November 18, 2024 • 21 mins
In this episode, Michelle welcomes listeners and introduces the top stories affecting emerging markets. She provides an in-depth analysis of Thailand's economic growth, recent rate cuts, and the country's economic outlook. The discussion then moves to the Philippines' CREATE MORE Act, exploring its potential implications. Michelle examines the ASEAN Digital Economy Framework Agreement (DEFA) and its significance for regional economies. The episode assesses the impact of a stronger US dollar on emerging markets and discusses strategic adjustments these markets are making in response. The episode concludes with a wrap-up and a mention of the sponsor.
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Transcript
Episode Transcript
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(00:00):
Welcome back to the Emerging Markets DailyBrief, bringing you the latest trends,
investment insights, and economic updates fromLatin America, Southeast Asia, and beyond.
I’m your host, AI Michelle, and this is aMagicPod production by PodcastAI.
Here are our top stories today...
(00:22):
First, the Thai baht gains as gross domesticproduct growth beats estimates, while Asian
foreign exchange markets start the week on amuted note.
Second, the Philippines refines its taxpolicies with the CREATE MORE Act.
Third, the ASEAN Digital Economy FrameworkAgreement is set to envision a future-ready
(00:43):
region.
Lastly, not only China, but India and otheremerging markets are expected to feel the pinch
of a stronger dollar, according to MitulKotecha.
Our first story today focuses on Thailand wherethe Thai baht has seen gains following the
country's better-than-expected gross domesticproduct growth figures.
According to a recent report, Thailand'seconomy expanded at a faster pace than
(01:07):
anticipated, primarily driven by robust exportperformance.
This economic momentum has provided a lift tothe Thai baht, which appreciated against the
United States dollar, reflecting positivesentiment among investors.
Despite this growth, there are still underlyingpressures on the Bank of Thailand to consider
(01:28):
rate cuts.
The central bank faces the challenge ofbalancing economic recovery with controlling
inflation and maintaining currency stability.
Analysts are closely watching how the Bank ofThailand will navigate these pressures,
especially as other Asian currencies havestarted the week on a subdued note, indicating
(01:48):
broader regional economic uncertainties.
The stronger-than-expected gross domesticproduct figures are a testament to Thailand's
resilience in the face of global economicchallenges.
However, the country's policymakers must remainvigilant, as external factors such as
fluctuating global demand and geopoliticaltensions could impact future economic
(02:10):
performance.
The Thai baht's recent gains are a positivesign, but sustained economic growth will depend
on strategic policy decisions and continuedexport strength.
Our next story delves deeper into the economiclandscape of Thailand.
The Thai economy has shown remarkableresilience, expanding faster than expected in
(02:33):
the third quarter, thanks to a surge in exportsand government spending.
According to the National Economic and SocialDevelopment Council, the gross domestic product
rose by 3.0% from a year earlier.
This performance exceeded the median estimateof 2.4% in a Bloomberg News survey and marked a
(02:55):
significant improvement from the revised 2.2%growth in the second quarter.
This robust growth, however, comes with its setof challenges.
Despite the impressive numbers, Thailand'sannual economic expansion still lags behind
that of its regional peers, such as Indonesiaand Malaysia.
(03:16):
Indonesia recently reported a quarterly growthof 4.95%, while Malaysia's gross domestic
product increased by 5.3% in the same period.
To address this, the Thai government, under theleadership of Prime Minister Paetongtarn
Shinawatra, is considering additional stimulusmeasures, including possible cash handouts, to
(03:38):
sustain the recovery into the next year.
Government spending is projected to be theprimary driver of economic growth in 2025,
complementing efforts to boost privateconsumption and tourism.
The National Economic and Social DevelopmentCouncil's chief, Danucha Pichayanan, emphasized
the role of cash handouts in stimulating theeconomy in the fourth quarter.
(04:02):
Despite these efforts, the Thai baht remainedrelatively unchanged, while the benchmark stock
index experienced a modest gain following thepositive growth data.
Looking ahead, the Thai government is expectedto continue its push for lower borrowing costs.
Tamara Mast Henderson, an economist withBloomberg Economics, highlighted that despite
(04:24):
the growth figures, household spending hasdecelerated, which may justify the pressure for
rate cuts.
Although the Bank of Thailand is likely to keeprates unchanged in December, the central bank's
recent unexpected rate cut—the first since2020—suggests a readiness to adjust monetary
policy as needed.
The National Economic and Social DevelopmentCouncil forecasts a full-year gross domestic
(04:49):
product growth of 2.6% for this year, with anexpected expansion of 2.3% to 3.3% for 2025.
However, there are potential headwinds, such asthe trade policies of United States
President-elect Donald Trump, which couldintroduce uncertainties due to trade barriers.
(05:10):
Additionally, household debt remains a concern,although upcoming debt relief measures might
alleviate some pressure.
On the positive side, public investmentrebounded in the third quarter, growing by over
25% after several quarters of decline.
This surge in public investment, coupled withfavorable growth in exports of goods and
(05:31):
services, underpins the economic recovery.
Export items such as rice, rubber, computers,and telecommunications equipment saw increased
values, while automotive, petroleum products,and electrical appliances experienced declines.
In summary, while Thailand's economy is showingsigns of robust recovery, the path ahead
(05:54):
requires careful navigation of both domesticand international challenges.
The government's strategic fiscal measures andthe central bank's monetary policies will play
crucial roles in sustaining this momentum andaddressing the underlying pressures in
household consumption and private investment.
(06:14):
In our next story, we turn our attention to thePhilippines, where the government has recently
approved a significant piece of legislationknown as the CREATE MORE Act.
Officially titled the Tax Incentives forEnterprises to Maximize Opportunities for
Reinvigorating the Economy Act, this new lawaims to make the Philippines a more attractive
destination for foreign investment as SoutheastAsian countries compete to bolster their
(06:39):
economic recovery in the post-pandemic era.
The CREATE MORE Act builds upon the foundationsof the 2021 Corporate Recovery and Tax
Incentives for Enterprises Act by introducingseveral key enhancements to the country's tax
incentive framework.
Among the most notable changes is theintroduction of a 20 percent corporate income
(06:59):
tax rate for Registered Business Enterprisesunder the Enhanced Deductions Regime.
This reduced rate applies to taxable incomederived from registered projects or activities,
effectively lowering the overall taxliabilities for businesses.
This legislative move aligns the Philippineswith the Organization for Economic Co-operation
and Development's Global Minimum Taxrequirement of 15 percent, ensuring that the
(07:24):
country remains competitive on the globalstage.
Businesses can also benefit from enhanceddeductions on research and development,
training, and other qualifying expenses.
This amendment not only brings the Philippinesinto compliance with international standards
but also provides significant local incentivesfor businesses.
(07:45):
To further incentivize investments, the CREATEMORE Act increases the range and percentage of
deductible expenses under the EnhancedDeductions Regime.
For example, additional deductions for powerexpenses have been increased to 100 percent
from the previous 50 percent.
This change is particularly appealing toenergy-intensive industries, such as
(08:09):
manufacturing and logistics, making thePhilippines a more attractive destination for
these sectors.
The Act also introduces deductions for expensesrelated to trade fairs and exhibitions,
encouraging businesses to expand their marketsboth locally and internationally.
Furthermore, companies can now carry over netoperating losses as deductions within five
(08:31):
years following the Income Tax Holiday periodof a project, rather than within the taxable
year of the loss.
These expanded deductions are designed toincentivize investment and stimulate economic
growth.
Under CREATE MORE, eligibility for taxincentives has been broadened to include both
foreign and local enterprises that meetspecific conditions.
(08:54):
This adjustment replaces the narrower focus onexport enterprises under the previous CREATE
Act, encouraging a wider range of businesses toinvest in the Philippines.
By broadening the scope, the government aims toattract strategic industries that can drive
economic growth and create jobs.
Another significant change is the extension ofthe maximum period for tax incentives to 27
(09:18):
years, up from the 17 years provided underCREATE.
This long-term benefit is intended to givebusinesses more time to recover their
investments and realize profits, thus makingthe Philippines a more attractive destination
for large-scale, high-value projects.
The CREATE MORE Act also addresses ambiguitiesin the Value-Added Tax provisions under the
(09:42):
previous act, specifying the goods and serviceseligible for VAT exemptions and zero-rating.
Eligible items now include janitorial andsecurity services, financial and consultancy
services, as well as marketing, promotional,and administrative operations.
Moreover, special provisions have beenintroduced for high-value domestic market
(10:05):
enterprises.
These enterprises, which boast investmentcapital of at least 15 billion Philippine pesos
or export sales of at least 100 million UnitedStates dollars, enjoy enhanced zero percent VAT
on local purchases and VAT exemptions onimports.
These incentives are expected to attractsignificant investments in infrastructure,
(10:28):
heavy industries, and export-orientedmanufacturing.
Simplification of local taxation is another keyfeature of the CREATE MORE Act.
The law imposes a local tax of up to 2 percentof gross income for Registered Business
Enterprises during their Income Tax Holiday orEnhanced Deductions Regime period.
(10:48):
This replaces various local taxes and fees,thereby reducing administrative burdens and
allowing businesses to focus on theiroperations rather than navigating complex tax
requirements.
In summary, the CREATE MORE Act is poised totransform the Philippine business landscape by
making it more attractive for both foreign andlocal investors.
(11:09):
With its globally competitive tax rates andstreamlined incentives, the law addresses
long-standing concerns about the complexity ofthe country's tax system.
Enhanced deductions for energy expenses and VATrelief for export-oriented enterprises are
expected to attract businesses inenergy-intensive sectors, stimulating
innovation, increasing production capacity, andenhancing the Philippines' competitiveness in
(11:33):
the global market.
Today, we're diving into the ASEAN DigitalEconomy Framework Agreement, or DEFA, which is
shaping up to be a cornerstone for digitaltransformation across Southeast Asia.
The framework aims to enhance economicintegration, bolster competitiveness, and
promote sustainable development throughout theregion.
(11:55):
Negotiations for DEFA are currently in theirsecond year, with expectations running high for
what this agreement could achieve by 2030.
DEFA is part of the "Acceleration Phase" of theBandar Seri Begawan Roadmap, which seeks to
expedite trade, improve interoperability, andcreate a safer, more inclusive digital
(12:15):
environment for businesses and consumers alike.
A study commissioned to inform the negotiationshas projected that a fully realized DEFA could
potentially double the region's digital economyto two trillion dollars by 2030.
This ambitious goal underscores the importanceof establishing progressive rules across nine
(12:36):
key areas, including digital trade, e-commerce,cybersecurity, cross-border data flows, data
protection, and emerging technologies likeartificial intelligence.
Ms.
Prewprae Chumrum, Chair of the ASEAN DEFANegotiating Committee and Executive Director of
the Bureau of Trade in Services and InvestmentNegotiations at the Ministry of Commerce of
(13:01):
Thailand, has shared her insights on DEFA'stransformative potential.
She highlights the strong political will andcollective commitment from ASEAN leaders and
economic ministers to craft a forward-looking,high-standard agreement that responds to the
rapidly changing digital landscape.
(13:21):
The primary goal is to build on existingframeworks and set new standards for digital
cooperation.
To unlock the goal of a two trillion dollardigital economy, several foundational enablers
need to be addressed.
Enhancing digital infrastructure is paramount,with reliable internet connectivity being
crucial for seamless cross-border digital tradeand services.
(13:46):
Advancing digital literacy and workforcereadiness is also vital, as equipping citizens
and businesses with necessary skills isfundamental to thriving in the digital age.
Harmonizing regulatory frameworks across ASEANis another key enabler, as streamlined policies
can reduce barriers and build trust betweenmember states.
(14:09):
However, aligning these enablers across such adiverse region poses challenges.
Digital infrastructure varies significantlyamong ASEAN countries, creating disparities
that must be bridged through targetedinvestments and policy alignment.
Similarly, the demand for digital talent isoutpacing supply, necessitating collaboration
(14:31):
with the private sector, educationalinstitutions, and governments to equip the
workforce with essential skills.
Regulatory harmonization remains complex, aseach ASEAN member state has its own
regulations, particularly concerning dataprivacy, digital taxes, and cybersecurity.
(14:52):
To future-proof DEFA, ASEAN recognizes the needfor flexibility in its structure.
This involves adopting "technology-neutralcommitments" that set high-level standards
while accommodating emerging technologies.
Additionally, DEFA may include review clausesand consultation mechanisms to ensure
adaptability to the evolving digital landscape.
(15:13):
These measures aim to keep the agreementrelevant and effective over time.
Balancing ambition with feasibility is crucial,given ASEAN's diversity.
While DEFA aims to be ambitious, it's essentialthat all member states are able to implement
their obligations.
This requires a pragmatic approach,incorporating flexibility and adjustment
(15:35):
mechanisms for countries that may faceimplementation challenges.
The goal is an inclusive agreement where nonation is left behind.
Although DEFA is primarily driven by economicobjectives, it could facilitate deeper
collaboration in political-security andsocio-cultural areas within ASEAN.
The frameworks established for mutual trust andshared standards could enhance cybersecurity
(15:58):
collaboration and cross-border data governance.
On a socio-cultural level, DEFA's potential toimprove digital literacy and foster
entrepreneurship could promote greaterconnectivity among the region's people.
As negotiations progress, the DEFA NegotiatingCommittee continues to engage with
(16:19):
non-governmental actors, including the privatesector, academia, and civil society.
Their insights are invaluable for understandingthe real-world impact of DEFA’s obligations and
ensuring the agreement remains relevant.
Stakeholder participation is crucial forcrafting an effective framework that meets the
needs of all involved.
(16:40):
Looking ahead to 2025, the vision for ASEAN'sdigital cooperation and integration includes
creating a vibrant, interconnected digitalecosystem that empowers individuals,
businesses, and governments.
Ensuring access to reliable, high-speedinternet is critical for participating in the
digital economy.
(17:01):
Establishing interoperable digital serviceswill facilitate cross-border commerce and data
sharing, while prioritizing cybersecurityresilience will protect critical infrastructure
and personal data.
The aim is to foster innovative ecosystems thatdrive entrepreneurship and support micro,
small, and medium enterprises, enhancingASEAN's competitiveness on the global stage.
(17:28):
In our final story today, we turn our attentionto the broader implications of a strengthening
United States dollar, as highlighted by MitulKotecha, Head of Forex and Emerging Markets
Macro Strategy Asia at Barclays.
As the dollar gains strength, its effects arebeing felt not only in China and India but
across various emerging markets.
(17:50):
The rising dollar, coupled with increasingUnited States yields, is drawing capital away
from these regions.
This shift is not just a theoretical concern;it's a tangible reality as foreign investors
are already exiting markets like India, drivenby fears of slowing growth and uncertainties in
central bank leadership.
(18:12):
India, in particular, is bracing for potentialchallenges with the impending retirement of its
central bank governor, Shaktikanta Das, onDecember 10, 2024.
Meanwhile, China is also feeling the pressureof a stronger dollar.
Despite initial optimism surrounding itsstimulus measures, the reality has been
(18:33):
underwhelming.
The recent National People's Congress meetingrevealed a net six trillion yuan debt swap
without substantial action in critical areassuch as the property sector or consumer
spending.
This has led to a reevaluation of China'seconomic outlook as the country awaits further
developments from the incoming United Statesadministration under President-elect Donald
(18:54):
Trump.
The strong dollar is acting like a vacuum,pulling money towards the United States due to
expectations of tax cuts and fiscal expansion.
This dynamic is leaving emerging marketsvulnerable to capital outflows and financial
instability.
The situation is exacerbated by the UnitedStates' economic resilience, which continues to
(19:16):
attract global investment, furtherstrengthening the dollar and putting pressure
on other currencies, including the Chineseyuan.
As we look ahead, the December work conferencein China and the March National People's
Congress meeting are pivotal moments that mayprovide further clarity on China's economic
strategy.
(19:36):
However, for now, the optimism that once buoyedChinese equities is waning, and the pressure on
the yuan continues to mount amidst a strongdollar environment.
The broader emerging market spectrum is alsofacing challenges.
As the dollar remains strong, it's not justChina and India that are affected, but other
(19:57):
emerging markets as well, including those inSoutheast Asia and Latin America.
These regions must navigate the complexities ofa shifting global financial landscape, where
the strength of the United States economy playsa central role.
While the United States benefits from thisenvironment, with its equity markets and
economic indicators reflecting strength, otherregions must prepare for potential volatility
(20:22):
and outflows.
The path forward for emerging markets involvesstrategic policy adjustments and a focus on
maintaining economic stability amidst externalpressures.
That wraps up today’s update on EmergingMarkets Daily.
If you enjoyed staying informed on the latesttrends and opportunities across Latin America,
(20:42):
Southeast Asia, and beyond, be sure tosubscribe or follow so you never miss an
episode.
And don’t forget to click the link in the shownotes to learn more about MagicPod by
PodcastAI.
Stay connected with the world of emergingmarkets!
Welcome back to the Emerging Markets DailyBrief, bringing you the latest trends,
investment insights, and economic updates fromLatin America, Southeast Asia, and beyond.
I’m your host, AI Michelle, and this is aMagicPod production by PodcastAI.
Here are our top stories today...
(00:22):
First, the Thai baht gains as gross domesticproduct growth beats estimates, while Asian
foreign exchange markets start the week on amuted note.
Second, the Philippines refines its taxpolicies with the CREATE MORE Act.
Third, the ASEAN Digital Economy FrameworkAgreement is set to envision a future-ready
(00:43):
region.
Lastly, not only China, but India and otheremerging markets are expected to feel the pinch
of a stronger dollar, according to MitulKotecha.
Our first story today focuses on Thailand wherethe Thai baht has seen gains following the
country's better-than-expected gross domesticproduct growth figures.
According to a recent report, Thailand'seconomy expanded at a faster pace than
(01:07):
anticipated, primarily driven by robust exportperformance.
This economic momentum has provided a lift tothe Thai baht, which appreciated against the
United States dollar, reflecting positivesentiment among investors.
Despite this growth, there are still underlyingpressures on the Bank of Thailand to consider
(01:28):
rate cuts.
The central bank faces the challenge ofbalancing economic recovery with controlling
inflation and maintaining currency stability.
Analysts are closely watching how the Bank ofThailand will navigate these pressures,
especially as other Asian currencies havestarted the week on a subdued note, indicating
(01:48):
broader regional economic uncertainties.
The stronger-than-expected gross domesticproduct figures are a testament to Thailand's
resilience in the face of global economicchallenges.
However, the country's policymakers must remainvigilant, as external factors such as
fluctuating global demand and geopoliticaltensions could impact future economic
(02:10):
performance.
The Thai baht's recent gains are a positivesign, but sustained economic growth will depend
on strategic policy decisions and continuedexport strength.
Our next story delves deeper into the economiclandscape of Thailand.
The Thai economy has shown remarkableresilience, expanding faster than expected in
(02:33):
the third quarter, thanks to a surge in exportsand government spending.
According to the National Economic and SocialDevelopment Council, the gross domestic product
rose by 3.0% from a year earlier.
This performance exceeded the median estimateof 2.4% in a Bloomberg News survey and marked a
(02:55):
significant improvement from the revised 2.2%growth in the second quarter.
This robust growth, however, comes with its setof challenges.
Despite the impressive numbers, Thailand'sannual economic expansion still lags behind
that of its regional peers, such as Indonesiaand Malaysia.
(03:16):
Indonesia recently reported a quarterly growthof 4.95%, while Malaysia's gross domestic
product increased by 5.3% in the same period.
To address this, the Thai government, under theleadership of Prime Minister Paetongtarn
Shinawatra, is considering additional stimulusmeasures, including possible cash handouts, to
(03:38):
sustain the recovery into the next year.
Government spending is projected to be theprimary driver of economic growth in 2025,
complementing efforts to boost privateconsumption and tourism.
The National Economic and Social DevelopmentCouncil's chief, Danucha Pichayanan, emphasized
the role of cash handouts in stimulating theeconomy in the fourth quarter.
(04:02):
Despite these efforts, the Thai baht remainedrelatively unchanged, while the benchmark stock
index experienced a modest gain following thepositive growth data.
Looking ahead, the Thai government is expectedto continue its push for lower borrowing costs.
Tamara Mast Henderson, an economist withBloomberg Economics, highlighted that despite
(04:24):
the growth figures, household spending hasdecelerated, which may justify the pressure for
rate cuts.
Although the Bank of Thailand is likely to keeprates unchanged in December, the central bank's
recent unexpected rate cut—the first since2020—suggests a readiness to adjust monetary
policy as needed.
The National Economic and Social DevelopmentCouncil forecasts a full-year gross domestic
(04:49):
product growth of 2.6% for this year, with anexpected expansion of 2.3% to 3.3% for 2025.
However, there are potential headwinds, such asthe trade policies of United States
President-elect Donald Trump, which couldintroduce uncertainties due to trade barriers.
(05:10):
Additionally, household debt remains a concern,although upcoming debt relief measures might
alleviate some pressure.
On the positive side, public investmentrebounded in the third quarter, growing by over
25% after several quarters of decline.
This surge in public investment, coupled withfavorable growth in exports of goods and
(05:31):
services, underpins the economic recovery.
Export items such as rice, rubber, computers,and telecommunications equipment saw increased
values, while automotive, petroleum products,and electrical appliances experienced declines.
In summary, while Thailand's economy is showingsigns of robust recovery, the path ahead
(05:54):
requires careful navigation of both domesticand international challenges.
The government's strategic fiscal measures andthe central bank's monetary policies will play
crucial roles in sustaining this momentum andaddressing the underlying pressures in
household consumption and private investment.
(06:14):
In our next story, we turn our attention to thePhilippines, where the government has recently
approved a significant piece of legislationknown as the CREATE MORE Act.
Officially titled the Tax Incentives forEnterprises to Maximize Opportunities for
Reinvigorating the Economy Act, this new lawaims to make the Philippines a more attractive
destination for foreign investment as SoutheastAsian countries compete to bolster their
(06:39):
economic recovery in the post-pandemic era.
The CREATE MORE Act builds upon the foundationsof the 2021 Corporate Recovery and Tax
Incentives for Enterprises Act by introducingseveral key enhancements to the country's tax
incentive framework.
Among the most notable changes is theintroduction of a 20 percent corporate income
(06:59):
tax rate for Registered Business Enterprisesunder the Enhanced Deductions Regime.
This reduced rate applies to taxable incomederived from registered projects or activities,
effectively lowering the overall taxliabilities for businesses.
This legislative move aligns the Philippineswith the Organization for Economic Co-operation
and Development's Global Minimum Taxrequirement of 15 percent, ensuring that the
(07:24):
country remains competitive on the globalstage.
Businesses can also benefit from enhanceddeductions on research and development,
training, and other qualifying expenses.
This amendment not only brings the Philippinesinto compliance with international standards
but also provides significant local incentivesfor businesses.
(07:45):
To further incentivize investments, the CREATEMORE Act increases the range and percentage of
deductible expenses under the EnhancedDeductions Regime.
For example, additional deductions for powerexpenses have been increased to 100 percent
from the previous 50 percent.
This change is particularly appealing toenergy-intensive industries, such as
(08:09):
manufacturing and logistics, making thePhilippines a more attractive destination for
these sectors.
The Act also introduces deductions for expensesrelated to trade fairs and exhibitions,
encouraging businesses to expand their marketsboth locally and internationally.
Furthermore, companies can now carry over netoperating losses as deductions within five
(08:31):
years following the Income Tax Holiday periodof a project, rather than within the taxable
year of the loss.
These expanded deductions are designed toincentivize investment and stimulate economic
growth.
Under CREATE MORE, eligibility for taxincentives has been broadened to include both
foreign and local enterprises that meetspecific conditions.
(08:54):
This adjustment replaces the narrower focus onexport enterprises under the previous CREATE
Act, encouraging a wider range of businesses toinvest in the Philippines.
By broadening the scope, the government aims toattract strategic industries that can drive
economic growth and create jobs.
Another significant change is the extension ofthe maximum period for tax incentives to 27
(09:18):
years, up from the 17 years provided underCREATE.
This long-term benefit is intended to givebusinesses more time to recover their
investments and realize profits, thus makingthe Philippines a more attractive destination
for large-scale, high-value projects.
The CREATE MORE Act also addresses ambiguitiesin the Value-Added Tax provisions under the
(09:42):
previous act, specifying the goods and serviceseligible for VAT exemptions and zero-rating.
Eligible items now include janitorial andsecurity services, financial and consultancy
services, as well as marketing, promotional,and administrative operations.
Moreover, special provisions have beenintroduced for high-value domestic market
(10:05):
enterprises.
These enterprises, which boast investmentcapital of at least 15 billion Philippine pesos
or export sales of at least 100 million UnitedStates dollars, enjoy enhanced zero percent VAT
on local purchases and VAT exemptions onimports.
These incentives are expected to attractsignificant investments in infrastructure,
(10:28):
heavy industries, and export-orientedmanufacturing.
Simplification of local taxation is another keyfeature of the CREATE MORE Act.
The law imposes a local tax of up to 2 percentof gross income for Registered Business
Enterprises during their Income Tax Holiday orEnhanced Deductions Regime period.
(10:48):
This replaces various local taxes and fees,thereby reducing administrative burdens and
allowing businesses to focus on theiroperations rather than navigating complex tax
requirements.
In summary, the CREATE MORE Act is poised totransform the Philippine business landscape by
making it more attractive for both foreign andlocal investors.
(11:09):
With its globally competitive tax rates andstreamlined incentives, the law addresses
long-standing concerns about the complexity ofthe country's tax system.
Enhanced deductions for energy expenses and VATrelief for export-oriented enterprises are
expected to attract businesses inenergy-intensive sectors, stimulating
innovation, increasing production capacity, andenhancing the Philippines' competitiveness in
(11:33):
the global market.
Today, we're diving into the ASEAN DigitalEconomy Framework Agreement, or DEFA, which is
shaping up to be a cornerstone for digitaltransformation across Southeast Asia.
The framework aims to enhance economicintegration, bolster competitiveness, and
promote sustainable development throughout theregion.
(11:55):
Negotiations for DEFA are currently in theirsecond year, with expectations running high for
what this agreement could achieve by 2030.
DEFA is part of the "Acceleration Phase" of theBandar Seri Begawan Roadmap, which seeks to
expedite trade, improve interoperability, andcreate a safer, more inclusive digital
(12:15):
environment for businesses and consumers alike.
A study commissioned to inform the negotiationshas projected that a fully realized DEFA could
potentially double the region's digital economyto two trillion dollars by 2030.
This ambitious goal underscores the importanceof establishing progressive rules across nine
(12:36):
key areas, including digital trade, e-commerce,cybersecurity, cross-border data flows, data
protection, and emerging technologies likeartificial intelligence.
Ms.
Prewprae Chumrum, Chair of the ASEAN DEFANegotiating Committee and Executive Director of
the Bureau of Trade in Services and InvestmentNegotiations at the Ministry of Commerce of
(13:01):
Thailand, has shared her insights on DEFA'stransformative potential.
She highlights the strong political will andcollective commitment from ASEAN leaders and
economic ministers to craft a forward-looking,high-standard agreement that responds to the
rapidly changing digital landscape.
(13:21):
The primary goal is to build on existingframeworks and set new standards for digital
cooperation.
To unlock the goal of a two trillion dollardigital economy, several foundational enablers
need to be addressed.
Enhancing digital infrastructure is paramount,with reliable internet connectivity being
crucial for seamless cross-border digital tradeand services.
(13:46):
Advancing digital literacy and workforcereadiness is also vital, as equipping citizens
and businesses with necessary skills isfundamental to thriving in the digital age.
Harmonizing regulatory frameworks across ASEANis another key enabler, as streamlined policies
can reduce barriers and build trust betweenmember states.
(14:09):
However, aligning these enablers across such adiverse region poses challenges.
Digital infrastructure varies significantlyamong ASEAN countries, creating disparities
that must be bridged through targetedinvestments and policy alignment.
Similarly, the demand for digital talent isoutpacing supply, necessitating collaboration
(14:31):
with the private sector, educationalinstitutions, and governments to equip the
workforce with essential skills.
Regulatory harmonization remains complex, aseach ASEAN member state has its own
regulations, particularly concerning dataprivacy, digital taxes, and cybersecurity.
(14:52):
To future-proof DEFA, ASEAN recognizes the needfor flexibility in its structure.
This involves adopting "technology-neutralcommitments" that set high-level standards
while accommodating emerging technologies.
Additionally, DEFA may include review clausesand consultation mechanisms to ensure
adaptability to the evolving digital landscape.
(15:13):
These measures aim to keep the agreementrelevant and effective over time.
Balancing ambition with feasibility is crucial,given ASEAN's diversity.
While DEFA aims to be ambitious, it's essentialthat all member states are able to implement
their obligations.
This requires a pragmatic approach,incorporating flexibility and adjustment
(15:35):
mechanisms for countries that may faceimplementation challenges.
The goal is an inclusive agreement where nonation is left behind.
Although DEFA is primarily driven by economicobjectives, it could facilitate deeper
collaboration in political-security andsocio-cultural areas within ASEAN.
The frameworks established for mutual trust andshared standards could enhance cybersecurity
(15:58):
collaboration and cross-border data governance.
On a socio-cultural level, DEFA's potential toimprove digital literacy and foster
entrepreneurship could promote greaterconnectivity among the region's people.
As negotiations progress, the DEFA NegotiatingCommittee continues to engage with
(16:19):
non-governmental actors, including the privatesector, academia, and civil society.
Their insights are invaluable for understandingthe real-world impact of DEFA’s obligations and
ensuring the agreement remains relevant.
Stakeholder participation is crucial forcrafting an effective framework that meets the
needs of all involved.
(16:40):
Looking ahead to 2025, the vision for ASEAN'sdigital cooperation and integration includes
creating a vibrant, interconnected digitalecosystem that empowers individuals,
businesses, and governments.
Ensuring access to reliable, high-speedinternet is critical for participating in the
digital economy.
(17:01):
Establishing interoperable digital serviceswill facilitate cross-border commerce and data
sharing, while prioritizing cybersecurityresilience will protect critical infrastructure
and personal data.
The aim is to foster innovative ecosystems thatdrive entrepreneurship and support micro,
small, and medium enterprises, enhancingASEAN's competitiveness on the global stage.
(17:28):
In our final story today, we turn our attentionto the broader implications of a strengthening
United States dollar, as highlighted by MitulKotecha, Head of Forex and Emerging Markets
Macro Strategy Asia at Barclays.
As the dollar gains strength, its effects arebeing felt not only in China and India but
across various emerging markets.
(17:50):
The rising dollar, coupled with increasingUnited States yields, is drawing capital away
from these regions.
This shift is not just a theoretical concern;it's a tangible reality as foreign investors
are already exiting markets like India, drivenby fears of slowing growth and uncertainties in
central bank leadership.
(18:12):
India, in particular, is bracing for potentialchallenges with the impending retirement of its
central bank governor, Shaktikanta Das, onDecember 10, 2024.
Meanwhile, China is also feeling the pressureof a stronger dollar.
Despite initial optimism surrounding itsstimulus measures, the reality has been
(18:33):
underwhelming.
The recent National People's Congress meetingrevealed a net six trillion yuan debt swap
without substantial action in critical areassuch as the property sector or consumer
spending.
This has led to a reevaluation of China'seconomic outlook as the country awaits further
developments from the incoming United Statesadministration under President-elect Donald
(18:54):
Trump.
The strong dollar is acting like a vacuum,pulling money towards the United States due to
expectations of tax cuts and fiscal expansion.
This dynamic is leaving emerging marketsvulnerable to capital outflows and financial
instability.
The situation is exacerbated by the UnitedStates' economic resilience, which continues to
(19:16):
attract global investment, furtherstrengthening the dollar and putting pressure
on other currencies, including the Chineseyuan.
As we look ahead, the December work conferencein China and the March National People's
Congress meeting are pivotal moments that mayprovide further clarity on China's economic
strategy.
(19:36):
However, for now, the optimism that once buoyedChinese equities is waning, and the pressure on
the yuan continues to mount amidst a strongdollar environment.
The broader emerging market spectrum is alsofacing challenges.
As the dollar remains strong, it's not justChina and India that are affected, but other
(19:57):
emerging markets as well, including those inSoutheast Asia and Latin America.
These regions must navigate the complexities ofa shifting global financial landscape, where
the strength of the United States economy playsa central role.
While the United States benefits from thisenvironment, with its equity markets and
economic indicators reflecting strength, otherregions must prepare for potential volatility
(20:22):
and outflows.
The path forward for emerging markets involvesstrategic policy adjustments and a focus on
maintaining economic stability amidst externalpressures.
That wraps up today’s update on EmergingMarkets Daily.
If you enjoyed staying informed on the latesttrends and opportunities across Latin America,
(20:42):
Southeast Asia, and beyond, be sure tosubscribe or follow so you never miss an
episode.
And don’t forget to click the link in the shownotes to learn more about MagicPod by
PodcastAI.
Stay connected with the world of emergingmarkets!
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