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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

ASEAN Economic Community

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
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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

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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)

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
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30

Syetarn Hansakul
ASEAN April 2013

Governance indicators

Regulatory quality (2011)

Government effectiveness (2011)

Percentile ranking (0 = lowest, 100= highest)

Percentile ranking (0 = lowest, 100= highest)

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

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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

ASEAN Economic Community

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

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

Source: Deutsche Bank, IMF WEO Oct 2012

Deutsche Bank
DB Research

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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

Source: Deutsche Bank, IMF WEO Oct 2012

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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

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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

Source: IMF WEO Oct 2012

CPI

Fiscal balance

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

% of GDP (*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

Source: IMF WEO Oct 2012

Deutsche Bank
DB Research

-3,9

Syetarn Hansakul
ASEAN April 2013

2014F

Cambodia
2012P

CLMV*
2013F

2014F

Source: IMF WEO Oct 2012

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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

Nominal GDP: USD 14 billion


Population: 15 million
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

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DB Research

Political stability likely to continue


Syetarn Hansakul
ASEAN April 2013

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Lao PDR snapshot


Real GDP growth

Current account

% yoy (*CLMV data calculated using simple average)

% of GDP (*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

Source: IMF WEO Oct 2012

2013F

2014F

Source: IMF WEO Oct 2012

CPI

Fiscal balance

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

% 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

Source: IMF WEO Oct 2012

Deutsche Bank
DB Research

-3,9

Syetarn Hansakul
ASEAN April 2013

2014F

Lao
2012P

CLMV*
2013F

2014F

Source: IMF WEO Oct 2012

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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
Population: 6 million
GDP per capita: USD 1,454
(nominal)
Source: IMF

Political stability to be maintained

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ASEAN April 2013

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Myanmar snapshot
Real GDP growth

Current account

% yoy (*CLMV data calculated using simple average

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

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

Source: IMF WEO Oct 2012

2013F

-9,5
CLMV*
2014F

Source: IMF WEO Oct 2012

CPI

Fiscal balance

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

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


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

Source: IMF WEO Oct 2012

Deutsche Bank
DB Research

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ASEAN April 2013

2014F

-8,6

-9,2

-3,9

-7,8

Myanmar
2012P

-4,3

CLMV*
2013F

2014F

Source: IMF WEO Oct 2012

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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)


Nominal GDP: USD 54 billion
Population: 64 million
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
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Vietnam snapshot
Real GDP growth

Current account

% yoy (*CLMV data calculated using simple average

% of GDP (*CLMV data calculated using simple average

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

Source: Deutsche Bank, IMF WEO Oct 2012

Source: Deutsche Bank, IMF WEO Oct 2012

CPI

Fiscal balance

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

% of GDP (*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

Source: Deutsche Bank, IMF WEO Oct 2012

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

Source: Deutsche Bank, IMF WEO Oct 2012

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 GDP: USD 138 billion
Population: 90 million
GDP per capita: USD 1,523
(nominal)
Source: IMF

Regulations/Institutions/Governance
need to be strengthened
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DB Research

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19

Agenda

Deutsche Bank
DB Research

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ASEAN April 2013

Thailand economic outlook

CLMV economic outlook

ASEAN Economic Community

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

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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

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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


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****

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

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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

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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

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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
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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
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