Yes, you are right. But the size of the Indo economy is not the only reason.
Is Indo a major source of FDI for the region? No
Is Jakarta a financial centre? No
Are the fundamentals of the Indo economy same as the other economies in the region? No
Indo is a commodities driven economy and like @
Viet says it is very reliant on commodity exports to China. So naturally it will follow different cycles to other, more manufacturing based economies in ASEAN.
Yes. All those countries you mention would benefit. But don't take my word for it. Let the bond markets have the final word.
Indonesia
Malaysia
Phillipines
Singapore
Thailand
Viet Nam
Do you notice the huge spreads between Indo treasuries against other ASEAN? That shows that investors don't consider the fundamentals of the ASEAN region to be the same and consider the other economies to be less risky. Even Vietnam has a lower cost. BTW look at how much the cost of borrowing for Vietnam has fallen. Impressive stuff.
Now look at the credit default swap spread.
Indo is the blue line. This means that insurance for Indo debt is higher than for any other regional country. Does that look like a regional leader? Compare against Germany who are an actual regional leader :
The guy in the op-ed seems to be making is that Indonesia is more like a bellwether for the region. That investors seem to see the region as a whole seems to be contradicted by the market. But then it's an op-ed so you can't really depend on it.
Now, I ask you again, explain to me how Indo tanking would drag the region down. Hint: you can't because it's too simple a question.
Let's look at FDI in the region and who the big player is. Here is a note from a SEA based consultancy:
Foreign Direct Investment in ASEAN – Key Findings - ASEAN Business News
So, Indo is the largest economy but not integrated enough to be a source of contagion. Infact, investors might actually see other SEAsia countries as alternatives rather than compliments - this has been the trend since 1997. Now take this in before you spout more ignorance.
Hmmm as alternatives are they more interesting than Indonesia?
Your statement is a craps
Outlook on ASEAN Investment 2015
Posted on October 14, 2014 by
ASEAN Briefing
By
Matthew Zito
Indonesia, Malaysia, and the Philippines are surging ahead of their regional neighbors, with FDI increases of 17, 19 and 20.4 percent, respectively, in 2013, according to Bank of America Merill Lynch. Meanwhile, Singapore continues to receive the lion’s share of total FDI in the region, which last year grew five percent to a net value of nearly US$64 billion. The city-state’s attraction for foreign investors derives not only from its often overlooked manufacturing base, but also as a channel for routing FDI into other locations in ASEAN.
Based on World Bank figures, Vietnam showed a more modest FDI increase of 6.36 percent year-on-year for 2013. Analysts expect this to spike, however, following Vietnam’s entry into full compliance with the ASEAN Economic Community by 2015. This will remove virtually all tariffs on goods traded between Vietnam and ASEAN member nations, as well as various quantitative restrictions and non-tariff barriers. To date, 72 percent of registered capital for FDI into Vietnam has come from manufacturing and processing.
The ten member states of ASEAN can be divided in many ways: geographically, the bloc is split between continental states like Myanmar, Thailand and Cambodia and the archipelagos of Indonesia and the Philippines; culturally, the region is home to the largest Muslim nation in the world (Indonesia), bastions of Buddhism like Cambodia and Thailand, and the Roman Catholic majority of the Philippines; and in economic terms, the GDP of Indonesia exceeds that of runner-ups Thailand and Malaysia combined, and weighs in almost one-hundred times larger than Laos. But it is the region’s growing integration that is drawing the attention of foreign investors. With a milestone target for economic integration fast approaching in 2015, the region is poised to be awash in FDI over the coming years.
In fact, investment into ASEAN is already at an all-time high, with FDI inflows into the region’s five largest trading countries (the “ASEAN-5”: Singapore, Malaysia, Indonesia, the Philippines, and Thailand) totaling US$128.4 billion in 2013, according to Bank of America Merrill Lynch. Of course any discussion of the rising competitiveness of ASEAN must address the dragon in the room: China. In terms of both total investment and year-on-year growth, these five powerhouses outperformed China in 2013.
Historically, Singapore has been the greatest recipient of FDI in the region, followed at a wide margin by the remaining ASEAN-5 members and Vietnam. The city-state is also the largest source of intra-regional FDI at 45 percent, while the greatest outside contributors are the European Union (25 percent of total FDI), Japan (13 percent) and the United States (11 percent).
Investment has been variously directed into different sectors based on its country of destination. Whereas in Malaysia, Thailand and Vietnam, the manufacturing industry has been the main recipient of investment, there has been a greater emphasis on the services sector in the more advanced economies of Singapore, Indonesia and the Philippines.
From a regulatory standpoint, manufacturing is the most liberalized sector for foreign investment into ASEAN, contrasting with the more stringent restrictions placed on business services, communications and transportation in the region. The World Bank’s East Asia Pacific Economic Update found that Thailand, the Philippines and Malaysia are among the most restrictive countries for foreign equity, while Cambodia and Singapore allow for nearly 100 percent foreign ownership in most sectors.
ASEAN Economic Community
ASEAN Economic Community is one element, along with the ASEAN Security Community and Socio-Cultural Community, of the larger ASEAN Community initiative targeted for implementation by 2020, as decided upon at the ASEAN Concord II in October 2003. In 2007, further details for AEC were laid out in the AEC Blueprint, including the now looming deadline of 2015. The Blueprint sets out the intention to “transform ASEAN into a single market and production base, a highly competitive economic region, a region of equitable economic development, and a region fully integrated into the global economy.”
The first of these goals promises an unrestricted flow of goods, services investment, and skilled labor between member nations, as well as a “freer flow” of capital. Liberalization measures for the free flow of goods, services, skilled labor, capital and investment have already been 85 percent achieved, according to official ASEAN estimates. Although doubts have been raised as to whether Cambodia, Laos, Myanmar and Vietnam will be able to meet the compliance target of 2015, The World Bank has calculated that ASEAN’s overall trade costs have come down 15 percent over the past ten years, with intra-regional trade nearly doubling over the same period, to almost US$500 billion last year.
As envisioned by the Blueprint, the achievement of these goals calls for “new mechanisms and measures to strengthen the implementation of its existing economic initiatives; accelerating regional integration in the priority sectors; facilitating movement of business persons, skilled labor and talents; and strengthening the institutional mechanisms of ASEAN.” To accomplish these goals, the Blueprint sets out various targets for IP, e-commerce, and infrastructure projects by 2015.
AEC is supported by two further agreements: the ASEAN Comprehensive Investment Agreement (ACIA) and the ASEAN Framework Agreement on Trade in Services (AFAS). The former includes provisions for the liberalization of FDI using a negative list approach – in which investment is permitted into all sectors not explicitly prohibited by a given signatory country -, and sets out mechanisms for dispute resolution and rule making . Conversely, AFAS provides for the opposite approach, whereby FDI in certain services is prioritized based on their inclusion on a positive list.
Additionally, several key ASEAN members (Brunei, Malaysia, Singapore and Vietnam) are also included in ongoing negotiations for the Trans-Pacific Partnership, a U.S.-led regional free trade agreement. The currently 12-member group represents two-fifths of world GDP, including economic heavyweights such as the United States, Japan, Canada, Australia, and Mexico. If ratified, the TPP would entail FTA-style tariff reductions in key economic sectors, in addition to other commitments regarding intellectual property protection, environmental standards, and e-commerce.
Lastly, the Regional Comprehensive Economic Partnership (RCEP) is a proposed agreement for creating a free trade network between ASEAN and the six countries with whom ASEAN has existing FTAs (Australia, China, India, Japan, Korea and New Zealand). Unlike the TPP, the RCEP aims to accommodate a broader range of economic disparity between its potential signatories, who account for nearly half of the world’s population and approximately one-third of global GDP.
- See more at:
Outlook on ASEAN Investment 2015 - ASEAN Business News
where is your Myanmar and Vietnam will stands to facing against AEC
