ASEAN Market Watch: Indonesian Manufacturing, Thai E-Commerce, and the Future of ASEAN’s Digital Economy

Indonesia Increases Rankings to become among World’s Largest Manufacturers

Indonesia topped Russia and the UK, placing in the top 10 manufacturing nations globally, according to the United Nations Industrial Development Organization (UNIDO). Indonesia moved up to 10^th place from its previous position on 12 in 2015. This has been attributed to its ability to continue keeping factories running due to strong domestic demand, despite a global downturn. Indonesia’s industry ministry has stated that manufacturing contributes over 18 percent of national GDP. UN data pointed also out that while textiles and tobacco make up a small share of output, chemicals, machinery and vehicles are growing fast. The government has been promoting the manufacturing industry through improvements in productivity and fiscal policy.

While the country still ranks low in the ease of doing business rankings, the government remains committed to deregulation. The manufacturing sector grew at 5.04 percent in 2015, higher than the economic growth rate of 4.79 percent. The industry also contributed to a higher employment level though the rate of job creation was minimal. Foreign investors should look at manufacturing options in Indonesia as its government looks to compete with other ASEAN countries.

RELATED: Pre Investment and Market Entry Advisory from Dezan Shira & Associates

ASEAN: Digital Economy Projected to Show Strong Growth

ASEAN is projected to be in the top five digital economies by 2025 according to a joint study report by a consulting and telecommunications firm. The growth of the digital economy is projected to add US $1 trillion to the GDP of ASEAN over the next decade. The growth will be driven by an increase in broadband services in the region, higher worker productivity and the growth of new digital industries. Industries such as e-commerce, m-finance, and cloud computing services will be key drivers of this growth. ASEAN has a strong base to build and develop its digital economy. For instance, ASEAN has a healthy economy with an overall GDP of US $2.5 trillion, which is growing at six percent per year. In addition, ASEAN member states have a population of over 600 million, and 40 percent of them are under the age of 30. Moreover, the smartphone penetration is around 35 percent and growing rapidly.

While a bright future is in the pipeline for ASEAN, several roadblocks exist to achieving a full digital economy. Some include a weak business case for building out broadband services, regulations inhibiting mobile finances services, and the absence of a single digital market. The report highlights several policy initiatives that can be undertaken to accelerate growth including improving broadband connectivity, innovation in mobile financial services and e-commerce and strengthening local digital economies among others. The existence of the aforementioned features coupled with the projected growth estimates highlights the future business opportunities in ASEAN’s digital economy. 

 Related: IMF Estimates Philippine Growth to Top 6% in 2016

Thai Post Teams Up with E-commerce Firm Shoppe

Capitalizing on the mobile shopping market, Thailand Post signed a partnership agreement with Shopee, a Singapore based mobile shopping app, to provide free delivery of goods to customers shopping on the Shopee site. The agreement will allow Shopee to deliver products under 250 grams free of charge. Sellers will be required to pay the cost of delivery in advance and Shopee will later reimburse sellers at a later date. Thailand’s e-commerce market has grown by 20 percent a year mostly due to due smartphones. Around 40 million people access the internet through their phones making it a huge market to access, according to officials at Thailand Post.

Meanwhile, Shopee – which has a presence in several ASEAN countries – aims to boost its online sales via a partnership with Thailand Post which has a reliable and countrywide delivery service. Thailand Post is also in talks with other e-commerce firms such as Japan’s Line Corporation and South Korea’s SK Planet for a similar partnership. The development highlights the growing e-commerce market in Thailand which foreign investors can tap into.

Annual Audit and Compliance in ASEAN
For the first issue of our ASEAN Briefing Magazine, we look at the different audit and compliance regulations of five of the main economies in ASEAN. We firstly focus on the accounting standards, filing processes, and requirements for Indonesia, Malaysia, Thailand and the Philippines. We then provide similar information on Singapore, and offer a closer examination of the city-state’s generous audit exemptions for small-and-medium sized enterprises.

The Trans-Pacific Partnership and its Impact on Asian Markets
The United States backed Trans-Pacific Partnership Agreement (TPP) includes six Asian economies – Australia, Brunei, Japan, Malaysia, Singapore and Vietnam, while Indonesia has expressed a keen willingness to join. However, the agreement’s potential impact will affect many others, not least of all China. In this issue of Asia Briefing magazine, we examine where the TPP agreement stands right now, look at the potential impact of the participating nations, as well as examine how it will affect Asian economies that have not been included.

An Introduction to Tax Treaties Throughout Asia
In this issue of Asia Briefing Magazine, we take a look at the various types of trade and tax treaties that exist between Asian nations. These include bilateral investment treaties, double tax treaties and free trade agreements – all of which directly affect businesses operating in Asia.

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