Fed, Fitch thicken plot for Asia’s economic outlook 

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TOKYO – Few policymakers in Asia, if any, are more anxious to see the US Federal Reserve halt its tightening cycle than Rhee Chang-yong in Seoul.

Data show that no major financial system in the region is getting whipsawed more by Fed interest rate hikes than South Korea’s. According to Bloomberg, investors who bet on Korean debt over the last year lost 15%, the worst in developing Asia.

This puts Governor Rhee’s team at the Bank of Korea directly on the frontlines of all 11 rate hikes Fed Chairman Jerome Powell executed over the last 17 months. It follows that the BOK is a top beneficiary of the Fed declaring it’s done tightening.

Powell hasn’t formally done that. On July 26, when the Fed raised its benchmark to roughly 5.3% from 5.1%, highest level since 2001, Powell left the door open for another tap of the brakes in September.

For all intents and purposes, though, the Fed’s most aggressive rate cycle since the mid-1990s is done. Already, US consumer prices have fallen to a 3% pace of increase from more than 9% a year ago..

The breathing room that a cessation of Fed austerity creates is stellar news for the Bank of Japan and People’s Bank of China, both under new leadership.

The Fed isn’t the only Washington variable preoccupying Asia. On Tuesday, Fitch Ratings stripped the US of its AAA rating, echoing a 2011 move by Standard & Poor’s. The step comes as the US national debt approaches US$33 trillion and lawmakers in Washington play politics with borrowing policies.

“The rating downgrade of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to ‘AA’ and ‘AAA’ rated peers over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions,” Fitch says.

These challenges come as the new leaders of the BOJ and PBOC face their own unique challenges at home. One glaring similarity, though, is that both Kazuo Ueda in Tokyo and Pan Gongsheng face the central banking equivalent of a baptism by fire.

Ueda, just 115 days in the BOJ top job, has gotten a serious wake-up call in recent days. On July 28, the BOJ announced that 10-year yields would be allowed to exceed 0.5%.

Kazuo Ueda, governor of the Bank of Japan. Photo: Wikipedia

For most central banks, it would be dismissed as a highly technical tweak to account for a widening spread between US and Japanese rates. Yet for an institution stuck in the quantitative easing matrix for 23 years now, it was nothing short of shocking in market circles.

Ueda’s team spent the last few days cleaning things up. On Monday, as 10-year yields topped 0.6% for the first time in nine years, the BOJ scrambled to buy yen to halt the rise in rates. That day alone, Ueda’s team bought in excess of US$2 billion of government bonds.

By Tuesday, BOJ officials were signaling to local media that the big policy changes aren’t assured. This sets the stage for a tug of war between the BOJ and bond traders.

“The markets are likely to test the BOJ’s resolve, as it probably will seek to engineer a gradual shift away from its [yield curve control] policy over the next year or so, while leaving the short-term rate target unchanged, as it still believes that Japan needs supportive monetary policy,” says economist Duncan Wrigley at Pantheon Macroeconomics.

Yet there’s no doubt that a BOJ’s U-turn is now in motion. That will have far-ranging implications far and wide, says economist Mathias Dollerup Sproegel at Sydbank A/S in Copenhagen.

Though Tokyo’s policy shift seems “a matter of fine-tuning” it can have “a major impact on Danish homeowners with fixed-rate loans,” he says. If the BOJ “continues to tighten monetary policy and thus allows higher and higher interest rates in Japan, this may mean that it will become more expensive to buy a home in Denmark.”

Yet the Fed wrapping up its tightening cycle buys some time for Ueda’s team in Tokyo. For one thing, the BOJ can look forward to fewer strains in local credit markets. Each Fed rate hike forces the BOJ to regulate liquidity flows accordingly. The wider the US-Japan yield gap, the more work the BOJ must do to address market dislocations.

Though few expect actual BOJ rate hikes anytime soon, less rate turbulence from the US gives Ueda space to figure out how to normalize Japanese rates. Devising a plan to withdraw from a government bond market in which the BOJ owns more than half of all outstanding issues won’t be easy.

The same goes for the stock market. During the decade Ueda’s predecessor spent running the BOJ, Haruhiko Kuroda grew its balance to the point where it topped the size of Japan’s US$5 trillion economy. During that time, the BOJ became the biggest holder of Japanese stocks via exchange traded funds.

That multi-year buying binge made the BOJ the largest holder of Japanese shares — even bigger than Japan’s US$1.4 trillion Government Pension Investment Fund, the largest such entity in the world. It also makes it hard for the BOJ to withdraw without cratering the equity market.

In recent months, the Nikkei Stock Average surged to 30-year highs. The BOJ will be loath to pull the rug out from under a rally in which Warren Buffett has played a headline-grabbing role. This unwinding process may have a greater chance of success if global debt markets are calm.

Pan Gongsheng, governor of the People’s Bank of China. Photo: Wikimedia Commons

In Beijing, Pan’s first week on the job proved supremely hectic. Pan assumed the role of PBOC governor on July 25, three days before Ueda’s big splash in global financial circles.

Tumbling home sales are adding to already extreme pressures on developers grappling with a multi-year credit crisis. News that Country Garden, a top Chinese private-sector developer, scrapped a US$300 million stock offering added to the sense of gloom hovering over the economy.

Right out of the gate, Pan confronts a worsening slowdown, an economy on the verge of deflation, a property sector in crisis, record youth unemployment and capital leaving the second-biggest economy.

This week also brought fresh reminders that manufacturing is sputtering. Activity contracted for a fourth consecutive month in July, a dynamic that makes reaching this year’s 5% growth target less and less likely. The Caixin/S&P purchasing managers index fell to 49.2 in July from 50.5 the previous month.

“Looking forward, policy support is needed to prevent China’s economy from slipping into recession, not least because external headwinds look set to persist for a while longer,” says economist Julian Evans-Pritchard at Capital Economics.

Recent data, says economist Xu Tianchen at the Economist Intelligence Unit, point to a “potential death spiral” in the real estate sector that spreads more widely around the economy.

Economist Katrina Ell at Moody’s Analytics notes that “forward indicators, including new export orders, suggest ongoing near-term weakness. Goods demand will remain soft from the US and Europe through the remainder of 2023.”

Thomas Gatley, economist at Gavekal Dragonomics, notes that there are probably two main reasons China’s manufacturers ended up holding more inventory than normal. “First,” he says, “they were concerned about disruptions in their supply chains, and wanted to hold more raw materials in case deliveries of those key inputs were halted or delayed. Second, they anticipated higher levels of consumer demand than actually materialized, which caused finished goods to pile up in warehouses.”

Explanation No. 1, Gatley says, looks most relevant to the machinery and electronics sectors, where many products are produced by complex global supply chains that were particularly vulnerable to the disruptions in global shipping which occurred during the pandemic. Inventories of raw materials held by the machinery and electronics sectors rose from around 1.15 months of sales before the pandemic to a peak of nearly 1.3 months of sales in 2022.

At the same time, China’s service sector also faced intensifying headwinds. In July, activity in the non-manufacturing sector fell to 51.5 from 53.2. Economist Robert Carnell at ING Bank notes that while mainland authorities have been vocal in their support for the economy, “so far, that has not translated into the sort of sizable fiscal policy stimulus many in the market have become used to expecting. We don’t think it’s coming.”

Carnell says that the one component that stands out from the rest, is expectations, which looks like an unrealistic outlier compared with what is going on elsewhere.

“We can only put this down to continued hope that the government will pull something out of the bag that will re-invigorate the economy,” Carnell says. “However, while we believe that a great many micro measures will be implemented to improve the functioning of the economy, including a reduction in constraints on the private sector, we aren’t at all convinced that there is a fiscal bazooka waiting to fire up the economy. So, if those expectations aren’t fulfilled and begin to wilt, then this PMI could well join the manufacturing sector in contraction.”

As China slows and Japan underperforms, officials in Beijing and Tokyo are hopeful for a quieter second half of 2023 from the external sector.

Clearly, the Fitch news throws a new wrinkle into the mix. US Treasury Secretary Janet Yellen called the downgrade “arbitrary” and “outdated.” But for officials in Japan and China, which hold the world’s largest stockpiles of US Treasury securities, the downgrade is a stark wake-up call. Tokyo is sitting on US$1.1 trillion of Treasuries, while China is stuck with more than US$870 million.

Amid extreme uncertainty, this much is true: Doubts about the dollar’s trajectory, and peak Fed rates, are a game changer in global markets, adding to the reasons for Asia investors to fasten their seatbelts. 

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A new era for DCM? | FinanceAsia

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The repercussions of recent black swan events are contributing to a new dealmaking landscape – one that continues to ebb and flow as geopolitical tensions rise and governments work to ensure that regional emissions fall.

As regulators respond to global inflation with interest rate hikes, market participants are adapting to the post-pandemic outlook, where the structural integrity of systemic lenders has been called into question; bank runs have been navigated; and a debt ceiling default, narrowly avoided.

“Volatility is the only constant,” Elaine He, head of Debt Capital Markets (DCM) Syndicate for Asia Pacific at Morgan Stanley, told FinanceAsia.

“Bond issuance has been slow as issuers wait on the sidelines because of uncertainty and the increasing rates environment,” Barclays’ head of Debt Origination, Avinash Thakur, motioned. “The biggest factor impacting dealmaking continues to be the US Federal Reserve’s tightening bias.”

“Even if there is a lot of liquidity in the market, the cost of borrowing is too high,” Singapore-based corporate practice partner at DLA Piper, Philip Lee, told FA.

“Most CFOs, CEOs or other corporate decision makers who are in their late 30s or early 40s, would not have even started their careers when interest rates were this high – in the late 1990s, or early 2000s. I suspect it will take some time for companies to adjust to this higher interest rate environment.”

But Sarah Ng, director for DCM at ANZ, holds some positivity amid current market uncertainty. She noted how recent headline events are influencing short-term market sentiment and shaping deal-focussed behaviour, for the better.

“We are seeing narrower open market windows. This has meant that issuers have had to adopt an opportunistic and nimble approach when accessing primary markets,” she offered.

“We did see a degree of caution and a flight to quality, especially post-Silicon Valley Bank (SVB) and Credit Suisse, but the sell-off was largely contained to specific bank capital products. What has been surprising, has been the speed of bounce-back in both primary and secondary market activities, with a robust pipeline of issuers and receptive investor base back in play,” she explained.

FA editorial board member and head of DCM for Asia Pacific at BNP Paribas, Manoj Agarwal, agreed that unexpected developments have made market activity very much “window-driven”.

“From an issuer perspective, being prepared and able to access markets at short notice, as and when market windows are optimal, has become important,” he said. 

Furthermore, he noted that market recovery has been much faster this year, compared to the protracted period of indecision brought about by the Covid-19 pandemic.

“Although the year has been peppered with volatility and disruption, market efficiency is also improving, helping to reduce the impact these events have on dealmaking,” he emphasised.

Going local

George Thimont, head of ESG Syndicate for Asia Pacific and leader of the regional syndicate (ex-Japan) at Crédit Agricole, observes three notable trends emerging amid the current, Asia-based dealmaking environment.

“Issuance is broadly down across the board – in spite of good demand from the investor community. From a sectoral perspective, the notable absentees are the corporates, and local market conditions in certain jurisdictions, such as South Korea, have offered good depth and pricing versus G3 currencies.”

Citing Bloomberg data, Agarwal noted that for Asia ex-Japan, 2023 year-to-date (YTD) G3 DCM volume as of mid-June was down by 35.4% year-on-year (YoY), with 2022 already down by 54% compared to the same period in 2021.

But he agreed that South Korea displays some optimism, given that its 2023 YTD deal volumes remain flat, compared to the same period in 2022.

In fact, some of the market’s larger institutions have been quite active overseas. In February, the Korea Development Bank (KDB) issued $2 billion in bonds via Singapore’s exchange (SGX) in what constituted one of the largest public market issuances by a Korean institution in recent years.

Debt from issuers such as sovereigns, supranationals and agencies (SSA) or state-owned enterprises (SOEs) has benefitted, managing director and head of Asia Pacific Debt Syndicate at Citi, Rishi Jalan, told FA. 

“We expect corporate issuance in the US dollar bond market to be a bit more robust in the second half of the year,” he explained. In the meantime, Jalan said that some issuers are selectively tapping local currency markets where financing terms are lower, such as in India, China and parts of Southeast Asia.

However, not everyone feels that Asia’s regional markets can cater to the demands of the significant dry powder at play.

“Most liquidity in the local currency market comes from the banking system,” Saurabh Dinakar, head of Fixed Income Capital Markets and Equity Linked Solutions for Asia Pacific at Morgan Stanley, told FA.

He is sceptical of the current capacity for local markets to meet the requirements of internationally minded issuers. However, he noted as an exception the samurai market, which he said had proven vibrant for some corporates with Japan-based businesses or assets.

“Larger long-term funding requirements can only be satisfied through the main offshore currencies, such as dollar securities,” he explained.

Turning to the regional initiatives that have been set up to encourage participation in Asia’s domestic markets such as Hong Kong’s Connect schemes – the most recent of which, Swap Connect, launched in May – Dinakar shared, “What we need to see is broader stability.… These developments are great, but for investors to get involved in a meaningful way, general risk-off sentiment needs to reverse.”

“There was huge optimism around reopening, post Covid-19. This has since faded as corporate earnings have disappointed and there has been no meaningful stimulus. The markets want to see policy stimulus and, as a result, corporate health improving. Performance across credit and equities will then follow.”

Sustainable momentum

One area of Asian activity that stands strong in the global arena, is ESG-related issuance.

In March, the International Capital Market Association (ICMA) published the third edition of its report on Asia’s international bond markets. The research highlighted that, in 2022, green, social, sustainability and sustainability-linked (GSSS) bonds accounted for 23% of total issuance in Asia – higher than the global ratio of 12%.

“Demand is still more than supply, and investors tend to be more buy and hold, so we’ve seen that sustainable bond issuance has been more resilient than the market as a whole,” shared Mushtaq Kapasi, managing director and chief representative for ICMA in Asia.

“ESG has come to form an integral part of the dealmaking conversation in Asia. Over 30 new ESG funds have launched here in 2023; the number of ESG-dedicated funds is up 4% YoY; and Asia makes up 11% of the global ESG fund flow as of 1Q23 – up from 5% a year ago,” said Morgan Stanley’s He. 

“The Hong Kong Special Administrative Region (HKSAR) government recently came to market as the largest green bond issuer in Asia so far this year,” she added.

Discussing the close-to-$6 billion green bond issuance, Rocky Tung, FA editorial board member, director and head of Policy Research at the Financial Services Development Council (FSDC), shared that the competitive pricing contained a variety of durations and currencies that “help construct a more effective yield curve that will set the benchmark for other issuances – public and private – to come.”

This, he explained, would not only be conducive to the development of green and sustainable finance in the region, but would specifically enrich Hong Kong’s debt capital market.

“ESG-related bonds can provide issuers with an additional selling point to attract investors,” Mark Chan, partner at Clifford Chance, told FA.

“They can demonstrate the issuer’s commitment to fighting climate change for example…. Issuers with a social agenda, such as the likes of the Hong Kong Mortgage Corporation (HKMC), can highlight their mission and objectives by issuing social bonds to enhance the investment story.”

In October last year, HKMC achieved a world first through its inaugural issuance of a dual-tranche social facility comprising Hong Kong dollar and offshore renminbi tranches, which totalled $1.44 billion.

“We are also seeing more bespoke ESG bonds such as blue and orange structures,” Chan added, referring to recent deals that the firm had advised on, including the Impact Investment Exchange’s (IIX) $50 million bond offering under its Women’s Livelihood Bond (WLB) Series; and issuance by China Merchants Bank’s London branch, of a $400 million facility – the first blue floating-rate public note to be marketed globally.

FA editorial board member and head of sustainability for HSBC’s commercial banking franchise in Asia, Sunil Veetil, noted that while Asian issuance fell in most segments, green sukuk and social bonds helped sustain momentum.

“For green debt, energy was the most financed project category in Malaysia, the Philippines, Thailand, and Vietnam, accounting for more than 50% of allocation,” he shared, citing a report by the Climate Bonds Initiative (CBI).

“In Singapore, which remains the undisputed leader of sustainable finance in Southeast Asia, around 70% of green debt went to buildings, mainly for the construction of green buildings, and to a lesser extent, for retrofits and to improve energy efficiency.”

“There continues to be regulatory support for ESG bonds, including grants provided by the Asia-based stock exchanges to list green bonds,” added Jini Lee, partner, co-division head for finance, funds and restructuring (FFR) and regional leader at Ashurst. 

A boom for private credit

Crédit Agricole’s Thimont told FA that Asian credit has remained resilient through recent global risk events. Private markets and funds are emerging as alternative sources of capital for those corporates with weaker funding lines, DLA Piper’s Lee observed.

Indeed, the further retrenchment of banks from lending has provided an opportunity for private credit players to swoop in and fill an increasingly large void. Globally, the sector has grown to account for $1.4 trillion from $500 million in 2015 and Preqin estimates that it will reach $2.3 trillion by 2027.

Once a niche asset class, investors are drawn to private credit’s floating rate nature which moves with interest rates and offers portfolio diversification.

Andrew Tan, Asia Pacific CEO for US private credit player, Muzinich & Co, earlier told FA that private credit players aim for investment returns of around 6-8% above the benchmark rate in the current environment.

The firm’s sectoral peers, including KKR, have argued that institutional investors should consider allocating as much as 10% to private credit. Alongside Blackstone and Apollo, the US global investment firm has added to its Asian private credit capabilities in recent years, while new players, including Tokyo-headquartered Softbank, have recently entered the market. In May, media reported that the Japanese tech firm sought to launch a private credit fund targetting late-stage tech startups and low double-digit returns.

Elsewhere in Japan, Blackstone recently partnered with Daiwa Securities to launch a private credit fund in the retail space, targetting individual high net worth investors (HNWIs).

Unlike in the US, where non-bank lenders now outnumber traditional financiers, “Apac remains heavily banked, so we expect to see ample room for private debt to grow in the region,” Alex Vaulkhard, client portfolio manager within Barings’ Private Credit team told FA.

He sees particular opportunity to serve the private equity (PE) space. “Although PE activity has been a bit slower in 2023, we expect activity to return, which will increase lending opportunities for private debt.”

Asia accounts for roughly $90 billion or about 6.4% of the global private credit market, according to figures cited by the Monetary Authority of Singapore (MAS) that highlight the market’s growth potential.

The biggest vehicle in Asia to date is Hong Kong-headquartered PAG’s fourth pan-Asia fund which closed in December at $2.6 billion.

However, overcrowding in some markets – notably India, where investors have amassed since new insolvency and bankruptcy laws came into force from 2016 – has made lenders increasingly compete for deals and acquiesce to “covenant-lite” structures, where investor protection is reduced.

But Tan, who is currently fundraising for Muzinich’s debut Asia Pacific fund – a mid-market credit strategy with a $500 million target, believes this only to be a problem in more developed markets such as Australia and is unlikely to become an issue in the wider region.

“If anything, the trend is in the direction of more conservative structures with increased over-collateralisation and stricter covenant protection,” he told FA.

Fundamentally, seasoned private credit participants are aware of the importance of covenant protection, so their likelihood to compromise on this is low, he added.

With monetary policies tightening at one of the fastest rates in modern history and recession looming in several markets, a key challenge for private credit is borrowers’ ability to service their debts.

“There is no doubt that default rates will go up and I would be cautious of cashflow lends with little or no asset backing,” said Christian Brehm, CEO at Sydney-headquartered private debt manager, FC Capital, calling for adequate due diligence when evaluating opportunities in the current environment.

“We would not be surprised to see an increase in default rates, but these are more likely to occur in more cyclical industries or among borrowers who have taken on too much debt in recent years,” Vaulkhard opined.

The managers suggested a tougher fundraising environment ahead, as the performance of fixed income instruments improves to offer limited partners (LPs) attractive returns.

What’s next?

The banking sector’s evolving regulatory landscape is also contributing to Asia’s changing DCM outlook.

Initially proposed as consequence of the 2008 global financial crisis (GFC) and with renewed rigour on the back of recent adversity across the banking sector, new capital requirements are set to be rolled out in the US and Europe as a final phase of Basel III. Often dubbed “Basel IV” for their magnitude, market implementation was originally scheduled for January 2023, before being delayed by a year to support the operational capacity of banks and market supervisors in response to the Covid-19 pandemic.

Experts caution that while more stringent banking regulation will challenge Asia’s traditional lending mix, it will also offer opportunity.

“There is a big amount of regulatory capital to be rolled out following the new Basel III rules, which will impact the type of debt to be issued,” said Ashurst’s Lee.

“We have been speaking to issuers who have been anticipating this uptrend as well in the coming years and are building in this scenario in their mid- to long-term treasury planning,” she added.

“Although the implementation of the Basel III final reform package was postponed in jurisdictions such as Hong Kong, those subject to it will no doubt be grappling with the new capital requirements already,” said Clifford Chance’s Chan, noting how its introduction will likely impact banks’ risk-weighted asset (RWA) portfolios.

“Aspects such as the raising of the output floor could potentially see some banks try to charge more for their lending,” he said.

Hironobu Nakamura, FA editorial board member and chief investment officer at Mizuho and Dai-Ichi Life tie-up, Asset Management One Alternative Investments (AMOAI), agreed that the new Basel reforms will lead to more scrupulous risk assessment by lenders, but how this will affect banks’ portfolio construction more concretely, remains uncertain.

“A heavy return on risk asset (Rora) requirements will likely impact banks’ risk asset allocations, region to region. [But] it is quite early to determine whether Asia is risk-off or -on at this stage, from a bank portfolio perspective.”

FA editorial board member and AMTD Group chair, Calvin Choi, proposed that if lending were to become more expensive for global players, there could be upside for regional banks.

“Updated Basel rules will impact global banks operating onshore, adding costs and making them less able to use their balance sheets. Local banks won’t have this constraint, so they will win market share,” he shared.

However, he noted that  for those Asian banks that want to participate in overseas markets, business will become more costly and compliance-heavy. “It will keep more local banks local.”

“All of this will mean a higher cost of borrowing and less capital available to banks…. It will create opportunities for non-bank lenders such as non-banking financial institutions (NBFI), family offices and private funds to fill the gap,” said DLA Piper’s Lee.

“With stricter capital requirements under ‘Basel IV’, we anticipate that bank loan funding will become more expensive for issuers. As such, we could see a return to capital market funding from issuers who have hitherto heavily relied on loan markets this year,” said ANZ’s Ng.

Choi added that this may even lead to Asia’s bond markets being viewed as more competitive than their global counterparts.

“Overall, the DCM market has become slow and stagnated,” Nakamura observed. “However, there are areas where funding is continually needed,” he said, pointing to the energy transition space as well as digital transformation. 

What exactly the new regulatory environment will mean for Asia’s market participants amid macro volatility, rising interest rates and escalating geopolitical tensions, remains unclear. But the developing outlook could offer those able to structure more creative facilities, more business; drive the advancement of Asia’s local capital markets; and support the region’s wider efforts to transition to net zero.

Proponents of private credit remain optimistic.

“Capital raising might cool down in the short-term, but the true private debt lending market is about to kick off,” said Brehm.

“We believe that there is a lot of growth ahead,” Barings’ Vaulkhard stated, sharing that conditions are likely to improve for lenders this year, with spreads widening, leverage falling, and overall credit quality enhancing. 

“We are only at the start of a multi-year growth journey,” Tan concluded.  

 

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In-depth: Exploring Hong Kong and Indonesia’s strategic potential | FinanceAsia

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Last week (July 26), Hong Kong Exchanges and Clearing Limited (HKEX) and the Indonesia Stock Exchange (IDX) signed a Memorandum of Understanding (MoU) marking strategic collaboration aimed at strengthening ties and exploring mutually beneficial opportunities across both markets.

According to the announcements, the partnership will see the exchanges meet regularly to develop new capital market products, including exchange-traded funds (ETFs) and derivatives; enable cross-border listings; and promote sustainable finance across the region, through shared best practices and the development of carbon markets.  

The releases point to the benefits made available through enhanced cooperation, including access to the international connectivity and vibrance on offer via Hong Kong’s marketplace, as well as the talent, creativity and innovative characteristics of Indonesia’s “new economy” participants.

Discussing the news, Singapore-based Clifford Chance partner, Gareth Deiner, who specialises within the firm’s South and Southeast Asian capital markets practice, shared with FinanceAsia his take on the opportunity presented by forging a deeper connection with the market that is home to world’s largest nickel supply.

“The mutually beneficial aspect of this collaboration is that it offers access to a wide pool of North Asian institutional investors and therewith, an enhanced liquidity pool.”

Shanghai and Singapore-based Clifford Chance partner, Jean Thio, acknowledged the significant number of Indonesian conglomerates that operate outside of the domestic market and seek access to North Asia’s investor community.

She highlighted her work in 2022, advising on the spin-off IPO of Chinese dairy farm operator AustAsia Group, a subsidiary of Indonesian agribusiness, Japfa, as demonstrating this point.

“International issuers look to Hong Kong as a way of accessing international institutional capital. The new collaboration complements other regional initiatives, such as Stock Connect.”

Hong Kong and China’s central banking authorities announced in May the launch of the sixth iteration of the regional bilateral scheme, the northbound channel of Swap Connect. The initiative is the first derivatives mutual market access programme globally and opens up institutional entry to China and Hong Kong’s interbank interest rate swap markets.

In terms of the current trends permeating Indonesia’s capital markets, Deiner shared, “Historically, Indonesia’s future-facing minerals – cobalt, copper and nickel – would be exported. But now these are proving key elements of Indonesia’s onshore energy transition story, as they are core components used in the manufacture of wind turbines, solar panels and electric vehicles (EVs).”

“As such, Indonesia has implemented bans on the export of unprocessed nickel ore, in order to facilitate the development of the EV supply chain onshore.”

Deiner and his team advised the underwriters of Harita Nickel’s IDR9.7 trillion IPO on the IDX in April, which media attributed to being part of a government push to privatise state-owned enterprises (SOEs).

Amit Singh, Singapore-based partner and head of Linklaters’ South and Southeast Asia capital markets practice agreed that the newly formed “super-connection” opens the door to meaningful, increased liquidity for Indonesian companies.

“Hong Kong also gains a valuable link with the growing mining and supply chain powerhouse that Indonesia is developing into,” he told FA.

“Mining, minerals and other supply chain-focussed industries are driving Indonesia’s IPO boom in 2023,” Singh explained, pointing to his involvement in Merdeka Battery’s IDR9.2 trillion ($620 million) IPO in April. The PT Merdeka Copper Gold Tbk subsidiary owns one of the largest nickel reserves globally and has a portfolio of EV battery assets across the Sulawesi region.  

“This trend is likely to continue and grow in the upcoming years, and Hong Kong is clearly seeking to position itself closely with Indonesia and its burgeoning strengths in these areas.”

Dual listings

Tjahjadi Bunjamin, Jakarta-based managing partner and head of the finance practice at Herbert Smith Freehills (HSF) partner firm, Hiswara Bunjamin & Tandjung (HBT), agreed that the MoU means that Indonesia will obtain greater access to Chinese issuers and the related international investment base.

“This is particularly important given the dominant role of Chinese companies in the EV ecosystem.”

He explained to FA that the collaboration further enables the exploration of dual listings by both parties: “Both will benefit from a more coordinated approach to listing in the two jurisdictions, as well as more clarity on listing requirements for issuers and investors.”

“Dual listings and increased regulatory cooperation will accelerate the maturation of the Indonesian capital markets, allowing them to more quickly adapt as deal sizes and investor interest and scrutiny in the market widens,” Singh added.

David Dawborn, HSF partner and senior international counsel at HBT, noted that a challenge for the partnership will involve the fact that Indonesia’s capital markets system remains primarily focussed on basic equity and debt securities.

“It could benefit from new ideas and products available through Hong Kong’s capital markets system, which is more flexible and easier to navigate in many aspects.”

In prior discussions with FA, experts have commended Indonesian regulators for their efforts to make the market’s domestic exchange more accessible and attractive as a listing destination.

In late 2021, the Indonesian financial services authority, Otoritas Jasa Keuangan (OJK), approved amendments to the listing regime to allow firms with multiple voting rites (MVR) to participate on the domestic exchange. The move signalled continued progress to bring Indonesia’s capital markets in line with other global exchanges, such as those of the US and Hong Kong, which have had dual class share frameworks in place since the 1980s.

Recent research by the Hong Kong Trade Development Council (HKTDC) citing Refinitiv data suggests that more than 70% and 25% of companies currently listed on IDX meet the minimum capital requirement for listing on Hong Kong’s GEM (which serves small and mid-sized issuers) and main board, respectively. “This implies that there is a huge potential pool of candidates for dual primary and secondary listing,” the report noted.

However, the research added that so far, “only three Indonesian companies domiciled in Indonesia are currently listed overseas, and none are listed in Hong Kong.”

Tech story

Poised to become the seventh largest global economy by 2030, Dawborn underlined Indonesia’s endeavours to become a regional leader for Southeast Asian capital markets, following its success as host of last year’s G20 summit, in Bali.

Already home to a variety of tech unicorns (companies valued at over $1 billion) including Blibli, Bukalapak, Traveloka and GoTo, Indonesia is fast-emerging as a Southeast Asian tech hub, with its internet economy expected to double in value to be worth $146 billion by 2025.

Experts suggest that Indonesia holds significant potential to elevate Asia’s prominence on the global tech stage.

“Where we are in the macroeconomic cycle, with interest rates at an all-time high following another bump by the Fed last week, the landscape is challenging – high interest rates are not the friend of the tech sector. But the minute that inflation starts to settle, I think we’re going to witness the next chapter of Indonesia’s tech story,” Deiner said.

“Traditionally, Southeast Asian companies have always thought of the US when it comes to tech, but the HKEX has worked to be increasingly accommodative for these firms and Hong Kong is starting to prove a very attractive listing venue for those active in biotech,” explained Clifford Chance’s Thio.

“So-called US stock orphan listings (where a company has no operations, investor relations or management in a particular market but chooses to list there) are becoming a real discussion point across the Asian IPO landscape. I agree that Hong Kong may become an increasingly compelling venue for tech firms. In doing so, it supports the regional sector growth story,” Deiner added.

The tech sector is also set to support Indonesia’s efforts in the sustainability space. The market published the first version of its green taxonomy in January 2022.

“The ESG frameworks and disclosure standards of listing venues have become a hot topic in the IPO execution process and in equity offering documents more generally, and the variation in ESG disclosure standards across different international markets is creating a degree of execution friction across transactions in different markets,” Deiner explained.

“I was interested to read that the exchanges highlighted ESG considerations in the MoU as this will hopefully present an opportunity for the two markets to converge on ESG standards.”

“If this leads to a greater uniformity in ESG disclosures across primary equity markets, this could really be a game changer for market activity, and would be a very exciting development to monitor,” he added.

“As Hong Kong already has more developed carbon related, ETF and derivative products and trading systems, Indonesia and the market’s investors will benefit from access to this knowhow and technology,” noted HBT’s Bunjamin.

Jakarta-based corporate partner and capital markets lead, Viska Kharisma, told FA that following the introduction of Indonesia’s Financial Services Omnibus Law in 2023, OJK has been considering marketing more types of offshore securities in Indonesia, including carbon-related instruments.

“We understand that OJK and IDX propose to issue a new carbon market trading regulation in the near future, which should facilitate access by international investors to carbon credit opportunities through Indonesian industrial and mineral companies,” she said.

Reflecting on the opportunity on offer as a result of the official partnership, Deiner shared, “Where there is a cross- or secondary listing as part of a primary offering on any two international exchanges, you’re going to have an element of friction between their respective listing standards and the requirements that one legal jurisdiction or one regulator will impose versus another – and in many ways, the art of dealmaking in large-scale equity capital market (ECM) transactions of this nature, involves getting these two pieces to fit.”

“There’s nothing particularly apparent that has created a roadblock between the markets until now, but then that’s why you have the MoU. Hopefully it will provide a robust basis to ensure that any future obstacles can be navigated or removed,” he concluded.

HKEX declined to comment beyond the press release. IDX, the Indonesian Chamber of Commerce and Industry (KADIN) and a number of Indonesian banks did not respond to requests for comment.

 

¬ Haymarket Media Limited. All rights reserved.

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Suitors are courting Malaysia’s state plantation giant Felda – what this could mean for PM Anwar’s reform agenda

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“FELDA DEPOSIT” BROKEN The mismanagement at the plantation group and the backlash from the fiasco at state-owned 1Malaysia Development Bhd (1MDB) broke the so-called “Felda deposit” with settlers turning their backs on UMNO. It led to the fall of the Najib-led National Front government in the 2018 general election, pushingContinue Reading

Woman accused of heading romance scam gang

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PUBLISHED : 1 Aug 2023 at 13:30

Woman accused of heading romance scam gang
Metropolitan police detectives arrest Dueanpen Jitwimolprasert, 33, in Photharam district, Ratchaburi, on Monday. She is accused of heading a romance scam gang. (Photo supplied)

Police have arrested a 33-year-old woman who is the alleged head of a romance scam gang who used photos of a well-endowed woman to gull men into buying new cars on time payment, and then stole them.

Pol Maj Gen Theeradet Thumsuthee, chief investigator of the Metropolitan Police Bureau, said on Tuesday that Dueanpen Jitwimolprasert was apprehended at a house in tambon Tha Chumpol of Photharam district, Ratchaburi province on Monday.

She is the alleged mastermind of the Busarakham romance scam gang. They used pictures of an attractive,  well-endowed woman using the name Busarakham on a dating app and lured many men into falling for her and finally buying her brand-new cars through hire purchase agreements. Ms Busarakham promised that she would pay the instalments.

Instead, the gang stole the vehicles and left their male victims with the debt.

Pol Maj Gen Theeradet said the Busarakham gang was notorious. It focused on men in the central plains, western and eastern regions.

He said about 15 victims had already filed complaints with police. The two most recent were in the eastern province of Chon Buri.

Ms Dueanpen was arrested while packing her bags, apparently preparing to flee.

The suspect denied all charges and insisted she had nothing to do with any scams perpetuated by Ms Busarakham, who was arrested earlier.

According to police, Ms Dueanpen admitted to transfers of money between herself and Ms Busarakham, but said they were just normal loans.

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‘I had no idea’: Spectrum of the Seas passengers in the dark after person falls overboard cruise ship

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SINGAPORE: Passengers on Royal Caribbean cruise ship Spectrum of the Seas said that they were unaware someone had fallen overboard until news broke online.

Several passengers told CNA that there were a few announcements paging for a woman to report to guest services sometime between 5.30am and 6.30am on Monday (Jul 31) morning.

Mr Pedro Adrian Aguirre was awake and sitting at his room’s balcony when he heard the first announcement.

“I thought since (it was the) last day maybe she had an outstanding debt,” he said.

Another passenger who only wanted to be known as Ms M Ori, said that there were a few announcements “in the cabins and all over the ship” at about 6am.

These announcements were made within the span of about 30 minutes, she estimated.

“As we have cruised over 50 times we knew something was not right,” said Ms Ori.

Another passenger CNA contacted said he did not hear the announcements as he was asleep.

SEARCH AND RESCUE

The Maritime and Port Authority of Singapore (MPA) said on Monday that a passenger had fallen overboard.

In its last update on Monday night, MPA said that search efforts coordinated by the Maritime Rescue Coordination Centre (MRCC) were underway. 

The MRCC was notified of the incident at about 7.50am while the vessel was en route to Singapore.

Royal Caribbean added that the ship’s crew immediately launched search and rescue when it was found that the person had fallen overboard.

A care team is currently offering assistance and support to the family of the missing passenger, the company said.

“I would like to think that the cruise line did the correct procedure in order to make it possible to find the person,” said Ms Ori, who found out about the incident via a post on Facebook.

She added that passengers were not told of the incident.

“After the announcement in the cabins there was nothing else. Nothing seemed to be (out) of the ordinary and we just went to have breakfast,” she said.

“I had no idea and we were chatting to a big group of 20 people before we left … and no one even mentioned a word of it, we were not aware of it. And definitely not told.”

Disembarkation was as per scheduled on Monday morning, added Mr Aguirre.

Spectrum of the Seas then left Singapore at 4.30pm, MPA said in a subsequent update at 11pm. Its initial statement, sent shortly after 9pm, said the ship was “currently berthed in Singapore” and “supporting with investigations”.

Royal Caribbean International said at 10.30pm on the same day that Spectrum of the Seas had been “cleared by authorities” and sailed as scheduled.

An itinerary on the Royal Caribbean website indicates a 12-night voyage to Tokyo, with stops in Vietnam and Hong Kong, starting on Jul 31.

CNA has contacted Royal Caribbean and MPA for further updates on the missing passenger.

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Italy joining China’s Belt and Road Initiative was atrocious move, defence minister says

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Italy's defence minister Guido Crosetto pictured in May at the Trento Economy Festival in Trento, ItalyGetty Images
By Alys Davies
BBC News

Italy made an “improvised and atrocious” decision in joining China’s Belt and Road (BRI) initiative, defence minister Guido Crosetto has said.

Mr Crosetto claimed the initiative had done little to boost Italy’s exports, making China the only winner.

China has previously said both nations have seen “fruitful results” as a result of the BRI.

Italy became the first developed economy to join the BRI in 2019 – a move criticised by its Western allies.

The global investment programme envisions connecting China with Europe and beyond through rebuilding the old Silk Road trade route.

Under it, China provides funding for major infrastructure projects around the world, in a bid to speed Chinese goods to markets further afield.

Critics see it as a tool for China to spread influence. Both the EU and the US expressed concern when Italy decided to join the scheme four years ago.

“The decision to join the [new] Silk Road was an improvised and atrocious act” that increased Chinese exports to Italy without having the same effect on Italian exports to China, Mr Crosetto told Italian newspaper Corriere della Sera.

He said Italy now needs to work out how to get out of the deal without damaging relations with Beijing.

“The issue today is: how to walk back (from the BRI) without damaging relations [with Beijing]. Because it is true that China is a competitor, but it is also a partner,” Mr Crosetto said.

As Beijing had become increasingly assertive on the world stage, Italy would have to think about how to withdraw “without producing disasters”, he said.

There has been intense discussion about whether Italy should remain in the BRI since May, when Prime Minister Giorgia Meloni said she wanted talks with China about possibly withdrawing.

It is set to be automatically renewed in March 2024 unless Italy makes a formal request to withdraw from it by December this year.

China’s foreign ministry previously said it believed “China and Italy should further explore their cooperation potential” under the BRI and “strengthen mutually beneficial cooperation to seek more fruitful cooperation results.”

In comments quoted in the English language edition of the state-affiliated Global Times newspaper in May, foreign ministry spokesperson Wang Wenbin added that the two nations have seen “fruitful results” in many fields as a result of the BRI.

Beijing has since launched a diplomatic campaign to try to persuade Italy to renew the deal by sending senior officials to the country to lobby its case.

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WeChat: Why does Elon Musk want X to emulate China’s everything-app?

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Elon Musk.Reuters
By Peter Hoskins & Fan Wang
BBC News

Earlier this week Elon Musk rebranded Twitter to X – another step in his plan to emulate Chinese mega app WeChat.

Mr Musk has long said that he wants to transform his social media firm, which he bought last year for $44bn (£34.4bn), into a much larger platform.

He has previously praised WeChat – a so-called “everything app” that combines chat, dating, payments and social media – and has said creating something “even close to that with Twitter… would be an immense success”.

In a post on X this week, Mr Musk said that over the coming months, “we will add comprehensive communications and the ability to conduct your entire financial world”.

He will hope that growing X will lead to a jump in revenue – the company has lost almost half its advertising revenue since Mr Musk bought it, and it is struggling under a heavy debt load.

So what is WeChat – and why does Mr Musk want to emulate it?

Launched by technology giant Tencent in 2011, WeChat is now used by almost all of China’s 1.4bn people.

Calling it a super-app is an understatement.

Its services include messaging, voice and video calling, social media, food delivery, mobile payments, games, news and even dating.

It is like WhatsApp, Facebook, Apple Pay, Uber, Amazon, Tinder and a whole lot more rolled into one.

It is so woven into the fabric of Chinese society that it is almost impossible to live there without it.

As you can see from the images below, the interfaces for its various parts are distinct.

Three screenshots showing different parts of WeChat

It started as a messaging platform like WhatsApp or iMessage, and its two most-used features are the WhatsApp-like “Chats” and “Moments”, which is similar to Facebook.

Its widely-used “Wallet” feature can be linked to debit and credit cards – most shops and online retailers in China accept WeChat payments, with users scanning QR codes to pay. People can also pay household builds, make investments, and even take out loans on WeChat.

Government services are also on WeChat, with users able to check social security information, pay speeding tickets and book hospital appointments.

And during the pandemic, it became an essential: while the whole country was under strict zero-Covid restrictions, it was impossible to move around without a “health code” generated on the app.

But there are several downsides to having so many features on one app.

From a practical point of view, WeChat takes up a large part of a phone’s memory – typically tens of gigabytes of data storage.

More seriously, the huge reach of WeChat into every corner of Chinese life has raised concerns about government censorship, surveillance and other privacy issues.

China blocks access to many foreign websites, from news outlets like the BBC to social media platforms such as Facebook and, ironically, Elon Musk’s X.

This level of state control over the internet also makes it extremely dangerous for people to speak out against the government on WeChat.

It is not unusual for dissenting voices to have their accounts suspended for days or weeks for something they have said in Chats or on Moments.

Even people sharing seemingly uncontroversial information have found themselves on the wrong side of government censors and had their accounts and chat groups shut down.

Kitsch Liao, assistant director of the Atlantic Council’s Global China Hub, says super-apps like WeChat align with Beijing’s aims of organising all aspects of life to keep control of the country.

“Principally to prevent ‘political risk’ – anything that could germinate into an opposition and eventual risk to the CCP’s [Chinese Communist Party’s] rule.”

Will it work in the West?

WeChat’s huge success in China is down to two major factors, Kecheng Fang, at Chinese University of Hong Kong, tells the BBC.

For one, most people in China access WeChat on smartphones, rather than desktop computers, due to the relatively late development of the internet in the country.

“Which means they live in the walled gardens of apps rather than the open web. It is much easier to build an ‘everything app’ on smartphones than on computers,” he says.

Mr Fang also says that China’s lack of competition regulation – which contrasts with most Western countries – allows an app like WeChat to effectively block rival platforms, such as shopping platform Taobao and video app Douyin.

Could Mr Musk make a similar app work outside China? We may be finding out soon – and experts believe it may all depend on digital payments.

Kendra Schaefer, from policy research firm Trivium China, says that Mr Musk has already recognised some of the key elements that have helped make WeChat “critical to daily life” in China, including integrating social media with digital payments.

That could be the “secret sauce of the super-app”, she says.

Edith Yeung, from investment firm Race Capital, points out that a major difference between China and the West is the widespread adoption of digital payment technology.

Most merchants in China do not accept cash or credit cards.

This difference, she says, may be an obstacle to Mr Musk’s ambitions. “It will take the Western world longer to implement a truly cashless or credit card free society,” she says.

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As regional cities expand, urban poor risk being left behind

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Un Raksmey and her husband were both widowed with two and three children each before they met and began a life together along a dusty road on the outskirts of the Cambodian tourism capital Siem Reap.

They built a rustic house with corrugated steel on a small plot of land that they’d bought in 2008. There, they began selling everyday products to repay their debts and support their children’s education. 

But their economic struggles kept growing. By 2021, during the Covid-19 pandemic peak, the couple could no longer afford enough food for their children.

“He decided to ask his mom to allow him to use her land title to take more loans to buy more stuff to sell and to feed our kids,” Raksmey said, talking about her husband. “Life was so difficult because we were so poor and didn’t have knowledge, because he quit school in grade seven and I quit school in grade six.”

The couple and their six children are now one of the 75 poorest families in Siem Reap, as selected by an informal settlement relocation project led by the non-governmental organisation Habitat for Humanity Cambodia. In partnership with the local government, the non-profit aims at providing the selected households with a stable and safe house environment and ensuring their long-term financial stability.

The programme is one of many of its kind across fast-urbanising Southeast Asia as stories such as Raksmey and Leap’s become increasingly common. According to reports from the UN Development Programme (UNDP) and other institutions, Asia-Pacific is home to the largest concentration of people living in urban poverty. As regional cities absorb newcomers seeking economic opportunity and better access to public services, governments are pushed to find ways to absorb them into the social fabric. 

“[The region] is more urban than rural since 2019, and the trend is that the urban population will continue growing in comparison to the rural one,” said Luis Noda, Asia-Pacific vice president at Habitat for Humanity International. “Many people are migrating to the cities looking for better opportunities. Unfortunately, this growth in population is surpassing the urban planning capacity of cities and newcomers end up living in informal settlements.”

If we decide to move, we’re not sure that we will earn the same income to repay the debt.”

Un Raksmey

Currently, one in four people in Cambodia lives in urban areas, according to the World Bank. In the Philippines, that number is one in two. About 40% of the urban population in these countries live in informal settlements. In conflict-stricken Myanmar, the bank’s latest data suggests 58% of the population is living in slums.

The stakes for better housing are high, not only for families but also for national interests.  Habitat for Humanity asserts improving informal settlements can boost a country’s GDP by as much as 10.5% while improving quality of life for residents. 

However, urban informal settlements do offer some benefits – namely cheap accommodation in areas where the poor might otherwise be priced out. Resettlement locations are often far-removed from city centres where residents can find better-paid work, and those who move away often struggle to rebuild their livelihoods.

This is the fear of Raksmey and her husband. The newly built resettlement village, named Veal, is six kilometres out of town. While most of the other families have already relocated, the couple is postponing to keep the little income they have managed to earn through their small shop.

“The reason [why] I am still here is because there are more customers here so we still can earn enough money to repay the debt,” Raksmey said. “And if we decide to move there, we’re not sure that we will earn the same income [as here] to repay the debt.”

On the outskirts of Siem Reap, Un Raksmey lives with her family in a house made of corrugated metal sheets. Her family is to be relocated to the new Veal village on the outskirts of Siem Reap as part of Habitat for Humanity Cambodia’s informal settlement improvement project. Photo by Beatrice Siviero for Southeast Asia Globe.

As marginalised families such as Raksmey’s weigh their options on the urban fringe, international non-profits have pushed more of their own focus into the region.

More than half of Habitat for Humanity’s global network is currently working on a campaign to address inadequate housing for informal settlements across the Asia-Pacific, from Nepal to Australia. 

Much of this work is based in Southeast Asia. The organisation is doing policy work and identifying funding for housing rehabilitation in Indonesia while carrying out other major resettlement projects in Vietnam, Cambodia and Myanmar. 

Pushed into an economic spiral by the 2021 military coup, Myanmar’s issues with urban poverty have become dire for many residents. 

 The risk of forced evictions since the military seized power has grown immensely.” 

UNDP Myanmar Resident Representative Titon Mitra

“It is essential to also consider [that] low-income urban areas in Myanmar often lack basic services and infrastructure,” said UNDP Myanmar Resident Representative Titon Mitra, pointing to core needs such as access to clean water. “This further squeezes already low incomes and reduces the time for work or education. In the worst cases, people may risk illness using unclean sources.”  

Yangon’s urban poor are those who are facing the harsher consequences of the bloody chapter of civil war started by the coup. Although not a conflict zone, the country’s largest city is home to thousands of internally displaced persons. 

With that, a January UNDP report projected Yangon’s poverty rate to triple from 13.7% in 2017 to 41.9% in 2022.

“These people often live in informal settlements too, where their homes are flimsy and impermanent, and conditions are typically squalid and cramped,” Mitra said. “What’s more, the risk of forced evictions since the military seized power has grown immensely.” 

According to his experience, people living in informal settlements – many of whom have lived there for decades – may be given just a few days’ notice to dismantle their homes and move out with no offer of an alternative place to live.

People living in the city’s poorest townships earn 30% less than those in the rest of the region and are more vulnerable to a host of social issues such as violence against women, limited access to drinkable water and school dropouts of children, according to the UNDP research.

“To create sustainable solutions to decrease urban poverty, it is critical to create more opportunities for people, including work and education,” Mitra said. “There needs to be support to the private sector to create jobs and efforts to train the workforce to fill those roles.”

A small park square in the newly-built Veal village in Siem Reap, Cambodia. The housing project was developed by the non-profit Habitat for Humanity as part of an informal settlement improvement programme. Photo submitted.

In an attempt to ease their conditions, the non-governmental organisation Step-in Step-up Academy, a delivery arm for UNDP, has been providing vocational training to Yangon youths.

Jackie Appel, the organisation’s founder, said the highest demand before the coup was usually in healthcare, office work and hospitality.

“We go out and we look for available jobs. We then create a tailored curriculum and call these very vulnerable people to join our training sessions,” Appel said. “But we cannot do this successfully without giving them food, vaccinating them, providing medical care and a stipend they can take home every month to give to their families.” 

The number of trainees varies according to the job availability in Yangon and their age must be over 18. However, many families forge their children’s age in official documents to have them selected for the training. 

We have to be able to get them jobs first. If there are no jobs, they can’t sustain their houses.”

Jackie Appel,, founder of Step-in Step-up Academy in Yangon

“This created another whole new area of concern,” Appel said. “But you can’t prove whether they are 18 or 14. Yet we couldn’t kick them out because they would be the perfect trafficked or exploited group of people. They’re the most vulnerable.”

Regardless of their real age, young adults have the potential to become breadwinners and support the cost of newly provided houses. But Appel also said, the potential to earn relies on opportunities being available – a factor outside a nonprofit’s control.

“Of course, these young people can sustain their own houses and their own communities,” she said. “But we have to be able to get them jobs first. If there are no jobs, they can’t sustain their houses.”

Post-coup Myanmar represents a particularly challenging landscape for international aid, but in general tight cooperation between institutions is key to successful housing improvement projects. Ensuring families can sustain themselves long-term is crucial for their well-being and that of their country, according to all the experts who spoke with the Globe.

In Cambodia, the most visible relocation project – a massive resettlement of thousands of families from Angkor Park in Siem Reap, home of the country’s historic temples – has cut a difficult path. Residents said they were forced from the park into a new zone far outside the city, away from the stream of tourists that many had relied on to make a living.

Habitat for Humanity was uninvolved with that effort, which is being handled solely by the Cambodian government. The nonprofit’s resettlement project at Veal village ensures the new residents are attached to an existing community, so the new families can integrate and work with local partners to find the support they need. The families also receive a range of training programmes, from vocational skills to family planning and basic land law.

“The lack of adequate housing in informal settlements is complex enough that no individual organisation can effectively tackle it alone,” Habitat for Humanity’s Noda said. 

For resettlement at Veal, selection criteria included areas such as land ownership, household income of less than $1.90 per person a day, house size smaller than 4 square metres per person or the disability of a family member.

Lampo Leap, right, and her 73-year-old mother, in wheelchair, in the family’s new house in the Veal village resettlement site. Photo submitted.

The chosen households were considered as the most vulnerable and hazardous and at high risk of living illegally on the state land, on infrastructure such as roads, canals or sewage systems. New Veal resident Lampo Leap, 35, said she was “excited” with the move.

“We no longer live in an odoured place,” Leap said. “Living along the canal was terrible. [The smell] affected our health. Living here, my mother sleeps better, and in the morning there is fresh air coming in.”

Leap is the deputy leader of the newly-built community, as well as a mother of a 10-year-old girl. She left her job at a local hotel four years ago, when her 73-year-old mother, who is now blind, started needing daily care. They have both been widows for more than a decade and have been relying on Leap’s brother’s income from his job in Thailand.

On a June afternoon in Veal, community leader Kung Sothy, 75, sat next to Leap after returning from a nearby bank to retrieve the monthly salaries for the village’s sewing group. 

“While I am having a good house and permanent place to reside, I try to find more income [for my community] so that in the future we won’t face difficulty like before,” Sothy said.

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