The lime-green Yamaha Mio motorbike that Suryadi bought in 2011 to commute to his job pumping gas in Jakarta would have cost 11.8 million rupiah ($1,220) had he bought it outright. Instead he financed the purchase with a loan at 16 percent interest. Now the 44-year-old father of three is making monthly payments to Bank Danamon Indonesia (BDMN) that eat up about one-fifth of his salary. He’ll end up paying 46 percent more than the cost of the bike by the time he retires the loan. “I don’t have the money to pay in cash,” says Suryadi, who like many Indonesians goes by one name. “Paying in installments is all I can afford.”
Amid growth that the Organisation for Economic Co-operation and Development projects will average 6.4 percent during the next four years, cash-strapped borrowers like Suryadi have helped make Indonesian lenders the most profitable among the 20 biggest economies, according to data compiled by Bloomberg. The average return on equity is 23 percent for the five banks with a market value of more than $5 billion, the data show. That’s greater than the average 21 percent returns at similar-size banks in China and more than double the 9 percent in the U.S. The Indonesian banks’ impressive financial performance is built on loans with an average interest rate of 12 percent—and deposit rates that average 4.6 percent interest, according to Bank Indonesia, the country’s central bank. “There’s plenty of demand for credit but limited supply,” says Ken Timsit, a Jakarta-based partner and managing director at Boston Consulting Group.
Lenders’ profits in the world’s 16th-largest economy might have been even higher if Indonesian banks weren’t also among the most inefficient. The nation’s biggest lenders spend as much as 4 percent of their total assets on operating expenses like maintaining branch networks, compared with 2 percent in Malaysia and 1 percent in Singapore, says Timsit. Alexander Chia, a Kuala Lumpur-based analyst at RHB Capital, blames Indonesia’s geography: More than two-thirds of the archipelago’s 242 million people are spread throughout rural areas on its 6,000 inhabited islands.
Halim Alamsyah, a deputy governor of Bank of Indonesia, says he expects loans to increase 23 percent this year. There’s plenty of room for growth: As profitable as Indonesia’s banks are, they lend to only 28 percent of the population, or about 67 million people, according to World Bank data. Suryadi, the gas station attendant, says he’s saving to build a house that may cost about 50 million rupiah and, he says, “I would like to borrow some money.”
The government has changed its plan to build a new port in Cilamaya and is seeking a better location in Subang or Indramayu, West Java.
Vice President Jusuf Kalla said the government needed to build a new port but it would not be in Cilamaya.
The Vice President, who visited Cilamaya with several ministers, including Coordinating Maritime Affairs Minister Indroyono Susilo and Transportation Minister Ignasius Jonan on Thursday, said the new port would be built east of Cilamaya, either in Subang or Indramayu.
Kalla said the main reason to move the new port’s location to another regency was because waters in the area were already crowded by offshore mining activities and oil tankers transporting crude oil to Jakarta and other cities.
The government has allocated Rp 34.5 trillion (US$2.6 billion) to construct a new port, as Tanjung Priok Port is deemed too crowded.
For detailed story, visit here
government has changed its plan to build a new port in Ci…
South Korean steelmaker POSCO will almost double its investment in Indonesia to $11 billion over the next five years, from $6 billion currently, Chief Economics Minister Hatta Rajasa said on Friday. The world's fourth-biggest steelmaker, already has a multi-billion dollar joint venture with Indonesian state-owned PT Krakatau Steel, the country's biggest steel producer. Earlier this year, the South Korean firm's affiliate POSCO Engineering & Construction, formed a consortium to build two 300-megawatt power plants on Indonesia's Sumatra island, worth around $1 billion. A POSCO spokesman in Seoul said the South Korean firm has yet to make detailed investment commitments in Indonesia, and noted other partners would jointly invest in any projects. Foreign direct investment in Indonesia stayed strong in the second quarter, showing the G20 member remained a magnet in a troubled global economy and that changes in mining ownership rules are not cutting i…
Inflation increased slightly in March, data from the Central
Statistics Agency, or BPS, showed on Wednesday, as prices were pushed up
by higher prices for fuel and rice and continued weakening of the
Analysts said stronger inflation would limit Indonesia’s central bank’s ability to further reduce its key interest rate. The BPS announced March’s headline inflation rate was 6.38 percent, compared with 6.29 percent a month earlier.
“This is broadly in line with our forecast and the consensus median,”
said Dian Ayu Yustina, a Jakarta-based economist with Bank Danamon
The administration of President Joko Widodo has reformed the fuel
price policy to a regulated price that can fluctuate according to the
global oil price and the exchange rate.
Looking forward to the rest of the year, analysts Wai Ho Leong and
Angela Hsieh from Barclays said the path of inflation was still benign.