Asia rose to new heights in 2014 despite the many challenges that beset the region. Headline-making developments ranged from China dethroning the United States as the world's largest economy, subject to vigorous debate as that may be, to the tragic mystery of Malaysia Airlines Flight MH370.
The region was also home to some landmark leadership changes. In India a single party secured an absolute majority in the lower house for the first time in more than 30 years, while in Indonesia, a small businessman with no ties to the country's political or military past became president. Thailand, on the other hand, managed to repeat the history of eight years earlier with a military coup to oust an elected prime minister.
On the economic front, China's slowdown sent shivers through the global economy, leading to a decline in the prices of commodities, culminating in the oil price plunge the world has been witnessing as the year draws to a close.
In Japan, meanwhile, the mantra of "Abenomics" began to ring hollow as attempts to revive the economy hit roadblocks, but Shinzo Abe has won re-election and vows to keep firing his stimulus "arrows" in hopes that one will hit a bullseye.
While China attempts to keep its economy on course, it's encountered choppy seas — literally and figuratively — across the region where many countries are fed up with Beijing's sweeping claims to most of the South China Sea. Anti-Chinese riots in Vietnam left collateral damage, and the Philippines has adopted an increasingly hostile tone as well. The hopeful news is that Beijing is starting to take a more conciliatory approach and has vowed to work with Asean to prevent any future misunderstandings.
Elsewhere, there is optimism in Vietnam for the first time in many years as its economy is getting back on track. In Myanmar, investors continue to arrive in search of opportunities, hopeful that a presidential election in 2015 will come off smoothly. Cambodia, with one of Asia's most open economies, is also poised for impressive growth but faces the challenge of sustaining the gains.
Today, Asia Focus looks back on come of the events that made headlines in 2014.
ASIA
The recent 40% plunge in world oil prices has presented countries across the region with a windfall as they head into 2015, but whether it translates into higher growth depends on whether the money is spent or saved, according to a report by Standard & Poor’s.
“Spending the windfall can raise GDP in key economies while saving it will provide little or no stimulus to growth,” said Paul Gruenwald, the Asia-Pacific chief economist for the ratings agency.
Energy imports vary in importance across the region’s economies. Singapore tops the table with an oil trade deficit of 13% of GDP, followed by Thailand at 7.6%. But larger economies such as Korea and India also run sizable oil trade deficits of about 5% of GDP. Malaysia has a fractional oil trade surplus and Vietnam a marginal deficit. In terms of value, China and Japan dominate with annual oil import bills approaching US$300 billion.
According to S&P, if the oil price windfall is largely spent, the effects on GDP would be highest in the Philippines, Hong Kong, China and Thailand. For these four countries, a year-long drop in Brent crude to $65 per barrel could raise output by one-third of 1% or more. India and Korea would see GDP rise by around 0.2%. The effects in the rest of the region would be broadly neutral.
CHINA
Big and Getting Bigger: China has overtaken the United States as the world’s largest economy, according to one measure used by the International Monetary Fund. By the end of 2014, it said China would make up 16.48% of the world’s purchasing-power adjusted GDP (or $17.632 trillion), compared with 16.28% ($17.416 trillion) for the United States. Economists are quick to point that GDP per capita in China is $5,947, compared with $50,979 in the US. At current rates, they say, it would take 74 years for the two countries to draw even.
Economic Slowdown: China’s economic growth is likely to slow down to 7.1% next year, says the chief economist at the People’s Bank of China, citing continued slackness in real estate investment, which will offset growth from an expected acceleration of exports. Exports are expected to increase 6.9% in 2015, compared with 6.1% this year.
Property Bust: Growth in real estate investment has slowed further but property sales in November hit the highest level of the year, indicating that Beijing’s efforts to help the ailing sector may be starting to pay off. Property investment, which affects more than 40 sectors from cement to furniture, grew at its slowest pace in five years between January and November, rising 11.9% from a year earlier. Signs of bottoming out in a key sector would ease fears of a sharp slowdown in the overall economy.
Top of the World: The Chinese e-commerce giant Alibaba Group laid claim to the largest initial public offering in world history, after additional share purchases by underwriters brought the total amount raised to $25 billion. Alibaba’s IPO surpassed the 2010 offering from the Agricultural Bank of China, which raised $22.1 billion in its debut on the Hong Kong Stock Exchange. Alibaba shares entered the New York Stock Exchange in September at $68 and were trading at $105 last week.
INDIA
Modi-fication: The Bharatiya Janata Party, led by Narendra Modi, won 282 of the 545 seats in the lower house of Parliament in May, tossing out the Congress Party that has led the country for most of the past 67 years. It was the first time in three decades that a single party had captured an outright legislative majority, giving the BJP a strong position from which to push for broad reforms of Asia’s third-biggest economy. The Indian election is the world’s largest exercise in democracy, with 537 million votes cast over a five-week election cycle this year.
Taking Stock: Indian shares are on a roll and that’s bringing the country’s stock exchanges onto the global stage. The market capitalisation of Mumbai’s BSE has reached 100 trillion rupees ($1.6 trillion), up 40% from last year, as investors are betting that Indian companies will benefit from the economic policies of the Modi government. The BSE is now ranked 10th among world bourses by market value, according to the World Federation of Exchanges. In terms of year-to-date performance it was up 30.6% as of Dec 25, the third best gain in the world. The National Stock Exchange is ranked 11th by capitalisation and its S&P CNX Nifty index is up 29.7% for the year to date.
Water Woes: The heaviest rainfalls in 50 years in Kashmir in September stretched Indian and Pakistani rescue and military services to the limit, with more than 1.5 million people affected in total. High waters left 400,000 residents stranded in Srinagar, the main city of India’s Jammu and Kashmir region, where authorities said floods and landslides claimed 282 lives and damaged 253,000 houses.
Power of Peace: Indian child rights campaigner Kailash Satyarthi and Pakistani education activist Malala Yousafzai were hailed as “champions of peace” at the Nobel Peace Prize ceremony in Oslo. Malala said she was there to stand up for the rights of forgotten and frightened children, and to raise their voice rather than pity them. Mr Satyarthi said receiving the prize was “a great opportunity” to further his work against child slavery.
Mission to Mars: The Mangalyaan satellite successfully entered the orbit of Mars, making India’s space agency only the fourth to achieve the feat, after the Soviet Union, Nasa and the European Space Agency. Remarkably, the entire Mangalyaan mission cost just 4.5 billion rupees — or about $74 million — compared with the $672 million Nasa spent on its maven orbiter.
JAPAN
Abenomics: Despite all the hype about “Abenomics” and some bold moves by the central bank to spur activity, Japan fell deeper into recession than forecasters expected. Economists blamed the third-quarter contraction on the impact of a consumption tax increase from 5% to 8% in April. Prime Minister Shinzo Abe wisely put off a planned increase in the sales tax and asked the voters for a second chance to get Abenomics right. They rewarded him on Dec 14 with an even bigger lower house majority.
The Light Stuff: The 2014 Nobel Prize for physics was awarded to a trio of scientists in Japan and the United States for the invention of blue light-emitting diodes (LEDs). Isamu Akasaki, Hiroshi Amano and Shuji Nakamura made the first blue LEDs in the early 1990s. The devices are now in widespread use in a new generation of bright, energy-efficient lamps, as well as colour display screens of all sizes.
VIETNAM
Economic Revival: Vietnam is showing continuing signs of economic recovery, with GDP projected to improve by 0.2 percentage points year-on-year to 5.6% for 2014. The positive projection is largely attributed to macroeconomic stability and progressive expansion in foreign-invested manufacturing for export. GDP expanded 6.2% in the third quarter, bringing the nine-month growth rate to 5.6%.
Offshore Anxiety: Anti-China protesters set several Chinese- and Taiwanese-owned factories on fire and looted hundreds of others in southern Vietnam amid tension over Beijing’s deployment of an oil rig in a disputed portion of the South China Sea in May. Some Korean and Japanese properties were also damaged by rioters who mistook their signs for Chinese ones. In Binh Duong, the province most heavily affected, out of 351 factories that were damaged, looted or destroyed, only 14 were actually owned by Chinese corporations.
SINGAPORE
Property Correction: Both private and public home prices continued to slip in the third quarter of the year. Private home prices fell 0.6% and are now down 3.8% on an annual basis, but private home prices are still 56% above the last trough in 2009. Public housing prices fell for the fifth straight quarter by 1.6% and have now fallen 6.8% from the peak of the market.
MYANMAR
Investor Avalanche: Foreign direct investment (FDI) into Myanmar exceeded the government’s original target of US$4 billion just six months into the fiscal year that began on April 1. As of Sept 30, FDI totalled $4.09 billion and officials were saying $5 billion could be within reach. The telecoms sector topped the list, accounting for $700 million, as mobile operators continued to expand their networks, followed by manufacturing. The entry of some international hotel chains also was a factor.
LAOS
Air Disaster: Senior government and military officials were among the 14 people killed when an Antonov AN-TK74-300 aircraft crashed in Xiangkhouang province near the Vietnam border on May 17. Four passengers including National Assembly President Pany Yathotou survived the crash, which killed Deputy Prime Minister and Defence Minister Douangchay Pichit, Public Security Minister Thongban Saengaphon, Vientiane governor Soukan Mahalat and Lao People’s Revolutionary Party propaganda chief Chuang Sombounkhan.
The group was en route to a ceremony marking the 55th anniversary of a military victory over royalist forces at the Plain of Jars. The crash was the second major aviation accident in Laos in seven months. In October 2013, a Lao Airlines ATR-72 turboprop crashed during a heavy storm as it approached Pakse airport, killing all 49 people on board.
INDONESIA
Change at the Top: From small-town businessman to Jakarta governor to president of the world’s fourth most populous country, it’s been a remarkable few years for Joko Widodo. “Jokowi”, as he’s known, took office in October after winning a bitterly contested election in July over former general Prabowo Subianto. Gen Prabowo finally conceded defeat after losing a court challenge of the result. While Jokowi has positioned himself as a man of the people, his biggest challenge will be working with an opposition-led coalition in the House of Representatives.
So Long to Subsidies: One of the first tasks of Indonesia’s new president was to make good on his pledge to unwind fuel subsidies, which had been eating up one-fifth of total government spending or 3% of GDP. Fuel prices that were among the cheapest in the world were raised by more than 30% to 8,500 rupiah (22.40 baht) per litre for gasoline and 7,500 rupiah (19.80 baht) for diesel. Protests were minimal because the move had been expected for a long time.
SOUTH KOREA
Sorrow at Sea: The captain who abandoned hundreds of schoolchildren as the Sewol ferry sank was sentenced in November to 36 years in prison, on the same day that officials finally called off the underwater search for those still missing from the April disaster. A court found Lee Joon-seok not guilty of capital murder, to the dismay of many victims’ relatives, but convicted him of gross negligence.
The overloaded Sewol capsized on April 16 while making a turn during a routine voyage to the holiday island of Jeju. Lee abandoned the sinking ship with hundreds of people, most of them teenagers on a school excursion, on board. Only 172 of the 476 passengers were rescued. To date, 295 bodies have been recovered and nine are unaccounted for.
The entirely manmade disaster exposed serious safety lapses. The 6,825-tonne Sewol had undergone an illegal redesign and was carrying twice as much cargo as it was designed to accommodate. Observers blamed this on cosy ties between ferry operators and regulators that had also enabled the Sewol’s owner to skimp on safety features to save money.
MALAYSIA
Twin Tragedies: One of the greatest aviation mysteries of modern times remains unsolved heading into 2015 — the disappearance of Malaysia Airlines Flight MH370. It was the first of two disasters to strike MAS, which was already in deep financial trouble. MAS has since been delisted from the stock market ahead of a massive overhaul under a new German chief executive who is expected to shed at least 6,000 jobs, among other changes.
Flight MH370, with 227 passengers and 12 crew, vanished on March 8 while flying from Kuala Lumpur to Beijing. No distress signals were sent, and no one knows why the plane deviated from its flight path. The Boeing 777 is now believed to have plunged into the Indian Ocean somewhere west of Australia, where experts say it will take until May 2015 to complete a search of the “priority zone” they have identified. Months of searches costing hundreds of millions of dollars and personnel and equipment from 26 countries have yet to uncover a trace.
Just three months later, on July 17, Flight MH17 from Amsterdam to Kuala Lumpur was shot down over eastern Ukraine, killing all 298 passengers and crew. A missile fired by Russian-backed rebels was believed to have been the cause, while Russia blames a missile fired by a Ukrainian pilot. A Dutch Safety Board report stopped short of saying the Boeing 777 was downed by a missile, saying that the aircraft “was penetrated by a large number of high-energy objects ... [resulting in] a loss of structural integrity”.
PHILIPPINES
Peace Deal: A peace accord signed in May with the country’s largest Muslim rebel group was the culmination of 12 years of negotiations and a significant political achievement for President Benigno Aquino III. It grants largely Muslim areas of southern Mindanao greater political autonomy in exchange for an end to armed rebellion, but other insurgent groups have vowed to keep fighting for full independence.
The region is also home to the Abu Sayyaf, an Islamist extremist network with international links. Malaysian Prime Minister Najib Razak, whose country helped broker the peace talks, called the signing “a momentous act of courage.” More than 120,000 people have died in separatist violence since the 1970s in Mindanao.
Nature’s Fury: Typhoon Hagupit slammed the central Philippines in December with downpours and gales, toppling trees, cutting power lines and threatening the recovery of regions devastated by Typhoon Haiyan a year ago. Hagupit was the most powerful storm to hit the country this year, exceeding a July typhoon that killed more than 100 people. Fearful of a repeat of Haiyan, which left 7,350 dead, the government undertook a massive evacuation effort ahead of Hagupit, which in the end claimed 21 lives.
CAMBODIA
Worker Exodus: Tens of thousands of Cambodians fled Thailand in June, fearing a crackdown on migrant workers under the military government that seized power in May. At the Aranyaprathet crossing alone, 110,000 workers streamed into Poi Pet in Cambodia, where Banteay Meanchey provincial governor Kor Samsarouet likened the movement to “a dam collapsing”.
The exodus left Thai employers, notably in the construction industry, severely short of workers, and the junta acted quickly to put things right. Rather than persecuting illegal migrant workers, Thai officials vowed to improve conditions through a proper registration system. By doing so, they hoped to curb the influence of labour brokers and traffickers who prey on migrants — and whose numbers include more than a few police officers and soldiers.
Phnom Penh also moved quickly to provide workers who wanted to return to Thailand with special passports, and Thai authorities made good on their pledge by setting up one-stop service centres for migrant labour registration. Almost all of the Cambodian workers were back on the job in Thailand within weeks.
Wage Hike: Cambodia agreed in November to raise the minimum wage in its vital clothing industry to US$128 a month, a 28% increase, but short of the $140 that unions were demanding. The “poverty wage” in Cambodia is estimated at $120 a month.
The garment industry is worth about $5 billion, more than one-third of the country’s GDP, but wage-related protests and strikes, some of them violent, have been frequent in the past two years. Eight major fashion brands that source clothing from Cambodia, including Sweden’s H&M and the UK's New Look, submitted a joint letter to the Phnom Penh government pledging to pay higher prices for goods from Cambodia in order to ensure livable worker wages, social stability — and uninterrupted production.
