ASIA BUSINESS FORUM
Asia Economic Outlook: What to
Expect in 2013
January 23, 2013
Washington State Export Destinations 2011
Top 25 Markets and % Share of State Total
Value (Millions)
% Share
$56,669
87.5
11,233
17.3
1
China
2
Canada
8,547
13.2
3
Japan
6,468
10.0
4
Korea, South
3,261
5.0
5
United Arab Emirates
2,753
4.3
6
Hong Kong
2,079
3.2
7
United Kingdom
2,017
3.1
8
Turkey
1,760
2.7
9
Australia
1,718
2.7
10
Taiwan
1,715
2.6
11
Indonesia
1,587
2.5
16. Singapore, 1.5% 19. Malaysia, 1.3% 22. Philippines, 1.2% 24. India, 1%
Source: US Census Bureau
Asian Markets as Share of Washington State Exports = 46 %
Worth over $26 billion in 2011
UPDATE ON JAPAN’S ECONOMY IN 2012 AND
PROSPECTS FOR 2013
Marie Anchordoguy, Professor and Chair, Japan
Studies Program, University of Washington

I. HOW HAS JAPAN’S ECONOMY
PERFORMED IN 2012 AND WHAT ARE ITS
PROSPECTS FOR 2013? WHAT ARE KEY
FACTORS IMPACTING PERFORMANCE?

A. GDP Growth
--2012: 0.7%-1%, Forecast for 2013: 0.9%1.2%
--Japan’s 2012 GDP is still 3% below the
peak it reached in early 2008.



B. KEY REASONS FOR SLOW GROWTH IN
2012 AND 2013

i) Heavy dependence on exports and Health of
other Economies

ii)High Yen

iii)Aftermath of 3-11-11 Triple Disasters

iv) Political Instability
a. Former PM Noda pushed through controversial
increase in consumption tax
b. Lower House Election in mid-December 2012.
Liberal Democratic Party (LDP) won and
Democratic Party of Japan (DPJ) lost, but this was
a vote against the DPJ not for the LDP. LDP
President Shinzo Abe become Prime Minister
again (also 2006-07)
c. Instability of policies toward nuclear power


v)Consumer Electronics makers confront serious
problems
vi) Japan-China Dispute over Senkaku/Diaoyu
Islands
a. Right-wing Mayor of Tokyo decides to buy the
islands in 2012; Japanese government decides it
would be best for them to buy them instead.
Leads to anti-Japanese demonstrations and
vandalism, and plummeting Japanese exports to
China.
II. WHAT ARE GROWTH AREAS IN 2013 AND
WHAT IS NEW IN 2013?
 Growth Areas:
--Auto industry, opportunities related to Japan’s
strong M&A activities, employment and investment
opportunities for foreigners.
 What’s New:
--New leadership in Japan, China, and Korea
provides more political stability and an opportunity
for a new beginning in Japan-China and Japan-Korea
Relations


--Decision about joining TPP (Trans Pacific
Partnership) free-trade agreement talks

III. WHAT ARE THE RISK AREAS IN 2013 THAT WILL
LIKELY AFFECT PERFORMANCE?
--Japan-China Relations
--Upper House Election in July 2013; if the LDP loses,
there would be a split in the two houses of
parliament, leading to further gridlock.
--Health of the Global Economy









IV CONCLUSION
--Japan will continue to muddle through
--Citizens are very unhappy. Leadership vacuum
--Distrust of government has grown sharply since
the triple disasters
--The high cost of importing energy will continue to
be a drag on the economy
Still, many positive trends; Japan is not doing so
poorly when placed in context of economic,
political and social problems in the EU and US
UPDATE ON CHINA’S ECONOMY IN 2012 AND
PROSPECTS FOR 2013
JANUARY 23, 2013
Fraser Mendel, Partner
Davis Wright Tremaine LLP
CHINA – 2012 IN REVIEW







Leadership Transition
Slowing economic growth
Local government debt situation
Falling real estate prices
Debt problems, slower growth, weak export
demand
Increased outbound investment
Continued friction in the South China Sea
CHINA – 2012 ECONOMIC GROWTH
NEW POLITBURO STANDING COMMITTEE
President Xi Jinping
Premier Li Keqiang
Zhang Dejiang Yu Zhengsheng Liu Yunshang
Wang Qishan
Zhang Gaoli
CHINA – 2013 OUTLOOK







Economic growth stable
Exports remain depressed
Real estate prices declining
Debt problems slow growth
Continued emphasis on
innovation
Increased outbound investment
Continued friction in the South
China Sea
OVERALL SLOWING ECONOMIC GROWTH
8
Percent growth, y-o-y
2013-2018
7
2019-2025
6
Total Factor Productivity
Capital Contribution
5
Labor Composition
4
Labor Quantity
3
2
1
0
-1
Optimistic
Base
Pessimistic
Optimistic
Base
Pessimistic
Sources: The Conference Board Global Economic Outlook 2013, https://www.conference-board.org/data/globaloutlook.cfm?
CHINA – GROWTH AREAS IN 2013








Planning for Demographic changes
Renewable energy
Online retailing
Infrastructure
Construction / real estate
Pollution mitigation and control
Clean and green food products + investment in
overseas agriculture
Expanded acquisition of overseas resources
CHINA – 2013 RISK FACTORS







Diaoyutai / Senkaku Conflict
Pollution
Corruption & Anti-corruption efforts
Rising costs
Economic inequality
Bankruptcy of some smaller cities
Growth of unregulated lending sector
ASIA BUSINESS FORUM
January 23, 2013
Indonesia: 2012 – 2013 Economy & Business Climate
Anita Sulaiman, Country Adviser – Singapore & Indonesia
INDONESIA’S PERFORMANCE: 2012 IN REVIEW
Source: Bank of Indonesia
2012 HIGHLIGHTS
February
September
Largest
contract in
commercial &
Boeing
history: Lion
Air order of
230 Boeing
737 airplanes
worth $22.4
billion
McKinsey
releases
“Unleashing
Indonesia’s
Potential
Report”:
Now 16th.
2030, could
be world’s
7th largest
economy,
surpassing
Germany &
UK)
January
Indonesia
Financial
Services
Authority
(OJK)
formed
January
April 23
S&P affirms
sovereign
credit rating
at BB+
(Outlook:
Positive)
Garuda
named
“Best
International
Airline”
Moody’s
upgrades
sovereign
credit rating
to investment
grade: Baa3
from Ba1
(Outlook:
Stable)
Central
Bank
lowers BI
rate to
5.75%
(from 6%)
February
Foreign
exchange
reserves hits
highest level
(2012) of
$114.93
billion
Jakarta elects
new Governor
Joko (Jokowi)
Widodo (snubs
political
establishment)
September
November 21
Fitch
affirmed
sovereign
credit
rating at
BBB(Outlook:
Stable)
Indonesia
tops
Nielson
Global
Consumer
Confidence
Survey (Q3
2012) with
score of
119,
(alongside
India).
January 18
April
November
Indonesia, as
next APEC
Chair,
announces
2013 logo &
theme:
Resilient AsiaPacific –
Engine of
Global Growth
December
GOOD BUT LOWER PERFORMANCE: WHY?
Global economic
uncertainty
•
•
•
•
Crisis in Europe & recession in US
Instability in Middle East & Africa
Slower economic growth in emerging countries esp. China & India
Trade imbalance with declining exports (& burgeoning imports)
Weak infrastructure &
high logistics costs
•
•
•
•
•
Overburdened airports: Jakarta’s CGK at beyond capacity past 6 years
Poor condition of ports: Unable to keep up with economic growth
Bad roadways, bad traffic; floods
Poor connectivity between towns/cities/regions
Policies & regulations deemed as hindrance to businesses
Government initiatives
Strong domestic consumption
driven by emerging middle
class
Influx of investments
• Master Plan MP3EI (2011- 2025): Economic development
• Master Plan MP3KI (2011- 2025): Poverty reduction
• Tax incentives
•
•
•
•
Highest contributor to economy: ≅ 2/3 of GDP
240 million (World’s 4th most populous nation)
45 million consuming class (to  to 135 million in 2030)
Robust consumer confidence with surge in government & private sector
projects
•
•
•
•
Second biggest contributor: ≅ 30% of GDP
Regaining of investment grade: Fitch in Dec. 2011 & Moody’s in Jan. 2012
AT Kearney FDICI: Ranked #9 in the world (from 19 in 2010)
2012 realization may top $31 billion (Rp. 300 trillion), a record
OUTLOOK FOR 2013 POSITIVE
Annual GDP growth target set at 6.8 % (BI forecast: 6.3% - 6.8%)
Domestic consumer demand 65% of GDP = less vulnerable to Europe & US drag
Fitch: Affirmed RI’s investment grade at BBB- (stable outlook); boost joining BRICS
Investment realization targeted to increase to Rp. 390.3 trillion (FDI $29 billion)
Govt set inflation rate assumption at 3.5% - 5.5%
Government to hold BI rate steady at 5.75% (since March 2012)
Household consumption (to  5.8 – 6.3%) & investment (to  10%) will continue to drive
growth
Per capita income rising & middle class growing (to expand to > ½ total population)
Oil & gas investment to increase: $26.2 billion: 274 work plans & budgets approved
Exploding gas demand = efforts to reduce exports + expand downstream capacity
Sales of capital goods, including machine tools, will rise 8% to $27 billion
RISKS & CONCERNS
Endemic
corruption/Judiciary a
problem:
118
in list of 176 countries
Rising inflation from
domestic fuel subsidies &
power tariff hike
(Transparency International)
Weak institutions &
bureaucratic
inefficiencies: 128 out of
185 globally
(World Bank’s Doing Business)
Political uncertainty:
2014 elections
Infrastructure congested
& inadequate to support
growth; respond to
natural disasters
Lack of institutions with
strong capital structure to
finance planned projects
Crisis in developed
world: Threaten exports,
foreign liquidity,
investment growth
Emerging trend of trade
deficits fueling current
account deficits & hurting
the Rupiah
Under-developed HR:
Low-skilled workforce +
Minimum pay increase
not matched with
increase in productivity
REASONS TO BE OPTIMISTIC + OPPORTUNITIES
Master plans to guide
development & growth:
Impetus for change
Relative political &
economic stability:
Conducive to business
Strong & growing
domestic demand: Fuel
growth, limit exposure
to external shocks
Poverty reduction
means growing middle
class
Growing middle class
means better qualified
workforce & bigger
market
Positive investment
outlook thanks to strong
economic fundamentals
Abundance of fertile
land & natural
resources
Financial markets
poised for volatility:
Stock market to
maintain good
performance
Financial stability:
Investor confidence
evident in influx of
capital investment
THANK YOU | TERIMA KASIH
Anita Sulaiman
anitasulaiman@aol.com
PUBLIC DEBT BURDENS (% OF GDP)
AT KEARNEY 2012 FDICI
Son Michael Pham, Principal
U.S – Asia Gateway
VIET NAM
ECONOMIC
OUTLOOK
For 2013
VIET NAM
Son Michael Pham, Principal
U.S – Asia Gateway
smp@usasiagateway.com