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US Exit from Trans-Pacific Partnership Represents Lost Opportunity for Asia

The TPP deal went far beyond existing free trade agreements (FTAs), by setting standards in areas including intellectual property rights, government procurement, environmental and labor conditions, and corruption prevention, in addition to reducing or eliminating tariffs.

Boris Sullivan

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On 23 January 2017, President Donald Trump took an executive action to formally withdraw the US (Aaa stable) from the Trans-Pacific Partnership (TPP) trade pact.

Since the US held effective veto power over the agreement due to the size of its economy, its decision means the deal cannot go ahead in its current form.

This represents a lost opportunity for Asia Pacific signatories, and especially for those countries that would have substantially expanded their export access to major markets.

The TPP deal went far beyond existing free trade agreements (FTAs), by setting standards in areas including intellectual property rights, government procurement, environmental and labor conditions, and corruption prevention, in addition to reducing or eliminating tariffs.

It also further increased access to trade – even where agreements already existed – by addressing some sensitive markets, such as Japan’s agricultural products.

TPP signatory economies – Australia (Aaa stable), Brunei (unrated), Canada (Aaa stable), Chile (Aa3 stable), Japan (A1 stable), Malaysia (A3 stable), Mexico (A3 negative), New Zealand (Aaa stable), Peru (A3 stable), Singapore (Aaa stable), the US and Vietnam (B1 stable) – accounted for about 40% of global GDP.

Lost export and growth opportunities are material for Vietnam, Malaysia

Both would have benefited from the opening up of trade with the US, and relatively large foreign direct investment (FDI) inflows longer term.

For Japan and New Zealand, TPP would have lowered tariffs on important exports. For Singapore, it would have smoothed production chain linkages, and services would have gained greater market access.

TPP-fuelled reform momentum could lose steam

TPP acted as a catalyst for reform in several signatory countries. While implemented measures are unlikely to unravel, TPP’s demise could slow the impetus for structural change that could boost competitiveness and investment, and improve institutional quality.

In particular, TPP ratification in Malaysia would have necessitated reforms to state-owned enterprises (SOEs) and government procurement. It is now unclear whether such reforms will proceed.

New trade deals unlikely to fully substitute for TPP

Signatory countries are working on other bilateral and multilateral trade deals, including the Regional Comprehensive Economic Partnership (RCEP).

However, with the exception of a Free Trade Area of the Asia-Pacific agreement (FTAAP), the potential benefits from these trade pacts would be smaller than TPP, as they would cover a smaller share of global trade, overlap with existing arrangements, and be narrower in scope.

Subscribers can access the full report at:

http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_1057769

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Japan

Thai DPM Somkid meets with Japanese Chamber of Commerce

Thai government is pushing forward projects such as the Thailand 4.0 development model and the Eastern Economic Corridor without any changes in key policies, reaffirming the coalition government will ensure a unified economic direction through economic ministers meetings.

National News Bureau of Thailand

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JCC Bangkok president meets DPM Somkid

BANGKOK, 5th August 2019 (NNT) – Deputy Prime Minister Somkid Jatusripitak has given an assurance to JCC Bangkok president, that Thailand is pursuing key policies including Thailand 4.0 and the EEC project, while the JCC president says Japanese investors are more confident with the Thai economy in H2 2019

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Business

How Asia could be the winner in the US and China’s Belt and Road race

The world’s three largest economies – the US, China and Japan – are actively manoeuvring for economic and geopolitical influence through infrastructure funding

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Infrastructure development has become one of the great battlegrounds of our time.

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Companies

Hino To establish a development and production base in Thailand

Once the factory begins operation in 2021, Hino will first start off by producing vehicles for the domestic Thai market

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Japanese motor Company to push forward with locally led manufacturing of best-fit products to quickly respond to customer needs in close proximity

Under this new setup, Hino will be constructing a new center in Bang Bo, Samutprakarn Province to consolidate and strengthen our product planning, development, and production functions for best-fit products in ASEAN.

The site has an area of roughly 400,000 sqm. Construction is scheduled to begin in July 2019 with operations to begin in 2021.

The new center will consist of the new plant’s production area, and a development area centered around a test track. The total investment amount is expected to be roughly 11.5 billion yen.

Operations to begin in 2021

Once the factory begins operation in 2021, we will first start off by producing vehicles for the domestic Thai market, and expect to begin supplying ASEAN best-fit vehicles to other emerging markets by roughly 2024.

Hino Motors, Ltd. (HQ: Hino City, Tokyo, President & CEO: Yoshio Shimo; hereafter “Hino,”) and Hino Motors Manufacturing Thailand, Ltd. (HQ: Samrong, Samutprakarn Province, President: Somchai Pleankaew; hereafter “HMMT”), our manufacturing company in Thailand, in order to achieve our vision of “Corporate strategy 2025” and enable us to respond to customer needs in close proximity, will be taking steps in Thailand, one of our key centers of operation, to accelerate our efforts to strengthen our business foundation in ASEAN.

By newly appointed Mr. Somchai Pleankaew, who has an exceptional career background with Hino, to president of HMMT, we will be creating an organizational setup that will enable us to drive our business in a locally led manner.

Mr. Somchai Pleankaew, who assumed the office of president of HMMT as of Feb 1 has this to say:
HMMT will put all of our effort to make this project successful in order to enable the growth of our company. Our aim is to serve all customers to their greatest satisfaction by providing the best-fit products and total support customized for each vehicle.

In addition, as a center of Monozukuri, including product planning, development, and production, as well as Total Support in ASEAN, Hino Thailand will collaborate and go forward with Hino in ASEAN in order to grow and strengthen together to support the growth of our customers’ businesses in the ASEAN region.

The Hino Group will be reforming its business structure to achieve sustainable growth leading up to 2025. We position Thailand as one of our key markets for sales in the ASEAN region, our second pillar after the Japanese market. The country is also one of our key business centers and a driver of Monozukuri and Total Support within the region.

The new center to be constructed will consolidate and strengthen our product planning, development, and production functions in Thailand.

New center overview

NameSuvarnabhumi Monozukuri Center
LocationBang Bo, Samutprakarn Province
Site area400,000 sqm
FunctionsProduct planning, development, and production of Hino vehicles
Products producedLight- and medium-duty trucks and buses
Operation startup dateScheduled for 2021
EmployeesApprox. 1,300 (at the time of operation startup)

As a “Monozukuri Center” it will be designed with the capability to commercialize and supply ASEAN best-fit products locally and consistently. In addition to increased coordination between different functions, we will be taking steps in product development to push forward with localization of product development by upgrading organizational setups and constructing a new test track so that we will be able to respond to customer needs quickly and accurately at close customer proximity. In the area of production, the production functions that are currently distributed across existing plants in Thailand will be consolidated at the new center to improve production efficiency.

Furthermore, know-how from the Koga Plant―our global mother plant―will be actively incorporated into the plant to create a system that will enable us to deliver competitive products to our customers in a timely fashion.

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