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Indonesia Extends Luxury Tax Break for Small-Car Sales

In an attempt to restore the nation’s economy amid the pandemic, the Indonesian government extended its luxury tax break for sales of small cars, first enacted in March 2021, until year-end. The incentive has paved the way for the industry’s impressive recovery. However, challenges remain.

 

Indonesian woman driving a car

 

Indonesia, the second largest automobile manufacturing nation in Southeast Asia, faced a severe decrease in both demand and supply for cars due to COVID-19. From nearly 1.3 million cars produced in 2019, the country halved its production to around 690 thousand cars in 2020. Reduced consumer demand and halted production due to movement restrictions tied back Indonesian car sales until February 2021.

Luxury Goods Tax Relief Enabled Recovery of the Automotive Industry

The Indonesian government imposes a luxury goods tax (Indonesian: Pajak Penjualan atas Barang Mewah (PPnBM)) on vehicles based on engine displacement and body type. With an exemption of low-cost and energy-efficient cars, such as Toyota Agya or Honda Brio Satya, automobile sales are charged 10-125% of tax percentage.

The PPnBM was first relieved in early March 2021 for sales of new cars with an engine capacity of less than 1,500 cc. The incentive targets the automotive sector and related industries, which contributed 10.16% of the country’s GDP and employed more than 1.5 million people in 2018.

The original plan stated a 100% government support of the tax payment from March to May, 50% from June to August, and 25% from September to November. In June, the government extended the relief to fully bear the tax on sales of small cars until August and half of the tax on new purchases made from September to December. The latest extension of the tax relief, announced in September, will be in place until the year-end. The government also allowed a 25%-50% tax discount for cars of more than 1,500cc to 2,500cc capacity.

Since the initial implementation of the policy, sales in March rose to 84,910 units, marking a growth of 73% month-on-month (MoM) and 10.5% year-on-year (YoY). This remarkable jump slightly dwindled throughout the second and third quarter. However, YoY growth was sustained at a high level, significantly at 1443.6% in May.Graph showing Indonesia automotive sales

In August, the Indonesian automobile manufacturers association (GAIKINDO) reported total national car sales of 83,819 units, reaching close to the country’s pre-pandemic level of monthly sales volume. Cumulatively from January-August 2021, retail car sales reached a total of 545,424 units, equivalent to a 68% growth compared to last year, signifying a positive consumer response to the tax incentive.

Expansive Production Meets Domestic Demand and Exports

The jump in demands allowed car production to increase in the same manner. Despite increased movement restrictions from May due to a surge in COVID cases, the production results showed positive YoY growth. As the country managed to subdue its infection rates from August, a strong bounce back in production was visible in the month’s production result. Production from January-August marked a 65.8% increase YoY.

Graph showing Indonesia automotive production

From January-August 2021, the 4×2 passenger cars production benefit heavily from the tax incentive, recording a 70.4% YoY growth compared to 2020. Meanwhile, the production of 4×4 passenger cars, which receives a 25% discount in PPnBM, has not been equally fruitful. However, comparing with August 2020, 4×4 production in August 2021 has shown a significant increase YoY.

Indonesian Automotive production comparison chart

There’s also a noticeable growth of 64.3% in the Affordable Energy Saving Cars 4×2 category, originally already free from the luxury tax. As the government push for more environmental-friendly solutions in the domestic automotive industry, Energy Saving Cars are expected to meet with elevated demand in the near future.

Challenges Remain on the Road to Recovery

Automotive sales during the last quarter of the year have been historically the most lucrative. With generous governmental support, the industry could expect to reach 1 million units in production and 800 thousand in sales. However, there are challenges to surpass in order to realise this potential.

Since its introduction in March 2021, the tax incentive has helped boosted domestic car purchases, with its subsequent extensions considered to have further accelerated the recovery of the automotive industry. The industry welcomes positive projections toward the end of 2021. However, the current global pandemic and semiconductor shortage may challenge the nation on its road to recovery.


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    China Implements Three-Child Policy to Cope with the Rapidly Aging Population

    In a major shift from the existing two-child policy that has failed to raise the country’s declining birth rates and avert a demographic crisis, China announced on May 31st that they now allow all married couples to have three children.

     

    Chinese parents playing with a baby

     

    In 1979, China introduced its controversial one-child policy to prevent Chinese couples from having multiple children to limit its increasing population growth and boost the economic development. In 2013, realizing the severity of the aging population, the government allowed parents who came from one-child families to have two children. Three years later, in 2016, China ended its decade-old policy and replaced it with a two-child initiative in the attempt to mitigate the risks of the rapidly aging population. Despite a short-lived jump in birth rates, the initiative has yet to show any significant, long-lasting results given the high cost of raising children in the country.

    Recently, data from China’s seventh decennial census, released on May 11th, indicated that only 12 million children were born in 2020, a decline of nearly 20% from 2019. Besides, the fertility rate of China stood at 1.3 children per woman in 2020, which is far below the expected level of 2.1 to reach a stable population. The survey also showed that the proportion people of the age 60  and over rose from 8.9% in 2010 to 13.5% in 2020, and the average age of Chinese is predicted to reach 46 by 2050, indicating China’s rapidly aging population.

     

    Graph showing China birth rate 1978-2020

    In a major policy revision intended to address the problems of its aging population and shrinking labour force, China recently further relaxed its limits on reproduction and announced that it would allow all married couples to have up to three children. The implementation of this new three-child policy is a part of the renewed attempts of China’s government to improve the imbalance population structure, actively cope with the substantial aging population and preserve the country’s human resource advantages.

    The new policy change will also come with a variety of supportive measures. China will reduce the educational costs, expand maternity leave and workplace protection for pregnant women and step-up tax and housing support.

    Although there is no certainty about the effectiveness of the new policy, China’s stock market has already responded to the news with an optimistic feeling. According to Reuters reports, stocks related to baby products and services, such as toy makers and diaper manufacturers, surged as soon as the news came out.


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      Great Potential Behind Chinese 618 Shopping Festival

      In addition to China’s biggest shopping festival, Double Eleven, the upcoming 618 Shopping Festival on June 18th is a great showcase of the world-leading development of the e-commerce industry in China, with trillions of dollars of merchandise sold in a very short time and delivered with extremely short delivery times to the homes of consumers.

       

      China 618 shopping festival

       

      In recent years, with the growing popularity of online shopping and the emergence of many e-commerce platforms, E-Commerce is becoming a dominant form of retail in many categories. As the second largest shopping event in the country, 618 Shopping Festival, which has been held annually in since it was initiated by the E-commerce giant Jingdong (JD.com) in June 2010, has been generating huge sales through providing attractive promotions. According to Chinese online payment clearing house – Nets Union Clearing Corporation (NUCC), the total GMV (Gross Merchandise Value) during China’s 618 Shopping Festival in 2020 reached 16.91 trillion yuan (2.52 trillion USD), an increase of 42% comparing to that of 2019.

      In the latest 618 Shopping Festival, Tmall and JD.com, two major e-commerce platforms in China, both broke their transaction records. JD.com experienced a huge GMV growth of over 33% (YoY).

      Graph showing 618 festival growth

      To prepare for the frenzied shopping during the 618 Shopping Festival, many e-commerce platforms need to restructure their logistics network to fulfill the surging customers’ demand. Third-party logistics enterprises such as YTO Express and BEST Supply Chain have also been investing in automatic sorting equipment. After placing an order on the e-commerce platform, the operation center will get the order information immediately. Through the automated line, the average outbound processing time of each package is only 3 minutes, and the accuracy rate of picking goods can reach nearly 100%.

      For some categories, such as electronics and cosmetics, JD has shown the capabilities to optimize for extremely short delivery times, under an hour, by AI-enabled demand prediction and omni-channel models. Another enabler for JD is a working with an open supply chain platform that can enable efficient resource usage, fewer touchpoints and more direct routes from manufacturer to consumer.

      In conclusion, China’s e-commerce industry will continue to grow in the coming years and will be a driver for investments in logistics, and open opportunities for more western brands to quickly reach large markets in China.


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        China’s Thriving Drone Industry

        Drone Industry Overview

        Lately, the media have been filled with articles and clips of drone shows that have painted Shanghai’s iconic skyline in different shapes and words. A recent event used over 3 000 drones to paint the skyline with their huge company logo, another used it to create a huge, mysterious, scannable QR code advertisement in the night skies of the city, shaping the future of high-tech advertising. These record-breaking publicity stunts are a milestone in the deployment of massed drones.

         

        Drone flying in the sky over Shanghai

        Future of Drones: Applications & Uses

        The drone industry in China, also known as Unmanned Aerial Vehicle (UAV) industry, has expanded rapidly in the recent years with the emergence of many companies making drones for commercial, industrial, and military use. The leading technology, coupled with the increasing domestic demand in different fields as well as supporting policies of government are driving the growth of China’s UAV industry strongly and making it an attractive market for businesses.

        Over the past few years, unmanned aircrafts have become central to the functions of many businesses and governmental organizations and have managed to pierce through areas where certain industries were either stagnant or lagging behind. Individuals, commercial entities, as well as governments have come to realize that drones have multiple useful features that can be applied in various fields and are putting more focus on this technology. Increasing work efficiency and productivity, improving accuracy, refining service and customer relations, and solving security issues are some of the common applications of drones globally.

        The Chinese Drone Market Outlook

        The Chinese market is currently the second largest drone market in the world and will continue closing the gap with the leading market, the United States, until 2024. In the upcoming years, the market is expected to grow strongly with a CAGR of 40.57% between 2017 and 2024. The volume of drones in China is also predicted to witness an impressive growth of 25.7% in 2022 and amount to 3.08 million pieces by 2025.

        Graph showing drone market growth

        As the home country of DJI, the world’s largest drone maker, drones are becoming increasingly popular in China. DJI has long been the global leader of drone manufacturing, and holds over 70% of the global drone market share. During 2013 – 2017, its sales revenue almost doubled every year and its industrial output exceeded $3.8 billion in 2019. The success of DJI is mainly driven by its low production cost, skilled labor as well as its responsiveness to the market needs.

        Graph showing China drone market share

        Opportunities and Challenges

        The aggressive growth of the UAV industry in China can be attributed to the policy and regulatory support as well as tremendous investments from the Chinese government. According to the UAV guideline published by the Chinese Ministry of Industry and Information Technology, the ministry has planned to establish and revise more than 200 rules covering the research, production, application, and safety regulation of civilian drones. Also, recently in May 2021, Chengdu Aircraft Industry Group (CAIG) – a subsidiary of the state-owned Aviation Industry Corporation of China signed a deal with the provincial government of Sichuan to jointly invest around 1.55 billion USD to establish an industrial park in the region, dedicated to UAV.

        With the great support from government and the accelerating development of technology, China is dominating the global consumer and commercial drone market, and the buzzing center of this industry is Shenzhen. The city is widely regarded as China’s Silicon Valley and is the home to over 600 licensed drone manufacturers, out of a total of around 7,000 in mainland China. The concentration of drone enterprises in Shenzhen is ideal for the industry’s global competitiveness and innovation.

        The increasing demand for a next-generation logistics network is also offering significant growth prospects to China’ drone market. With the population of over 1.4 billion and various cities in the world’s top 20 list for highest density, China has an urgent need for greater movement of people, goods, and services. JD.com – China’s second largest online platform, has been building a drone-delivery network that covers 100 rural villages leveraging 40 unmanned aircrafts since 2017. SF Express, one of the global leaders in drone delivery, recently became the first company with a Drone Operator License in China; providing a scale of delivery that is unparalleled to anywhere else.

        Besides the great opportunities, the drone industry in China is also facing numerous challenges that might affect its aggressive future growth. Drone applications are spreading rapidly, but how to prevent their potential public safety hazards has become a common issue of public safety management around the world. China wants to support its booming drone market, but still needs to regulate it to prevent accidents. Certain commercial drone uses in densely populated areas such as Beijing and Shanghai have been limited and this would pose a challenge to the potential implementation of the emerging drone delivery method.

        The drone market in China is also witnessing the emergence of hundreds of new entrants, which will possibly drive down the average selling price of drones significantly in the upcoming years. Investors or industry players seeking opportunities to enter China’s drone industry should be of aware the increasingly fierce competition in this booming market.

        Summary

        It is undeniable that drones are rapidly growing in popularity at a global scale with its diverse applications in different industries. As the home of the world’s largest drone manufacturer, China’s drone industry has witnessed an impressive growth in the past few years and is opening concrete opportunities for businesses. Driven by the strong governmental support as well as technological advancements and the surging domestic demand, the industry will continue to thrive in the upcoming years despite some of the regulatory and safety management challenges it might encounter.


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          Exploring The Booming Craft Beer Industry in Vietnam

          Craft Beer is becoming a new trend on Vietnam’s beer market and is favoured by the majority of the young Vietnamese generation thanks to its unique flavours. Although Vietnam is still an undeveloped market for craft beer, the alcohol consumption habits of consumers and the rapid growth of the middle class in the country will continue to drive the growth of the craft beer industry in the coming years and continue to attract new players to enter the market.

           

          Barman tapping a glass of draft beer

           

          The local Craft Beer market started to thrive around 2014 when foreign beer brewers started brewing in Saigon. Since then, many famous Vietnamese craft beer brands such as Platinum, Pasteur Street Brewing Company, Winking Seal, Heart of Darkness, Fuzzy Logic and C-Brewmaster have appeared and gained a proven position amongst Vietnamese consumers, especially the among the young generation. These craft beer producers do not only serve the local consumers, but have also embarked distribution internationally to America, Europe and all-around Asia.

          The craft beer market of Vietnam has also witnessed a penetration from foreign cooperation’s that want to take part of this thriving market. In 2018, Golden Gate, a pioneer in the restaurant chain business model in Vietnam, officially opened its American imported craft beer chain (Craftbrew Vietnam) in Hanoi with the expectation of becoming a bridge for America’s leading craft beer manufacturers to enter Vietnam’s market and bringing the Vietnamese beer lovers opportunities to enjoy high-quality and famous American craft beer brands. As of June 2021, Golden Gate has a total of 55 restaurants across the country, serving different craft beer brands such as Kona, Lost Coast, Green Flash, Sierra Nevada and Blue Moon.

          Further, the Vietnamese beer market is expected to grow at a CAGR of 6.44% between 2021 and 2025 and is expected to reach 9.5 billion USD in 2025. Additionally, the middle class in Vietnam, which is the main consumer of craft beer, is growing rapidly and is predicted to account for more than 50% of the population by 2045, according to the World Bank. Craft beer, therefore, will be a lucrative niche market for businesses.

          Graph showing craft beer market in Vietnam

          Besides the great opportunities in Vietnam, the craft beer industry is also facing certain challenges in Vietnam. The most noticeable one is the higher price compared to the regular beers. In Vietnam, the price of a regular beer is only about 0.6 to 0.9 USD/bottle, while craft beer is ranging from 2.9 to 3.8 USD/bottle. The price differences are mainly driven by the complicated production process of Craft Beer, and its higher nutritional composition compared to other types of beer. This has posed the challenge for craft beer producer in attracting the Vietnamese price-sensitive consumers.

          In conclusion, the craft beer market in Vietnam is expected to thrive in the next few years and will continue to attract the attention of both local and foreign players despite the challenges it might face. The rising income and increasing alcohol consumption as well as the changing tastes and preferences of Vietnamese consumers are opening up business opportunities for craft beer manufacturers and will continue to drive the growth of Vietnam’s craft beer industry in the upcoming years.


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            SIAL China 2021 Brought Together Global Leaders in the Food and Beverage Industry

            SIAL China 2021, one of the world’s biggest food and beverage (F&B) professional showcases and conferences, was held at the Shanghai New International Expo Center (SNIEC) on May 18, 2021. Featuring an exhibition area of 180,000 square meters, the event brought together over 4,500 exhibitors to come and showcase more than 300,000 products.

             

            SIAL China 2021

             

            SIAL China is an integral part of the SIAL Network, a 56-year exhibition company oriented from Paris. Since 2000, the event has been held annually in Shanghai and has brought a great number of opportunities for both international and local F&B companies to gain a deeper understanding of China and Asia’s markets as well as increase their international visibility. At SIAL China, food producers, distributors, wholesalers, and retailers will be able to experience the most innovative and demanding products in the industry.

            This year, the exhibition was held across an area of 180,000 m2 and attracted more than 4,500 exhibitors from over 60 countries and regions to come and showcase more than 300,000 products. In conjunction with the exhibition, the three-day event also featured more than 16 forums and activities, collaborating with global leaders in the F&B industry and over 100,000 professionals to analyse the global food trends.

            SIAL China also collaborates with XTC World Innovation to hold SIAL Innovation Competition which is a unique international competition that rewards the best innovations in food and non-food related products, such as packaging and containers. Furthermore, unlike the previous 21 exhibitions, SIAL China 2021 has empowered the 700,000 food industry professionals from all over the world by giving them the opportunity to participate in and interact via live streaming platforms of ten concurrent forums. In the future, SIAL China expects to continue strengthening exhibition services through Internet, using live streaming platforms as well as other latest communication methods.

            In 2021, the event will take a strategic step forward with the SIAL China South exhibition, which will be held from 28 to 30 October in Shenzen. This marks the evolution of SIAL’s deep dedication to the Chinese market and is also a further expansion of the SIAL Network.

            With the existing SIAL Network and a strong edge of its dedication to China for 22 years, SIAL China has brought together around 40,000 global exhibitors and over one million global professionals and remains positive despite the harsh economic situation, making it a trading platform where food and beverage from all over the world converge.


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              Cross Border E-commerce is Opening China’s F&B Market for Foreign Exporters

              The Chinese government is supporting the growth of CBEC (cross border e-commerce) businesses to promote foreign trade in the country with a range of new initiatives. CBEC is therefore gaining momentum in China and is opening more opportunities for foreign F&B (food and beverage) exporters and enterprises to enter China’s giant consumer market.

               

              Woman shopping online with credit card and phone

               

              CBEC – the activities of trading products through online platforms across national borders is gaining momentum in China and is opening the Chinese F&B market wider to international exporters. Through CBEC platforms, international brands can sell their products to Chinese consumers at preferential duty rates without a license to operate a business in the country.

              In the recent years, CBEC is becoming an important channel for import and export activities in China. From 2016 to 2020, the percentage of CBEC from China increased from 2.2% to 11.25%. According to a study of iiMedia Research Group, in the first quarter of 2020, Chinese CBEC users were more likely to buy F&B, toiletries, and healthcare items via CBEC platforms, partly due to the Chinese New Year and the COVID-19 outbreak. In China, there are many online platforms that operate cross-border e-commerce, some of the key players in China are Alibaba’s Tmall with 28% market share, Kaola with 20.5%, JD.com and Vipshop Global with 13.5% and 9.8%, respectively.

               

              Chart showing market share of cross border e-commerce companies in China

              In 2020, in an attempt to accelerate the growth of CBEC, Chinese government rolled out several policies, including adding more CBEC pilot areas and pilot cities, expanding CBEC retail import list as well as cutting down tax and tariffs. In May 2020, China’s State Council approved the establishment of 46 comprehensive CBEC pilot zones, bringing the total to 105 areas in China. In January 2020, Chinese authorities released the notice to expand the pilot cities for CBEC by adding 50 cities and the island of Hainan into the new pilot scheme of CBEC .

              Further, in December 2019, the “List of Goods under CBEC Retail Import” were also expanded to allow more international F&B products to be sold through CBEC platforms. The products in the list will not be subject to the license approval, registration, or filing requirements for first time importation. A total of 92 items were added to the list, including frozen seafood like frozen oysters, scallops, octopus, and alcohol drinks such as gin and vodka.

              In conclusion, it is undeniable that these new initiatives of Chinese government have made it easier for foreign F&B companies to bring their products to China’s market. Selling products through CBEC platforms not only save money but also save time for foreign brands since companies do not need to have warehouse or legal license and legal entity in China. International F&B entrepreneurs can also use CBEC platforms to develop a mechanism to collect customer and sales data from the platforms to build up market expansion strategies as well as discovering the opportunity to develop offline channels in the country.


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                Vietnam’s Growing Alternative Protein Market is Gaining Attention from Foreign Investors

                Vietnam’s Alternative Protein Market has already witnessed great growth in recent years and is predicted to grow strongly between 2021 and 2025 with a CAGR of 11.85% and reach 500 million USD by 2025. With the aggressive growth in the upcoming years, the market has become attractive for both foreign and domestic entrepreneurs, reflected by the rising foreign direct investment as well as the dynamic participation of local players ranging from start-up to leading food manufacturers.

                 

                Woman eating a vegan burger

                 

                By the end of 2020, Vietnam’s Alternative Protein Market reached 249 million USD, with the dominant share of soy-based protein (70%). Despite the raging pandemic, the market is expected to grow strongly with a CAGR of 11.85% the coming five years. The strong growth of Alternative Protein in Vietnam is mainly driven by the increasing health concerns among consumers and growing consumer focus in sustainability as well as ethical considerations.

                 

                Graph showing trends for protein alternatives in Vietnam

                The rising demand for healthy sources of protein of Vietnamese consumers has further driven the growth of alternative protein market in Vietnam. According to Nielsen Surveys and Global Trend reports in 2018, health concern is by far the most important trend that affects alternative protein intake in Vietnam. The study showed that 37% of Vietnamese consumers consider health to be among their top two concerns while 90% are concerned about the long-term health impact of the ingredients.

                Graph showing health concerns in Vietnam

                Another rising concern is the environmental impact of the production of animal-based meat that have impacted the drastic growth of meat substitutes market in Vietnam. According to an analysis of The Guardian, meat production uses the vast majority of farmland (83%) and produces 60% of agriculture’s greenhouse gas emission. Therefore, alternative proteins which have less impact on environment and require less land-use, have gained popularity among Vietnamese consumers who are becoming more conscious about environmental issues. The market is also receiving increasing governmental support, reflected by the new tax incentives for entities that focus on clean, high-tech, and eco-friendly agriculture.

                With more people shifting away from animal-based meat toward healthier and more sustainable protein alternatives, many food manufacturers ranging from start-up to leading food companies, and even meat producers are embracing alternative protein products to meet the increasing demand.

                The market also captures the attention of foreign investors, reflected by a range of global plant-based protein brands such as Beyond Meat to enter Vietnam’s market in the recent years. In Vietnam, Cricket One – a start-up company that produces cricket protein powder received multi-million dollars investment in late 2020 from a Singaporean Investment Fund and continues to gain attention from foreign investors. The company is currently having its products sold in twelve different countries and is the only one in Asia that have the permission to export for human consumption to Europe. Also, Hadara Corporation – a Japanese plant-based meat company that already has its products present in Singapore and Thailand is also looking for distributors in Vietnam.

                In conclusion, there is no doubt that Vietnam is a potential market of alternative protein for both international and domestic players from start-up to leading companies. The demand for healthier and more sustainable sources of protein of Vietnamese consumers are increasing considerably due to their rising concerns on the impact of animal-based protein on their health as well as the environment. Vietnam’s Alternative Protein Market is therefore predicted to grow strongly in the upcoming years and will continue to gain the attention of foreign investors.


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                  China’s International Consumer Product Expo Attracted Worldwide Attention

                  In May 2021, China’s first International Consumer Expo was held with the aim to accelerate the entry of foreign brands and increase sales under the recently enacted tax-free policies for consumers that is one of many policies in the Hainan Free Trade Port. The Chinese central government has in 2020 released a roadmap for making Hainan a hub of increased opening to the world with policies covering many sectors. Apart from Consumer duty free & tourism, the strategy also includes policies for internationalizing the service sector, healthcare, information technology, transport sector and manufacturing that foreign companies should evaluate in their strategic planning for Asia.

                   

                  China International Consumer Expo 2021

                   

                  In the second quarter of 2021, China’s held its first International Consumer Product Expo (CICPE) in Haikou, the capital of Hainan. The exhibition was jointly organized by China’s Ministry of Commerce’s Trade Development Bureau and the Hainan Provincial Bureau of International Economic Development, with the aim to accelerate Hainan’s Free Trade Port’s development and underline China’s commitment to open-up and share business opportunities with the rest of the world. Going forward, the event will be held annually, with a focus on consumer products.

                  The Expo, which took place from May 7 to May 10, attracted the attention of both international and domestic exhibitors from over 70 countries and regions to come and showcase their products. Over 1,400 companies participated to exhibit nearly 2,500 brands during its 4-day run. In addition, on the last day of the event, the exhibition was opened to consumers and attracted more than 50,000 visitors, bringing the total audience to around 100,000 people.

                  In the tropical Hainan province, Chinese consumers on vacation or business visits can buy duty-free foreign products, to bring with them when they return to other provinces of China. Hainan recently raised the annual duty-free shopping quota from 30,000 yuan (4,335 USD) to 100,000 yuan (14,450 USD) per each person. Also the number of duty-free product categories has also been expanded from 38 to 45, with products such as cellphones and laptops added to the list.

                  Graph showing Hainan duty free sales 2021

                  According to the statistics from China’s Haikou Customs, in the first quarter of 2021, around 17.8 million items were purchased by 1.8 million people in Hainan’s duty-free shops during the three-month period, an increase of 328% and 177% (YoY), respectively. With the strong recovery of consumer activities after the economic downturn 2020Q1 due to Covid, and the major enhancement of duty-free shopping, the total sales at Hainan’s zero-duty zone surged in the first quarter of 2021 and reached 13.6 billion yuan (2.1 billion USD), up 356% (YoY). According to a report by KPMG, it is predicted that Hainan’s free trade port agreement will soon become the world’s largest duty-free market if it continues to grow at the current trajectory.

                  The gathering of the world’s best quality products in the Consumer Product Expo in Hainan has brought in not only new opportunities for international companies to develop their businesses in China’s giant market, but also for the local players to bring their products to the world. Many foreign brands have launched their new products in this exhibition. For instance, Shiseido – a well-known cosmetic company in Japan has introduced its new skincare brands Ginza and Baum. Other big companies such as L’Oréal, Swatch Group also introduced their new products during the event


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                    by Asia Perspective Asia Perspective No Comments

                    Indonesia Releases Draft of New Prioritized Investment List

                    In January 2021, Indonesia’s government drafted a new investment target list, aiming to boost investments in certain industries.

                     

                    Jakarta city view

                     

                    The existing list, released in 2016, categorizes industries into three levels. Those that are open to investment (priority list), those that are closed to investment and lastly those who are open, but with regulations. Under the new list, Indonesia have added one additional type of investment level, which requires a partnership with an Indonesian SME. Further, the new list loses the investment requirement as more industries are put into the prioritized category. Therefore, Indonesia is bumping up the incentives for foreign investments to Indonesia, as there is less restrictions and required conditions.

                    For a business field to be defined as a ‘prioritized’, it must meet the following criteria:

                    Criteria for Indonesia prioritized businesses

                    Investments into business sectors that are periodized are eligible for both fiscal and non-fiscal incentives. Fiscal incentives include (amongst others) tax holidays, allowances and import duty exemptions, while non-fiscal incentives include (amongst others) ease of attaining business licenses and work permits. As a result of the lucrative incentives, more high-tech and innovative investments to Indonesia could improve the competitiveness of Indonesia’s position on the global market. Further, as the list prioritize labour-intensive investments, there is a great opportunity for foreign investors looking for cheaper labour costs within the manufacturing sector.

                    In conclusion, Indonesia’s new list aims to attract more foreign investments to the country. With bigger foreign capital flow into Indonesia, the employment rate and economic performance will be improved. In addition, high-tech and innovation investment might scale up Indonesia’s production output across different industries in the longer perspective. For foreign investors, the updated investment list provides them with substantial opportunities under a more friendly and stable investment environment. As a result, this could be a win-win outcome for both Indonesia and foreign businesses.


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                      Marcus Sohlberg, Business Development Director

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