Financial Services Analytical Update - ASEAN Member States' COVID-19 Fiscal and Monetary Stimulus Update: April 14, 2020

Financial Services Analytical Update | April 14, 2020
Authors: Michaela Wong, Shay Wester, Marc Mealy, Jamie Lin, Nick Zuroski 

Update of COVID-19 Fiscal and Monetary Stimulus Policy Across ASEAN

Following our previous financial services analytical update that discussed ASEAN’s ongoing efforts to mitigate the economic impact of COVID-19 as of mid-March, the Council has compiled further developments within every ASEAN member state on the rollout of economic stimulus policies.  For analysis of both movement of people/goods and economic stimulus policy, visit our COVID-19 Digital Dashboard.
On March 19, the government of Brunei issued deferments on financing and loan repayments for up to six months within the air transport, tourism, hospitality/event management, and food and beverage sectors.  Just two days after, Brunei stated that other sectors may also be eligible for deferments if they consult with their lenders, while also unveiling six-month deferments on the Employees Trust Fund and Supplementary Contributory Pension for micro, small, and medium enterprises (MSMEs) with employees earning below US$1,060.  That announcement also established 30% discounts on rental rates for MSMEs in the four core affected sectors leasing government buildings and the temporary exemption of customs and duties on personal hygiene products.  On March 29, the government issued a third wave of stimulus, focusing on 25% wage subsidies for MSMEs, a co-matching grant scheme of up to US$14,130 for businesses entering the e-commerce sphere, and provision of business courses through Darussalam Enterprise’s Industry Business Academy program. 
Cambodian Prime Minister Hun Sen has stated that the government has diverted between US$800 million and US$2 billion toward COVID-19 economic relief, adding that the US$800 million figure will stand if the outbreak lasts for six months and the US$2 billion figure if for a year or longer.  That funding includes state revenue reductions through various tax relief measures in affected sectors such as tourism and travel and 20% wage subsidies for minimum wage workers in the tourism sector.  However, Prime Minister Hun Sen clarified that only “legally registered and formally verified” businesses will be eligible for this aid, which may prove problematic as approximately 95% of Cambodia’s SMEs are not officially registered.  To reduce barriers to borrowing, the National Bank of Cambodia is lowering the interest rate on the Liquidity-Providing Collateralized Operation up to 0.5%, reducing the local and foreign currency reserve requirement interest rate to 7% for a six-month period, and postponing the rollout of the Capital Conservation Buffer to next year. 
On March 18, the Government of Indonesia announced a third US$1.8 billion stimulus package focused on the country’s healthcare system.  That package involves reallocation of funding to strengthen healthcare services through hospital infrastructure and procurement of medical devices, as well as distribution of government payouts.  On March 31, President Joko “Jokowi” Widodo disclosed the signing of a government regulation-in-lieu-of-law that added over US$24.7 billion in COVID-19 mitigation funding to the state budget.  That additional funding includes measures to remove the 3% budget deficit cap, lower the corporate tax rate to 22% (a 3% decrease), expand social safety nets, and restructure financing for SMEs. 
Lawmakers are also currently deliberating an omnibus bill on taxation, which proposes to amend seven taxation laws and cut corporate income tax, create power to overrule regional tax rates, require foreign nationals to pay taxes only on income generated in Indonesia, and eliminate the dividend tax, among other reforms.   An omnibus bill on job creation is also under deliberation, which aims to reduce costs of doing business and boost investment in the country.  Potential reforms include lifting of foreign worker permit requirements and differentiation of minimum wage requirements across provincial governments.  Additionally, President Jokowi has noted that Bank Indonesia had purchased US$11 billion of government bonds in 2020 following interest rate cuts in January and February. 
On March 20, the Government of Laos approved a preliminary 13-measure stimulus package presented by the Ministry of Planning and Investment following the cabinet’s monthly meeting.  On the same day, Prime Minister Thongloun Sisoulith announced the formation of a task force focused on reducing COVID-19’s economic impact in the country.  On April 2, Prime Minister Thongloun issued a decision that outlined a three-month salary tax exemption for monthly salaries below US$550, deferment of payments for affected firms (such as contributions to National Social Security Fund), and a three-month profit tax exemption for micro-enterprises, among other policies.  Additional proposed policy includes lowering of electricity tariffs and acceleration of fiscal spending projects such as the Laos-China railway and expressway construction.  Also on March 20, the Bank of Lao PDR (BOL) lowered reserve requirements to 8% (a 2% decrease) for foreign currencies and to 4% (a 1% decrease) for domestic currency.  Additionally, on March 26, BOL released guidelines that encourage lenders to restructure financing of affected debtors, provide one-year grace periods for such affected debtors, and lower interest rates as needed. 
On March 27, Malaysian Prime Minister Muhyiddin Yassin unveiled a new US$58 billion stimulus package that provides US$23.1 billion in business support via tax deferments, restructuring or postponement of Employees Provident Fund contributions, soft loans, and wage subsidies for employers who have experienced an income decrease of more than 50%.  On the consumer side, US$2.3 billion have been allocated for cash assistance, with RM10 billion to be distributed as one-time payouts to the M40 and B40 groups.  On April 6, Prime Minister Muhyiddin announced an additional US$2.3 billion stimulus package focused on assisting SMEs, which expands wage subsidies for SMEs with 4,000 employees or fewer and provides around 700,000 SMEs with approximately US$500 million in special grant funding.  In addition, it diverts US$46 million toward interest rate reduction to 0% within Bank Simpanan Nasional’s Micro Credit Scheme and TEKUN Nasional funding for up to US$2,300. 
On March 24, Bank Negara Malaysia (BNM) announced US$23 billion in additional relief measures for the country’s finances.  The measures entail six-month postponement of all individual and business loans for small and medium enterprises (SMEs), the choice to convert existing credit card to personal loans, and restructuring of corporate debt. 
On March 18, Myanmar’s Ministry of Planning, Finance, and Industry (MOPFI) announced the formation of a USD$70 million soft loan fund for firms in the cut, make and pack sector, hotels and tourism, and SMEs.  The announcement also unveiled exemption from the 2% Advance Income Tax export tax until September, extension of tax payments from affected sectors until September, and postponement of the social security contribution deadline to three months after the end of the month.  On March 24, the Central Bank of Myanmar (CBM) cut interest rates by 1% to spur economic and business activity, following its 0.5% cut on March 13.  As of April 1, bank deposit rates stand at 6.5%, and lending rates have an 11.5% ceiling for collateralized loans and 14.5% for unsecured loans. 
The Philippines:
Following the March 16 unveiling of a US$535 million stimulus package, on March 30 President Rodrigo Duterte announced an in-the-works US$3.9 billion “social protection program” focused on assisting informal workers, individuals living in poverty, and people working in “no work, no pay” occupations.  Finance Secretary Carlos Dominguez clarified that the additional funding will come from “non-budgetary sources,” meaning that taxes will not be increased and the program will not interfere with other projects outlined in the national budget.  The second package includes monthly cash transfers between US$100 and US$160 over two months for eligible families and US$100 subsidies for agrarian reform beneficiaries.
On March 19, the Bangko Sentral ng Pilipinas (BSP) cut its policy rate by 50bps to 3.25%.  This came after a 25bps cut on February 6.  BSP has also reduced commercial banks’ reserve requirement ratio by 200 bps, relaxed know-your-customer regulations to facilitate the opening of bank accounts, and purchased US$5.9 billion in government securities. 
The Government of Singapore announced a second economic relief package on March 26, consisting of US$33.6 billion in stimulus funding allocated through a supplementary budget.  That package outlines a three-pronged approach of: protecting workers and livelihoods; helping enterprises with immediate challenges; and fostering economic and social resilience.  The budget provides monthly payouts of approximately US$700 to self-employed individuals for nine months and up to around US$630 payouts to adults.  Additionally, it includes wage subsidies up to 75% for the tourism and aviation sectors, 50% for the food services sector, and 25% for all employers.  On April 6, the government unveiled a third stimulus package worth US$3.6 billion.  The third slew of relief measures adds 75% government wage offsetting within the first US$3,250 for all employees during the month of April, as well as approximately US$420 payouts to all adults.  Foreign worker levies will be waived for one month. 
As regards monetary policy, on March 30 the Monetary Authority of Singapore (MAS) set the Singapore dollar’s appreciation rate at 0%, lowering the mid-point of the policy band in an attempt to stabilize prices.  The next day, MAS introduced repayment deferments for struggling individuals and SMEs on residential property loans, up to six-month deferment of life and health insurance premium payments, and a low-cost funding option for SMEs via an MAS-Sing dollar facility. 
On March 24, the Thai cabinet approved a second stimulus package worth $3.5 billion that provides US$1.4 billion in cash handouts for 3 million workers lacking social security and US$1.8 billion in soft loans and tax relief to that same group.  Small businesses will be granted tax deferment and provided with US$300 million in loans.  On April 7, the Thai cabinet approved a third, massive $58 billion stimulus package.  The new measures outline US$18.4 billion in support for affected workers and the self-employed, an extension of US$153 monthly payouts to 9 million workers until September, and US$12.2 billion for infrastructure investment and creation of local jobs. 
The third package also includes plans for the Bank of Thailand (BoT) to divert US$15.3 billion in soft loans toward mid-sized firms, who can apply for up to UA$15.3 million with an annual 2% interest rate.  BoT will also establish the Corporate Bond Liquidity Stabilization Fund, which will add US$12.2 billion to the corporate bond market. 
The Vietnamese Ministry of Planning and Investment has drafted a $2.6 billion relief package for individuals and businesses affected by COVID-19.  Poor and near-poor households will receive monthly payments amounting to US$43 between April and June and contract laborers will receive US$77 per month.  On April 3, Minister of Finance Dinh Tien Dung signed Official Dispatch No.3915/BTC-CST, which extends tax and land lease payment deadlines for various manufacturing sectors, entertainment, real estate, libraries and museums, and foreign credit and banking organizations.  The extension provides a total of US$7.6 billion in tax and lease relief for affected sectors. 
On March 31, the State Bank of Vietnam (SBV) urged commercial lenders to reduce minimum settlement fees of 50% through the interbank electronic system, as well as to curb dividends and operating expenses to maintain sufficient supplies of capital.