ASEAN Market Watch: Philippines Manufacturing, Cambodia Agriculture, and Indonesia’s Textile Industry
Philippines: Manufacturing Continues in Upward Trajectory
Philippines registered a Purchasing Managers’ Index (PMI) of 56.5 in October, suggesting a continued expansion in the manufacturing sector. PMI measures the health of the manufacturing sector, and a reading of 50 and above indicates improvement in business conditions, while a score below that indicates deterioration. Manufacturing activity showed strong growth due to strong domestic demand for new orders. In addition, export sales also contributed to strong operating conditions. Further improvement in purchasing and employment, with continued stock building is likely to continue to help the sector.
The Philippines lead the region by a wide margin, followed by Vietnam. Nevertheless, analysts have stated that the continued depreciation of the Philippine Peso is likely to increase the average cost for manufacturing companies and reduce profits. Expensive raw materials used in production and the rise in prices of imported crude oil will also contribute to increased costs. Still, strong demand has allowed manufacturers to raise prices to keep up with costs. Proposed increases in public spending is also expected to give an additional boost to the manufacturing sector in the near term.
Cambodia Signs Agreement with Chinese Company on Agricultural Development
Cambodia signed a Memorandum of Understanding (MoU) with a Chinese company on agricultural development. The company will invest around US$2 billion in constructing a 300-hectare special economic zone (SEZ) in Kampong Speu province. The zone will contain storage facilities, packaging factories, and factories for processing agricultural products. The company is also expected to advise farmers to grow crops that are in demand in the Chinese market.
The company will also cooperate with the Agriculture, Forestry and Fishery Ministry to build an Agricultural Research and Development Center and a Center for Sanitary and Phytosanitary Control. This will also help to attract more Chinese investment in the SEZ. In addition, the agreement is expected to boost Cambodian agricultural exports to the international market with a focus on China.
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Indonesia: Government to Boost Textile Industry
Indonesia’s government is preparing several incentives in a bid to boost the textile sector. Analysts have stated that as the sector grows, it will become more important to source raw materials locally which will need to be backed by investment and technology. The government plans to extend tax breaks by lowering value added taxes on raw materials locally which will make production costs lower. Gas prices are also expected to be lowered.
Textile producers are also hoping the government will make a trade deal with the EU which will help Indonesia compete with other countries, particularly China and Vietnam. The government has stated that a Comprehensive Economic Partnership Agreement (CEPA) with the EU is expected to be in place by 2018. At present, the EU is Indonesia’s fourth-largest trading partner and imposes duties in the range of 11 to 30 percent on textile imports. Textile exports totaled US$12.3 billion, accounting for 1.2 percent of the country’s GDP in 2015. The government aims to make the country a top five global textile exporter, up from its present ranking of 10th.
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