ASEAN KEY DESTINATIONS
Investments in ASEAN slowed in Q2:WB
INVESTMENT in major ASEAN economies in the second quarter have slowed down owing to structural problems, the World Bank said in a new report.
In its latest East Asia and Pacific Economic Update released yesterday, the Washington-based lender said inflows of investment slowed in large ASEAN economies, namely Indonesia, Philippines, Vietnam, Thailand and Malaysia.
The World Bank said that in Indonesia, the impact of a poor investment climate has been made worse by weak export prices of commodities, increases in the cost of capital and corrections in the real estate sector.
“Investment has been a major driver of economic expansion (in Indonesia) in recent years,” the World Bank said,
The bank said investment growth in Southeast Asia’s largest econonmy has slowed since 2013 and remains sluggish at 4.5 per cent in the second quarter as opposed to an average growth of 8.8 per cent per year between 2004 and 2012.
The World Bank said there are sharp contractions in both spending on machinery and equipment and in real estate investment.
“Weak commodity prices have reduced the demand for machinery and equipment from the mining sector and weighed on investable funds more broadly,” the bank said.
It also pointed out that protectionist policies and measures, including limits on the foreign ownership of mines and banks, export bans on unprocessed minerals and other raw commodities and food import restrictions had impact on foreign investor sentiments.
“Public investments also remains low and weakness in implementation hamper the efficient execution of infrastructure projects,” the World Bank said.
The World Bank said that in the Philippines and Vietnam, investment slowdown reflects structural factors.
In the Philippines, investment growth had slowed to four per cent year-on-year in the second quarter, from 12 per cent in 2013 and 19 per cent in 2010.
“Investment performance has always been volatile in the Philippines,” the bank said.
The World Bank said that this year, spending on equipment, accounting for half of fixed investment, weakened in the second quarter after private construction, comprising one-third of fixed investment, contracted in the first quarter.
It noted underlying weaknesses included weak implementation of public infrastructure investment together with underdeveloped financial markets and rigid labour markets.
In Vietnam, the World Bank said that while foreign direct investments remain substantial, private domestic investment has decreased. It said that credit growth is weak as the banking system struggles with inadequate capital. It also said the business environment was dragged down by the slow pace of business regulatory reform.
The World Bank said that political unrest in Thailand led to investment standing 20 per cent lower than the year before in the second quarter of 2014.
“Protracted turmoil has disrupted economic activity and dampened investor confidence,” the bank said.
The World Bank said the automotive industry suffered the largest investment downturn, as many foreign vehicle manufacturers held back previous plans to expand their industrial facilities.
The political turmoil has also dirupted key infrastructure plans.
Asean News, Investment
However, In Malaysia, the investment slowdown appears temporary due to its public investment program, which had concluded many of its projects and have since reduced investment.
The World Bank said that public investment should rebound with the approval of new projects and that private investment which has accounted for over half of all fixed investment in the last 10 years, remains robust.
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