Johor-Singapore SEZ, Indonesia's Growth, and HSBC's Projections for Southeast Asia

In this episode, Michelle welcomes listeners and provides an overview of the top stories in Southeast Asian markets. She delves into the Johor-Singapore Special Economic Zone, discussing its prospects, challenges, and strategic objectives. The focus then shifts to Indonesia's economic growth, highlighting efforts to enhance the manufacturing chain and export offerings. Michelle examines the impact of free trade agreements and BRICS membership on Indonesia. She also discusses HSBC's global economic growth projections and their implications for Southeast Asia. Finally, the episode explores Indonesia's nickel industry, assessing its global supply impact and potential output changes. The episode concludes with a call to action for listeners.

Episode Transcript

(00:00):
Welcome back to the Southeast Asia MarketsDaily Brief.
I’m your host, AI Michelle.
Here are our top stories today...
First, Rafizi Ramli discusses how theJohor-Singapore Special Economic Zone could add
RM125 billion yearly to Malaysia's grossdomestic product, setting it up to rival Klang

(00:21):
Valley within a decade.
Second, Indonesia's economy shows potential togrow 8 percent if structural reforms are
thoroughly implemented.
Third, a move by Indonesia regarding nickel mayreduce the global supply by 35 percent,
according to Macquarie.
Today, we're diving deep into the excitingprospects of the Johor-Singapore Special

(00:45):
Economic Zone, or JS-SEZ, as unveiled byMalaysia's Economy Minister, Rafizi Ramli.
The initiative is projected to contribute animpressive RM125 billion, or approximately 28
billion United States dollars, to Malaysia'sgross domestic product annually over the next

(01:06):
ten years.
Such a contribution positions the JS-SEZ as aformidable economic force, potentially rivaling
the well-established Klang Valley in economicsignificance.
During a recent fireside chat at the MalaysiaEconomic Forum, Minister Rafizi highlighted the
unique challenges and opportunities presentedby the JS-SEZ.

(01:29):
He emphasized the complementary economicelements of Johor in Malaysia and Singapore,
which together offer compelling valuepropositions to global investors.
This is especially pertinent as internationalcompanies navigate the intricacies of the
geopolitical landscape and seek robust supplychain solutions.
The Johor-Singapore Special Economic Zone aimsto become a regional powerhouse by fostering

(01:53):
investments, creating job opportunities, andencouraging sustainable development.
Its strategic objectives include attractingboth local and foreign investments, boosting
industrial capacity, enhancing infrastructure,and driving technological innovation while
maintaining a focus on sustainability.

(02:13):
Positioned near Singapore, the JS-SEZ leveragesits strategic location to enhance its
attractiveness as a hub for investment andinnovation.
Johor is keen to establish itself as a regionalcenter for manufacturing, logistics,
technology, and tourism.
The zone spans strategic areas across Johor,with significant developments concentrated near

(02:38):
the Johor-Singapore border, making it a pivotalarea for economic growth.
Indonesia's economy has been in the spotlightrecently with discussions centered around its
potential to achieve an 8 percent growth rate.
This ambitious target, set by President PrabowoSubianto, comes with significant challenges, as

(02:59):
highlighted by Pranjul Bhandari, the ChiefIndia and Indonesia Economist at HSBC Global
Research.
According to Bhandari, realizing this growth iscontingent upon implementing robust structural
reforms.
It's not enough to rely solely on traditionalfiscal and monetary policies; Indonesia must

(03:20):
delve deeper into structural changes to reachthese heights.
At a recent media briefing in Jakarta, Bhandariemphasized the importance of enhancing the
manufacturing value chain, particularly throughdownstreaming efforts.
He pointed out that while Indonesia has madestrides in increasing the value of its domestic
raw materials, particularly in sectors likedownstream metals, it needs to expand further

(03:44):
into global value chains, especially in theelectric vehicle battery and electric vehicle
sectors.
This diversification is crucial if Indonesia isto approach an 8 percent growth rate.
Bhandari also highlighted the potential forIndonesia to increase its export offerings,
particularly to the United States.

(04:05):
Unlike some countries, Indonesia's tradesurplus with the United States isn't
substantial enough to attract punitive tariffs,making it a promising avenue for growth.
However, to capitalize on this, Indonesia mustimprove its infrastructure and workforce
skills, creating a solid foundation for theseexpanded trade relations.

(04:26):
Another critical aspect Bhandari touched uponis the acceleration of free trade agreements
and bilateral agreements with developedcountries.
These agreements could provide Indonesia withthe necessary leverage to diversify its exports
and bolster economic growth.
In the medium term, such trade deals couldsignificantly enhance Indonesia's economic

(04:48):
landscape, providing new opportunities forgrowth and development.
With Indonesia's recent full membership intothe BRICS group—comprising Brazil, Russia,
India, China, and South Africa—Bhandari sees awealth of economic opportunities.
However, he notes that many BRICS countrieshaven't fully maximized these opportunities

(05:09):
through cooperative trade agreements.
If Indonesia can tap into this potential, itsmembership in BRICS could be a catalyst for
increasing exports and boosting its real grossdomestic product growth over time.
HSBC's projections for global economic growththis year remain steady at around 2.7 percent,

(05:30):
with Asia, excluding Japan, expected tomaintain a resilient growth rate of 4.4 percent
by 2025.
Within the Association of Southeast AsianNations, economic growth among the top six
member countries is forecasted to reach 4.8percent.
Despite the global uncertainties, HSBCestimates that Indonesia could achieve a growth

(05:55):
rate of 5.1 percent by 2025.
Now, let's turn our attention to Indonesia'snickel industry, a critical player in the
global market.
According to Macquarie Group Limited, potentialcuts to Indonesian nickel mine output could
remove more than a third of global supply,posing a significant risk to nickel prices

(06:17):
worldwide.
This move by Indonesia, the largest producer ofnickel, could have far-reaching implications
for industries reliant on this essential metal,particularly the electric vehicle battery and
stainless steel sectors.
The Indonesian government is currentlyconsidering a substantial reduction in nickel
mine quotas, potentially cutting output from272 million tons in 2024 to as low as 150

(06:44):
million tons this year.
Such a drastic cut would be about 40 percentlower than Macquarie’s base case scenario,
leading to a significant decrease in theavailability of this battery metal.
While Macquarie views cuts of this magnitude asunlikely, it acknowledges that any
lower-than-expected output from Indonesiapresents an upside risk for nickel prices.

(07:08):
Last year, nickel faced its second consecutiveannual loss, primarily due to surging
Indonesian output and waning demand frombattery-makers and the stainless steel
industry.
This year, however, traders are closelywatching China's economic stimulus efforts and
the potential effects of the incoming UnitedStates administration’s tariff policies, both

(07:29):
of which could influence demand and pricingdynamics.
Indonesian mine output remains a pivotal factorfor global nickel prices.
The country's ore supply, which accounts formore than half of global production, struggled
to meet demand last year due to governmentrestrictions, resulting in record nickel
imports from the Philippines.

(07:50):
This highlights the delicate balance betweensupply and demand in the nickel market, with
Indonesia's policy decisions playing a crucialrole.
As we look forward, the potential changes inIndonesia's nickel output underscore the
importance of monitoring policy shifts andtheir implications on global markets.
The ripple effects could extend beyond justpricing, impacting supply chains and the

(08:14):
strategic planning of industries dependent onnickel.
This situation exemplifies the intricateinterplay of economic policy, global trade, and
resource management in today's interconnectedworld.
Alright that's a wrap for this episode.
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(08:35):
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Thanks again for listening, and hope to catchyou next time.