INDONESIA OUTLOOK

From The Jakarta Post April 2, 2015 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 The government has changed its plan to build a new p...

From The Jakarta Post April 2, 2015 PLN, State electricity company  has said that its plan to hold the prequalification tender for the procurement of liquefied natural gas (LNG) aims to accelerate a 35,000 Megawatt (MW) power plant construction project. PLN’s director for strategic procurement and primary energy, Amin Subekti, said the company would hold a tender not only to ensure smooth power plant construction but also to secure its gas supply. PLN would auction not only the supply of gas but also its transportation and supplying infrastructure as well as its regasification facilities. He said PLN had announced studies on the prequalification process, followed by consultation sessions held at the company’s headquarters in Jakarta on Wednesday. Moreover he explained that in the end, the tender winners would create consortiums in which each of them would be permitted to procure gas domestically or through imports, to accommodate and to store, to transport and regasify the gas i...

From The Jakarta Globe April 1, 2015 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 rupiah. 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 Indonesia. 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. They projected inflation to average 6...

From Antara News March 23, 2015 Managing Director of the World Bank Sri Mulyani Indrawati said financial inclusion is important for countries in Southeast Asia or the ASEAN region, including the Republic of Indonesia. According to Sri Mulyani, countries in the ASEAN region represent 12.3 percent of the world population and do not have access to banks where Indonesia contributes up to 5.9 percent and Vietnam up to 2.1 percent. Meanwhile, small and medium enterprises contribute between 23 to 58 percent of Gross Domestic Product (GDP). However, it is estimated that less than 15 percent of businesses are expected to have adequate access to bank credits. Sri Mulyani pointed out that the central banks and governments of ASEAN have set ambitious targets for it. "It is important that the private sector is provided with more innovative financial services," Sri Mulyani said. National authorities should encourage the private sector to invest more in ...

From The Jakarta Post March 25, 2015 Unlike other global financial agencies, the Asian Development Bank (ADB) has painted a more positive picture of the Indonesian economy this year, arguing that the government’s policy reforms will have an impact on economic growth sooner than expected. The ADB forecast Indonesia to grow by 5.5 and 6 percent respectively this year and 2016, far more optimistic than estimates from the World Bank and the International Monetary Fund (IMF), which said the economy would grow by 5.2 percent this year. The projections are based on the assumption that the new government’s rapid reform momentum is maintained, especially the acceleration in infrastructure building and budget disbursement. Edimon Ginting, ADB Indonesia chief economist  said he expected the country’s economic expansion to be more inclusive and to absorb more jobs, given the current administration’s focus on boosting the manufacturing sector. Currently, every 1 percent of economic growth in...

From Reuters March 21, 2015 Indonesia will impose a levy of $50 a tonne on exports of crude palm oil when prices fall below a threshold triggering a monthly tax on shipments overseas, the chief economics minister said. When prices of crude palm oil fall below the threshold of $750 a tonne on average, the world's top producer of the tropical oil cuts the monthly tax on its CPO exports to zero. Benchmark Malaysian palm oil futures have fallen more than a fifth over the last year, and ended on Friday at 2,160 ringgit ($579) per tonne. Indonesian officials are preparing new rules for a charge of $50 on every tonne of CPO shipped at the zero export tax rate, Sofyan Djalil told reporters, with the funds going to help pay for biodiesel subsidies announced in recent weeks. The measure will go to Indonesian President Joko Widodo for approval on his March 30 return from overseas trips. Indonesia ramped up biodiesel subsidies last month, in a bid to protect its biofuels industr...

From Bloomberg March 19, 2015 Indonesia’s state pension fund plans to increase its investment in affordable housing by fivefold to fulfill demand from low-income workers. BPJS Ketenagakerjaan will invest 10 percent of its 193 trillion rupiah ($14.7 billion) of assets under management to build homes this year, compared with 2 percent in 2014, President Director Elvyn Masassya said in an interview on Thursday. An estimated 34 percent increase in the pension’s membership this year to 22.3 million people may expand the fund’s assets to 233 trillion rupiah by the end of 2015 and help finance the housing investment, Masassya said. The move is in line with President Joko Widodo’s pledge to address a “dangerous” level of inequality that threatens the stability of the world’s fourth most-populous nation and to boost growth to 7 percent. The country is grappling with an economy expanding at the slowest pace in five years and a currency at near the weakest level since 1998, which prom...

From Indonesia Investment March 18, 2015 The World Bank released its latest Indonesia Economic Quarterly report on 18 March 2015. In this report, entitled ‘ High Expectations ’, the World Bank states that it praises the early reform progress in several key areas such as fuel subsidies as well as more key reforms that are underway. This raises high expectations about the Indonesian economy in the middle and longer term. However, the government also faces challenges to implement further complex structural reforms amid subdued growth prospects. Rapid economic growth for Southeast Asia’s largest economy is unlikely to occur before 2016 as investment growth remains sluggish and global commodity prices remain low (due to the economic slowdown in China) hence limiting Indonesia’s export performance. Considering this context, the World Bank believes that the only way to trigger speedy economic growth is by doubling government spending in infrastructure immediately (causing a multiplier...

From The Jakarta Post March 20, 2015 Thousands of unrealized investment permits for projects totaling US$23 billion has been repealed by The Investment Coordinating Board (BKPM), a measure taken for the first time in at least seven years. The board annulled 6,541 licenses granted to foreign investors between 2007 and 2012. According to BKPM chief Franky Sibarani, the permits sat unrealized amid a host of obstacles that ranged from problems with land acquisition to the lack of supporting permits from local administrations. The so-called “principal permits” serve as an initial step for investors to complete their projects in Indonesia, where investment is the second-biggest driver of growth after domestic consumption. It usually takes several years for investors to realize their project after acquiring the principle permit. For detailed story, visit here

From The Jakarta Post March 20, 2015 Indonesian exports to Egypt rose by 21.71 percent to US$1.34 billion throughout the 2014 fiscal year from the $1.1 billion recorded in the previous year. The double-digit increase showed Jakarta’s commitment to continue exploring economic and trade activities with Cairo, said Indonesian Ambassador to Egypt Nurfaizi Suwandi. According to the Indonesian embassy’s trade attaché in Cairo, Burman Rahman, the primary Indonesian goods exported to Egypt included crude palm oil (CPO), coffee, tea, yarn, textiles, paper, handicrafts, tires, electronic devices, and vehicle spare parts. There are 17 companies participating at the CIF’s Indonesian stand consisting of 10 Indonesian firms, five Cairo-based companies and two Indonesian-Egypt joint venture firms. “Our batik and textiles have already penetrated the market in Dubai. Now we want to try to enter the Egyptian market,” said Tutu Nurhasanah from PT Syukestex, one of the participants from Indonesia. f...

From Antara News March 19, 2015 A.M. Fachir , Indonesian Deputy Minister of Foreign Affairs has appealed to Saudi Arabian Deputy Minister of Foreign Affairs Khalid bin Saud bin Khalid to further open its market for Indonesias products. "From the economic side, the trade volume of Saudi Arabia is much more surplus than ours as Indonesia buys oil from it," he pointed out here, Thursday. Indonesia hoped that the Saudi Arabian government will open its market for Indonesian products as a reciprocal gesture for the bilateral trade relations shared between both countries. According to Fachir, bilateral trade between Indonesia and Saudi Arabia reached about US$8.2 billion, of which Saudi Arabia enjoys a surplus of around US$5 billion. He noted that about 750 thousand to one million Indonesians annually undertake Umrah pilgrimage to Saudi Arabia. For detailed story, visit here

From The Jakarta Post March 19, 2015 Due to the leakage of several commodities to end consumers had distorted prices in Southeast Asia’s largest consumer of sugar, the government will continue restricting imports of raw sugar amid concerns that. The Trade Ministry will not allocate raw sugar for border areas, regions in the eastern part of the archipelago or for idle mills — places that are considered prone to leakage to end consumers — as stipulated in a ministry regulation issued late last year. The ministry regulation also prohibits refined sugar from being delivered via distributors or sub-distributors, requiring it to be sold directly by refiners to the major user, the F&B industry. The government will also further tighten the issuance of import licenses for raw sugar, as it will issue import quotas on a quarterly basis instead of on an annual basis as previously, Thamrin further said. To anticipates higher consumption by the industry during the fasting month and Idul Fit...

From The Jakarta Globe March 19, 2015 According to a report by the property consultancy Knight Frank, the number of Indonesian billionaires is projected to double over the next decade on the back of the country’s economic growth and political stability, fuelling a demand for property both in the country and abroad. Knight Frank’s “The Wealth Report,” showed there were 24 billionaires in Indonesia last year, followed by 192 centa-millionaires — those with a minimum net worth of $100 million, excluding their primary house. Meanwhile, 650 individuals are regarded as having “ultra high” net worth, which the property consultancy defined as those with net assets exceeding $30 million. According to the survey, 16 percent of Indonesia’s ultra high net worth individuals plan to buy another property in 2015. In total, they invested $153 billion in domestic and overseas properties last year, including office space, residential homes, warehouses, retail space and hotels.  Fo...

From Business Insider March 19, 2015 Indonesian conglomerate Lippo Group plans to launch payment, chat and other online services early next year as it continues expanding in the nascent e-commerce industry of the world's fourth-most populous country, a senior executive told Reuters. Lippo has already earmarked $500 million for a new online department store, and investment in services planned for the first quarter of 2016 will be on top of that, director John Riady said in an interview late on Wednesday. Indonesia has one of Asia's biggest untapped e-commerce markets which is only recently drawing major investors in search of the next Alibaba Group Holding Ltd. Japan's SoftBank Corp late last year led a $100 million investment in Indonesian online marketplace Tokopedia. For detailed story, click here .

From Business Asia One March 19, 2015 Indonesia will resume free trade and economic partnership negotiations with important trading partners as President Joko "Jokowi" Widodo's administration steps up efforts to boost exports amid the country's economic slowdown. Bachrul Chairi, director general for international trade co-operation at the Trade Ministry, said the resumption of the negotiations was one of the government's key programs to improve the country's international trade, which often suffered a deficit due to weak exports. Among the resumed negotiations on free trade agreements (FTAs) and comprehensive economic partnership agreements (CEPAs) include those with Australia, Chile, the European Union (EU), India, Iran, South Korea and Turkey, according to Bachrul. The negotiations have been ongoing for several years, but have shown no significant progress. Some of the trade talks have even been delayed. Bachrul added that the government ...

From The Wall Street Journal March 19, 2015 Indonesia likes to boast that foreign direct investment has hit record highs in recent years, but it could have attracted even more if the government had made it easier for investors to do business here. Indonesia’s Investment Board said Thursday that it cancelled 6,541 licenses issued to foreign investors between 2007 and 2012 because difficulties they faced clearing land, getting permits from local governments to build or having environmental impact assessment plans approved prevented the projects from happening. Among the projects that had their licenses revoked was a $5-billion refinery project funded by Middle-Eastern investors and a $800-million bauxite smelter project from a Chinese investor, said Franky Simbarani, chairman of the investment board, known as BKPM. He declined to name the investors. In total, the planned investment for the revoked projects amounted to $23 billion, BKPM said. That’s just shy of the $28.62 ...

From Antara News March 18, 2015 In the next five years, the government plans to build more power plants with a combined capacity of 42,000 Megawatts across the country, said Sofyan Bashir, president director of state electricity company PLN, told the press at the Presidential Office here on Tuesday evening. The construction of the power plants with a combined capacity of 42,000 Megawatts will cost Rp1,100 trillion, of which Rp608 trillion will be contributed by PLN and Rp508 trillion by the private sector. Hopefully, there will also be additional power supply of 10,000 megawatts in December 2015. The use of local content in the power plants will be increased, he stated. Additional power supply of 35,000 megawatts will be distributed among islands across Indonesia, with Sumatra receiving 9,000 megawatts, Java and Kalimantan receiving 2,000 megawatts and Sulawesi receiving 2,700 megawatts. Moreover, Bashir said President Joko Widodo asked PLN to pay attention to...

From The Jakarta Globe March 17, 2015 On Monday, California-based private equity firm Elixir Capital’s ECM Straits Fund announced  that it has agreed to invest $4.5 million in Bintang Timur, a plastic waste management company based in Java. Amir Azahar, managing director of Elixir Capital and the firm’s regional head in Southeast Asia, said that the investment will help the company expand both in Java and Bali. Following the launch in 2014 of Elixir’s ECM Straits Fund, the firm has invested in numerous small and medium enterprises (SMEs) throughout “southern Asia.” The Fund recently announced digital commerce investments in Annelutfen, Turkey’s leading e-commerce business for baby and mother products, and FashionValet, Southeast Asia’s premier online destination for female fashion and top fashion designs. For detailed story, visit here

From Jakarta Globe March 17, 2015 The Agriculture Ministry estimates that domestic rice production between January and April 2015 will top 32.9 million metric tons unhusked rice, up 4.1 percent from 31.6 million metric tons in the same period last year. The harvest during the rainy season typically accounts for 60 percent of the total domestic production of the staple grain, Hasil Sembiring, the Agriculture Ministry’s director general of food crops, said on Monday. The government has been repairing irrigation canals since the start of the year, which it says should boost production in the following harvest season, between May and July, Hasil said. For detailed story, visit here

From Antara March 17, 2015 The government of Indonesia and South Korea have expanded the scope of their green business center (GBC) by inviting other countries to join in the cooperation, the Steering Committee of GBC, Meliadi Sembiring, said here Monday. "Initially GBC was realization of a project from the first ASEAN-European Meeting that was initiated by Indonesia and South Korea," Sembiring added. GBC was established in Indonesia several years ago in Jakarta. GBS has become a business development incubator for Indonesians and Koreas small and medium enterprises as well as a medium for business, training and consultation for both countries. For detailed story, click here .