COVID-19: ASEAN region update for Australian exporters

Key insights

Indonesia – Recent Google mobility reports show that visits to retail and recreation locations are down 12 percent on pre-pandemic levels. Similar contractions are reported for transit stations (–15 percent) and workplaces (–12 percent). Forecasts for Indonesia agree that 2021 will see a weak recovery followed by a firmer recovery in 2022. Retail sales are reported as falling 16.4 percent in the year to February 2021 after an 11.9 percent drop in 2020.

Malaysia – The government has imposed the country’s third nationwide lockdown. Measures include universally enforced stay-at-home orders, interstate travel bans and school closures. The government is weighing stricter closures as the public health situation deteriorates.

Philippines – The economy contracted by 4.2 percent in the first quarter of 2021. This marks the fifth consecutive quarter that the country has been in recession owing to the pandemic and associated lockdowns.

Singapore – A spike in locally transmitted and unlinked community cases of COVID-19 has led the government to restrict movement from 16 May to 13 June. Under the latest regime, working from home and home schooling are required. Restaurants are not allowed to offer dine-in service. The restrictions will place more pressure on an already impacted food service sector.

Thailand – The economy shrank by 2.6 percent in the first quarter of 2021 as the third wave of the pandemic took its toll, with more than 2000 new cases reported daily. The Office of the National Economic and Social Development Council expects the economy to grow by 1.5–2.5 % this year, driven by goods export, private consumption, and private and public investment.

Market opportunities

Health

Thailand – The pandemic has fast-tracked solutions that deliver health services through telemedicine. The Samitjev Virtual Hospital created a smartphone app which enables remote patient examinations, diagnoses and treatments through its 380 physicians around the clock. The service is expected to be rolled out to other Asia-Pacific countries.

Thailand – Demand for immunity-boosting supplements is on the rise. However, the Thai Food and Drug Administration categorises most nutraceutical and vitamin supplement products as ‘drugs’, which means they can only be distributed via registered pharmacies. This limits the capacity for Australian vitamin and supplements companies to take advantage of online channels, and also restricts the sale of such goods via traditional retail.

Infrastructure

Malaysia – Construction of the major infrastructure project East Coast Rail Line is on track to resume, albeit with a 14 percent rise in building costs to $15 billion. The railway is a signature project of China’s Belt and Road Initiative in Malaysia and is intended to connect the less developed east coast with the western region to stimulate economic development.

Thailand – Multiple infrastructure projects are likely to commence in the next four years, creating opportunities for Australian companies. These include:

  • a high-speed rail network linking Bangkok’s three airports worth $10 billion
  • the Eastern Airport City project at U-Tapao, Rayong worth $13 billion
  • Phase 3 of the Map Ta Phut deep seaport development worth $2.5 billion.

These projects are located in the special economic zones within the Eastern Economic Corridor, which offer corporate income tax exemptions and reductions. Japan is the top FDI applicant in the corridor ($2.3 billion), followed by China ($920 million).

Thailand – The Transport Ministry will accelerate US$7.4 billion of spending on major road and rail projects. Projects include the expansion of Bangkok’s mass transit network, and expressways linking important industrial provinces along the nation’s eastern seaboard. A major contract associated with the Thai-China high speed railway from Bangkok to northern Thailand’s Nakhon Ratchasima has been signed.

Agriculture and Food & Beverage

ASEAN – The acceleration of e-commerce continues. A survey by Facebook and Bain & Company reveals that consumers in Southeast Asia bought groceries online almost three times more often this year as compared to 2019.

Indonesia – There is increased interest from Indonesian importers in new food products from Australia. This includes beef products, and mid-range and premium-range packaged food and beverage products. Interest may be due to optimism around the rollout of the Sinovac vaccine in Indonesia, or simply reflective of the New Year period.

Indonesia – Indonesian supermarkets have observed consumers’ increasing awareness of the risks of high cholesterol and diabetes, and a concurrent rise in interest in healthier foodstuffs. The latter group includes dairy, ‘healthy’ packaged food, and fresh fruit and vegetables.

Malaysia – Australian biotech Stemcell United has partnered with Universiti Malaysia Sabah to develop and commercialise seaweed-derived downstream products. The partnership is responding to the growing vegetarian movement in ASEAN and increasing consumer demand for plant-based food alternatives.

Philippines – Australian agri-food products face increased competition from other foreign producers. Specific opportunities include healthier food options, such as fresh fruits and vegetables, and plant-based products. Opportunities also include premium and imported food items like meat, wine, dairy and baking ingredients. Meanwhile importers say animal feeds continue to be in high demand, particularly by the hog and poultry industries.

Singapore – Consumer demand for Wagyu beef has increased, especially beef from Japan. This is despite price increases of up to 20 percent. Some restaurants offer different grades of Wagyu at different price points to customers.

Thailand – As the COVID-19 resurgence gathers pace retailers are leaning towards importing fruit in large quantities with a longer shelf life. Consumers aim to minimise wastage. This will impact demand for Australian summer fruit. Protocols do not permit mixed shipments, and full container orders are typically too large for buyers.

Supply chain, travel & tourism

Thailand – Australian exporters report that decreased container availability and higher sea-freight rates are impacting their business. Booming Chinese exports to the US and Europe have led to a lack of empty containers where they are required. The US has a surplus of empty containers, but ports in the US are congested and turnover is reported to be slow.

Fast moving consumer goods

Vietnam – Market research group, Kantar expects sales of fast-moving consumer goods (FMCGs) to expand by 6.4 percent this year in the major cities and 8.7 percent in rural areas. This slightly undershoots the 10 percent growth achieved in both areas last year. In the cities, growth in packaged food will stabilise at around 10 percent. Personal care products will grow by at least 10 percent.

Technology

ASEAN – Demand for innovative ag-tech is growing across the region with ensuing opportunities for Australian companies. FluroSat, an Australian ag-tech company, recently won the Future Food Asia 2020 Award. The full crop-cycle analytics provider delivers reports and alerts on all aspects of crop performance and health to their clients.

ASEAN – New internet users across the region grew by 40 million in 2020, according to the just-released e-Conomy SEA Report by Google, Temasek and Bain & Co. The pandemic has accelerated digital adoption particularly in e-commerce, online media and food delivery. E-commerce has risen 63.2 percent in just one year. The report signals growth opportunities in healthtech, fintech and edtech.

Malaysia – The inaugural cyber defence and cyber security exhibition, CYDES, has been postponed to 28 June in the hope that the lockdown will conclude by then. This is a significant opportunity for Australian security firms to virtually meet defence-related industry partners in market. Malaysia has a deficit in cybersecurity professionals.

Singapore – The corporate venture unit of ST Engineering continues to express keen interest in promising cybersecurity technologies that complement its existing businesses. ST Engineering Ventures will invest in US-based CloudSphere, a cloud management and governance provider.

Philippines – The Philippine Economic Zone Authority wants to include the defence industry in its new Strategic Investment Priorities Plan. Other key industries are electrical and electronics; chemical and pharmaceuticals; machinery and transport; agriculture and agribusiness; information technology-business process management; research and development; and artificial intelligence, automation, robotics, and digital technologies.

Finance and fintech

Singapore – The Boston Consulting Group reports that Singapore-based fintechs raised $640 million in equity funding in the first quarter of 2021, 3.5 times more than the same period last year. The sector raised a record $1.4 trillion in 2020, dominated by Grab, Xfers and imToken. Retail banking, capital markets and technology attracted the strongest funding so far in 2021.

Philippines – COVID-19 has fast-tracked the take-up of digital payments in the Philippines, which is traditionally a cash society. Globe, the country’s leading telco, reported a 150 percent year-on-year increase in registered users for its GCash mobile money service, and an eightfold jump in payments. The Philippine central bank is aiming for half of all payments to be digital by 2023.

Thailand – The Commerce Ministry intends to remove three types of services from ‘List 3’ of the Foreign Business Act: telecommunications, finance and software development. This means businesses in these sectors will not be required to seek permission from the Foreign Business Commission to operate in Thailand.

Vietnam – According to Korean venture fund, Nextrans investment in local startups expanded by 34 percent year-over-year in the first quarter of 2021. Fintech was the most popular investment sector. According to surveys, the use of digital wallets, contactless payments and QR code payments increased strongly during the pandemic. Contactless cards saw a 67 percent usage increase in food and dining in 2020. QR codes payments expanded by 71 percent in bill payments and 58 percent in retail shopping.

Ed-tech

Malaysia – The government is encouraging institutions to adjust their existing learning modules and assessment methods to suit the digital environment and increase the capacity of teaching staff. Australian distance learning expertise is well-positioned to help train and support Malaysian teaching staff members who are given education-digitalisation objectives.

Malaysia – The Ministry of Higher Education has outlined several areas of strategic focus for 2021, including Empowering the Education Digitalisation Agenda, Enhancing Strategic Collaboration Network, Strengthening Graduates Marketability, and Driving Community Well-being, Promoting Institutional Excellence. Capacity building of lecturers in teaching online and hybrid models will continue to offer opportunities for Australian universities and trainers.

Vietnam – The Ministry of Education and Training has issued new guidance for the delivery of joint qualifications on online platforms. The Ministry’s new guidance offers opportunities for Australian education providers to develop new TNE models with local academic institutions and promote the online education capabilities of Australia’s education sector.

Thailand – The Eastern Economic Corridor (EEC) Office will work with government agencies and the private sector to sharpen the skills of more than 8,500 workers in 2021. The Office estimates that more than 475,000 workers will be needed in the next five years, including people with the skills required by foreign companies. The government is looking at ways to improve skills to better serve targeted industries, particularly in sectors such as next-generation cars, robotics, medical technology and aviation.

Singapore – Ngee Ann Polytechnic wants new technologies to enable students to design and develop prototypes using 3D printing technologies. The polytechnic seeks a partner to move their program to an online space and allow students to 3D print products virtually. This presents an opportunity for Australian edtech companies to bridge this gap in STEM education.

Manufacturing & defence

Malaysia – The Government will soon announce tax incentives to promote electric vehicles under the National Automotive Policy. They include tax and duties exemptions in duties (import, excise and sales taxes). The government has introduced the Low Carbon Mobility Blueprint 2021–2030. It contains proposals to tax vehicles that emit carbon, levy fees on fossil fuels, exempt import and excise duty for hybrid electric vehicles, and establish charging stations.

Singapore – The biennial naval and maritime industry show IMDEX 21 will only offer a maritime conference and business fora on 27–29 July. Exhibitions have been cancelled, affecting Team Defence Australia’s plans to set up a stand for Australian defence companies, including Austal.

Thailand – The government has set a target for electric vehicles (EVs) to make up 30 percent (750,000 vehicles) of all auto production by 2030. The government wants to establish Thailand as a regional EV manufacturing base, although widespread use of EV is not anticipated for at least 10 years. Companies that invest in EVs are eligible for corporate tax exemptions of up to eight years. A new excise tax structure for EV will be finalised this year.

Singapore – The Government has announced a ‘qualitative transformation’ of the advanced manufacturing sector in response to the disruption of international supply-chains caused by COVID-19. The program aims to encourage a shift to products where competition is not based on cost but on intellectual property and the quality of products. This shift is intended to grow the manufacturing sector by 50 percent over next decade. It opens up opportunities for Australian companies with capabilities in biomedical electronics and precision engineering.

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