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Electric vehicles (EV) industry gaining momentum in ASEAN

The development of electric vehicles (EV) is gaining momentum in Southeast Asian nations, as such vehicles require fewer parts and barriers to market entry are lower compared to engine-powered vehicles, according to The Yomiuri Shimbun.

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The development of electric vehicles (EV) is gaining momentum in Southeast Asian nations, as such vehicles require fewer parts and barriers to market entry are lower compared to engine-powered vehicles, according to The Yomiuri Shimbun.

In its article on the July 8 issue, the Japanese newspaper analysed the development trend of automotive industry in Southeast Asia, which is focusing on electric vehicles.

It said in Vietnam, Thailand and other Southeast Asian countries, local companies have entered the automobile market in succession, adding that they are attempting to take on the challenge of competing with Japanese carmakers, who dominate the regional market, by promoting their domestic brands.

The governments of these countries are also heightening efforts to support the development of their own auto industries, with electric vehicles as the key focus. Vietnamese conglomerate Vingroup completed an automobile factory in June to produce Vietnam’s first auto brand, it said.

In September 2017, Vingroup — which is known for its wide-ranging businesses including real estate, retail, and information and communications technology — announced it intended to enter the automobile industry.

In less than two years, Vingroup created new cars by adopting technologies of companies such as General Motors and BMW through business cooperation.

Electricity provider is building the first EV made in Thailand
Electricity provider Energy Absolute is building the first EV made in Thailand

The company said it has already received more than 10,000 sales orders. In Thailand, electricity generating company Energy Absolute PCL unveiled in March a minivan made in Thailand, from design and development through to parts procurement.

The company, which has yet to start selling the minivan, said the car is part of a national EV concept. In the Philippines, local companies are turning public transportation methods such as tricycles and jeepneys into EVs.

Meanwhile, in Malaysia, which already has two national car manufacturers, the government is promoting a new national car concept for the EV age.

According to the article, new-car sales in ASEAN, excluding Cambodia and Laos, increased 6.6 percent from the previous year to a record 3.56 million units in 2018. The figure has already reached to nearly 70 percent of the number in the Japanese market, which has sales of about 5.2 million units.

The ASEAN number is expected to exceed 4 million units by the end of 2020. Japanese carmakers currently have an overwhelming 80 percent share of the Southeast Asian market. Southeast Asian domestic brand cars will likely intensify their competition with Japanese automakers over the growing market, the article reported.-VNA

Auto industry in ASEAN sees vibrant development: Japanese newspaper | Vietnam+ (VietnamPlus)

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Asean

Assessing the economic impacts of COVID-19 on ASEAN countries

All ASEAN countries are dependent on tourism flows but Thailand is probably the most dependent.

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Author: Jayant Menon, ISEAS–Yusof Ishak Institute

The COVID-19 pandemic is first and foremost a human tragedy. Measures introduced to deal with the pandemic could save lives but are having wide-ranging economic effects and inducing economic contagion.

There are already studies estimating the economic impact of the virus. But greater focus is needed on the transmission mechanisms of the economic contagion and in critiquing how assessments of the economic impacts are made, concentrating on the ASEAN region.

The effects of COVID-19 are hitting ASEAN economies at a time when other risk factors, such as a global growth slowdown, were already rising.

COVID-19 is disrupting tourism and travel, supply chains and labour supply

Uncertainty is driving negative sentiment. This all affects trade, investment and output, which in turn affects growth. Tourism and business travel, as well as related industries, especially airlines and hotels, were the first to be affected. And the conditions are worsening as more countries go into shutdown.

The supply disruptions emanating mostly from China will reverberate throughout the value chain and disrupt production. Since China is the regional hub and accounts for 12 per cent of global trade in parts and components, the cost of the disruption in the short run will be high.

The negative effects of quarantine arrangements on labour supply could also be high depending on duration and sector. Manufacturing has been hit harder than service industries, where telecommuting and other technological aids limit the fall in productivity.

All these disruptions will lead to sharp declines in domestic demand. And their impact on economic growth will further propagate these disruptions. This compounding effect can magnify and extend short-run effects into the long run.

The highest economic cost could come from the intangibles

The effects of negative sentiment about growth and general uncertainty — which is already affecting financial markets — will feed into reduced investment, consumption and growth in the long run.

Rolling recessions around the world now appear inevitable, despite the stimulus measures being contemplated. If so, there will be sharp increases in unemployment and poverty. Some degree of decoupling from China, or de-globalisation in general, may also be a permanent reminder of this pandemic.

Among ASEAN countries, Singapore, Malaysia and Thailand are heavily integrated in regional supply chains and will be the most affected by a reduction in demand for the goods produced within them. Indonesia and the Philippines have been increasing supply chain engagement and will also not be immune.

Vietnam is the only new ASEAN member integrated into supply chains with China and is already suffering severe supply disruptions.

Given time, supply-side adjustments will alter trade and investment patterns. The main adjustment will involve relocating certain activities along the supply chain from China to ASEAN countries. Although the pandemic will disrupt the relocation phase, ASEAN countries can benefit from the new investments, mitigating overall negative impacts.

Thailand is probably the most tourism dependent Asean country

All ASEAN countries are dependent on tourism flows but Thailand is probably the most dependent. Cambodia and Laos receive most of their investment and aid from China, and a marked growth slowdown in China will affect them the most.

The Philippines and Mekong countries have large overseas foreign worker populations and restrictions on their movement or employment prospects as COVID-19 spreads will affect sending and receiving countries. Brunei and Malaysia are net oil exporters and the price war indirectly induced by the pandemic will hit them hard. Others will benefit from lower oil prices, as will the struggling transport sector.

In measuring the impacts of COVID-19, it is important to separate its marginal impact from observed outcomes. This is important because the remedy may vary depending on the cause of the disruption. This requires an analytical framework that can measure deviations from a baseline scenario that incorporates pre-existing trends. A model-based analysis, rather than casual empiricism, is required to reduce the problem.

Even before the outbreak, risks of a global growth slowdown were rising

The restructuring of regional supply chains had started, driven initially by rising wages in China and accelerated by the US–China trade war. While COVID-19 may further hasten the pace and extent of the restructuring, it is only partly responsible for what may happen. It would be misleading to attribute all of the current disruption to COVID-19. Had the trade war not preceded it, COVID-19 may have resulted in greater disruption to supply chains.

Any assessment of impacts must recognise that the spread of COVID-19 is unpredictable, and so too the response by governments. It is difficult to estimate the impacts of a shock that is uncertain in itself. This reiterates the need for rigorous modelling and scenario analyses. The current trend points to risks rising, often accelerating, as with previous epidemics. This uncertainty underscores the need for caution in assessing, and regular recalibration in producing assessments.

Jayant Menon is a Visiting Senior Fellow in the Regional Economic Studies Programme at the ISEAS–Yusof Ishak Institute, Singapore.

A version of this article first appeared in ISEAS Commentary.

This article is part of an EAF special feature series on the novel coronavirus crisis and its impact.

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Asean

Coronavirus’ economic impact in East and Southeast Asia

The ASEAN+3 Macroeconomic Research Office (AMRO) estimates that the COVID-19 epidemic could deduct as much as half a percentage point from the economic growth of some regional economies in 2020.

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As the number of coronavirus cases continues to rise around the world, there are deep concerns over the potential economic impact of the virus.

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Asean

Trade War Incentive Schemes flourishing in ASEAN

Countries such as Thailand, the Philippines, Malaysia, and Indonesia have unveiled an array of incentive packages to entice businesses affected by the US-China trade war.

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Governments across ASEAN have been unveiling an array of incentive packages to entice businesses affected by the US-China trade war.

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