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ASIAN INTELLIGENCE An Independent Fortnightly Report on Asian Business and Politics No.
1,090 Wednesday, April 20, 2022 REGIONAL OVERVIEW .......................... 2 PHILIPPINES .......................................... 10 CHINA ......................................................... 3 SINGAPORE............................................. 11 HONG KONG ............................................. 4 SOUTH KOREA ....................................... 11 INDIA .......................................................... 6 TAIWAN ................................................... 12 INDONESIA ............................................... 7 THAILAND .............................................. 14 JAPAN ......................................................... 8 VIETNAM ................................................. 15 MALAYSIA ................................................. 9 EXCHANGE RATES ................................ 16 POLITICAL & ECONOMIC RISK CONSULTANCY LTD. Average Salary Raises Projected For 2022(nominal annual percent change)2.33.43.53.94.24.55.05.45.86.06.98.8012345678910Percent Political & Economic Risk Consultancy, Ltd. Issue #1,090 REGIONAL OVERVIEW The changing outlook for wages and salaries No Asian country covered by this report has a consumer price inflation rate as high as the US, which just reported a rate of 8.5% in March-over- March, the fastest pace since 1981.
However, most of the same cost-push forces behind the acceleration of inflation in the US are also affecting Asia, including skyrocketing energy costs, supply-chain disruptions, and fallout from the war in Ukraine.

Consequently, consumer price inflation has been accelerating in Asia too, especially since the start of this year.
in Most governments the region are forecasting that price pressures will ease in the second half of 2022, but that could just be a mutually supported consensus view rather than anything that is grounded in hard facts.

The pandemic, while easing in most countries, is still flaring up in certain locations, such as in the Shanghai area of China recently, and these sporadic outbursts are enough, if they continue, to prevent supply chains from stabilizing.
The war in Ukraine could be disruptive for a long time and have negative global consequences, especially on prices.

Moreover, with US interest rates likely to move higher fast, the debt servicing burdens of many Asian countries will be increasing, while the exchange rates of their currencies against the US dollar – and against imported commodities that are benchmarked against the US dollar – are already depreciating.

This is likely to add further to imported price pressures in Asia.
Most companies in Asia with a financial year that coincides with the calendar year or runs through March drew up their new budgets, including staffing and salary projections, before the disruptive impact of factors like higher oil prices and fallout from the Ukraine war were as obvious as they are now.

Inflation rates had not yet started accelerating, and few corporate planners had a crystal ball that could see US prices moving as high as they have so fast.
The consensus thinking in all of Asia at the time when these budgets were being formulated was in the percentage of that economic conditions would improve in 2022 compared with 2021.

Companies were hopeful that COVID would decline as a problem and that an increase the population receiving vaccinations would enable workers to return to their offices.
Consequently, recruitment efforts are expected to increase in 2022, with more than three in 10 companies indicating their intention third were to add headcount, while another undecided.

Most companies were anticipating low single-digit inflation – in the 1% to 3% range – and were planning to raise pay levels to a modest degree, after having refrained from doing so in 2020 and 2021.
Companies in wealthier countries like the four Asian Tigers and Japan seemed to be gravitating toward salary increases of 2% to 3%, with Japan on the low side and South Korea on the high side.

Companies in developing countries indicated they intended to increase real wages by 3% to 6%, with the Philippines and Indonesia on the low side and China and Vietnam on the high end of this spectrum.
However, in most cases, it now looks like actual inflation in 2022 will be higher than what governments and companies were projecting at the start of the year when they were formulating their employee compensation plans.

If they stick with what they have budgeted, real wages and salaries will go up much more slowly this year than the original plans called for.

The rates of price increases might slow in the second semester, but they might not.
What is certain is that they are higher now in many Asian countries than the governments are projecting for the full year and that workers are feeling enough pain to increase their job-hopping and complain about their predicaments.

To avoid labor problems, companies are likely to raise wages and salaries this year more than they had originally planned just months ago, depending on how high inflation accelerates.
India With consumer prices up 6.1%, currently has the highest rate of consumer price inflation of all the countries covered by this report, while Thailand’s rate is 5.7% and the Philippines’ rate is 4.0%.

Even developed Asian economies that Page 2 ASIAN INTELLIGENCE April 20, 2022 Issue #1,090 Political & Economic Risk Consultancy, Ltd. normally have very low inflation rates are starting to experience higher inflation than usual.
Consumer prices in Singapore are running 4.3% higher than one year ago, while they are up 4.1% in South Korea.

industries The price-wage problem is more acute in developing Asia than in the region’s developed economies.

That is because the number of low- skilled workers is much higher in the developing world, and many of these people are employed in service like tourism, transport, and restaurants, which are likely to be slower to recover from COVID than export-oriented manufacturing.
These workers will be lucky if their pay keeps up with the rate of inflation, especially if their jobs require a lot of petrol or other energy.

In other words, the lowest income groups are likely to be hurt the worst by the rise in inflation and their limited ability to command higher pay.

labor types of In contrast, some in developing countries are very scarce and will be able to command much higher wage and salary increases than the market average.
For example, as noted in the Indonesia and India sections of this report, people with niche skill sets can expect salary increments of 20% or more when they move to a new job, which is one reason why labor turnover is likely to be especially high in these job categories.

in It is a similar story in Asia’s developed economies.
It is a great time to have an advanced degree and experience the semiconductor industry, while many workers skilled in internet and cloud security, life sciences, and e-commerce software and development strategy will also be able to command double-digit pay hikes.

Moreover, COVID has still not eased enough to make it easy for places like Singapore and Hong Kong to import the talent they need quickly.
This will force employers in CHINA these markets to rely more on the local labor pool, where the availability of certain talent is much more limited.

Considering how much banks want to expand their labor forces for certain positions, such as wealth management, these labor categories could also enjoy big pay increases this year – well ahead of the rise in the cost of living.
One problem with this pattern of low wage increases for the unfortunate majority in Asia alongside high increases for the fortunate few is that it will aggravate the problem of income inequality with which many governments, from China to Japan, are wrestling.

This gap is at its highest level in decades for most developing and developed economies in the region.
Unlike in decades past, when the gap was defined mainly in terms of birth when a wealthy elite could use their inherited wealth and political positions to defend and enhance their wealth, the new wealth gap is being driven more by differing levels of access to education and training in the latest technology.

To be sure, families that are already wealthy have an advantage here too, but their position is not as exclusive as before.
There are also many new entrants to this circle, and their success is through social media and other very visible platforms.

Indeed, it is enabling average Asians to aspire to upward economic mobility in ways they never could before.

However, aspirations can quickly lead to frustrations if political leaders are insensitive or shocks like COVID turn out to be dream-busters.

There are indications that this could be happening in some countries is a development that needs to be monitored closely.
in the region now.

It Comments There are two ways to look at wage and salary trends in China.

One is to view China alone, in which case the trend of pay increases is slowing.

It reached its lowest level in several decades last year with most employers raising their wages by between 3% and 7%, with an average increase of about 4.3%.
It is likely to accelerate slightly this year, but the average increase is likely to stay below 5%, but compared with as recently as 2019, when average annual pay increases in China were running 10% or more, this is still quite slow.

April 20, 2022 ASIAN INTELLIGENCE Page 3 Political & Economic Risk Consultancy, Ltd. Issue #1,090 The second way to look at pay trends in China is by comparing them with trends in other countries in the region, both developing and developed.
None have been able to match China’s trend over the past two decades.

Moreover, as limited as China’s wage and salary growth was last year and is likely to be in 2022, the rates of increase in almost all other countries in the region will be lower.
The government’s statistics covering wage trends in China tend to run higher than those reported by foreign investors in China, but the government figures also include employees of private local and state-owned companies and the longer-term trend of these figures is slowing sharply too.

According to the National Bureau of Statistics, in 2021 the per capita wage income of residents nationwide was 19,629 yuan, an increase of 9.6% over 2020.
Wages and salaries in urban areas were much higher than those in rural areas (Rmb 28,481 vs Rmb 7,958), but the rate of increase last year was much slower in urban areas than in rural regions (8.0% vs. 14.1%).

The government has so far succeeded in keeping consumer price inflation in China low.

In March, the annual rate was 1.5%, which implies real wages have risen more sharply in China than anyplace else in Asia.
Some economists have concluded that China faces bigger risks from the slowing economy than it does from rising inflation, which could be correct, but even if inflation accelerates just two or three percentage points this year, which is possible given recent commodity price trends, it would cause a big drop in real incomes, which is not going to make the population very happy and would interfere with the government’s desire to restructure the economy more toward domestic consumption and away from exports and fixed investment.
Economists are currently forecasting consumer inflation of 2.2% (the IMF’s latest forecast is 1.8%).

Still, there are a lot of variables, including how much further domestic production will be affected by COVID shutdowns in China, the inflation fallout from the war in Ukraine, and China’s willingness to adjust local interest rates if domestic price pressures build.

The more real wages fall, the more social pressure in China could build.
On the other hand, the more the government succeeds in holding up real wages, the easier it should be to retain the public’s support and preserve social stability.

HONG KONG Comments One of the most negative impacts of the COVID-19 pandemic on Hong Kong has been to decrease the size of the local talent pool, as many expatriate staff have returned to their home countries or moved elsewhere, while many Hong Kong-born residents have emigrated.
A February diplomatic letter to the government by the EU estimated that over 10% of EU residents in Hong Kong have left in the past year and a half, stressing that this was a conservative estimate.

An indication of the outflow of local people is that over 94,000 Hong Kong residents departed the city via the HK International Airport in 2022 alone, while 26,000 residents arrived.
Page 4 ASIAN INTELLIGENCE April 20, 2022 Slowing of Wage Growth in China(nominal annual percent change)10.28.98.88.17.16.25.96.05.54.34.902468101220122013201420152016201720182019202020212022PercentSurvey of European companies in China Issue #1,090 Political & Economic Risk Consultancy, Ltd. Companies have had to lay off staff to survive the slump in business, but now that business is starting to recover and demand for workers at all levels is rising again, the talent pool in the local labor market has decreased, while it is still difficult getting foreign talent to relocate to Hong Kong to replace the talent that has left Hong Kong over the last two years.
The biggest upward pressure on salaries, as elsewhere in Asia, will be for those employees with niche skills.

For example, while the overall increase in wages and salaries in financial services is likely to be modest in 2022, wealth managers could see double-digit pay increases as major banks like HSBC and Citibank try to attract new talent to staff their rapidly expanding wealth business.
A January report by the American Chamber of Commerce in Hong Kong noted that 40% of the respondents to a survey of its members cited the decreasing size of the talent pool as their biggest challenge.

This was followed by COVID restrictions, difficulties retaining local talent, difficulty hiring new local talent, rising salary and wage expenses, difficulties attracting skilled senior staff, and difficulties hiring overseas talent.
The immediate impact of the squeeze is to increase labor turnover rates and to put upward pressure on wages and salaries.

Moreover, this pressure is being intensified by an acceleration of inflation, which means households need more income to live.

Recent government statistics suggest that consumer price inflation might even be rising faster than nominal monthly wages, which implies real wages are declining or stagnating.

The annual increase in consumer prices in December 2021 was 2.4%.
This rate might not seem very high, but it was well above most nominal wage increases for employees up to the supervisory level (excluding managerial and professional employees).
In the same December-over-December period, real wages for those working in manufacturing declined by 1.1%; imports/export, wholesale and retail trade by 1.3%; transportation by 3.1%; accommodation and food service activities by 0.9%; financial and insurance activities by 0.2%; professional and business services by 0.9%; and personal services by 2.0%.

The only sectors to post a real increase in wages during this period was real estate and maintenance management, where real wages increased by 0.1%.
Companies specialing in human resources estimate that wages will increase by around 3% to 3.5% in 2022.

According to the AmCham survey, 39% of the respondents indicated that they intend to increase their headcounts in 2022.

This compares with 8% who increased their headcounts last year.
It is doubtful, however, that this will be enough to slow labor turnover rates in 2022 or to stop a further net outflow of people who have cooled on staying in Hong Kong due to the way COVID has been handled and local political developments have Similarly, there is sapped confidence.
almost no chance that labor imports will rebound strongly before the second half of this year, and that depends entirely on how COVID progresses between now and then and how government travel and quarantine restrictions are eased.

As long as restrictions are as difficult as they are, it will take a lot more than small pay increases to get talent to move to Hong Kong, especially when that same talent is in such high demand elsewhere.
While upward pressure on wages will remain strong, overall inflation in 2022 could remain relatively low.
The outflow of local labor combined with the limited inflow of new labor to replace it will probably keep local real estate prices April 20, 2022 ASIAN INTELLIGENCE Page 5 Wages and Inflation Are Converging(year-on-year percent change)-3-2-1012345Mar-17Jun-17Sep-17Dec-17Mar-18Jun-18Sep-18Dec-18Mar-19Jun-19Sep-19Dec-19Mar-20Jun-20Sep-20Dec-20Mar-21Jun-21Sep-21Dec-21 Change In Average Monthly Nominal EarningsPer EmployeeConsumer price inflationPercentSource: Hong Kong Census and Statistics Department Political & Economic Risk Consultancy, Ltd. Issue #1,090 and rents stable.
They might even decline slightly.

Since this is the single biggest expense for most households, housing should help to stabilize the overall rate of consumer price inflation this year.

Working against this will be higher transport, electricity, and food prices.

The wildcard will be prices for services, which have been holding steady throughout the pandemic, but now could accelerate as a result of the rise in labor costs as the economy opens up.
Those service firms that have been hanging on by their fingernails for the past two years are also likely to take advantage of any recovery they can to raise their incomes, which will translate into higher prices.

Even so, the trend that was evident in the final quarter of 2021 in which the acceleration in consumer prices started to push the rate of inflation above the rate of increase in nominal wages and salaries is unlikely to last long.
Both trends are likely to converge around the 3% to 3.5% level this year.

INDIA Comments The upturn in the economy is translating into higher salaries, more hiring, and increased rates of labor turnover this year.

Hiring activity is expected to see 31% growth across seven key sectors - automotive, banking & financial services, global in-house centers, heavy engineering and manufacturing, internet businesses, information technology, and pharmaceuticals.
Of these seven sectors, employment growth will be most rapid in automobile, IT & web-enabled services, and internet business.

According to a survey undertaken by digital recruitment platform Taggd in association with the Confederation of Indian Industry, the strongest demand will be for professionals with one to five years of experience.

Gig workers are expected to make up 9% of the workforce in 2022 up from 8% in 2021.

The average salary increase in 2022 is projected to be 8.8%.
Top performers can expect about 1.5 to 1.8 times the increments given to average In terms of employee performers.

segments, management, professionals, and support staff will see the biggest pay increases this year, ranging from 11.6% last year to 22.2%.

middle However, the rebound in the job market will remain deeply uneven sector by sector, and the overall average attrition rate is projected at 19%, well up on last year’s attrition rate of 12.1%.
High tech, pharmaceuticals, and e- commerce could see average salaries rise 9%-10%, which is more than the general industry projection.

On the other hand, wages in other sectors like hospitality, aviation, travel, and tourism, which were hit harder by the pandemic, are also likely to be slower to recover than others.
Although the nominal increase in wages and salaries in India this year is the highest of any country covered by this report, India’s rate of consumer price inflation is also likely to be higher than in most other countries.
In the years before the pandemic, there was a general sense of prosperity for non-agricultural Page 6 ASIAN INTELLIGENCE April 20, 2022 Biggest Salary Increases in Asia, But Also Highest Rate of Inflation(annual percent change)3.44.86.25.66.510.09.95.97.48.802468101220182019202020212022Consumer price, average annualAverage salary increasePercent Issue #1,090 Political & Economic Risk Consultancy, Ltd. workers in India’s formal economy.
Average annual wages and salaries were rising close to 10%, while inflation was running well below 5%, implying hefty real wage increases.

However, that changed dramatically in 2020, when real wages declined.

They increased again in 2021 but by only about 1.8%.

They are likely to accelerate further this year, but the size of the real wage increase will still be less than half what employees were enjoying before the pandemic.

Consumer price inflation has been accelerating since last September.
It was running just over 6% in February-over-February, driven by the increase in food prices.

The Central Bank is forecasting that inflation will slow slightly in the second half of this year, but rising oil prices and fallout from the war in Ukraine could put more upward pressure on prices than the authorities are currently expecting.

A 6.5% rise in consumer prices this year is possible.
In any event, the majority of workers will see income rises closer to the rate of inflation in their specific regions rather than to the 8.8% average expected for workers for companies in urban areas.

INDONESIA Comments Although inflation has stayed relatively low, average Indonesians have had to tread very hard just to keep their heads above water for the past few years.
For example, in 2021, the average working hour wage for Indonesians limited to an elementary school-level education rose only 0.7% from 2020, those with a high school degree saw an increase of 1.7%, and those with a university degree suffered a decline of 2.2%.

This compares with a 1.9% rise in consumer price inflation in the December-over-December period.

The government has increased the average minimum wage of each province by 1.09% for 2022.
This compared with an increase of 3.3% in 2021 and 8.6% in 2020. recovery Economic conditions Indonesia’s than 50% of should improve this year, and several industries will be taking on new staff at all levels.

However, is concentrated in a few sectors, while others are lagging.

In most neighboring the countries, more companies are expected to hire more staff in 2022, but in Indonesia, only between 30% and 40% of the companies have indicated an intention to expand their workforce.
In general, pay is likely to exceed the rate of inflation by one to two percentage points, which should be enough to give consumer spending a welcome boost.

According to one human resource consultancy, average pay increases will hit 6.5% in 2022.

Excluding companies that have implemented wage freezes, it is a 1.2 percentage point improvement from 5.3% registered in 2021 but still below the 6.9% annual increase in 2019 before the pandemic.
High tech and internet companies are expected to see the highest median salary increment of 7.3% in 2022, followed by companies in the chemical and life science sectors (both 7%), and consumer goods (6.5%).

While the mining & mining services have indicated their intention to limit pay increases in 2022, they are expected to offer the highest payout of 3.6 months in terms of variable bonuses.
April 20, 2022 ASIAN INTELLIGENCE Page 7 Most Indonesian Workers Will Be Treading Water in 2022(year-on-year percent change in consumer prices)0.00.51.01.52.02.53.03.54.02019/012019/032019/052019/072019/092019/112020/012020/032020/052020/072020/092020/112021/012021/032021/052021/072021/092021/112022/012022/03PercentSource: Statistics Indonesia Political & Economic Risk Consultancy, Ltd. Issue #1,090 However, it is important to remember that Indonesia has never been a “low labor cost” country.
To be sure, there is a large pool of relatively poorly educated and unskilled workers, many of whom cannot find employment in the official economy during the best of times and must work in the informal sector.

This pool has greatly expanded over the past two and a half years.

However, productivity has always been a problem.

However, the higher up the skill ladder one goes, the shorter the supply of labor becomes.
Companies have always had to pay a lot for those with the required skills and experiences, and as Indonesia pulls out of the pandemic, people with niche skills sets can expect salary increments of 20%-30% when they move to a new job.

Pay increases will be even sharper (30% to 35%) for senior positions that require strategic oversight and planning experience.

JAPAN Comment Inflation in Japan has been very low for years now, but the incomes of Japanese workers have also stagnated.
There could be a bit of relief this year, but not much.

In this year’s shintō, or spring wage offensive, Japan's top firms offered pay rises of around 2%, marking an uptick from the previous year, but only a handful of companies met Prime Minister Fumio Kishida's request for a 3% pay rise for workers to spur growth.

Most human resource and recruitment companies are forecasting that nominal wages will increase by 2%-3% this year.
In contrast, Japanese workers were expecting slightly bigger increases, but what stands out in Japan is that the gap between what employers are saying they will increase incomes and bonuses and what employees are expecting to receive is narrower than in any other Asian country.

Still, nominal pay increases averaging 3% would be an improvement over recent years, including trends at the start of this year.
Average cash earnings in Japan rose 1.2% in February 2022 from a year earlier, accelerating from a 1.1% annual gain in the previous month, due largely to low base effects from February last year when the pandemic took a toll on nominal wages.

Cash earnings increased mainly in accommodations, eating & drinking services (8.1%), mining & quarrying (7.2%), and real estate & goods & rental leasing (6%).
However, cash earnings decreased in electricity, gas, heat supply & water (-2.2%), and compound services (-1.9).

Still, the increases being given, although higher than in recent years, will not be enough to give the economy a significant boost.

In part, that is because the higher incomes will be largely offset by higher inflation, especially for fuel, transport costs, and some foodstuffs.
The annual increase in consumer prices is still less than 1%, but it has been trending higher since April of last year, and it could soon surpass 2%.

This could be seen as an achievement since the Bank of Japan has been trying to push the rate of inflation up to 2% for years now but has consistently failed to do so.

Its reaching this rate now is not a reason to cheer, however, since it is the result of cost-push pressures arising from rising commodity prices owing to the war in Ukraine.
The Central Bank does not want this kind of inflation but demand-pull Page 8 ASIAN INTELLIGENCE April 20, 2022 Workers in Japan Face Another Lean Year(year-on-year percent change)-2.5-2.0-1.5-1.0-0.50.00.51.01.52.02.5Consumer pricesWagesPercentSource: Statistics Bureau of Japan Issue #1,090 Political & Economic Risk Consultancy, Ltd. inflation arising from higher consumer spending.

This is not about to happen.


As the graph here shows, for most of the past three years, inflation has been running slightly higher than the increase in the wage rate.

Since 2000, real wages in Japan have risen just 0.39%.

Moreover, it is questionable that Japanese households would spend more even if their incomes did increase more.
The Ukraine crisis, spiking oil prices, a weakening yen, and the pandemic are all reasons the Japanese will be reluctant to consume more and, instead, will want to save money.

While individual workers are unlikely to see big pay increases this year, companies are expected to need more talent.

The problem is that there is a shortage of domestic labor, particularly with the skills in highest demand, namely workers possessing technical, analytical, or project-specific skills.
Moreover, unlike Singapore and Hong Kong, which are big importers of foreign talent to make up for domestic shortfalls, Japan is resisting going this route, despite a recent study by the Japan International Cooperation Agency that concluded the country needs 6.74 million foreign workers by 2040, nearly 300% more than the current 1.72 million workers, to sustain an average annual economic growth rate of 1.24% being targeted by the government.
The study assumed that Japan would lose more than 10% of its domestic workforce over the next two decades due to the low birth rate and aging.

MALAYSIA Comments The hardest recent year for labor in Malaysia was 2020 when the pandemic forced the government to restrict a wide range of activities, including manufacturing and most services.

Many companies opted for unpaid leave or cut wages when their operations could not be conducted as usual.
Consequently, average wages in the country that year dropped 9.0% in nominal terms.

The only redeeming feature that year was that consumer prices in December 2020 were running 1.4% lower than their year-early level, which cut the real fall in average wages that year to about 7.6%.

inflation consumer Conditions improved in 2021, and there should be a bigger recovery this year, as companies add on new jobs and raise pay levels.
Last year, average wages rose 4.1%, but also price accelerated, with the official index at the end of the year 3.2% higher than its level at the start of 2021.

Consequently, the real level of wages rose only 0.9%.

However, this year wages are expected to rise 3%-6%, with an average increase of 4.5%.

If consumer price inflation can be contained to 2.5% or less as the government and many private economists are forecasting, this would increase real wages by about 2.0%.
there will be big differences in increases, depending on industry and skill levels.

The recovery in pay levels of semi-skilled labor will be the slowest of all since this is where the supplies are most adequate.
The government will likely raise the However, April 20, 2022 ASIAN INTELLIGENCE Page 9 Real Wage Rise Accelerating in 2022(annual percent change)1.0-1.43.22.54.4-9.04.14.5-10-8-6-4-202462019202020212022Consumer pricesAverage nominal wage increasePercent Political & Economic Risk Consultancy, Ltd. Issue #1,090 minimum wage sometime during 2022 to help those who are paid the least keep up with the rising cost of living.
Those pushing for an increase in the minimum wage would like to see it adjusted to RM 1,500 per month from RM 1,200 currently.

In contrast to lower-paid, semi-skilled labor, executives could receive average annual pay increases of 6% to 9%, with positions in especially high demand enjoying increases of around 15%.

PHILIPPINES Comments The economy of the Philippines has been so weak over the past two and a half years that salary increases have been the lowest in over a decade.
Many employers laid off staff or reduced the number of hours worked.

Employees in these industries have, therefore, suffered declines in both nominal and real incomes.

The companies fortunate enough to weather the pandemic have had to hold the line on wages for most employees, while human resource companies report that more skilled employees, including middle-managers, have seen annual salary increases limited to between 3% and 4.5%.
Since consumer price inflation averaged 3.9% last year, this implies that real wages for this group increased around 0.5% in 2021.

Projected salary increases in the Philippines for 2022 will be lower than the regional average.

The actual results will depend very much on how successful the authorities are in holding down the rate of inflation.
Companies are likely to increase their headcounts, especially if the doors open more to foreign tourists and semiconductor manufacturers gear up to expand production in the face of strong foreign demand.

Again, workers in most industries will see wage and salary increases that barely match the rise in the cost of living, but workers in industries that enjoy a pickup in activity could see wage increases of around 6%, which would be the biggest raises they have enjoyed in a long time.
This will not be far above the rate of inflation, but enough to make a positive impact on consumer spending.

The highest salary increases are expected in the energy, life sciences, retail and wholesale, and shared services sectors, which expect increases of 6% in 2022, while the lowest increases are in the chemical and non-financial services sectors.

Consumer price inflation moved up to 4.0% in March-over-March from The in February-over-February.
3.0% acceleration was due to a 6.2% annual increase in prices for electricity, gas, and other fuels and a 10.3% climb in transport costs.

Food prices are holding steady, but the wildcard is the weather.

If the country enjoys good harvests, consumer price inflation should hold around 3% p.a., which is currently predicting.
But if the crops are damaged by bad weather at a time when world food prices have been pushed higher by the war in Ukraine and other factors, inflation could move closer to 5% is what the IMF Page 10 ASIAN INTELLIGENCE April 20, 2022 Most Workers Will Be Lucky to See Pay Rise as Fast as Inflation in 2022(year-on-year percent change in consumer prices)012345678PercentSource: Philippine Statistics Authority Issue #1,090 Political & Economic Risk Consultancy, Ltd. SINGAPORE Comments Inflation is accelerating in Singapore, but so are wages.
Since the third quarter of 2021, the gap has been widening in favor of wages, which means the growth of real wages has also accelerated.

The consumer price index in February was running 4.3% higher than its year-earlier level, due mainly to higher private transport costs.
However, the annual increase in the average nominal monthly earnings per employee jumped from 3.8% throughout the April-September period of last year to 6.9% in the fourth quarter, which raised the real annual increase in monthly earnings to 2.9% from 1.3%.
At the start of this year, private firms specializing in pay and other labor trends were forecasting that inflation in Singapore would be around 1.5% in 2022 and nominal salaries would increase by 3.5%, which would have meant a real salary increase of 2.0% on average, up from 1.2% in 2021.
However, last week, the Monetary Authority of Singapore, raised inflation its forecast for core (which excludes private accommodation and transport) for the whole of 2022 to 2.5%-3.5% from the prior forecast of between 2% and 3%.

Headline inflation, which covers all items, is now predicted to come in between 4.5% and 5.5%, considerably higher than the previous forecast of 2.5% to 3.5%.
The signs point to considerably faster inflation in the months immediately ahead, which will put more upward pressure on wages and salaries.

Although there is likely to be an increase in the supply of foreign labor, as COVID restrictions ease, the recovery of the domestic economy is likely to cause demand for both local and foreign labor to rise even faster.

This will cause the labor market to tighten further and lead to strengthened wage pressures in the months ahead.
Inflation has been pushed higher by the jump in oil and commodity prices, but some of the biggest increases have been in private accommodation and transport – both of which are excluded from the way core inflation is calculated.

Private transport inflation surged 17.2% in February-over-February, up from 14.0% in January-over-January.

Moreover, the rental price index of private residential properties increased 9.9% in the fourth quarter of last year from the like span of 2021.
As more management-level expatriates move to Singapore this year, upward pressure on mid-sized and large private residences will stay strong.

While overall private rents are likely to increase 8%-12% for all of 2022, the units most in demand are likely to see another year of rental growth of between 10% and 15%.
An indication of how much new demand there could be for apartments sought by expatriate professionals and managers moving to Singapore for work this year and next is that the numbers will come close to matching the decline in the number of Employment Pass holders that Singapore experienced during the pandemic.

These refer to foreigners who obtain a visa to work in Singapore in jobs that pay at least S$4,500 a month.

The figure fell by 9% in 2021 to 161,700, the lowest level since 2010.
To the extent that employers have April 20, 2022 ASIAN INTELLIGENCE Page 11 Wages Rise Faster Than Inflation(year-on-year percent change)-1012345678 Change In Average Monthly Nominal Earnings Per EmployeeConsumer price inflationPercentSource: Singapore Department of Statistics Political & Economic Risk Consultancy, Ltd. Issue #1,090 to pay these expatriate employees enough to cover their living requirements as well as meet the tightened requirements set by the government for hiring foreign workers (including increases in minimum pay criteria), the per-person-costs are likely to be much higher than what existed before the pandemic.
Moreover, to the extent that employers are unable to find all the foreign workers they want and must rely instead on local labor, it will further tighten the market for Singaporean workers and put their wages and salaries under more upward pressure, which will, in turn, feed through to higher local prices, especially for services, a segment of the market that until now has shown price stability.

The projected 3.5% increase in nominal wages this year is also just an average.
Singapore workers are expecting higher pay increases than what employers have planned.

Certain skills will be in especially high demand, including staff with certain hi-tech skills, as well as middle management and senior executive staff in life service industries.

Many in these industries can expect double-digit pay increases.

Staff turnover rates in industries employing these kinds of labor will also be higher than usual, a problem many employers will try to limit by giving big bonuses.
SOUTH KOREA Comments Consumer price inflation has been accelerating this year in Korea.

Demand pressures are low, reflecting the squeeze on limited pay incomes due to household increases and a reduction in hours worked, but supply pressures have been increasing as a result of higher crude oil prices.

In March, consumer prices were running 4.1% higher than their year-earlier level, up from 3.7% in December 2021 vs. December 2020 and the highest annual rate since December 2011.
At this rate, consumer price inflation is running more than double the Central Bank’s target range for the year.

Excluding food and energy, the annual increase in consumer prices in March-over-March was only 2.9%, but the 12.7% jump in transport prices hit households hard.

In response to the higher rate of inflation, the Bank of Korea increased its benchmark interest rate last week by 25 basis points, from 1.25% to 1.50%.

This was the fourth time the CB has increased the rate since last August.
Looking ahead, the CB is now forecasting that consumer price inflation will remain in the 4% range for some time, and run substantially above the February forecast of 3.1% for the year overall.

The average monthly household income amounted to 4.642 million won in the fourth quarter of 2021.

This was up 6.4% from the fourth quarter of 2020 in nominal terms and 2.8% in real terms.
However, in addition to employee income, which was up 5.6% last year, this increase also includes income households got from property (up 3.9%), self-employment (up 8.6%), and public transfers to households (up 10.7%).
Moreover, the biggest increase in employee income was for the lowest quintile of the population, which saw a 17.1% jump Page 12 ASIAN INTELLIGENCE April 20, 2022 WagesandPrices Are Both Accelerating in 2022(annual percent change)1.91.50.40.52.53.03.53.44.13.63.95.40123456201720182019202020212022Consumer pricesAverage monthly incomePercent Issue #1,090 Political & Economic Risk Consultancy, Ltd. in employee income largely because of the higher minimum wage and public transfers.
Those employees who made more than the minimum wage receive an average nominal increase of only 4.8%, with the range running from 3.4% to 7.3%, depending on the quintile.

The government has raised the minimum wage for this year by 5.1%, so the lowest-paid Koreans should be able to keep up with the rise in the cost of living.

Other workers should do a little better.

Nominal wages should increase around 6% this year, compared with 4.9% in 2021 and 3.0% in 2020.
Those earning salaries rather than wages should get a similar increase, but a few industries will have a comparatively high demand for certain types of labor.

Those possessing the skills and experience required by the semiconductor, IT services, and healthcare industries could enjoy pay increases closer to 15%.

TAIWAN Comments There is going to be significant upward pressure on wages and salaries in Taiwan in 2022.
According to private surveys, a majority of the companies in Taiwan are planning to increase their headcounts in 2022.

Even more significant is that some of the biggest increases will be for highly skilled workers who get high salaries already.

That is because there is a push by almost all the island’s biggest chipmakers to hire more engineers this year to bolster their aggressive expansion plans.
For example, Taiwan Semiconductor Manufacturing Co., and MediaTek are both expected to take on several thousand new workers this year, while major chip equipment makers and material makers are also building new production facilities and will need to hire more people locally.

The demand for talent in the semiconductor industry has prompted the government to order five universities in Taiwan to set up special semiconductor training programs, each with a quota of producing 100 masters and PhDs a year.
In addition to recruiting local students, the universities will also try to attract students from other countries that do not have a chip industry yet and allow them to work in Taiwan first to gain experience.

However, not all industries are in as strong a market as semiconductors.

Many Taiwanese are employed in services like restaurants, retail trade, and tourism that are recovering only slowly from the pandemic.
One of the potential problems is that there is large gap between what quite a employers have they are willing to pay and what those seeking a new job expect to be getting.

Many of the better-qualified workers are still likely to get pay increases of 15% or more this year (including bonuses), but overall increases are likely to be lower, at between 4% and 6%.
Human resource agencies are forecasting that overall industries and monthly earnings services will increase only around 3.5% this year, which might not be very much more than the rate of consumer price inflation.
indicated in April 20, 2022 ASIAN INTELLIGENCE Page 13 Just under 60% of companies Wage and Pressures Are Building(annual percent change)0.61.40.6-0.22.01.72.53.82.01.33.03.5-0.50.00.51.01.52.02.53.03.54.04.5201720182019202020212022Consumer pricesAverage monthly earningsPercentSources: Data through 2021 comes from the National Statistics Office of the Directorate-General of Budget, Accounting and Statistics.

Consumer price data for 2022 is the Central Bank’s current forecast.
The 2022 average monthly earnings forecast is based on privatesurveysoflocalcompaniesinJanuary2022.

Political & Economic Risk Consultancy, Ltd. Issue #1,090 surveyed indicate they plan to give their employees a wage hike in the first quarter of 2022.

Most of these increases will be based on workers’ performance, while the rest will be in the form of a blanket pay raise.

Those intending to hire new staff say they are willing to pay a starting monthly salary of NT$36,272 on average.
This is lower than the average of NT$40,789 expected by those seeking a new job.

A person working in Taiwan typically earns around NT$129,000 per month, with salaries ranging from NT$32,700 to NT$577,000.

The monthly basic wage (minimum wage) was adjusted by 5.2% to NT$25,250 at the start of this year.

Although inflation is accelerating in Taiwan, it is still relatively low.
Moreover, the government is forecasting that it will slow from current levels in the second half of the year, although that remains to be seen since there are so many variables at play, including fallout from the war in Ukraine and future oil prices.

The consumer price index for March of this year was only 3.3% higher than its year-earlier level, but the last time it reached this high was way back in August 2012.
This means Taiwanese are experiencing higher inflation than they are accustomed to, which could make them nervous and feel like they deserve higher pay increases than employers have indicated that are planning to grant.

It is possible, therefore, that both the wage and consumer price projections for 2022 contained in our graph here will have to be increased before the year is over.

Labor turnover is also likely to increase.

THAILAND Comments Last year was a particularly difficult one for Thai labor.
Annual increases in wages and salaries began to slow early in 2020 as soon as the pandemic hit, but the annual increase turned negative in 2021 and stayed there throughout the year.

On the recruitment front, Thailand’s job flow fell by about 37% on a year-on-year basis as the country went into lockdown for several months during the year.

Like other markets in the region, Thailand’s technology sector stayed resilient, particularly for e- commerce and other internet-based businesses.
Food production, too, proved to be a bright spot.

Both these areas are reasons for optimism going into 2022.

Manufacturing is also picking up, and companies producing goods for export are likely to increase their headcounts this year as well as raise wages and salaries.

However, the overall labor market in Thailand remains weak.

Companies in Thailand are forecasting a median 5% increase in overall salaries for 2022 as the economy starts to reopen after a prolonged and severe COVID-19 outbreak.
Excluding companies that have implemented wage freezes, this is a positive uptick from 4.5% lowest mark for Thailand in a decade, and highlights a return for salary increments to pre- pandemic levels of 5% in 2019.

However, is also accelerating.

inflation Many workers in Thailand may experience another year of declining real wages.
in 2021, the Page 14 ASIAN INTELLIGENCE April 20, 2022 For all of 2021, the increase in Thailand’s Labor Cost Index (Includingovertime,bonus,andotherwages.Y-on-y%change)-20-15-10-5051015PercentSource: Bank of Thailand Issue #1,090 Political & Economic Risk Consultancy, Ltd. consumer prices averaged 1.23%.

However, the trend was accelerating toward the end of the year and the rise has intensified so far this year.
Consumer prices in December were running 2.17% higher than their year-earlier level, and by March the annual increase had risen to 5.73%.

This was the highest consumer price inflation has been since September 2008.

Food prices gained 4.56%, the most since April 2014, after a 4.51% increase in February, boosted by meats and seasonings.

Also, transport inflation accelerated (11.29% vs 9.42%), mainly led by vehicles and vehicle operation; while there was a faster rise in housing cost (5.71% vs 5.69%).
Thailand's headline CPI for this year is projected to rise between 4% to 5%, compared with 1.23% in 2021.

VIETNAM Comments The shock of the COVID pandemic on Vietnamese workers has been especially severe since the year before the pandemic was one of plenty.

In both real and nominal terms, wages rose at double-digit annual rates throughout 2019.

However, as soon as the pandemic struck, companies responded by laying off staff, cutting salaries, and shortening work hours.
Workers have had to pull in their belts tightly, as the average monthly income of employees in the second quarter of 2020 fell 10.4% to 6.34 million VND from 7.07 million VND in the first quarter.

Conditions remained tough throughout 2021.

Nominal pay gradually recovered, but consumer price inflation also accelerated.

Consequently, in real terms, wages in Vietnam are still declining on an annual basis.
This could change in the current quarter, as the gap between the increase in wages and prices has almost disappeared.

For all of 2022, nominal wages are expected to go up around 6%, as companies rehire people and return wages and salaries to the pre-pandemic levels.

than transport costs.

their year-earlier The main reason inflation has been accelerating this year is because of In March, higher transport prices were running 16% higher level.
Fortunately, food, housing, and other major components of the consumer price index have remained stable.

While some of the recent global commodity price increases, such as the price of petroleum, may continue in the medium term, domestic demand is expected to improve only gradually in 2022, fully recovering only in 2023, thus countering inflationary pressures.

Consumer price inflation is expected to remain within the target of 4% set by the Central Bank.
limited acceleration of consumer price inflation should leave room for an increase in real wages by 3% to 4%.

The bigger problems employers in Vietnam are likely to face going forward have less to do with labor cost than with growing supply shortages of labor with certain skill sets, while job-hopping by labor at all skill levels will also remain a concern.
year, This the April 20, 2022 ASIAN INTELLIGENCE Page 15 Real Wages Will Start Increasing Again in 2022(year-on-year percent change)-10-50510152025 Change In Average Monthly NominalEarnings Per EmployeeConsumer price inflationPercentSource: General Statistics Office of Vietnam Political & Economic Risk Consultancy, Ltd. Issue #1,090 EXCHANGE RATES Currency Chinese renminbi Hong Kong dollar 4/15/22 6.3712 7.8441 Indian rupee 76.33165 Indonesia rupiah Japanese yen Malaysian ringgit Philippine peso Singapore dollar South Korean won Taiwan dollar Thai baht Vietnamese dong 14,344 126.45 4.2355 52.1820 1.3573 1,229.08 29.13 33.620 22,901 Commercial middle rate expressed in terms of US$1.
Published by: Political & Economic Risk Consultancy, Ltd. 20th Floor, Central Tower 28 Queen’s Road, Central, Hong Kong Mailing address: G.P.O.

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