The recent global stock market turmoil is also expected to take a toll on air travel, particularly in business class where full-service airlines earn most of their profits, said Mr Tony Tyler, director-general of the International Air Transport Association.

“Airlines in this region are finding profitability quite thin because of the pressure of strong competition, and there’s a lot of capacity in the market,” Mr Tyler told reporters ahead of the Singapore Airshow, which begins on Tuesday.

“When you take the strong competition from low-cost carriers in the region… and you take the very strong competition for long-haul traffic from the Gulf carriers, profitability for airlines in this region is not strong at all.”

IATA in December estimated global airlines’ net profit for 2016 at US$36.3 billion (S$50.7 billion), up 10 per cent from its estimate of US$33 billion for 2015.

But Mr Tyler said more than half of this year’s profit would come from North America, with earnings by Southeast Asian carriers likely to come under heavy pressure.

Underscoring the challenge, Mr Tyler said no-frills carriers now account for 54 per cent of capacity in Southeast Asia, up from around 38 per cent in 2009.

Comparably, budget airlines account for 31 per cent of capacity in the United States and 39 per cent in Europe. The global average is 26 per cent.

Budget carriers like Malaysia’s AirAsia, Indonesia’s Lion Air, Singapore-based Jetstar, Thailand’s Nok Air, Cebu Pacific of the Philippines and Vietnam’s Vietjet are giving regional industry mainstays like Singapore Airlines a tough challenge.

Gulf carriers like Qatar Airways, Etihad and Emirates have eaten into their Southeast Asian rivals’ long-haul premium markets by offering top-notch in-flight services and the latest aircraft.

Mr Tyler said Southeast Asian legacy airlines “can play to their particular strengths” to compete, leveraging on their strong brands and service quality.

They must also keep cutting costs and investing in modern fuel-efficient planes, he said.

“The airlines in this part of the world are generally well run, efficient businesses and they’re quite capable of competing… but it’s just certainly at the moment a tough market,” the IATA chief said.

– AFP

The government announced on Thursday that the target for the micro loan programme, dubbed People’s Business Credit (KUR), had been increased slightly to Rp 103.2 trillion (US$7.69 billion) from the Rp 100 trillion set in January, saying it was now preparing new participants to take part in the scheme.

Coordinating Economic Minister Darmin Nasution said the meeting had approved the target, which was agreed by 19 banks that would participate in the programme this year, far higher than the number involved in 2015.

The decision to increase the target was taken during a coordination meeting held at the Coordinating Economic Ministry’s headquarters attended by ministers and officials of state agencies as well as executives of state-owned banks.

He said the ministry was also expecting that the Financial Services Authority (OJK) would soon complete its ongoing review of four multifinance firms that were deemed as prospective candidates to join the KUR programme.

The four multifinance firms are BCA Finance, Adira Finance, Mega Central Finance and Federal International Finance, which are expected to disburse at least Rp 1.5 trillion of KUR loans this year.

“Apart from those four companies, there are several other multifinance firms who have already submitted their proposals to the OJK and are still under review,” Darmin said.

Darmin said the government had also added seven guarantor companies to provide insurance for the programme, namely Jamkrindo, Jamkrindo Syariah and Askrindo as well as guarantors owned by the regional governments of Riau, Bangka Belitung (Riau Islands), South Sumatra and Central Java.

In 2015, three state-owned lenders — Bank Rakyat Indonesia (BRI), Bank Mandiri and Bank Negara Indonesia (BNI) — participated in the KUR programme, along with one private lender, Bank Sinarmas, which played a relatively small role, mainly offering loans to Indonesian migrant workers (TKI).

As of Dec. 31, 2015 total loans disbursed by the KUR programme reached Rp 21.4 trillion to 960,424 customers, lower than the Rp 30 trillion targeted.

According to the Coordinating Economic Ministry’s data, the three state-owned lenders had continued to disburse Rp 6.48 trillion of KUR loans to more than 290,000 customers between Jan. 1 and Feb. 5 this year.

In order to achieve the 2016 nationwide KUR target, the government has allowed more banks, including privately owned and regional development banks, to join the programme, with certain requirements in terms of financial situation and business portfolios.

OJK chairman Muliaman D. Hadad said at least 70 percent of the total allocated amount would be disbursed by three state-owned lenders — BRI, Bank Mandiri and BNI — while the rest would go to other participants.

With more participants in the programme, Muliaman said the financial regulator was intensively reviewing the candidates, including studying its plan to involve rural banks to act as channeling agents for some banks.

“We’ve also paid special attention to seven regional development banks involved in the programme in order to ensure their readiness,” he said.

Bilateral trade has expanded from zero since the day Vietnam and the US normalised their diplomatic ties 20 years ago to US$36.3 billion in 2014. The figure is expected to hit $40 billion in 2015.

According to Deputy Minister of Industry and Trade Tran Tuan Anh, among the free trade agreements Vietnam has engaged in, the Trans-Pacific Partnership (TPP) agreement is expected to afford favourable conditions for Vietnamese exports.

Nguyen Duy Khien, head of the American Market Department under the Ministry of Industry and Trade (MoIT), said Vietnam shipped $30.6 billion worth of goods to the US in 2014, up 24 per cent against the previous year.

According to the MoIT, Vietnam began to access the US market in 1995. Vietnam’s export turnover to the country reached $800 million in 2000 – the year the Vietnam-US Bilateral Trade Agreement was signed.

The US has become Vietnam’s largest importer, purchasing garments, electronic products, footwear, rice and fish from the Southeast Asian nation.

In the sphere of investment, the US ranked seventh among the countries and territories investing in Vietnam with a total direct investment of $10.7 billion by June this year.

Vu DucGiang, President of the Vietnam Textile and Apparel Association, said Vietnam was the world’s fifth largest garment-textile exporter, and the US remained the country’s top market in this field.

However, the garment-textile and footwear sectors are forecast to face difficulties as a result of Vietnam’s TPP membership as the US has initiated the “yarn forward” rule of origin.

In order to benefit from tax breaks, Vietnamese companies must use materials imported from other TPP members, Giang said, noting this would be a real challenge for Vietnamese businesses when up to 70 percent of materials they are currently using are purchased from foreign countries, mainly China – a non-TPP member.

Deputy Minister Tran Tuan Anh said the TPP would be an impulse for Vietnam’s economy to gear towards comprehensive renovation, a higher competitive edge and a better business environment.

Anticipating opportunities afforded by the TPP, lots of US businesses have suggested expanding footwear orders with Vietnam, while many others have invested in weaving and dyeing projects in the country.

The trend sparks the hope that the TPP will continue creating a momentum for the two countries’ relationship, he said.

Economists also stressed the need to provide more information about the two countries’ markets and conduct trade promotion activities such as exhibitions, workshops and market surveys.

The US now has more than 720 valid projects in Vietnam. In the first quarter of 2015, US investors poured nearly $68 million into eight new projects in the country.

The 2015 CAD was equivalent to 2.1 percent of gross domestic product (GDP), compared with 3.1 percent CAD in 2014, the central bank said.

“It was due to a bigger decline in imports than in exports, as well as improved income and service balance. The drop in imports was caused by lower domestic demand in the sluggish economy,” said BI spokesperson Arbonas Hutabarat in a statement on Friday.

At the same time, he continued, the drop in exports was driven by weakened external demand caused by global slowdown and the continuing drop in global commodities prices.

In the fourth quarter of 2015 alone, the CAD stood at $5.1 billion or 2.4 percent of gross domestic product (GDP), widening from the third quarter CAD of $4.2 billion or 1.9 percent of GDP.

CAD is a measure of a country’s foreign trade in both goods and services. It is part of the balance of payments, which summarizes an economy’s transactions with the rest of the world.

Indonesia’s balance of payments slipped to a $1.1 billion deficit last year from a surplus of $15.2 billion in 2014, a result of declined surplus in Indonesian capital and financial transactions, Arbonas explained.

This is stated in the State Bank of Vietnam’s (SBV’s) Circular No 01/2016/TT-NHNN, which was issued on February 4 to provide guidelines for a decree on the development of supporting industries.

Decree No 111/2015/ND-CP, issued last November 3, said preferential policies related to credit, taxes and land rents would be offered to projects applying new technology, equipment and manufacturing processes that can help increase their production capacity by at least 20 per cent.

It also said the money borrowed by the SMEs must be guaranteed by credit underwriting organisations, and the SMEs must register a mortgage value of at least 15 per cent of the loans at the lending institutions.

The firms should also have at least a 20 per cent stake in the investment projects, and they must not owe anything to the state budget or be responsible for any bad loans with any lenders.

According to the circular, credit institutions and foreign banks’ branches in Vietnam will finance the prioritised projects with short-term loans in dong, with interest rates being equal to or less than the specific rates set by the central bank’s governor at certain periods of time.

The Vietnam Development Bank and other organisations authorised in conformity with the law would be the guarantors of the SME loans, the circular said.

Industry insiders asked, however, whether the loan incentives could truly help domestic SMEs take part in the development of supporting industries, as Vietnam integrated more deeply with the global economy.

As the country has entered into a variety of free trade agreements, especially the large Trans-Pacific Partnership trade deal, multi-national companies might take up supply chains right in the domestic market.

Yasuzumi Hirotaka, chief representative of the Japan External Trade Organisation in HCM City, told news website enternews.vn that Vietnam still lacked a solid foundation for supporting industries, with the enterprises being internally weak.

“There is a high risk that many of them will have to withdraw from the market. This will be clearly seen in the next one year or two, so the domestic firms need timely support from the government to improve their strength now,” he said.

He said about four million SMEs were offered low interest rates for loans in Japan, following government policies.

In Vietnam, SMEs and support industries are among several areas that the government prioritises for funding, besides exports, high-tech firms and agriculture and rural development.

According to the latest SBV report on dong lending rates, commercial banks applied rates of six to seven per cent per year for short-term loans, and nine to 10 per cent per year for medium to long-term loans, in the prioritised sectors in January.

In normal business areas, the short-term rates were between 6.8 per cent and nine per cent per year, and the medium to long-term rates were between 9.3 per cent and 11 per cent per year.

Executives of the banks predict that the fall in exports caused by the global economic slowdown especially in China, one of Indonesia’s main trading partners, would not severely hurt their international trade financing business.

Bank Negara Indonesia (BNI) president director Achmad Baiquni said the lender, which was one of the country’s major players in trade finance, had reviewed the possible impact of China’s lower growth on its overall loans.

“We are still optimistic about our trade finance business growing,” Baiquni said in Jakarta recently.

China’s economic growth is expected to remain relatively low, with the country’s gross domestic product (GDP) seen to increase by only 6.5 percent this year compared to 6.9 percent in 2015.

Due to the global economic slowdown, Indonesia’s total exports fell by 14.62 percent last year to US$150.2 billion. Non-oil and gas exports dropped by 9.77 percent to $131.70 billion year on year.

Non-oil and gas exports to China dropped by 19.44 percent to $13.25 billion in 2015 from $16.45 billion in 2014.

Rahmad Hidayat, BNI’s head of financial institutions and overseas network, said previously the bank was expecting to double its trade finance business this year in order to increase revenues in the international banking division.

Revenues from international banking, such as fees from trade finance and bank guarantees, contributed almost 5 percent to BNI’s total revenues as of last year.

By the end of 2015, loans from BNI’s overseas branches also contributed Rp 19.5 trillion (US$1.43 billion), or equal to 6 percent, to the bank’s total lending, with a jump of 93.8 percent year-on-year despite the weak global economy.

Rahmad said BNI held a market share of about 10 percent in Indonesia’s trade finance business and China would remain the main export destination for the bank’s customers.

“Lower national export growth only affected our trade finance volume, but revenues grew by 28.6 percent from trade finance in third quarter last year,” he said.

Another state-owned lender, Bank Rakyat Indonesia (BRI), also maintained a positive outlook for its international banking business, as China’s economic growth was expected to be buttressed by monetary and government measures.

BRI finance director Haru Koesmahargyo said the international banking business contributed less than 5 percent to the bank’s total revenues but was expected to help boost overall fee-based income.

“Our fee-based income still contributes 7 percent to our total income, but we expect that the growth can be higher than interest income,” he said.

Haru said BRI’s international banking business had seen positive growth in revenues, especially from remittance and money-changing services in Malaysia, Saudi Arabia, Taiwan and South Korea.

Voicing a similar view, CIMB Niaga strategy and finance director Wan Razly Abdullah said the bank expected to maintain its annual growth rate at 20 percent in the trade finance business, despite seeing flat growth in volumes due to falling global commodity prices.

Wan Razly said the bank was expecting to enlarge its market share in trade finance this year, as it would offer competitive rates on foreign exchange loans.

“Our remittance operation also continues to grow positively as we have a service called CIMB SpeedSend that helps increase fee-based income from that business,” he said.

Gloomy outlook at home

Meanwile, Financial Services Authority (OJK) deputy commissioner for banking supervision Irwan Lubis said in Jakarta on Tuesday that layoffs in the banking industry may continue this year, but the number will not be as high as in 2015 when thousands of workers lost their jobs. There had been massive layoffs in the banking industry last year after some banks took consolidation measures to improve the efficiency of their businesses.

For this year, Irwan predicted that some banks would still have to reduce their workforce, but if they were to do so, the numbers would be far lower than last year.

Last year, several banks decided to offer early retirement programs to their employees as they struggled with rising expenses and falling revenues caused by the country’s economic slowdown.

Among the banks that decided to cut back employees were the private lenders Bank Danamon and CIMB Niaga.

The applicants are from Taiwan, South Korea, Vietnam, Cambodia, India and Mauritius.

The official, who asked for anonymity, said Taiwan led with seven applicants including CTBC Bank, Mega International Commercial Bank, Taiwan Business Bank, Taiwan Cooperative Bank and Taiwan Shin Kong Commercial Bank.

The rest are from South Korea with two and one each from the remaining countries.

Failing in the first round in 2014, the Bank for Investment and Development of Vietnam (BIDV), Cambodia’s Cathay United Bank, the State Bank of India, the State Bank of Mauritius, and Taiwan’s E.SUN Commercial Bank and First Commercial Bank made the second attempt.

The CBM closed applications on Monday and the winners will be announced next month. All will have to open local branches within a year. “Eight banks from the previous round applied for the licence in this round,” the official said.

Than Lwin, senior consultant to KBZ Bank and former deputy governor of the CBM, welcomed the applications, expecting more foreign banks’ entry to lead to technology and knowledge-sharing.

Pe Myint, former managing director of CB Bank, doubted what the foreign banks would gain in entering the small market.

“We have not seen many active activities by the first nine foreign banks [awarded licences in 2014], as they are allowed to open only one branch and serve only foreign companies.

“As many foreign companies are still in the wait-and-see mood, we have not yet received many foreign direct investments as expected. “So it will result in more foreign branch offices here with a few activities because there are only a few corporate customers,” he said.

All nine winners in the first round have opened branches in Yangon – Thailand’s Bangkok Bank, Australia’s ANZ, Industrial and Commercial Bank of China, Malaysia’s Maybank, Singapore’s Oversea-Chinese Banking Corporation and United Overseas Bank, and Japan’s Bank of Tokyo-Mitsubishi UFJ, Mizuho Bank and Sumitomo Mitsui Banking Corporation.

The furniture industry saw a 7.4 per cent growth from 2012 to 2015, recording $6.25 billion in sales last year. But there will be challenges ahead.

A key plank of a new three-year blueprint is the development of talent with the right skills sets, the SFIC said.

To this end, it will put in place a “new training ecosystem”, that provides training on emerging trends in the industry, and the enhancement of skills.

The proposed training framework, which comprises a basic and specialised tier, will cater to industry practitioners, fresh graduates and also those making a mid-career switch.

SFIC said all course fees will be fully borne by employers, with funding support from the National Trades Union Congress’ e2i and the Singapore Workforce Development Agency.

“These initiatives are essential for the industry to remain competitive and sustainable. While the furniture industry continues to enjoy positive growth, it also faces significant challenges from pricing pressures, external competition and the lack of skilled talents, ” said SFIC president Ernie Koh.

He added that the industry has moved beyond just carpentry, to encompass design, manufacturing, and sales and retail.

Apart from the structured training programmes, the council said the furniture industry will set up its own accreditation scheme that will cover capability certification at the individual level and a quality-mark accreditation at the company level.

It also unveiled a programme to train and place local mature workers, aged over 40, in the furniture industry. The training course will start from the second quarter of this year.

The SFIC also appointed Mr Lee Yi Shyan, MP for East Coast GRC, as an advisor on Friday.

Mr Lee will advise the council on strategic directions and issues relating to further development of the furniture industry here.

“Looking ahead, it would be opportune to enhance targeted assistance for local companies, especially SMEs, to strengthen their capabilities and explore overseas markets to reap benefits from the AseanEconomic Community and the various multilateral treaties and tax agreements signed between Singapore and its global trading partners, ” Mr Lee said.

Mr Lee added that the transformation of the industry is timely as “we can take advantage of the current softer market conditions to review and revitalise for future growth”.

Coordinating Economic Minister Darmin Nasution said the policy was aimed at boosting investment, both domestic and foreign direct investment (FDI), while providing protection to small and medium enterprises (SMEs).

“It means that 100 per cent foreign ownership is allowed in the 35 sectors that have fully opened up to FDI,” said Darmin during a press conference at the State Palace in Jakarta on Thursday.

The 35 sectors include cold storage, sports centers, film processing labs, crumb rubber industry, warehousing, tourism, e-commerce with a marketplace value above 100 billion rupiah, toll road operators, telcom device certification, non-hazardous waste management and raw medicine materials.

Plantation firms with more than 25 hectares of land integrated with a processing plant will also be allowed foreign ownership of up to 95 per cent. Seven types of businesses, including leasing companies, will be allowed 85 per cent ownership.

Businesses allowed up to 67 per cent ownership include job training, travel bureaus, golf course developers, flight logistics supporting businesses, health care, private museums, catering, convention center and exhibition, consulting and construction businesses with contract values above 10 billion rupiah, as well as telcom network providers with integrated telcom services.

The seven sectors allowed 51 per cent foreign ownership include natural tourism management. Meanwhile, 32 sectors were still pegged with 49 per cent maximum foreign ownership such as acupuncture, land transportation and high voltage electric installation.

“This policy is not liberalization but an effort to modernize our economy by encouraging SMEs and national companies to improve creativity, innovation and technology,” Cabinet Secretary Pramono Anung said.

On the new list, 20 industrial sectors were closed or restricted sectors for FDI, added by four new sectors from previously 16 restricted sectors under the preceding 2014 DNI regulation.

“In the revised DNI, we have added utilization of natural coral for aquariums, souvenirs and accessories. It is closed to any kind of investment for environmental protection,” Darmin added.

The remaining 19 industrial sectors, he continued, were reserved for SMEs, including pre-design and consulting services, architectural design services and architectural services. In addition, no SMEs were open to foreigners, along with businesses with investment value of less than 10 billion rupiah.

Singapore scored 25.63 out of 30 measurable criteria critical to innovation, which include patent, copyright and trademark protection, enforcement, and engagement in international treaties, among other things, the USCC said in a release yesterday.

The score was a notch better than last year’s 25.38, although the percentage remains the same at 85 per cent of total score.

Half of the 38 economies, which together account for nearly 85 per cent of global gross domestic product, also improved their total score from last year’s index, indicating increased recognition of the benefits of intellectual property and a strong IP system, the chamber said in the release.

For Singapore, the key areas of strength included an adequate patent- enforcement legal framework, a strengthened copyright framework, and a legal framework for protection of unregistered marks, while high (although dropping) rates of software piracy were a key area of weakness.

’A number of indicators suggest that online piracy in Singapore has fallen in the past year. Industry reports on music sales show that

after four consecutive years of falls, the music market in Singapore grew by close to 5 per cent in 2015,’’ the study noted. ’’Increased sales of digital music and streaming services were drivers of this growth.

’’ Singapore Customs successfully seized a number of trademark-infringing goods and illegal tobacco last year, the study said, but lamented that the authorities’ right to action against suspected goods is limited to those bound for Singapore.

The United States, Britain, Germany, France and Sweden occupied top spots in the index, while Malaysia’s IP environment has improved gradually over the last four years, resulting in a cumulative increase in its score to 14.78.

As Malaysia is a negotiating partner in the recently signed Trans-Pacific Partnership, the IP standards within the agreement – once ratified and implemented – will further strengthen its IP environment, the study said.