Southeast Asia #2

Happy Sunday subscribers!

Thank you first of all for signing up for the SEA Bi-Weekly. I sincerely appreciate your support as ~40 of you expressed interest in learning more about this exciting market.

I was delighted to see many business owners signing up but I was also pleasantly surprised to see a handful of investors and diplomats in the list. Of course, I was happy to see a few of my contacts in Indonesia and Vietnam represent the region.

Without further due, I will jump straight into this week’s focus: Who is winning in SEA? USA or China? The answer is neither, it depends on your perspective.

Three questions were asked in this report:

1. Do the (elites/public) of this country have warmer feelings toward the United States or China?

2. Which of the two do they consider the most important strategic power in the region?

3. Which do they consider the most important economic power in the region?

First of all, one thing that is very obvious is that there are few reliable sources to determine the sentiment in most of the countries. Secondly, there are only a few ‘Toss-up’ feelings which shows that the line is rather clearly divided between the two groups.

Most countries have ‘Warmer Feelings’ towards the USA. Due to their higher Chinese-speaking population, preference towards China makes more sense in Malaysia and Singapore. You might be surprised to see Vietnam favouring the USA despite the Vietnam War. But modern history would tell us that Vietnam has been directly threatened by the Chinese military and they may like the USA more - the less aggressive bully with strong navy power.

There are mixed feelings when it comes to the perception of strategic power in the region. This goes to show that neither country has a strong foundation of influence in the region. To put this simply, in a post titled ‘Can Southeast Asia avoid a new Cold War?’, one of my favourite newsletters ASEAN WONK said, “…the narrowness of a bipolar U.S.-China prism both understates the broader range of alternate partners engaging the region such as India and Japan as well as the agency of Southeast Asian states like Indonesia or Vietnam in shaping autonomous regional pathways.” Nicely put 👏

China is clearly perceived as a ‘Leading Economic Power’, both by the general public and the elites. China boosts 2X trade volume to the USA. Although this discounts the involvement of other major regional economic powers like Japan and Korea, you cannot ignore the physical proximity and the trade volume.

Australian winter is well and truly over with the daytime temperature rising above 24/25 ‘C. I hope the Asian summer is showing some coolness. I can see some late-season typhoons may be unavoidable! Stay safe and see you in two weeks.

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Statistics of the Week

• In 2022, Thai exports of pet food for dogs and cats amounted to 85.211 billion baht (US$2.074 billion). (Source: Petfood Industry)

• As of 2021, Vietnam had around 1,005 convenience stores split across six key brands, both domestic and international. (Source: Vietnam Briefing)

• Total private equity fundraising in Asia has hit $48 billion so far this year via 176 funds, compared with $154 billion raised in all of 2022 via 688 funds. (Source: Reuters)

• The average time taken to complete an application for the recent visa policy relaxation in Vietnam is 30-45 minutes. It costs $50 for multiple entry visa (90 days) and $25 for a single entry (30 days). The eligible country list has not been updated. (Source: VN Express)

• 44% of Jakarta’s air pollution comes from transportation, compared to 31% from industry, according to the Ministry of Environment and Forestry. (Source: AP News)

Politics & Economy

The ongoing struggles faced by workers in Vietnam, including low wages and mass layoffs, have forced migrant workers to return to their hometowns and many people are quitting the state social security system in order to withdraw their funds. Although this is restricted to textile and electronics, this uncertainty needs to be factored if you are looking to manufacture in Vietnam. (Source: Vietnam Weekly)

According to a Swiss air quality technology company, Jakarta, the Indonesian capital with 11 million people, has been ranked as the most polluted city in the world. The Indonesian president has suggested moving the capital city from Jakarta to Nusantara, a new city being built on Borneo island. (Source: AP News)

Private equity firm CVC Capital Partners has raised over $4.45 billion so far for its new Asia-focused fund, with a target of $6 billion. Investors include Canadian Pension Plan Investment Board and The Oregon Public Employees Retirement System. (Source: Reuters)

Food

Thailand is ranked as the world's third-largest producer and exporter of pet food for dogs and cats after Germany and the United States. (Source: Petfood Industry)

Hill's Pet Nutrition and Harvard T.H. Chan School of Public Health researcher Dr. Curtis Huttenhower have joined forces to create the One Health Microbiome Resource (OHMR), the largest and most comprehensive reference database of human and companion animal microbiomes that dwarf the existing databases almost five-fold. The OHMR resources and data will be available to the entire scientific community, allowing for the advancement of microbiome research in humans, pets, and beyond. (Source: Petfood Industry)

Benefits of using a local distributor for entering the Vietnamese market: Vietnam has a vast distribution network, including supermarkets, wet markets, convenience stores, malls, and e-commerce retailers. (Source: Vietnam Briefing)

E-Commerce

‘nuff said.

Export Q&A with Athena

Q: What are some legal hurdles to selling on E-commerce platforms in Indonesia?

Athena: Foreign e-commerce organizers must establish a Representative office for a foreign trading company (TRO) if they fulfil the following criteria:

• Having more than 1,000 transactions with customers within a one-year period; and/or

• Delivered over 1,000 packages for customers within a one-year period.

A TRO acts as a selling, buying, or manufacturing agent for the foreign parent company and is prohibited from engaging in any trade or sales activities. ROs are limited to market research activities, obtaining information on potential clients, developing trade contacts, and gathering information on regulations and laws. Foreign investors can own 100% of an RO. (Source: ASEAN Briefing)

Q: How can I find a distributor in Vietnam?

Athena: There are several ways to find a distributor in Vietnam. You can conduct an online search, but this can be risky. Business matchmaking services can connect you with local distributors that meet your specific requirements and provide analysis and insights into the market. Connecting with local associations, such as the American Chamber of Commerce Vietnam (AmCham Vietnam) or the European Chamber of Commerce (Eurocham Vietnam), can also be helpful. Finally, networking events and word of mouth can be a great way to meet like-minded business owners for advice.

Diagram of the Week: Jakartans are as rich as Aussies

Jakarta GDP per capita: USD 61,488

Australia GDP per capita: USD 62,625