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GROUP RISK MANAGEMENT

DIVISION

BULLETIN

RISK MANAGEMENT

ISSUE 22
MAY 2016

Highlights in this
issue

Thailand
introduced new
automotive
excise taxes

Challenges for
Chinas economy
continue as
mixed
manufacturing
PMI data shows

Pos Indonesia
raise bond to
expand its
logistic to
support growing

India attempt to
build aerospace
and defense
manufacturing
hub

Thailands New Automotive Excise Taxes

Thailand bolstering green automotive


production by offering excise tax based on
emission rate of carbon dioxide (CO2)
Environmental
Thailand has been promoting green
automotive industry since early the 2000s
via introduction of alternative fuel such as
E10 (10% ethanol). In 2013, E10 had
replaced 91 octane pure gasolines to
leverage on the agriculture waste which is
used
to
made
ethanol,
therefore
benefiting the communities.
Beginning 2016, Thailand has mandated
that all new Eco-Car with the capacity of
1,300 to 1,400 cc must be installed with
Euro 5 engines emitting less than
100gm/km carbon dioxide with energy
efficiency of 4.3 litres for 100km. Euro 5M
fuel standard shall be used to ensure that
less of the volatile organic compounds
People
Highly efficient, skilled, and affordable
labor pool will continue to support the
growth
of
automotive
industry.
Automotive firms in Thailand are currently
applying
the
successful
German
apprenticeship system in their own Thai
operations in order to train the next
generation of skill labor for Thailands
growing automotive industry.
Besides,
the
government
is
also
cooperating with the private sector on
programs designed to train highly skill
employees for the industry with world

Investment
Nearly all the worlds major automotive
manufacturers have production facilities
in the country. The Thai government
extends support to foreign investor with
tax and non-tax incentives for the
manufacturing of vehicles, component
parts and automotive R&D and testing.
Some relaxations on foreign investors
were also introduced i.e. waiver on export
requirements, local content requirement,
location requirement and foreign equity
restrictions. By adhering to stringent
standards, manufacturers can easily
export to other high-standard markets
Economy
Thailand is in the process of establishing
more free trade agreement (FTA) with the
European Union, Canada, and US.
Currently, they have existing bilateral free
trade agreements with many countries,
including Japan, India, China, Australia,
Bahrain, Chile, Peru and New Zealand.
With the existing and upcoming FTAs
including
Regional
Comprehensive Economic Partnership
(RCEP), it is foresee that Thailand
automotive industry shall further expand
Sources:
www.thaiauto.or.th/
www.boi.go.th/
www.taia.or.th/

PT Pos Indonesia capitalizing on growing e-commerce

PT Pos Indonesia targets to be become giant logistic firm in the next 5


years - raising $75.2 million in rupiah bond to fund its logistic expansion
plan to capitalize on the growing of e-commerce business
Environmental
President Joko Widodo hopes to cut
logistics costs by building 11 bonded
logistics centers (PLBs or Pusat Logistik
Berikat) this year, with 50 more to follow
next year. The PLBs were developed as
part of the implementation of a second
economic policy package and expected to
serve as a distribution center or
warehouse for imported basic material. It
would also create more sustainable
logistic solution as integrated sharing
system will require less land; less
warehouses thus save energy and
improve efficiency in transportation.
Other benefits include longer storing
period of up to three years, compared to
People
The recruiting of 5,000 workers by stateowned postal operator in 2016 became
the highest recruitment throughout the
history of the national logistics company.
The massive workforce recruitment is
conducted
to
reinforce
business
competencies in the company's courier,
logistic, retail, and financial service
sector, as well as to strengthen its human
capital resource and development align
with the companys business plan.
Candidates are required to undergo a
thorough recruitment process such as
administration and skill assessment
selection, psychological test, interview,
data validation test and finally health test

Sources: www.posindonesia.co.id/
www.thejakartapost.com/
www.republika.co.id/
www.aseanup.com/

Investment
In order to be more competitive, the
state-owned
enterprise is currently
designing online marketplace website
specifically designated for micro, small
and medium-sized enterprises (SMEs).
The new business line of e-commerce
website will be synergized with other
programs for SMEs. It is aimed to develop
Indonesian SMEs and expand its market
especially in East Java Province which is
considered to be the largest base of SME
business owners, roughly about 6.8
million. After East Java, the program will
also be launched in Central Java and West
Java. PT Pos Indonesia will bring huge
Economy
South East Asias internet economy is
expected to surge to US$200 billion by
2025, driven mostly by the growth of ecommerce, online media and online
travel, as more people gain access to the
Internet. Increasing young population
with 70% under the age of 40 as well as
rapidly growing middle class would
further boost the industry. Moreover, ecommerce and logistics accounts for
61.4% of all investments in the region
from 2010 to 2015. Last year, a total of
US$1.1 billion was invested in South East
Asia, with a total of 355 deals made. Ecommerce
will
continuously
bring

China manufacturing gauge weakens further as economy loses


steam

Challenges for Chinas economy continue, as mix


manufacturing PMI data shows demand still weak

Economy
The Caixin China Manufacturing PMI
(Purchasing Managers Index) contracted
further in May 2016 to 49.2 points
compared to 49.4 points in April 2016,
reflecting a renew fall in new orders, falling
output, destocking, and ongoing job losses.
The impending collapse was foreshadowed
by a stock market crash in June 2015,
followed by repeat performances in August
2015 and January 2016 where exports fell
dramatically and economic growth slowed
People
Job-shedding
persisted
in
the
manufacturing sector, with the rate of
reduction remaining similar to February
2016s multiyear record. At the same time,
the backlog of work rose only slightly in
May. So far in 2016, the highest incidence
of job cutting has been seen in the energy
and extraction, transport, chemicals and
plastics sectors. The food and drink sector
has seen the lowest rate of job cutting.
Reflective of weak demand conditions,
companies trimmed their production
Sources: www.wsj.com/
www.cnbc.com/
www.tradingeconomics.com
www.scmp.com/

Investment
Chinas consumer and service sectors offer
investment opportunities where young
consumers are ready to spend on
everything from fitness products to health
foods to designer furniture, which will
create good investment opportunities amid
the countrys broader economic slowdown.
But recent weakening of Yuan on Monday
30th May 2016 might create short term
volatile in Chinas capital outflow. Prior to
the weakening, Chinese investors are
heavily buying up bitcoin to protect their
wealth against possible sharp declines in
the Chinese currency. Bitcoin was up 20% in
May 2016. The devaluation seen as a
Environmental
Chinas manufacturing sector has been
plagued by weak demand, rising labor
costs, overcapacity in industries resulted in
tighter
resource
and
environmental
problems. Another question is the energy
use. Electricity demand in China is
expected to continue growing, and the
easiest way to meet it will be through coalburning
power
plants
rather
than
alternative energy sources. Despite, some
scientists believe Chinas emissions may

India attempt to build a manufacturing hub under

People
Investment

Economy
With globally defence budgets in
declining trends, aerospace & defence
OEMs and Tier-1 companies need to
outsource to low cost countries like India
to stay competitive globally. India fares
better than EU (countries like Poland) or
the Americas (countries like Mexico),
given the existing industrial base and
quantum of trained workforce in India.
Indian industry today is on the threshold
of entering into a new era where it will
assume greater responsibility in making
the nation self-reliant in aerospace and
defence production. By promoting
Made in India, the government plans
to develop India into a manufacturing
hub by offering proven skills in product
design,
reconfiguration
and
Environmental
Over the last 30 years, nearly two-thirds
of the forest with the sizes of Haryana
states
in
India
lost
due
to
encroachments (15,000 sq km) and
23,716 industrial projects (14,000 sq
km). Indias forests now cover 640,819
sq km, or 21.34% of the country,
compared to 701,673 sq km 29 years
ago. Of the 14,000 sq km of forests
cleared over three decades, the largest
area was given over to mining (4,947 sq
km), followed by defence projects
(1,549 sq km) and hydroelectric projects

Make in India program is an initiative


launched to encourage overseas and
domestic
companies
to
increase
manufacturing in India under 4 major
policies:1) New Initiatives (to improve the ease of
doing business in India)
2) Foreign
Direct
Investment
(The
government has allowed 100% FDI in all
the sectors except Space (74%), Defence
(49%) and News Media (26%).
3) Intellectual Property Rights (IPR) (to
establish a vibrant IPR regime in the
country.
4) National manufacturing (to increase
People
The slowdown in China, however, could
make a big difference this time. China
became an export powerhouse because of
its vast pool of low-wage workers, but its
no longer so cheap to manufacture there.
Pinched by double-digit increases in
Chinas minimum wages, many companies
are looking for low-cost alternatives.
Southeast Asian countries such as Vietnam
and Indonesia are attractive, but they lack
the deep supply of workers available in
India. The hourly labor cost in India for
manufacturing averages 92, compared
with $3.52 in China. But at the end, the
Sources: www.bloomberg.com/
ability of to Indiawww.livemint.com/
match Chinas
investments in the roads, ports, and power

Sources : www.insideevs.com/

www.thehindubusinessline.com/