - 51.9


Sources: ADB, Bloomberg, CEIC, CIA, IMF, World Bank, Harvard, MIT, Trademap, the Government of Myanmar, and the Central Bank of Myanmar








Myanmar Kyat and Asia Dollar Index Public Debt and External Debt

Sources: ADB, Bloomberg, CEIC, CIA, IMF, World Bank, Harvard, MIT, the Government of Myanmar, and the Central Bank of Myanmar



Vietnam Monitor by EIC


Currencies

FX Last %MOM %YTD USDVND 22708.0 -0.16% -0.23% EURVND 25420.0 1.83% 6.05% JPYVND 204.6 0.46% 5.17% THBVND 666.5 1.47% 4.86% as of May 31, 2017

Facts and Figures Population (2016 est.) 95.26 million Labor force (2016 est.) 54.93 million GDP (2016 est.) 201.33 USD billion GDP per capita (2016 est.) 2,173 USD GDP by sector (2016 est.) Agriculture: 17%, Industry: 39%, Services: 44% Top exports (2016) Electronic products 39%, Textile 15%

Economic Outlook

Vietnam’s GDP expanded 5.1%YOY in the first quarter of 2017, marking a slowdown from 5.48% growth during the same period last year. Growth was dragged by a 10% contraction in the mining industry. The agricultural sector also faced an oversupply of pork and lower rice output caused by the high level of rainfall in the Mekong Delta. In 2017, the IMF revised Vietnam’s GDP forecast up to 6.5%. However, the government maintains a target growth of 6.7% this year. Manufacturing and services are expected to grow throughout 2017 and 2018, boosted by rising foreign investments in manufacturing, an increase in tourist arrivals and emerging middle-class.

Foreign direct investment (FDI) to Vietnam increased 40.5%YOY in the first four months of 2017, led by mega investment projects such as Samsung Display factory and the gas pipeline project in Kien Giang province, which is a joint-venture between Japanese investors and PetroVietnam. Manufacturing and processing sectors accounted for 70% of total investment, while mining and wholesale and retail contributed 12% and 5%, respectively. South Korea remained the largest foreign investor in Vietnam, followed by Japan and Singapore.

Construction of Tan Vu-Lach Huyen cross-sea bridge is expected to be completed within May. The bridge is a part of the Tan Vu-Lach Huyen highway project that aims to facilitate transportation to Lach Huyen port and attracts investment to Hai Phong province. In May, the gas pipeline project in Kien Giang province received an investment license with total investment of USD 1.27 billion. In addition, Da Nang International Airport finally opened its new terminal which is the key part of Vietnam’s preparation for APEC summit, held in Da Nang during November 5-11 this year.

Key risks for Vietnam are widening trade deficit and deteriorating non-performing loans. In the first quarter of 2017, trade deficit accounted for 4.5% of GDP, mainly driven by increasing imports of materials for domestic production as well as equipment and machine for foreign-investment projects. A large trade deficit can be a source of economic vulnerability, since the current level of foreign reserves can cover around only 2 months of imports. This is relatively low comparing to Thailand, Cambodia, and Myanmar.

1 June 2017



Financial markets

Government &

Politics

Moody revised its outlook on Vietnam’s sovereign rating from ‘stable’ to ‘positive’, and raised assessment of Vietnam’s long-term local-currency (LC) bond from Ba1 to Baa3. Moody’s report stated that robust FDI inflows would allow Vietnam to diversify the economy and gain market share in international trade and thus maintain the country’s dynamic economic performance. The report also suggested that Vietnam’s three key drivers are strong FDI inflows, stable debt prospect and improved funding profile.

Privatization of SOEs remains a priority in Vietnam’s government agenda, but the progress has been delayed. Accordingly, the government has announced the Directive No. 05/CT-BCT on rearrangement and renewal of SOEs during the 2017-2020 period. The plan requires SOEs to submit a restructure roadmap for approval in May. Vietnam’s government also raised foreign ownership limit for listed companies, such as VietJiet, from 30% to 49%.

Laws &

Regulations

New lending conditions of Vietnam’s financial institutions became effective in March 2017, under Circular 39 (Regulating Lending by Credit Institutions and Foreign Bank Branches to Clients). The new rules include standard on quality of borrower, borrowing principles, restructuring loan repayment term and restriction on loan contract.

Industry Update

Agriculture

Vietnam has repealed its restrictive regulations on rice exporters and traders that have been hindering their growth in rice export. This reform is expected to increase Vietnamese rice export in the world market. Currently, Vietnam is the world’s third largest rice exporter after India and Thailand.

The International Finance Corporation (IFC) has planned to invest up to USD 10 million in a project by Pan Group, a Vietnamese private-equity-backed agriculture firm. The Pan Group currently owns a leading distributor and producer of crop seeds, an integrated pangasius and clam processor and an important cashew nut processor.

Auto

Small cars imported from India to Vietnam during the first quarter of 2017 were more than tripled in value from the previous year. This is mainly due to a much cheaper retail price compared to cars from ASEAN, despite higher import tariff of 70% for India compared to that for ASEAN at 30%. However, there are increasing pressures on Indian cars, as they lack behind in terms of functionality and utilities. The price gap is expected to narrow after the elimination of tariff on ASEAN cars from 2018 onwards.



Financial services

The governor of the State Bank of Vietnam has set up a steering committee to boost FinTech. The committee will be in charge of developing an annual action plan and advising the governor to build an attractive ecosystem, especially on a regulatory framework.

The deputy prime minister has signed a plan aimed to transform Vietnam toward a cashless economy by 2020. The plan seeks to keep cash transactions at under 10% of total market transactions by providing adequate infrastructure and encouraging individuals to shift their payment habits.

Construction & Materials

E&E

Food &

Beverage

The Ministry of Industry and Trade (MoIT) has imposed preliminary Anti-Dumping (AD) duties of 21.18 - 36.33% on imported H-beam steel from China, under HS code 7216.33.00, 7228.70.10, and 7228.70.90. The scheme would take effect between April 2017 to August 2017. The decision came after the MoIT received a petition from POSCO SS Vina, who claimed that H-beam products imported from China have severely hit domestic producers.

Electronics industry in Vietnam expanded considerably reflecting the surge in exports of electronic products which expanded almost 50% in the first quarter of 2017. Key electronics exports from Vietnam are telephones, computers, and parts.

Sharp is to increase global production volume of smartphone camera modules through an acquisition of Sharp Takaya Electronic Industry, a Joint Venture with partners in Vietnam. This is a strategic move to focus on growth area which is a key focus of Foxconn, the current owner of Sharp. It is noteworthy that Sony has also invested in expansion of camera modules production in Thailand, recently.

Thai Wah Public Company Limited (TWPC) has invested THB 70 million to build their first vermicelli factory in Ho Chi Minh City. This move is in tandem with rising demand and local preference as noodle is a staple food in Vietnam. This new factory is expected to be fully operational during the second half of this year.

Bangkok Ranch Public Company Limited (BR) has completed the joint venture deal with a foreign partner, Asia Pacific International Trading Co., Ltd., which is a trading and distribution company of consumer goods and food products in Vietnam. This new partnership agreement is one of BR's business expansion policy to increase both domestic and foreign exposure in order to improve the revenue structure. The new company has registered capital of THB 6 million, BR will invest 49% of such amount while the rest will be invested by the Vietnamese counterpart.



Health care

Petrochemical

Power & Utilities

Real estate

Telecom

Ho Chi Minh City authorities encourage private investment in healthcare projects due to limited public resources. The healthcare sector needs investment capital from the private investors for public-private partnership (PPP) in the sector to improve the quality of facilities, services and health workers.

Siam Cement Group (SCG) become the major shareholder of Vietnam’s Long Son Petrochemicals (LSP) Complex and expected to start the new USD 4.5 billion investment in CAPEX project within the fourth quarter of 2017. The investment is also considered to be increased in the future as construction cost is expected to rise. This project has been designed to produce olefins from naphtha with the capacity of 1,600 KTA. LSP Complex will be the first petrochemical complex in Vietnam and the construction is expected to be completed by 2022.

Total (French O&G company) joint venture with Hanwha (South Korea) to invest USD 450 million in the Daesan complex. The investment will expand the ethylene production capacity for exports to China by 30% which is up to 1,400 KTA. The project is expected to be completed within mid-2019.

The Vietnamese government has announced its first FiT scheme for utility-scale solar power at VND2.086/kWh (USD 0.0935). The Ministry of Industry and Trade (MOIT) has released a draft of Power Purchase Agreement (PPA) which has several issues that could impact project bankability such as VND/USD indexation, offshore-arbitration, and off-taker risk.

Foreign investors have been entering Vietnam’s real estate market through M&A deals. Foreign investors’ finance and management expertise combined with domestic firms’ advantages in large land reserves and an understanding of the local business environment and legal policies will help create competitive edge. As a result, M&A activities in Vietnam’s real estate market continued to rocket in 2016. The trend is expected to continue in 2017.

Vietnam’s military-run carrier, Viettel, aims to expand its footprint in Indonesia and Nigeria, hoping to tap the massive potential in the two countries with almost half billion people. According to the plan, Viettel will bid for license and form joint ventures in these countries. If successful, Viettel will have presence in more than 10 overseas markets, including Laos, Cambodia, East Timor, Cameroon, Haiti, Mozambique, Burundi, Peru, Tanzania, and Myanmar.



Tourism

Wholesale &

Retail

Vietnam welcomed 4.3 million international visitors in the first 4 months of 2017 representing an increase of 30.3% over the same period last year. China was the top supply of tourists with 1.3 million visits or 61.1% improved. In 2020, the country forecasts 17 - 20 million of international visits and 82 million domestic trips that will contribute to around 10% of GDP or roughly USD 35 billion.

Vietnam’s Civil Aviation Administration submitted a plan to increase capacity of Tan Son Nhat International Airport in Ho Chi Minh city to serve 43 to 45 million passengers by 2020. Tan Son Nhat, Vietnam’s busiest airport, is designed to accommodate 25 million passengers a year, a capacity ceiling that was surpassed last year when it handled 32 million passengers.

Da Nang, a major city in the central region, has opened a new airport terminal, attracting golf tourism and night markets. Combining the new and current terminals, Da Nang airport will be able to serve 11 million passengers a year, up from 5 million passengers. Last year, many airlines such as Thai Air Asia, PG, and Jeju Air opened or increased their fights to Da Nang. In 2016, the city earned USD 68 million from golf tourism. It plans to open 3 more golf courses in 5 years as well as the Son Tra night market to offer attractions for locals and international travelers after it launched the first downtown shopping center on Le Duan Street.

Ho Chi Minh City’s Commerce and Revenue Department is now trying to regulate and tax e-commerce business, aiming to increase revenue. The department will submit the tax plan to the city’s government for approval soon. Vietnam's e-commerce market grew rapidly at 37% with a market value of about USD 4 billion in 2015. In addition, the Vietnamese government forecasts that online retail sales will reach USD 10 billion by 2020 or 5% of the retail market in the country.



Key Indicators Domestic Demand Share of GDP * Unit 2012 2013 2014 2015 2016 2017F Real GDP % YOY 5.3 5.4 6.0 6.7 6.2 6.5 Household consumption 67% % YOY 4.9 5.2 6.1 9.3 - - Government consumption 7% % YOY 7.2 7.3 7.0 7.0 - - Fixed capital formation 26% % YOY 1.9 5.3 9.3 9.4 - - Consumer price (end period) % 6.8 6.0 1.8 0.6 4.7 5.0 Policy rate (end period) % 9.0 7.0 6.5 6.5 6.5 - USDVND (period average) - 21,053 21,211 21,964 22,371 -

* Share of 2016 GDP

External sector Unit 2012 2013 2014 2015 2016 YOY% Export USD mn 111,296 128,749 145,869 159,987 185,487 15.9 Import USD mn 111,676 129,290 144,820 175,784 186,461 6.1 Export from Thailand USD mn 6,483 7,182 7,882 8,907 9,428 5.8 Foreign Direct Investment USD mn 8,368 8,900 9,200 11,800 12,600 6.8 Net TDI from Thailand USD mn 283 402 141 269 1,186 341.2 Visitor Arrivals Person mn 6.8 7.6 7.9 7.9 10.0 25.9

Note: 1) %YOY (year-on-year percentage change) of the YTD value 2) Exports and Imports are based on CEIC data. 3) FDI reflects foreign direct investment (net inflows). 4) Net TDI from Thailand reflects Thai direct investment abroad. Sources: ADB, Bloomberg, CEIC, CIA, IMF, World Bank, Harvard, MIT, Trademap, the Government of Vietnam, and the State Bank of Vietnam








Vietnam Dong and Asia Dollar Index Public Debt and External Debt

Source: ADB, Bloomberg, CEIC, CIA, IMF, World Bank, Harvard, MIT, the Government of Vietnam, and the State Bank of Vietnam

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