Futurise – shaping Malaysia’s regulatory innovation landscape

  • More stakeholders have asked for help with regulatory challenges faced
  • Ecosystem still shows lack of awareness over existence and benefits of the NRS

Futurise is tasked with creating a strong ecosystem as the building blocks for Malaysia to create a world class drone sports culture and ecosystem.

Futurise - shaping Malaysia’s regulatory innovation landscapeAs the first quarter draws to an end in approximately two weeks and Muslims have started fasting in the holy month of Ramadan, I would like to reflect on some milestones in expediting innovation to strengthen Malaysia’s future economy.

Set-up by the Ministry of Finance Malaysia in 2018, Futurise was mandated to spearhead the National Regulatory Sandbox (NRS) initiative, to provide solutions to regulatory challenges that can potentially hinder technology and innovation from operating efficiently in the market. The NRS initiative is meant to address industry and investor concerns that innovation faces challenges when deployed in the marketplace due to either the lack of, or at times, outmoded regulatory frameworks.

To a question that I get asked a lot, if I could put it in simpler terms, Futurise paves the ground for new and innovative ideas to operate in the market through safe testing of regulations and policies in a secured environment called a sandbox. The NRS brings together different groups like corporate organisations, government bodies, academia and entrepreneurs to solve regulatory challenges faced by innovative products and business models.

The existence of Futurise itself displays the commitment by the Malaysian Government to ensure that innovation within the economy can happen unhindered. In the complex national regulatory landscape across a multitude of industries and sectors, kinks in the framework can sometimes be efficiently addressed by a specialised outfit like Futurise that works closely with Government regulators and industry players to home in on specific pain points and expedite timely solutions.

The top-down approach used in yesteryears when prescribing regulatory frameworks may not be conducive to innovation. Futurise acts like a bridge, connecting different parts of the ecosystem – from regulators, industry players, organisations and relevant bodies. It is all about collaboration and ensuring that everyone can contribute to building a more innovative and advanced Malaysia.

Ultimately, Malaysia has taken significant steps in establishing a more dynamic innovation ecosystem. We are seeing ongoing NRS initiatives like the Autonomous Vehicle and Micromobility progressing steadily, while Futurise has gone into new areas like Sports Innovation, Digital Healthcare and Advanced Air Mobility or AAM. Meanwhile, our testbeds for autonomous vehicles and drone technology (Futurise together with the Civil Aviation Authority Malaysia created the nation’s first drone test zone in Cyberjaya) has seen a healthy rise in activity with increased testing by companies.

Yet, with the rapid pace of innovation taking place globally, there is always more new ground to cover on our shores. Did we encounter challenges? Most certainly. Stakeholder engagements can be complex, and understandably, sometimes emotions can run high.

Overcoming the challenges add a special sweetness to the NRS success—a journey all of us can appreciate, especially for the regulators and industry players involved. Despite the differences of opinions and individual objectives, we can find a common way forward as there is already a binding intention among all parties entering the sandbox to see innovation progress in the nation. That shared commitment tends to yield meaningful solutions. 

Undoubtedly, the ecosystem has become more tightly knit than ever before too. This heightened cohesion is evident in the progress Futurise witnessed throughout 2023 as I share some highlights.

1. Advancing Malaysian Advanced Air Mobility

In March of 2023, Futurise, in collaboration with the Civil Aviation Authority of Malaysia (CAAM), introduced the Unmanned Aircraft System (UAS) certification (C-UAS) and Manned Electric Vertical Take-Off and Landing (eVTOL) aircraft national regulatory sandbox (Manned eVTOL NRS). This initiative, unveiled during the RegTalk series in Cyberjaya, aimed to balance public safety with industry needs, fostering an environment for innovative air mobility solutions in Malaysia.

The C-UAS ensured UAS compliance with CAAM’s regulatory standards within the sandbox, removing bureaucratic obstacles for companies.

The potential benefits of Advanced Air Mobility (AAM) include promoting faster, safer, and quieter transportation while reducing ground congestion.

CAAM CEO, Captain Norazman Mahmud underscored the importance of regulatory buy-in and experimentation to propel the local drone industry forward. The RegTalk session featured speakers discussing regulatory frameworks and the state of the drone landscape, fostering engagement and idea exchange among industry stakeholders.

This undertaking was a step forward and a resounding affirmation of Malaysia’s dedication to shaping a future where urban air mobility transcends conceptualisation to become a tangible reality.

Futurise - shaping Malaysia’s regulatory innovation landscape

2. Exploring emerging technologies for Malaysia’s competitiveness

Futurise teamed up with the Malaysian Industry-Government Group for High Technology (MIGHT) in May 2023 and formalised the collaboration through a Memorandum of Understanding (MoU) at the Langkawi International Maritime and Aerospace Exhibition 2023 (LIMA).

The collaboration, initiated with the AAM sector, seeks to address disruptions and enhance sectors like transportation and logistics. MIGHT’s role involves leveraging its experience in identifying business prospects, fostering partnerships, and contributing to high-tech development. The collaboration anticipates identifying key drivers for change, preparing for future opportunities, and mitigating potential risks.

Also, Futurise is developing the Advance Air Mobility in Malaysia industry report, a joint collaboration between Futurise and MIGHT, likely to be announced in the middle of this year (2024).

3. RegTalk on 3D printing

In 2022, the global 3D printing market was US$19.8 billion and is expected to reach up to US$67 billion by 2028, a CAGR of 21.4% during the 2023-2028 period. Clearly 3D printing plays a pivotal role in the ‘modernisation of printing’, which is currently not properly regulated in certain sectors.

Hence, in August 2023, Futurise organised its RegTalk discussion on “3D Printing – How it Should be Regulated,” addressing 3D printing industry challenges and opportunities.  The event convened industry leaders and experts to explore the complex regulatory landscape of the burgeoning 3D printing industry.

Key issues such as legal concerns, regulatory impacts on industry development, and Malaysia’s global positioning in the 3D printing landscape were discussed with the recognition for a robust regulatory framework to balance innovation, security, and intellectual property protection.

RegTalk, a crucial initial phase within the NRS process, serves as an insightful and collaborative event for Futurise to scope out the breadth and depth of issues. Early feedback from regulators, ecosystem enablers, relevant ministries, agencies and industry players uncovers potential regulatory issues associated with the introduction of innovative products and services to the market.

Futurise - shaping Malaysia’s regulatory innovation landscape

4. MyAV Guidelines and Drone Sports Roadmap

Futurise, during the Cyberjaya Innovation Week 2023 held in September, introduced two groundbreaking initiatives, the MyAutonomous Vehicle 5.0 Guideline and the National Drone Sports Strategic Roadmap (NADSAR) 2023-2027.

It is expected that the Global Autonomous Vehicles Market will be worth US$325.9 billion by 2030. Furthermore, the Autonomous Vehicles (AV) Market is projected to expand at a CAGR of 47.1% through the 2021-2030 period.

Although the AV market in Southeast Asia is still in the infancy phase, a collaboration with the Ministry of Transport under the NRS established trial routes and safety standards for advancing AV solutions in Malaysia. To date, there are five AV trial routes in Malaysia, which are located in Cyberjaya, Putrajaya, Selangor, Johor and Kuala Lumpur, that play an important role in expediting the development of AV technology. Next year, it is expected that AV technology in Malaysia will enter the pre-commercialisation phase.

The NADSAR 2023-2027 (National Drone Sports Strategic Roadmap) meanwhile outlines the future of drone sports in Malaysia, focusing on youth engagement and skill development. Here, we are working closely with Sports Technology Malaysia Sdn Bhd, a subsidiary of Institut Sukan Negara mandated to accelerate sports technology adoption and creation.

Towards this end, Futurise was mandated by the Government in Jan 2022 to establish a National Drone Sports Excellence Centre (otherwise known by its Malay acronym AKSADRON), with the underlying objective of using the thrill-filled drone sports as a fertile ground to groom talent for the industry. To date AKSADRON, which was launched in March 2022,  has formed partnerships with several universities such as Universiti Kebangsaan Malaysia (UKM), Universiti Teknologi Malaysia (UTM), UiTM and others to run drone sports development programs among the youth.

At the same time we have set up our Dronecubator programme with four universities namely, Universiti Malaysia Pahang (UMP), UKM, UTM and Universiti Sains Malaysia (USM). The programme aims to provide a platform for students at the university and secondary school levels to get initiated into drone sports and technology to develop their skills and knowledge in drone design, building, piloting and maintenance. This programme supports current STEM and TVET modules and seeks to boost the creation of drone sports pilots and technicians in the country.

One of Futurise’s supportive university partners under the Dronecubator initiative is Prof. Madya Ts. Dr Haryanti Mohd Affandi from UKM, who believes AKSADRON and the DroneCubator initiative to be a valuable resource for universities with the program allowing students to build their own drones and even earn part-time income by conducting events.

“By expanding this program to other institutions such as matriculations and vocational colleges related to TVET, the vision and mission of higher education can be achieved in the context of the 4th and 5th Industrial Revolutions,” said Haryanti.

Forging international partnerships to strengthen regulatory efforts

Last June, Futurise and the UAE Regulation Lab (RegLab), under the General Secretariat of the UAE Cabinet, signed an MoU to accelerate regulatory innovation and leverage each other’s technical knowledge and experience.

The partnership will also activate co-research activities on vital areas of common interest such as the design, development and management of regulatory sandbox programmes and open innovation platforms for numerous industries. Together with UAE RegLab, two RegTalk sessions were organised, participated by industry experts on various mobility topics, including a visit to Abu Dhabi Integrated Transport Centre.

As part of efforts to explore opportunities and collaboration within the aerospace ecosystem globally, Futurise participated in the Paris Air Show also in June of last year. A visit to Skyport’s AAM testbed was an eye opener to understand how the test bed operates and learn from it to be replicated in Malaysia. My team is still working on this.

Skyport is developing Europe’s first test vertiport (landing sites for eVTOL aircraft) in France, with an eye towards launching commercial AAM services in time for the 2024 Paris Olympics.

Challenges

The regulatory environment is often complex, and navigating through existing regulations to create a sandbox that is both permissive and protective can be challenging.  It is important for regulatory authorities to be proactive in addressing these challenges to foster an environment that encourages innovation while safeguarding public interest and regulatory integrity.

Regular evaluations and adjustments to the sandbox framework can help address emerging challenges effectively.

Another key challenge that we have observed in Futurise, is the lack of awareness among potential participants, businesses, and the public about the existence and benefits of the regulatory sandbox. This limits participation in and dampens the impact of any outcome from our sandbox engagements. We are aware that effective communication and outreach are most essential to address this challenge.

Another challenge is in streamlining and coordinating with international regulatory bodies, aligning sandbox practices with global standards, especially when dealing with cross-border innovations.

Looking ahead

As Futurise reflects on its achievements, we look forward to the rest of the year. There will be more to do no matter what uncertainties lie in the global economy in the coming years. Already more stakeholders have approached Futurise for help to addressing regulatory challenges faced by them.

We have seen innovation remain persistent in both favourable and tough conditions. In fact, it’s been seen that challenging market situations can give rise to new technology driven solutions, products or ways business is conducted.

The strategic collaborations, innovative initiatives, and commitment to agile regulatory frameworks position Futurise as a driving force in Malaysia’s innovation landscape. The resolve is depicted by a sign outside the Futurise meeting room: “The Future Economy starts Here. Step inside.” Do join us to shape a stronger innovative future for Malaysia.


Rosihan Zain Baharudin is CEO of Futurise Sdn Bhd.

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PM outlines hub ambitions at global real estate event

Srettha offers updates on plans for international airports and Land Bridge

PM outlines hub ambitions at global real estate event
Prime Minister Srettha Thavisin delivers the keynote address, “Better Infrastructure in an Age of Risk, Scarcity and Emergency”, at the opening of MIPIM 2024, an international real estate market conference in Cannes, France on Tuesday. (Photo: Government House)

Thailand will be turned into a regional aviation hub within this decade as it is enjoys a strategic location where major cities across Asia are within a four- to six-hour flight, according to Prime Minister Srettha Thavisin.

Mr Srettha outlined his vision and experience with infrastructure development in Thailand in a keynote address at the opening of MIPIM 2024, an international real estate market event, on Tuesday in Cannes, France.

With Bangkok alone welcoming over 60 million passengers annually, Thailand aspires to further expand its capacity to accommodate even more travellers, said Mr Srettha, who is also the subject of a cover story headlined “The Salesman” in Time magazine this week.

He said plans are in place to expand existing airports and construct new ones. A notable project is the expansion of Suvarnabhumi airport to add new terminals and build two more runways. Once completed, the airport will be able to handle 150 million passengers yearly, compared with 60 million now.

Additionally, two new international airports will be built — one in the North and one in the South.

Lanna International Airport will serve as a second airport to the bustling tourism industry in Chiang Mai and other northern provinces.

Meanwhile, Andaman International Airport in Phangnga, adjacent to Phuket, will complement the long-haul hub in southern Thailand. Together, these new airports will accommodate an additional 40 million passengers annually, he said.

“With these large investments in infrastructure and services, I believe Thailand is well-positioned to lead the region as its aviation hub,” Mr Srettha said.

The premier also told his audience about the southern Land Bridge encompassing deep-sea ports in Ranong and Chumphon provinces, linked by a double-track railway, a motorway and an oil pipeline system.

If it is completed, he said, the Land Bridge would become the cornerstone of maritime connectivity in the Indo-Pacific region.

“Today we face a huge risk by solely relying on the Malacca Strait to travel between the Indian and Pacific Oceans. Currently, 25% of the world’s cargo flows through this narrow strait,” he said.

“Each year, 90,000 vessels have to navigate through this already congested waterway, resulting in slow-moving traffic and significant queuing. Consequently, shipping cargoes through the Malacca Strait is expected to face more problems in the near future.”

The Land Bridge project, he said, is important not only from a commercial standpoint, but is also critical in maintaining global trade and supply chain stability amid geopolitical uncertainties.

“We are confident that our Land Bridge project will be a success and a proud jewel of Southeast Asia, especially with Thailand as a neutral party, our Land Bridge will always be open to everyone,” Mr Srettha said.

Prime Minister Srettha Thavisin is featured on the cover of Time magazine this week.

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Woman charged with cheating Taylor Swift fan of S0 for Singapore concert tickets

A 29-year-old woman was charged in court with defrauding a Taylor Swift fan of$ 350 to purchase tickets to the first of the US pop star’s recent shows in Singapore on Tuesday ( Mar 12 ).

According to the police, Singaporean Foo Mei Qi is suspected of having duped customers into paying more than S$ 24,000 ( US$ 18 000 ) on the online market Carousell.

Foo is now charged with one count of cheating. According to court records, she allegedly persuaded another person to transfer S$ 350 to her on September 13, 2023, using the PayNow system.

This was for cards to Swift’s performance on March 2 during her first day on the superstar’s Singapore journey.

Swift wrapped up the final of her six sold-out displays on Saturday. After federal authorities secured an&nbsp, special offer with her, Singapore was the only cease in Southeast Asia for her Eras Tour.

Between March 3 and March 7, the policeman reported receiving a number of reports from victims, who apparently had been duped by an online seller selling concert tickets on Carousell.

The owner became inaccessible after receiving payment via PayNow or bank transport and failed to deliver the concert tickets.

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Johnson Controls opens new office and innovation center in Singapore 

  • The area will host the OpenBlue Innovation Center and can provide 450 employees.
  • Office complies with Singapore’s 2030 Green Plan, which promotes green growth.

George Oliver, chairman, and CEO of Johnson Controls at the company's Innovation Center

Johnson Controls, a leader in bright, healthy, and lasting buildings, today opened its innovative office in Singapore. The company, strategically located at One- northwest, serves as a living laboratory for collaboration, study, and development, furthering Johnson Controls ‘ commitment to its partners and community across Southeast Asia.

At the new business opening, Johnson Controls chairman and CEO George Oliver stated that” Singapore’s vibrant and innovative ecosystem corresponds with our vision for a more lasting future, where economic development goes hand in hand with economic management and social duty, ensuring a brighter and more resilient future for all.” Our Singapore company represents a fantastic next stage in our commitment to this vibrant and varied nation, he continued.

The area, which covers 3, 535 square meters, did house around 450 employees and house an OpenBlue Innovation Center that will demonstrate solutions for building owners, operators, and industry leaders to create intelligent buildings that are safe, healthy, and green.

Johnson Controls ‘ OpenBlue Innovation Center is a good example of how businesses are working with our ecosystem to advance innovation and technology growth, according to Jacqueline Poh, managing director of the Singapore Economic Development Board. We anticipate the wise and environmentally conscious building solutions that this center will create and provide to the East Asian region, she continued.

One-North’s connected habitat expands the effect of the novel service, encouraging cooperation with local partners, institutions, and industry experts to advance technology and solution integration to bring cutting-edge innovation to the market.

The new business building also supports The Singapore Green Plan 2030, which strengthens Johnson Controls ‘ commitment to advancing the country’s national plan on sustainable development in the face of obstacles like climate change and urbanization, and furthers Johnson Controls ‘ commitment to advancing the wise area change in Singapore and throughout Southeast Asia.

Johnson Controls claimed, in addition to supporting Singapore’s vision for a brighter and more efficient future, it has equipped more than 40 % of the city-state’s commercial properties with wise developing solutions.

With Singapore as our proper hub, Johnson Controls is well-positioned to promote sustainable development, facilitate innovation, and form lasting collaborations that may shape the region’s and the region’s future.

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Asia dominates list of decade’s top arms importers – Asia Times

Nine of the 10 biggest arms importers in 2019–23 were countries in Asia (including the Middle East) and Oceania, according to a report on international arms transfers released Monday by the Stockholm International Peace Research Institute.

Ukraine became the fourth biggest arms importer globally after it received transfers of major arms from over 30 states in 2022–23, the institute reported.

As for arms exporting countries, the United States, number one on the list, saw a rise of 17% between 2014–18 and 2019–23, while exports by Russia fell by more than half (53%). Arms exports from France grew by 47% and it supplanted Russia as number two on the global list.

Excerpts from the SIPRI report follow:

Asia-Pacific importers

Arms imports by states in East Asia (down 6.1%), Oceania (down 10%) and Southeast Asia (down 43%) decreased between 2014–18 and 2019–23.

China’s arms imports fell by 44% and accounted for 2.9% of the global total in 2019–23. The vast majority of Chinese arms imports (77%) came from Russia. The drop in Chinese imports is due to China’s growing ability to design and produce its own major arms. Its arms imports will probably decrease further as it develops this capacity.

Japan and South Korea are expanding their military capabilities, mainly because of tensions with China and North Korea. Japan (up 155%) and South Korea (up 6.5%) increased their arms imports between 2014–18 and 2019–23. The USA is the main supplier to both states, accounting for 97 per cent of Japan’s arms imports and 72 per cent of South Korea’s.

The two states are investing heavily in long-range strike capabilities. The USA supplied 29 combat aircraft to Japan and 34 to South Korea in 2019–23.

In the category of land-attack missiles with a range of 1000 km or more, in 2023 Japan ordered 400 and planned to order 50 more. These will, for the first time, give Japan the capability to reach targets deep inside China or North Korea.

Taiwan’s arms imports dropped by 69% between 2014–18 and 2019–23 despite heightened tensions with China. However, major deliveries are planned to take place over the next five years, including deliveries of 66 combat aircraft, 108 tanks and 460 anti-ship missiles. All these planned deliveries are from the USA, which supplied over 99 per cent of Taiwanese arms imports in 2019–23.

Australia was the eighth largest arms importer in 2019–23. Despite an overall 21% decline in its overall arms imports during the period, in 2023 it reached an agreement with the UK and the USA to import at least six nuclear-powered submarines. Australia ordered over 300 long-range missiles from the US. (Outside the region, Finland ordered 200 or those and Germany 75. Canada and the Netherlands have also decided to acquire them.)

Arms imports by Southeast Asian states fell by 43% between 2014–18 and 2019–23. However, tensions, mainly with China, continue to drive arms acquisitions by many states in the subregion.

For example, arms imports by the Philippines (up 105%) and by Singapore (up 17%) increased between the two periods. In addition, Indonesia, Malaysia and Singapore all placed substantial orders for combat aircraft and ships in 2019–23.

Myanmar, which accounted for 10% of all South East Asian imports, used imported major arms in internal conflicts in 2019–23. Its arms imports in the period mainly came from Russia (38%), China (26%) and India (18%).

India’s tensions with Pakistan and China largely drive its arms imports. India’s arms imports increased by 4.7% between 2014–18 and 2019–23, making it the world’s biggest arms importer in 2019–23 with a 9.8% share of all arms imports.

Russia remained India’s main supplier, but its share of Indian arms imports has shrunk from 76% in 2009–13 to 58%in 2014–18 and then to 36% in 2019–23.

India has instead looked to Western suppliers, most notably France and the USA, and its own arms industry to meet its demand for major arms. This shift is also visible in India’s new orders, many of which are placed with Western suppliers, and its arms procurement plans, which seemingly do not include any Russian options.

Arms imports by Pakistan grew by 43% between 2014–18 and 2019–23 and accounted for 4.3% of the world total, making it the fifth largest arms importer globally. Pakistan continued to strengthen its arms procurement relations with China: 82% of its arms imports came from China in 2019–23, as against 69% in 2014–18, and 51% in 2009–13.

Arms imports by states in the Middle East were 12% lower in 2019–23 than in 2014–18. Three of the top 10 arms importers in 2019–23 were in the Middle East: Saudi Arabia, Qatar and Egypt. The USA accounted for 52% of Middle Eastern arms imports. The next biggest suppliers were France (12%), Italy (10%) and Germany (7.1%).

Arms imports and the war in Ukraine

At least 30 states supplied major arms to Ukraine after the full-scale Russian invasion in February 2022, mostly as military aid, meaning that Ukraine was by some distance the world’s largest arms importer in the year 2023.

The USA supplied 39% of Ukrainian arms imports in 2019–23, followed by Germany (14%) and Poland (13%). To broaden Ukraine’s military capabilities, suppliers began to deliver long-range systems in 2023.

For example, Poland and Slovakia donated 27 surplus combat aircraft, and France and the UK supplied missiles with a range of 300 kilometers. During the year, Belgium, Denmark, the Netherlands and Norway also started to prepare for the delivery of over 50 surplus combat aircraft.

Russia relies primarily on its own industry for its major arms. However, in 2022–23 it imported flying bombs from Iran and ballistic missiles from North Korea, the latter in violation of a United Nations arms embargo on North Korea.

Russia’s initial invasion of Ukraine in 2014 increased the demand for arms in West and Central European states. For example, by the end of 2023 these states had a total of 791 combat aircraft and combat helicopters on order for import.

After it launched the full-scale invasion in 2022, Russia began a campaign of missile attacks against Ukraine. In response, many West and Central European states supplied air defense systems to Ukraine and several placed new import orders for them or accelerated existing procurement processes.

In 2023 Poland ordered 12 air defense systems from the USA, and Germany ordered a single but particularly high-value system from Israel. In 2022–23 Austria, Estonia, Latvia and Slovenia ordered air defense systems from Germany, while Finland and Slovakia ordered Israeli systems, and Lithuania and the Netherlands ordered Norwegian systems.

In addition, some states ordered missiles for systems being produced domestically or to arm newly acquired imports or their existing systems. For example, in 2023 Poland and Norway ordered missiles from the UK and the USA, respectively, for their new systems, while Germany ordered 500 missiles and Romania 200, all from the USA, for their existing systems.

Read the full study here. Its authors: Pieter D. Wezeman (Netherlands/Sweden) is a senior researcher with the SIPRI Arms Transfers Program. Katarina Djokic (Serbia) is a researcher, Mathew George (India) is the director, Zain Hussain (United Kingdom) is a researcher, and Siemon T. Wezeman (Netherlands) is a senior researcher with the program.

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China’s outbound investment reshaping the global economy – Asia Times

As economists obsess over plunging foreign direct investment into China, they risk missing a far more important trend: the giant waves of capital zooming in the other direction.

In 2023 alone, Chinese outward direct investment in the Asia-Pacific region surged 37% to nearly US$20 billion. That outflow speaks to how Chinese companies seeking growth abroad are altering financial dynamics from Asia to the West to Latin America.

And how China Inc’s investment ambitions are only just beginning to remake the global pecking order, despite Washington’s attempts to curb its influence.

“China’s ODI has risen substantially since the turn of the millennium,” says Frederic Neumann, chief Asia economist at HSBC. “Only starting to venture out into the international investment landscape in the mid-2000s, China was, in a sense, ‘late to the game.’ However, after rapid increases in the first half of the 2010s, China’s stock of ODI now surpasses that of Japan, Germany and the UK.”

And there’s still room for exponential growth. As of the end of 2023, Neumann notes, the overall stock of Chinese outward investment was just one-third that of the US, and still small relative to the size of China’s economy. At 15.7% of gross domestic product (GDP), Neumann says, “it’s well below” that of the major developed economies and the global average of 34%.

The reason, Neumann explains, is that Chinese firms have strong incentives to “go out” to explore global markets, including the so-called “Global South” developing markets. As China develops, its funding of ODI will be an increasingly vital channel to gain access to resources, markets and trade routes.

The dynamic marks an about-face from earlier policies de-emphasizing ODI in 2016 and 2017 and during the pandemic period. Yet an increasing amount of investment now “would align with broader Chinese economic and political development priorities,” Neumann says.

“We think that Chinese ODI flows are set to accelerate,” he adds. “In our baseline scenario, which envisages ODI rising in line with its recent trend, annual flows could rise by over 50%, with at least $1.4 trillion to be invested abroad between now and 2028.”

There’s an ever more dramatic upside scenario that HSBC is analyzing: China’s ODI rising in sync with per capita gross domestic product. That would mean a near-tripling of the recent pace of ODI to well over $400 billion per year.

China’s outgoing cash contrasts sharply with the 12% drop in overall FDI into emerging Asia in 2023. Roughly half of the investment China is making in the region is going to Southeast Asia, up 27% year on year.

Especially Indonesia. Southeast Asia’s biggest economy, which grew more than 5% in 2023, took in about US$7.3 billion of Chinese ODI last year.

“Indonesia has a track record of navigating shocks and maintaining economic stability,” says economist Satu Kahkonen, World Bank country director for Indonesia.

Incoming president Prabowo Subianto projects 8% growth for Indonesia over the next five years. The challenge, Kahkonen says, “is to build on strong economic fundamentals to deliver faster, greener and more inclusive economic growth.”

To achieve such growth, she adds, “it’s important to continue implementing reforms that remove bottlenecks that limit efficiency, competitiveness, and productivity growth. Doing so will enable Indonesia to accelerate growth, create more and better jobs, and achieve its vision of becoming a high-income country by 2045.”

Clearly, Chinese investment could help Jakarta achieve these lofty goals. That goes for other parts of Asia, too, as China’s global investment trends begin returning to pre-Covid-19 levels.

Significantly, the sectors in which China is focusing are shifting. For example, mining and real estate ODI have declined. More recently, manufacturing, transport, storage and postal services have been among the top sectors. Now, it’s technology, renewable and green energy, electric vehicles and digitalization.

Headline-grabbing EV sector investments include a joint venture between South Korea’s LG Chem and Zhejiang Huayou Cobalt. Others involve mainland automakers putting manufacturing facilities in countries such as Thailand, Vietnam and Malaysia.

China’s geographic priorities are pivoting, too. The US and Europe are less in favor, while Southeast Asia, Latin America and the Middle East are seeing more ODI from Asia’s biggest economy.

“The allure of new global markets and evolving business models are driving Chinese enterprises to venture abroad and expand their presence on the global stage,” notes economist Yi Wu, an author of the China Briefing newsletter published by Dezan Shira & Associates.

This, of course, presents new challenges. “While this trend opens doors to promising opportunities for Chinese firms,” Wu says, “the complexity of navigating diverse regulatory landscapes in different countries can be challenging to their global endeavors.”

There’s much about China’s role in the global economy that is being misunderstood. One is the state of US-China ties, the globe’s most important relationship.

“If you think the US is decoupling from China, think again,” says economist Robin Brooks at the Institute of International Finance. “Look at the sharp rise in China’s trade surplus with key ‘trans-shipment’ hubs around the world. Stuff made in China is still heading to the US, just on a more circuitous route. There is no decoupling. Only relabeling.”

Yet the pivot that may matter most is how China’s cash is moving upmarket.

Wu notes that in recent years, Xi’s Belt and Road Initiative (BRI) “presented tremendous opportunities for China’s ODI investors, leading to a significant uptick in the number and value of investments within these nations.” Yet such BRI projects covered just over 70 countries.

By the end of 2022, Chinese domestic investors had established what Wu calls a “robust global presence” with 47,000 offshore enterprises spanning 190 countries worldwide.

More than 60% of these enterprises were in Asia, 13% in North America, and 10.2% in Europe. That left roughly 16,000 overseas enterprises, around 34% in BRI countries.

All this means China Inc is methodically raising its “presence in the global market,” while “improving local infrastructure and creating massive jobs with their projects launched worldwide,” notes Yu Miaojie, president of China’s Liaoning University.

This includes Latin America. Thilo Hanemann, analyst at the Rhodium Group, notes that the US “is experiencing a post-pandemic boom in foreign direct investment, driven by the resilience of the US economy as well as new industrial policies that incentivize US manufacturing investment such as the CHIPS Act and the Inflation Reduction Act. Chinese companies are notably missing from the party.”

Instead, the burgeoning economies of the Global South are enjoying increased interest from the mainland.

“China’s engagement with Latin America has also been expanding rapidly,” says Wu of China Briefing.

A “substantial catalyst for this expansion,” he notes, was a nearly $3 billion transaction in Peru. There, China Southern Power Grid International acquired two Peruvian assets from Enel, Italy’s largest utility company. It speaks to how “Latin America emerged as a remarkable hub for M&A deals for Chinese enterprises,” Wu says.

Loletta Chow, global leader of EY China Overseas Investment Network, notes that “China remains Latin America’s second-largest trading partner and the region is gradually becoming a crucial economic and trade partner for Chinese enterprises.”

In a November report, EY China calculated that the mergers-and-acquisition deal value by Chinese enterprises in Latin America was $3.3 billion, up 185.9% year on year. The main targets were Peru’s power sector and advanced manufacturing and mobility sector enterprises in Brazil. 

EY Global notes that China Inc’s top interests in Latin America are electronics, cross-border e-commerce, agriculture, healthcare, culture and tourism, logistics, solar energy, and automotive, “signaling broad prospects for future collaboration between the two regions.”

It can also be a way to buttress China’s soft power in the region, notes Linda Calabrese, a research fellow at the Overseas Development Institute. “Therefore,” she says, “investing in renewables has positive non-monetary returns and can improve bilateral relationships.”

Margaret Myers, Asia-region director at the Inter-American Dialogue think tank, notes that Chinese investors “remain focused on traditional sectors of interest, too, including those related to China’s own food and energy security.”

Some of these still account for a significant portion of overall investment, but investment within these sectors is also shifting in ways that are consistent with China’s growing focus on innovation,” Myers says.

In general, she adds, “the sorts of large-scale infrastructure projects” that once characterized BRI “are no longer as emblematic of Chinese investment in Latin American countries as they once were.”

In many parts of the region, Chinese interest in canals, rail, and other major transport and energy, she adds, “is being replaced by a growing emphasis on innovation, whether in information and communication technology, renewable energy, or other emerging industries, consistent with Beijing’s laser focus on its own economic upgrading and global competitiveness.”

More broadly, EY’s Chow adds that “China’s commitment to high-level openness and utilization of international platforms such as the BRICS (Brazil, Russia, India, China) Summit, Shanghai Cooperation Organization Summit, the Third Belt and Road Forum for International Cooperation and Asia-Pacific Economic Cooperation (APEC) meetings supported the creation of an open world economy.”

This, Chow says, “has provided a more favorable policy coordination environment for the internationalization of Chinese enterprises. We look forward to the continued release of momentum in China outbound investment in the future.”

Of course, geopolitical currents are written between the lines in bold font. It’s worth noting that among the nations that saw a roughly 100% drop in engagement with China Inc investments between 2022 and 2023 were the Philippines, Mongolia and Papua New Guinea – all places that are at odds with Beijing on a variety of priorities.

As Christoph Nedopil, director of the Griffith Asia Institute, tells Nikkei Asia: “There are various reasons but it is typically due to incorporation of political and economic risks. For example, the Philippines and China have had some cooling of bilateral relationships.”

So do domestic economics. China Inc isn’t making outbound investments in a vacuum. And China’s wherewithal to continue pouring heaps of cash into projects around the globe requires stabilizing the financial system and ensuring GDP growth ends 2024 as close to 5% as possible.

But the ways in which Chinese ODI is offering a fascinating split-screen counternarrative to faltering FDI at home is a potential megatrend that deserves greater attention.

Follow William Pesek on X, formerly Twitter, at @WilliamPesek

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China’s manufacturing powerhouse Guangdong eyes technological transformation

Using a PIN to Face Challenges

Local and foreign producers have been asked to reevaluate their supply chain methods by rising costs and rising costs. Some businesses have relocated some of their activities to different areas, such as South Asia and Southeast Asia.

Chinese electronic vehicle manufacturers, for instance, have just received government support to establish export-oriented supply chains in response to US and European trade restrictions.

Wang Weizhong, government of Guangdong, noted that despite the challenges still present, the region has also improved the law-based, market-oriented setting to draw significant foreign-funded projects.

He claimed that more than 1, 900 of these companies opened stores in Guangdong in January this year, an increase of 106 % over the previous month.

” We does actively promote the high-end, intelligent, and efficient business. According to Mr. Wang,” we will diligently apply the government’s new round of large-scale equipment regeneration and deployment, as well as major policy measures like reducing logistics costs and trade-in of consumer goods,” he told CNA.

He added that Guangdong’s local technology potential has been in the top spot for the past seven times.

” We will view the creation of new quality productivity as a strategic move and a long-term move,” he said,” and this shows ) strong confidence in the development of Guangdong’s manufacturing industry.” &nbsp, &nbsp,

ATTRACTING TALENT AND Assets

The place has been a key force behind China’s financial reform and expansion. It is located at the intersection of China’s Greater Bay Area ( GBA ), a hub for rapid high-tech advancements that attracts significant foreign investment.

” The GBA will enable the agility of a lot of skills, including those from mainland China, Hong Kong, Macao, and even those from other parts of the world,” said one analyst. Therefore, it is difficult for Guangdong to maintain its current talent while attracting more talent from other regions, according to political scientist Professor Sonny Lo.

He thinks Guangdong continues to be a hotbed for foreign buyers as a result of increasing investments in technical knowledge and better communication to Hong Kong and Macao.

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PM sets ambitious goals for tourism

40 million foreign visitors are anticipated for this year.

PM sets ambitious goals for tourism
Srettha Thavisin, the prime minister, and French company officials speak yesterday in Paris about potential investment options in Thailand. ( Photo: Government House )

According to Prime Minister Srettha Thavisin, the government hopes to draw in an estimated 664 billion ringgit this year from Europe, Africa, and the Middle East.

According to Mr. Srettha, the state has set a global goal of 2.3 trillion ringgit for about 40 million foreigners.

At the Internationale Tourismus Borse ( ITB Berlin 2024 ), the largest travel and trade fair in the world, he made the remarks during a speech on Thursday at the Amazing Thailand Networking Event.

According to him, 28 million international visitors visited the nation last year, which generated about 1.2 trillion baht.

According to the prime minister,” Tourism contributes to the market and opens up employment opportunities for a sizable percentage of the Thai populace.”

According to him, the state intends to use every means at its leisure to grow Thailand’s tourism sector.

The government is making it easier for foreign tourists to travel, with cases being momentary card deductions granted to customers from India, Russia, Kazakhstan, and Taiwan over the past five decades.

Thailand and China both signed a mutual visa exemption deal as part of these efforts, which went into effect on March 1.

The government is also in talks with Asian member countries to follow a” One Visa, Free your Destination” agreement to encourage joint local tourism and more ease cross-border travel in the region, the prime minister said. It is also pushing to achieve visa-free travel arrangement deals with Western states in the Schengen area.

Additionally, Mr. Srettha added that efforts are being made to encourage small towns in areas like Bangkok and Chiang Mai.

” In lesser-known places, there are many interesting native nations and hidden gems. The prime minister said,” We are working to promote these distinctive values and provide tourists with unique experiences in these places.”

The state is also using Thailand’s” sweet energy” or cultural heritage as a selling point to encourage the country’s distinctive and important events, he said.

He even made reference to the Songkran water festival, which Unesco just declared to be humanity’s intangible cultural heritage.

The state plans to hold World Songkran Festival events throughout the entire country starting April 1 through April 21, he said.

Mr. Srettha met with European business leaders in Paris on Friday to talk about Thailand’s potential funding options.

Sébastien Bazin, the chairman and CEO of Accor, a European foreign hospitality business that operates hotels, villas, and vacation properties in Thailand, was one of the people he met.

They discussed approaches to collaborate on tourism and plan co-promotional activities to increase sales.

The primary minister spoke with Pascal Morand, the executive director of the Fédération de la Haute Couture et de la Mode, to discuss the possibility of making Thailand a South Asian style and design hub.

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The maritime issues ASEAN wants to talk about – Asia Times

Australian Foreign Minister Penny Wong issued a stark warning to Southeast Asian leaders this week: the region could face a “devastating” conflict over the South China Sea unless it strengthens its diplomatic and legal safeguards.

Wong said the region was already experiencing “destabilizing, provocative and coercive actions”, in addition to “unsafe conduct” in the air and sea. These were not-quite-so-veiled references to China’s recent actions in the South China Sea.

Other countries in the region – especially Vietnam and the Philippines – share similar concerns about China’s maritime assertions. They question, for instance, what Beijing’s rejection of the 2016 South China Sea tribunal ruling might mean for upholding international maritime laws and keeping crucial sea trade routes open.

This week, Manila again called out China’s “dangerous maneuvers” in the South China Sea. President Ferdinand Marcos Jr vowed not to yield an “inch” to China in the contested waters.

Australia and the Philippines recently signed an agreement to deepen maritime cooperation. This may lead to more joint defense exercises and patrols in the South China Sea.

But not all regional leaders agree about the potential threat. Malaysian Prime Minister Anwar Ibrahim issued a warning of his own at the ASEAN-Australia Special Summit this week over the West’s “China phobia.” If the US and Australia have problems with China, he said, “they should not impose it” on Southeast Asia.

Beyond territorial disputes

There is no doubt the great power competition between the US and China sets the strategic backdrop for Australia’s engagement with Southeast Asia.

But while maritime cooperation is increasing among regional states, this doesn’t mean they all agree on the central issues that affect the stability, safety and security of the region’s waters, specifically the South China Sea.

Southeast Asian countries have diverse interests, political systems and strategic priorities. And leaders in the region – like those of many other smaller and middle powers around the world – regularly say they do not want to have to choose between the US and China.

Not all countries are “hedging” to the same degree, but Australia should nevertheless focus its engagement on building genuine partnerships with Southeast Asian countries in their own right – not merely based on perceived external threats – and identifying and addressing shared issues of concern.

At this week’s ASEAN-Australia summit, for instance, Southeast Asian nations drove the idea of a dedicated maritime forum. While the forum did address security challenges such as “gray zone” activities, plenty of other challenges and opportunities were discussed. These included:

  • the importance of the “blue economy” concept, focused on the sustainable use of maritime resources for development and prosperity
  • improving maritime connectivity by ensuring free and open sea lanes of communication
  • bolstering law enforcement and governance to ensure maritime order across the region
  • better addressing environmental and climate change issues.

There was also a strong focus on understanding the local issues facing coastal and Indigenous communities in the region. An estimated 70% of Southeast Asia’s population lives by the coast, where they face increasing livability challenges due to climate change, economic uncertainty and the degradation of fishing stocks and natural resources.

This is not entirely new: ASEAN countries and Australia have been paying closer attention to shared maritime challenges beyond the sovereignty and maritime disputes in the South China Sea.

For example, ASEAN recently released its maritime outlook. In particular, it noted the importance of the region for “global trade, food and energy security and marine biodiversity.”

Opportunities for cooperation

It is no surprise maritime security has reached this level of importance on a shared diplomatic agenda.

While the concerns over China’s activities are real, it’s important Australia and its neighbors to the north focus more attention on the vast range of other ocean-based issues that don’t get as much attention.

These priorities include:

  • protecting open ocean supply chains
  • reducing pollution, in particular plastics, and preventing coral bleaching
  • supporting sustainable, legal and regulated fishing
  • mitigating human, arms and drug trafficking
  • addressing the very real challenges that climate change and rising sea levels present to maritime Asia.

These challenges are often less politically sensitive than strategic concerns, which enhances the prospects of cooperation. This is where science, research and development, knowledge sharing and expert networks can contribute to solving knotty problems. And many of these challenges are transnational, meaning they do not affect one state unilaterally, but often require collective responses.

The challenges are significant. So, too, are the opportunities for collaboration. Getting maritime cooperation right can support the human rights and livelihoods of millions of people across the region.

Rebecca Strating is Director, La Trobe Asia and Professor, La Trobe University, La Trobe University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Japan pumping money into Asia-Pacific’s terror fight – Asia Times

Amid a growing terror threat in other parts of the world, Japan has been dealing with limited terrorist activity so far. A notorious case of the doomsday cult Aum Shinrikyo is a matter of the past, while homegrown jihadist radicalization is negligible. And yet, being an island of safety in a stormy sea is no less of a challenge for the Land of the Rising Sun.

Throughout the past decades, terrorist incidents affecting Japanese nationals or interests have occurred abroad. In a statement aired in 2003, Osama bin Laden, the mastermind behind the 9/11 attacks, identified Japan as a potential target.

Twelve years later, at a time when the Islamic State gained global prominence, the nation faced a great tragedy. In 2015, ISIS militants took hostage and beheaded two Japanese nationals in Syria, one of whom, Kenji Goto, was a freelance journalist.

As of today, many experts believe that a protracted armed conflict between Israel and Hamas will play a pivotal role in shaping the terrorist threat landscape in 2024. The ongoing hostilities may fuel terrorist plots and assaults outside the area of conflict, encouraging small cells and lone wolf actors to attack targets associated with one of the sides. 

Just as important is a menace originating from ISIS. The Islamic State caliphate in Syria collapsed five years ago, but make no mistake: The group is still alive and active. To date, the jihadist organization has around 20 branches and networks operating in Africa, Southeast and Southwest Asia and in the Middle East. As for Asia, ISIS extremist ideology remains particularly entrenched in the Philippines and Indonesia. 

In a global fight against extremism, Japan stepped up to the plate by providing aid to international counterterrorism operations. Particularly, Tokyo supports, politically and financially, the US-led international coalition to fight ISIS.

Nonetheless, there is still more room for Japan to increase its counterterrorism cooperation, especially in the Asia-Pacific region. Indeed, Tokyo has a lot to offer its neighbors, be it security equipment or intelligence sharing. For instance, according to a former FBI agent, nobody in the world is better at physical surveillance than Japan’s law enforcement. 

Now, a new tool has become available: an aid scheme termed Official Security Assistance (OSA). Established in April 2023, the program allows Tokyo to help developing countries raise their security capabilities.

“Over the past decade, Japan has not only strengthened its alliance with the United States but also deepened its military ties with countries such as Australia and its European allies,” Masaki Mizobuchi, associate professor of Middle East politics and international security at Hiroshima University, told this writer. He added:

Japan has expanded its military cooperation with developing countries in Southeast Asia and beyond, focusing on capacity-building support for the militaries of partner nations.

However, until recently, Japan lacked a framework for providing new equipment to the defense authorities of other countries. Additionally, Official Development Assistance [ODA, Japan’s English term for foreign aid], aimed at the socioeconomic development of recipient countries, cannot be used for military purposes.

This restriction has been a significant obstacle to Japan’s foreign assistance efforts. The establishment of the Official Security Assistance is understood to be a measure to overcome this issue.

Professor Masaki Mizobuchi, terrorism expert. Photo: ResearchGate

Mizobuchi said the cooperation areas include such activities as vigilance monitoring, counterterrorism and counter-piracy, humanitarian efforts, and international peacekeeping operations. 

“Nevertheless, as a precaution, The Three Principles on Transfer of Defense Equipment and Technology and its associated operational guidelines will be enforced, thereby restricting cooperation to five specific types of logistical support: rescue operations, transportation, alert systems, surveillance, and minesweeping, as delineated in these guidelines,” Mizobuchi added.

Mizobuchi highlighted four aspects in which Japan’s OSA program can contribute to the fight against terrorism in Asia:

  • equipment and technology transfer,
  • humanitarian assistance,
  • intelligence sharing and cooperation,
  • maritime security.

In terms of technologies, OSA offers possibilities for “supplying non-lethal security equipment, surveillance technologies, and other critical assets that can bolster the counter-terrorism capabilities of partner countries,” Mizobuchi explained. Establishing intelligence-sharing frameworks could help “monitor and counteract terrorist movements, financing, and radicalization efforts across borders.”

“Japan’s advanced capabilities in disaster response can be leveraged to improve regional resilience,” he added. “Given Japan’s strategic interest in maintaining free and open Indo-Pacific sea lines of communication, its assistance could also extend to maritime security, helping to prevent piracy, smuggling, and terrorism at sea.”

Who will benefit most?

Since 2007, the Asia-Pacific region has suffered over 5,000 terrorist attacks. That is fewer than in the Middle East and Africa but considerably more compared with Europe and the United States. Today, terrorism is still a pressing challenge for Asia and needs to be addressed. 

“Countries like Indonesia, Malaysia, the Philippines, and Thailand could benefit significantly, as they have faced various terrorism challenges, including threats from jihadist groups affiliated with ISIS and local separatist movements,” Mizobuchi said while elaborating on OSA’s advantages.

A Filipino soldier uses binoculars during the siege of Marawi City by Islamic State-aligned militants, July 1, 2017. Photo: Twitter

Especially worth noting is the Philippines, which ranks second most affected by terrorism in the Asia-Pacific region, following Myanmar. The country is attractive to ISIS as the group can make use of sectarianism for recruitment and propaganda. In December, Islamic State put itself back in the spotlight by carrying out a deadly bombing at a Catholic Mass in the southern city of Marawi. 

The first-ever transfer of aid under the OSA framework was agreed upon in November during the visit of Japan’s Prime Minister Fumio Kishida to the Philippines. Under the deal, Manila receives US$4 million worth of coastal surveillance radars for the navy to enhance the nation’s maritime security.

Counterterrorism activities including joint operations are already on the security cooperation agenda between the two countries. OSA opens up new opportunities in this field and could potentially have an essential impact on the overall security of the region.

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