Indonesia Economy Forum

[nufix]

Shinkansen feasibility study in Indonesia in works

Japanese Shinkansen

The Japanese government has agreed with Indonesia to conduct next year its first feasibility study on introducing Japan’s bullet train technology to the Southeast Asian country, according to a source close to the negotiations.

The envisioned study puts Japan a big step ahead of rivals including China and South Korea, and brings it closer to winning the contract, the source said as reported by Kyodo News on Wednesday.

Japan has been pushing strongly for its technology and expertise to be applied abroad in making infrastructure more efficient, including by building high-speed railway systems.

The Indonesian railway construction project is worth Rp 50 trillion (about ¥450 billion), according to the source.

The Japan International Cooperation Agency will conduct a three-year study in connection with Indonesia’s plan to build a high-speed railway system on Java Island, and was expected to sign a memorandum with the Indonesian government on Thursday at the earliest, the source said.

The study will look into costs and passenger demand, and ways to secure funding for the roughly 150-km route connecting the Indonesian capital, Jakarta, to Bandung, the source said.

JICA will likely consider the prospect of operating an additional route from Bandung to Surabaya in eastern Java, according to Kyodo News.

With Indonesia keen to build high-speed railway links, the business opportunity for Japan is large as the combined potential routes will surpass 8,000 km, far larger than Japan’s bullet train network covering 2,400 km, industry watchers said.

In 2011, Indonesia announced its vision to create a high-speed rail linking Jakarta and Surabaya, a center of commerce, to stimulate the country’s economy.

Traveling at a maximum speed of 300 kph, the projected rail link would transport people over an estimated 730-km stretch in about three hours.

Shinkansen feasibility study in Indonesia in works | The Jakarta Post



Bakrie oil arm acquires field in South Africa
Raras Cahyafitri, The Jakarta Post, Jakarta | Business | Sat, October 19 2013, 2:15 PM

Jakarta listed PT Energi Mega Persada, arm of the widely diversified Bakrie group, sealed a deal to acquire an oil and gas block in South Africa.

Energi Mega announced on Friday that it had acquired a 75 participating interest in Buzi EPCC Block in Mozambique.

The company will be a new partner to the Mozambique government, which owns the remaining 25 percent stake through its Empressa Nacional de Hidrocarbonetos (ENH).

Energi Mega said the acquisition of the block, which is expected to start production in 2017, had been valued at US$175 million.

Energi Mega president director Imam Agustino said the Buzi block was a high value asset with measurable risk.

“A number of large multinational companies are actively exploring, appraising and developing their gas discoveries into LNG [Liquefied Natural Gas] projects in Mozambique. We are happy that our entry to Mozambique is in the early stages of gas development and our partner is the government,” Imam said in a written statement.

Energi Mega said it would finance the acquisition with internal cash and loan financing.

The company’s head of investor relations Herwin Hidayat said Energi Mega’s internal cash would finance almost 50 percent of the $175 million needed to acquire interest in the block.

He said that the Buzi block was a good prospect.

The Buzi block, one of many fields in Mozambique known for its gas reserves and resources, is reported to have 283 billion cubic feet of proven and probable gas reserves.

Moreover, the block also has 3.4 trillion cubic feet of gas prospective resources.

It is also surrounded by other producing gas fields, such as the Pande, Temana and Inhassoro oil fields.

Moreover, proper infrastructure of gas pipeline from Mozambique to South Africa will secure its distribution.

Demands are also in place, both export and domestic, including for Mozambique’s electric generation and petrochemical industry.

According to the ENH website, the previous 75 percent stake owner was Buzi Hydrocarbon.

A report from Reuters said ENH in 2009 sold its 75 percent stake to PT Kalila Production in a deal worth $30 million.

It said that Kalila Production would be represented locally by a 100 percent owned subsidiary called Buzi Hydrocarbons. Reuters also reported Kalila Production had operations in Indonesia as well as in the United States.

According to Energi Mega’s website, in 2004 the company acquired Kalila Energy Ltd. and Pan Asia Enterprise Ltd., the owners of 100 percent stake in Lapindo Brantas, which has a 50 percent working interest in and is the operator of the Brantas PSC (oil block).

However, in 2008, according to the website, Energi Mega converted a loan from Minarak Labuan Co. Ltd. into equity in Kalila Energy Limited and Pan Asia Enterprise Limited. Consequently, Energi Mega’s stakes in Kalila Energy Limited and Pan Asia Enterprise Limited were diluted to 0.01 percent.

Herwin said that Energi Mega acquired the 75 percent stake in the block from a company named Greenwich International Ltd. “It’s an independent company. The acquisition was carried out this October,” Herwin said.

Shares in Energi Mega, which are traded on the Indonesia Stock Exchange (IDX) under a code ENRG, ended 4.35 percent lower at Rp 88 on Friday compared to a day earlier.

Bakrie oil arm acquires field in South Africa | The Jakarta Post

 

[nufix]

Lion Air set to use Bangkok as a hub

BAMRUNG AMNATCHAROENRIT

THE NATION

Jakarta

Lion Air, the Jakarta-based low-cost carrier, will use Bangkok as one of its hubs to strengthen its network connectivity.

It hopes to play a bigger role the Thai and regional aviation market, drawing on Indonesia's strength as a popular tourist destination.

It has seven hubs at home - Jakarta, Batam, Surabaya, Bali, Ambon, Makassar and Manado - and one regionally in Kuala Lumpur, where it formed a joint venture with Malaysia's National Aerospace Defence Industries to establish Malindo Air, a budget carrier.

The group also runs Wings Air, a low-cost carrier flying to remote islands. The three carriers serve 76 destinations in Indonesia, far more than any other airline.

Bangkok is deemed a strategic location to link flights from the group's affiliated airlines and also regionally with cities. In the future, it plans to serve Japan and South Korea via its full service airlines. However, it's too early to reveal details.

CEO Rusdi Kirana said the launch of Lion Air in Thailand would help attract more travellers there. Even though it is newcomer there, that's not a big barrier. The market was large enough for every airline to survive, as long as they offer effective services.

It will compete head-on with AirAsia, which has a strong foothold there. It is eager to expand its network across Thailand and in the region through the years.

Last week, it said it would fly from Krabi to Chiang Mai and also to Singapore. Early next year, VietJet from Vietnam will launch its flight there and then no doubt competition will heat up.

In Thailand, Lion Group has set up a joint venture, Thai Lion Mentari Co. It has received an air operator licence from the Transport Ministry and is working to get an operator certificate from the Civil Aviation Department.

Its inaugural flight will be from Bangkok's Don Mueang International Airport to Jakarta next month, with two flights a day. It also plans to add the Bangkok-Kuala Lumpur route with a daily service and a Bangkok-Chiang Mai route with three daily services. Other Thai provinces in its sights include Phuket, Krabi and Udon Thani.

It has two new Boeing 737-900ERs in a 215-seat all-economy-class configuration. Over the next five years, it plans to build up its fleet to 50 aircraft.

Lion Group has placed orders with manufacturers for 708 planes, of which 408 are Boeings and the remainder are Airbus and ATR. In November last year alone, it ordered 201 Boeing 737 MAX and 29 737-900ER, costing US$21.7 billion. Later last year, it placed an order for 15 ATR 72s and 15 more, bringing the total to 30.

The big fleet can ensure smooth and timely expansion, especially when a potential market shows demand for travel. In Thailand, it'll offer a true "low" airfare.

Tassapon Bijleveld, Thai AirAsia's CEO, has shrugged off the entry of another low-cost carrier, saying his airline offers the best airfare deal in the market.

Kirana declined to disclose the airfare for Bangkok-Jakarta, but gave the example of Jakarta-Malando, which also takes about three hours.

That flight costs about $90. But the Bangkok-Jakarta price would be somewhat higher since it's an international flight with additional operating cost of over 20 per cent.

However, its competitive edge is 15 kilograms of luggage for loading for free. No extra fee such as booking at the counter is charged.

To spur travel demand, it will work with travel agencies to design packages to stimulate passengers to travel more in other parts of Thailand, not only serve point-to-point service.

Lion Air was established in 1999 and launched its first flight in 2000.Now it has 98 aircraft in its fleet, operating 580 flights a day to 31 domestic and five international destinations.

Lion Air set to use Bangkok as a hub - The Nation

 

[nufix]

Lion Air set to use Bangkok as a hub

BAMRUNG AMNATCHAROENRIT

THE NATION

Jakarta

Lion Air, the Jakarta-based low-cost carrier, will use Bangkok as one of its hubs to strengthen its network connectivity.

It hopes to play a bigger role the Thai and regional aviation market, drawing on Indonesia's strength as a popular tourist destination.

It has seven hubs at home - Jakarta, Batam, Surabaya, Bali, Ambon, Makassar and Manado - and one regionally in Kuala Lumpur, where it formed a joint venture with Malaysia's National Aerospace Defence Industries to establish Malindo Air, a budget carrier.

The group also runs Wings Air, a low-cost carrier flying to remote islands. The three carriers serve 76 destinations in Indonesia, far more than any other airline.

Bangkok is deemed a strategic location to link flights from the group's affiliated airlines and also regionally with cities. In the future, it plans to serve Japan and South Korea via its full service airlines. However, it's too early to reveal details.

CEO Rusdi Kirana said the launch of Lion Air in Thailand would help attract more travellers there. Even though it is newcomer there, that's not a big barrier. The market was large enough for every airline to survive, as long as they offer effective services.

It will compete head-on with AirAsia, which has a strong foothold there. It is eager to expand its network across Thailand and in the region through the years.

Last week, it said it would fly from Krabi to Chiang Mai and also to Singapore. Early next year, VietJet from Vietnam will launch its flight there and then no doubt competition will heat up.

In Thailand, Lion Group has set up a joint venture, Thai Lion Mentari Co. It has received an air operator licence from the Transport Ministry and is working to get an operator certificate from the Civil Aviation Department.

Its inaugural flight will be from Bangkok's Don Mueang International Airport to Jakarta next month, with two flights a day. It also plans to add the Bangkok-Kuala Lumpur route with a daily service and a Bangkok-Chiang Mai route with three daily services. Other Thai provinces in its sights include Phuket, Krabi and Udon Thani.

It has two new Boeing 737-900ERs in a 215-seat all-economy-class configuration. Over the next five years, it plans to build up its fleet to 50 aircraft.

Lion Group has placed orders with manufacturers for 708 planes, of which 408 are Boeings and the remainder are Airbus and ATR. In November last year alone, it ordered 201 Boeing 737 MAX and 29 737-900ER, costing US$21.7 billion. Later last year, it placed an order for 15 ATR 72s and 15 more, bringing the total to 30.

The big fleet can ensure smooth and timely expansion, especially when a potential market shows demand for travel. In Thailand, it'll offer a true "low" airfare.

Tassapon Bijleveld, Thai AirAsia's CEO, has shrugged off the entry of another low-cost carrier, saying his airline offers the best airfare deal in the market.

Kirana declined to disclose the airfare for Bangkok-Jakarta, but gave the example of Jakarta-Malando, which also takes about three hours.

That flight costs about $90. But the Bangkok-Jakarta price would be somewhat higher since it's an international flight with additional operating cost of over 20 per cent.

However, its competitive edge is 15 kilograms of luggage for loading for free. No extra fee such as booking at the counter is charged.

To spur travel demand, it will work with travel agencies to design packages to stimulate passengers to travel more in other parts of Thailand, not only serve point-to-point service.

Lion Air was established in 1999 and launched its first flight in 2000.Now it has 98 aircraft in its fleet, operating 580 flights a day to 31 domestic and five international destinations.

Lion Air set to use Bangkok as a hub - The Nation

 

[Reashot Xigwin]

Contraception on the Rise in Indonesia
By SP/Dina Manafe on 10:23 am November 12, 2013.
Category Health
Tags: birth, contraception, couples, family planning, fertile, health, long term, members
The number of people joining family-planning programs and taking contraception has risen by up to 8 million so far this year, an official said on Tuesday.

“Our duty is to assure that contraception is always available at health facilities,” Fasli Jalal, the head of the National Family Planning Agency (BKKBN), said while attending a nursing conference in Jakarta. “These contraceptives are free — the cost is born by the government in the state budget.”

Fasli said that the acute increase was most like attributable to the inclusion of contraception in Indonesia’s national health insurance scheme, known as the JKN. The JKN was first implemented on Jan. 1, 2014.

Longer-term forms of birth control are, however, available only to married couples on the insurance scheme — anyone having sex out of wedlock must continue to use prophylactics such as condoms at their own cost.

Fasli said around 58 percent of the country’s estimated 45 million couples were covered by the scheme.

Doctors and nurses should receive training, Fasli said, in how to administer the various treatments on offer — from injections lasting 8-12 weeks, to implants and surgery — while the agency will also provide incentives to health professionals from the state budget to promote wider use of contraception.

Contraception on the Rise in Indonesia - The Jakarta Globe

 

[nufix]

we should be tough on preventing baby boom, turning "two childs are enough" program into "two childs policy" for newly weds would be a start.

 

[Thunder.sea]

The Fall
For many years, Indonesia has enjoyed trade surpluses through its growing exports. However, a sudden decrease in global demands has left the country struggling with $2.3 billion trade deficit, the largest since 2008. This, together with the news of US government shutdown and the expected budget cuts, has put tremendous pressure on the country’s currency.

Reduction in the government’s fuel subsidy spending and increase in central bank interest rate are still unable to remedy the situation. Bank Indonesia has also asked local banks to work on improving the onshore trading volume and stated that it would specify hours in which banks could quote rupiah’s exchange rates in an attempt to cut down on speculative play in the global market and exercise some control over the weakening rupiah.

Nevertheless, rupiah depreciated by 6 percent in August 2013, making it the worst-performing currencies in Asia. By September, it was trading at 11,580 against the US dollar, its weakest level since April 2009.

The Aftermath
Rupiah’s volatility continues to scare investors. Indonesia’s stock and bonds have been met with weakened sentiments, thus decreasing the country’s appeal as an investment of choice among traders. Expensive import has also caused inflation to rise with estimates pegging the year-end level at 9 percent. This will be most harmful for small business owners and consumers from low income groups.

While weak commodity exports are expected to continue to widen the current account deficit, the optimists’ camp believes that weaker rupiah will help to bring back the balance in trade as it makes imports more expensive. Local products will be cheaper and more competitive in comparison which will result in increasing domestic consumption.

There is still another bright side to the situation. Indonesia has recently experienced growth in tourism as trips to Indonesia have become cheaper for many international travelers.

The Outlook
Rupiah’s devaluation is worrisome but experts see it more as a ‘short-term hiccup’ than anything else. Furthermore, the wave of currency depreciation is a global phenomenon and should not be taken as an indication of Indonesia’s unfavorable fundamentals.

Indonesia’s current trade imbalance can be fixed by strengthening the manufacturing sector. The former model, which relies heavily on raw materials and cheap labor, has supported the country’s growth so far but is largely under pressure now. Emergence of factories with higher value products is expected to start a new export regime that will help the country to bounce back. Indonesia’s publicly listed manufacturers have seen their shares rise, showing investors’ faith on the growth of this sector. Nevertheless, this solution comes with its own set of challenges in order to work. Indonesia has to focus in solving its problems of corruption, weak infrastructure, hardly functioning ports, and a poorly educated workforce.

Rupiah has been putting up a bad performance lately, however, well-planned policies can mitigate its negative impact on the economy and prevent any future similar crisis. Development of the manufacturing sector, reduced imports, and more competitive exports can boost domestic industries, thus cushioning the economy against currency instability and creating a more sustainable economic growth.
Rupiah is Asia’s Worst Performing Currency for 2013 | Global Indonesian Voices

Indonesian Economic getting worse in here

 

[Thunder.sea]

Indonesia’s economic nationalist policies have recently been on the rise. However, foreign investors are skeptical that politicians will be making policies that are strictly restrictive considering the fast approaching election.

While restrictive policies are bound to put local businesses at an advantage, they put foreign investors at a disadvantage and potentially lead to reduced foreign investment in the country. For an economy like Indonesia, which is now driven by both local demand and international trade, these policies can be a double-edged sword.

What is Economic Nationalism?
According to Wikipedia, economic nationalism is “a body of policies that emphasize domestic control of the economy, labor, and capital formation”.

It is an inward-looking trade policy that uses tariffs and restrictions to protect domestic consumption, workforce and capital gains. Using concepts such as protectionism, import substitution and mercantilism, it questions globalization and the benefits of unrestricted free-trade.

Some examples of economic nationalism include imposition of currency control by Malaysia government during the 1997 currency crisis, economic policy of tariffs and devaluation by Argentina during the 2001 financial crisis, tariffs for domestic steel production by the USA and controlled exchange of Yuan by China.

Economic Nationalism in Suharto’s era
Suharto was the second President of Indonesia and an authoritarian leader who ruled the country for about 30 years. Suharto’s rule, referred to as the ‘New Order’ (Orde Baru), has been attributed with traits of collusion, corruption and nepotism.

Suharto started off with restoration of policies focusing on economic development and ties with the West. Resentment grew among the Indonesians when they realized that there was an increased focus by the government towards attracting foreign investors and, hence, resulted in many violent protests. Fearing dissent among the people, Suharto introducedeconomic nationalist policies, such as imposing restrictions on foreign investors and started favoring indigenous Indonesian businessmen. It resulted in a rapid industrialization and impressive economic development as poverty went down and Indonesia was referred to as an ‘Asian Tiger’. Unfortunately, it was also largely coincided with growing corruption. The developmental impact by Suharto’s economic nationalism policies was shattered by the 1997 Asian Financial Crisis.

Economic Nationalism Now
Recently, Indonesia implemented many economic nationalist policies that put foreign investors at a disadvantage. Foreigners face heavy restrictions on the share of local businesses, especially on policies encouraging investment and creation of jobs in the mining industries. The Indonesian banking sector has been known as one of the most open regimes around the world. However, new regulations now restrict new investors from buying more than 40% shares of a local bank.

The rise of economic nationalist policies is bound to slow down foreign investments in Indonesia. The take-over of Bank Danamon, the 6th largest bank of the country by DBS Holdings Group, a Singapore-based company came to a halt following these policies.

In 2012, Jakarta came up with a new law requiring foreign companies to diversify their stakes in Indonesian projects gradually, with a maximum ownership at 49% and the majority being owned by Indonesian companies or the government. There have been increased concerns voiced over these policies by foreign diplomats of other countries. Greg Moriarty, the Australian Ambassador to Indonesia stated that Indonesia’s increase of economic nationalism is due to greater self-confidence in the South East Asia’s largest economy.

The nationalist policies are meant to give opportunities to local businesses but if the locals are slow to respond to such opportunities, there will still be a need for imports to meet the demands of goods by the people which can adversely affect the balance of payments for the country.

Conclusion
While Indonesia can afford the posturing in good times to give opportunities for local businesses to grow, signs are not encouraging for a sustained positive economic development. With strict policies and tags attached to investment in Indonesia, chances are that investors will start looking for other markets and that will put Indonesia at a disadvantage in the long run. An example is Freeport McMoRan, a US-based mining giant, where new divestment laws could end long-term mineral rights and profit-sharing between the company and the Indonesian government.

Standard & Poor, an international rating agency, is also declining to upgrade Indonesia’s sovereign debt ratings from BB+, stating the country is at risk of ‘policy slippages’. Although nationalist policies are crucial for protecting local businesses and displaying assured confidence among the locals, such policies can be perceived as restrictive which bring more harms for the economy in the longer run.

Indonesia's Economic Nationalism: a Double-edged Sword | Global Indonesian Voices

Indonesia’s Economic Nationalism: a Double-edged Sword

 

[MarveL]

RI seeks to suspend Oz
cattle imports

Bagus BT Saragih, The Jakarta Post, Jakarta | Headlines | Tue, December 10 2013, 10:03 AM

The government has requested cattle importers to temporarily halt bringing in livestock from Australia pending the completion of diplomatic moves to restore bilateral ties damaged by recent spying allegations.

Following reports of the surveillance, President Susilo Bambang Yudhoyono suspended cooperation on three fronts, namely military and defense; joint-patrols on people smuggling; and intelligence and information sharing with Australia.

Cooperation in other sectors, such as trade and agriculture, have apparently now also been affected.

Agriculture Minister Suswono said on Monday that the government had a clear stance on Jakarta-Canberra bilateral issues.

He said that the ball was now in Australia’s court, which, he said, should prove its genuine commitment to rebuilding trust and confidence within Indonesia. “However, when it comes to cattle and beef imports, the deals were made within a business-to-business framework. We can only appeal to importers to act in line with the government’s stance, until everything is completely normalized,” Suswono said.

He called on business players in the sector to make the necessary adjustments in accordance with the progress of bilateral relations.

The minister also said that the government was ready to reduce the volume of imported cattle from Australia. “If the President is not satisfied with Australia’s response to the recent diplomatic tension, then we will review the policy,” the Prosperous Justice Party (PKS) politician said.

Days after news reports about Canberra’s tapping of the phones of Yudhoyono and First Lady Ani Yudhoyono broke, last week, Coordinating Economic Minister Hatta Rajasa indicated the cattle trade with Australia could also be affected, saying that Indonesia should begin to reduce its dependence on Australian cattle.

State-owned agribusiness PT Rajawali Nusantara Indonesia, meanwhile, said it had halted talks on a cattle ranch operation in Australia, saying that it had started talks with a New Zealand firm as an alternative.

Previously, the Indonesian Chamber of Commerce and Industry (Kadin) said it hoped that the frayed Indonesia-Australia ties would not hurt the domestic economy.

Kadin chairman Suryo Bambang Sulisto said the government should not make any decisions pertaining to business affairs, which might disrupt long-established, mutually beneficial economic relations.

“The government needs to be careful about [making] any decisions that could affect the business sector; it needs to thoroughly assess the benefits and disadvantages. We do not want this issue to negatively affect investment flows or other business aspects,” Suryo said.

He added, however, that the government’s plan to suspend bilateral talks on the comprehensive economic partnership agreement (CEPA), which began last year, was acceptable as it was likely to have only a minor impact on businesses.

The move to halt CEPA negotiations was publicized on Wednesday, along with the official announcement that the government was suspending its cooperation with Australia on preventive measures to curb the number of boat people passing through Indonesia.

Indonesia and Australia recently completed the second round of talks on the CEPA, which aims to significantly boost bilateral trade.

Australia has traditionally been Indonesia’s largest trading partner. The two countries traded a total of US$10.20 billion worth of commodities and products last year, of which Indonesia exported goods worth $4.91 billion and imported goods worth $5.3 billion.

RI seeks to suspend Oz cattle imports | The Jakarta Post

 

[Reashot Xigwin]

Yay! Indonesia’s taxis now have internet

• December 11, 2013
• at 12:30 pm
• by Enricko Lukman

Indonesia’s capital city, Jakarta, is notorious for its traffic jams, and it’s just a waste of time getting stuck on the road as you head to your next meeting. One taxi fleet recognizes this problem and wishes to put a smile on the face of its passengers by offering free wi-fi.

Express Group has free wi-fi installed in 400 of its taxis in Jakarta, Depok, Tangerang, and Bekasi areas. These special cabs will have a Huawei wi-fi hotspot logo on the back of each vehicle. Yes, these cabs are using Huawei E5520 routers, which explains the Huawei logo.

The free wi-fi program is run jointly between Chinese phone-maker and telecoms hardware giant Huawei, IT product distributor Intertec, and local telco Telkomsel. This pilot program will last for six months and might be extended if the company gets good results out of it. Express Group is the second largest taxi fleet in Indonesia, commanding about 11 percent market share in the country.

I’m excited about this program, and I think it can convince a few customers to hail Express cabs if they want to surf the net for free – or get some work done – whilst on the road. If this project is successful in putting more butts in passenger seats, then market leader Blue Bird Group could be prompted to offer similar connectivity in its taxi fleet.

Recently Express Group sealed a partnership with ticket booking site Tiket, which enables customers to make online reservations for the company’s rental cars.

(Editing by Steven Millward)

Yay! Indonesia’s taxis now have internet

 

[MarveL]

Japan's MUFG provides its first Islamic loan in Indonesia

TOKYO: Mitsubishi UFJ Financial Group's core banking unit will become the first Japanese bank to provide an Islamic loan in Indonesia, financial sources said, a key step that the bank hopes will help it build up its Islamic financing business.

Rapid economic growth in Muslim-majority countries in Southeast Asia and the Middle East has spurred many non-Muslim institutions to foray into Islamic finance. The top 20 Islamic banks have been growing 16 percent annually in the last three years, far outpacing their conventional rivals, according to Ernst and Young.

Bank of Tokyo-Mitsubishi UFJ (BTMU) joined hands with BNP Paribas, CIMB, Standard Chartered and HSBC to provide a total $50 million in 3.5-year loans to a unit of Indonesia's largest automotive distributor PT Astra International, the sources said.

They declined to identified as they were not authorised to speak publicly about the matter.

A BTMU spokesman declined to comment.

BTMU set up an Islamic finance team in Malaysia in 2008 and the team now has 25 bankers. In addition to Malaysia and Indonesia, the bank has also provided Islamic finance in Singapore and Brunei. - Reuters

Japan's MUFG provides its first Islamic loan in Indonesia - Business News | The Star Online

- -​

 

[Nike]

Japan's MUFG provides its first Islamic loan in Indonesia

TOKYO: Mitsubishi UFJ Financial Group's core banking unit will become the first Japanese bank to provide an Islamic loan in Indonesia, financial sources said, a key step that the bank hopes will help it build up its Islamic financing business.

Rapid economic growth in Muslim-majority countries in Southeast Asia and the Middle East has spurred many non-Muslim institutions to foray into Islamic finance. The top 20 Islamic banks have been growing 16 percent annually in the last three years, far outpacing their conventional rivals, according to Ernst and Young.

Bank of Tokyo-Mitsubishi UFJ (BTMU) joined hands with BNP Paribas, CIMB, Standard Chartered and HSBC to provide a total $50 million in 3.5-year loans to a unit of Indonesia's largest automotive distributor PT Astra International, the sources said.

They declined to identified as they were not authorised to speak publicly about the matter.

A BTMU spokesman declined to comment.

BTMU set up an Islamic finance team in Malaysia in 2008 and the team now has 25 bankers. In addition to Malaysia and Indonesia, the bank has also provided Islamic finance in Singapore and Brunei. - Reuters

Japan's MUFG provides its first Islamic loan in Indonesia - Business News | The Star Online

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i don't know ..................

 

[MarveL]

Indonesia continues to grow faster than India

Indonesian economy clocks 5.6% growth in Q2 as compared to India's growth rate of 4.8%
Somesh Jha | New Delhi December 14, 2013 Last Updated at 21:02 IST


Indonesia, which replaced India as the second fastest growing economy in the world a few years ago, continued to grow faster than India in the second quarter of 2013-14, despite its economic growth rate standing at a four-year low.

India's growth rate in Q2 of 2013-14 stood at 4.8 per cent, sub-five per cent for the fourth quarter in a row. Compared to this, the Indonesian economy clocked 5.6 per cent growth in Q2, which was the weakest in four years. Indonesia's economy rose 5.8 per cent in the first quarter of 2013-14. India's economy, on the other hand, picked up pace from a four-year low of 4.4 per cent in the second quarter of the current financial year.

Indonesia's economy was hit by weak exports and a low consumption level due to high inflation. Indonesia's inflation stood at 8.32 per cent in October.

India also witnessed high inflation and consequent high interest rates dictated by RBI policy. As such, the demand of consumers in the economy, indicated by private final consumption expenditure (PFCE), remained low even as it grew higher than Q1. PFCE grew 2.16 per cent in this period against 1.62 per cent in the previous quarter. Last year, this had risen by 2.54 per cent. Retail-price inflation entered double digits in October in India after a gap of six months, clearly indicating that in the third quarter as well, demand might not pick up significantly.

On the other hand, exports were one of the few saviours for the Indian economy. The outbound shimpments rose double digits for three consecutive months in the second quarter (at current prices).

Obviously, China's growth was the highest. Among the rest of the BRIICS nations however, Russia, Brazil and South Africa saw lower growth rates than India in the second quarter.

Like India's economy, the Chinese economy also saw higher GDP expansion in Q2, compared to Q1. Its economy rose 7.8 per cent in Q2 of 2013-14, against 7.5 per cent in Q1.

Investment constituted half of the total growth in GDP of China. However, the growth in exports was weak.

The rise in India's GDP was mainly boosted by good farm produce as it grew 4.6 per cent in this quarter -- a two year high. Services remained at more than a decade low of 5.7 per cent.

All this while, the investment rate hovered around 30 per cent of GDP, which could have easily given a growth rate of over 7 per cent, had projects not been stalled or fuel-supply linkage problems in power companies resolved.

Things are not rosy in Russia as well, as it is witnessing the worst slowdown since the 2008 recession. Russia's GDP in July-September this year grew at the same pace as it expanded in the first quarter--1.2 per cent. This is the weakest growth among BRIICS nations. However, the government and various economists are hopeful of a recovery in the second half of the year - just as in India.

In South Africa, a contraction in mining, manufacturing and the agriculture sector led to a subdued growth of 1.4 per cent in the September quarter against 1.3 per cent growth in the previous quarter.

Brazil's GDP rose 2.2 per cent compared to last year's same quarter.

This comes after the Brazilian economy grew at the fastest pace at 3.3 per cent in the last three years in the June quarter.

Indonesia continues to grow faster than India | Business Standard

--​

 

[Reashot Xigwin]

Indonesia needs 30 years to become advanced nation
Sat, December 14 2013 15:13 | 430 Views

Andi Abdussalam


(ANTARA News/Konecranes)


Jakarta (ANTARA News) - Having been classified as a middle-income country since the early 1990s, Indonesia needs about 30 years to come out of what is called the middle-income trap and move into the high-income group of countries.

Indonesia, according to the Organization of Economic Cooperation and Development (OECD) forecasts, is expected to shift from a middle-income nation to a high-income, or advanced country, by 2042.

"That is much slower than Malaysia, which is expected to make that transition by 2020, China (by 2026) and Thailand (by 2031)," the Head of the Asia Desk, OECD Development Centre, Kensuke Tanaka, told participants at a seminar last week.

The middle income trap refers to a situation in which a country that has become a middle-income nation fails to become a high-income country and experiences stagnation.

Based on international standards, a country is said to have fallen into a middle-income trap if it stays at the middle income level for 42 years.

Indonesia, Tanaka said, is only leading the Philippines, which is forecast to shift to an advanced nation by 2051, Vietnam by 2058 and India by 2059, because of being late in carrying out institutional developments and in anticipating changes.

"A number of middle-income developing countries are facing difficulties in maintaining their long-term growth and in moving away from the middle-income trap," noted Tanaka.

The OECD official said to escape the trap, developing countries must change their basic economic structures and develop their modern service sectors.

According to Indonesian Finance Minister Chatib Basri, of the 113 countries classified as middle-income nations since 1960, only 13 have been successful in developing into high-income states. The others remain caught in the middle-income trap.

He cited Brazil, India and South Africa as examples of countries that could not escape the trap. Japan, South Korea, Singapore and Ireland, on the other hand, succeeded in moving into the high-income group of nations.

"Indonesia has only been classified as a middle-income state since the early 1990s. It is, therefore, still possible to avoid the middle-income trap," he added, speaking on the sidelines of an international seminar on the "Middle Income Trap" organized by the finance ministry, the National Development Planning Board and Bank Indonesia in Denpsar, Bali, on Thursday.

He added that Indonesia has a possibility of moving into the high-income group of countries based on several factors, such as high economic potential, including abundant natural resources, and a population of up to 250 million people.

Demographically, he said Indonesia's population is dominated by the productive, working-age group, which benefits the national economy.

This demographic pattern of a high proportion of working-age individuals in the population is called the demographic dividend and enhances a countrys economic performance.

"Of course, it is not easy to jump from a middle-income group to a high-income group. Even a World Bank study has shown that the number of countries that have fallen into the middle-income trap is far greater than the number of countries that entered the high-income group," he noted.

The finance minister said that Indonesia, which had been classified as a lower middle-income country since the 1990s and now had an average per capita income of around US$5,170 a year, would never become an advanced nation if it continued to depend on its natural resources and low labor wages.

He added that technological innovation-based human resource development is desperately needed to boost Indonesias productivity and prevent the country from falling into the middle-income trap. Better human resources are required to turn Indonesia into a high-income and advanced nation.

Chatib said one of the solutions to achieving these goals is boosting productivity through the creation of technological innovations, such as was done by South Korea, which became an advanced country in 15 years.

"We have to build good and capable human resources to boost productivity. The transformation should be done so that we will not depend on raw materials and low labor wages," the minister said.

In order to improve the quality of human resources, the Indonesian government will provide a tax allowance for companies that conduct research and development (R&D) for improving human resources.

"We are considering a tax allowance for companies conducting R&D for the improvement of human resources," the minister said.

Finance Deputy Minister Bambang Brodjonegoro added that persistent income and development disparities among regions could also push Indonesia into a middle-income trap.

"Indonesia has to overcome not only the disparities in peoples incomes, but also gaps in the development of its regions," the finance deputy minister said on Friday.

He noted that while Indonesias economy over the past decades has been relatively stable, the disparities between urban and rural areas continue to increase. As a result, the underprivileged cannot enjoy the benefits of national development.

"Jakartas share in the gross domestic production (GDP) distribution has been rising. In 1990 it was only 12.1 percent, but by 2010 it had increased to 16 percent. So, 16 percent of Indonesias economic output is generated in Jakarta. In contrast, the shares of Java and Bali are declining. This is not appropriate because the regional autonomy of these regions has not created growth, causing people in the regions to migrate to Jakarta," he noted.

Bambang suggested that major cities, such as Bandung, Surabaya and other cities in Kalimantan and Sumatra, should be converted into new growth centers to ensure more evenly distributed economic development. It would also reduce the burden on Jakarta, he added.

"We should not let people migrate to Jakarta at will because it places a burden on Jakarta, which is not good for Indonesias economy," Bambang said.

In order to overcome such disparities that can trap the country in the middle-income group level, Indonesia has to undertake structural reforms to evenly distribute growth.

According to Dody Budi Waluyo, executive director of Economic Research and Monetary Policy Department of the Bank Indonesia (the central bank), Indonesia needs to carry out structural reforms to accelerate its high-value productivity program and to become an advanced country.

"The point is that Indonesia should carry out structural reforms to support even growth stability and to coordinate certain sectors, particularly the production sector," Waluyu said.

He added that Indonesia could avoid the middle-income trap because it has the largest economic potential among developing countries. With this potential, Indonesia, as a middle income nation, could overcome the constraints it is facing to shift into the group of countries with high income levels.

"Structural reforms will be a long process. Indonesia has actually done it since it was affected by the 1997 crisis. Though it has not achieved a maximal result, yet it has to continue to do it with a more coordinated policy with Bank Indonesia," Waluyo said.

(A014/INE)
EDITED BY INE
(A014/KR-BSR/A014)
Editor: Jafar M Sidik

COPYRIGHT © 2013

Indonesia needs 30 years to become advanced nation - ANTARA News

 

[Nike]

RI’s economy to grow
6% in 2014: VP
The Jakarta Post, Jakarta | Business | Mon, December 16 2013, 10:30 PM

Vice President Boediono has said he is optimistic that with better control of food-price inflation Indonesia’s economy will grow by between 5 percent and 6 percent in 2014.

“I predict that our economic growth will improve next year although it is not likely to be over 6 percent as occurred in 2011. However, this cannot be avoided if we want a balance between stability and economic growth,” said Boediono.

He was speaking to journalists and foreign diplomats at the Jakarta Foreign Correspondence Club in Jakarta on Monday, as quoted by Antara news agency.

Boediono added that Indonesia’s inflation rate until the end of 2013 was expected to reach 8 percent and this figure was far above the country’s average inflation rate during the last several years, which was between 4 and 5 percent annually.

“There are several factors that have triggered such a high inflation rate, including the fuel price hikes and increases in non-rice food commodity prices,” he said.

Boediono was also confident that investment and consumer spending in 2014 would remain high. Activities centering on the 2014 general elections would likely contribute positively to growth as well, he said.

Boediono added that oil imports would probably reduce due to the government’s plan to shift from petroleum diesel to palm-oil based biofuels.

On economic growth and stability, the Vice President said Indonesia was still noted globally as a high-growth country. After enjoying stable economic growth of 6 percent annually, Indonesia’s economic growth fell to 4 percent when the economic crisis hit in 2008. The country later restored pre-2008 rates of annual GDP growth of 6 percent, exceeding growth in other countries with the exception of China.

Boediono acknowledged that Indonesia had been suffering a current-account deficit since the fourth quarter of 2011.

“This is caused by decreased export values due to declines in commodity prices in the international market. Moreover, imports remain high particularly of subsidized fuel for domestic needs,” said Boediono.

“In 2012, Indonesia’s growth was also still supported by investment and consumer spending that was relatively high despite weaker exports,” he went on.

Declining export values in 2013 were one of major causes of Indonesia’s weaker economic growth. Nevertheless, Boediono said, there were many positive factors that could raise enthusiasm in 2014, so that he was optimistic 6 percent growth was achievable for Indonesia in the midst of the ongoing global economic slow down. (ebf)

RI’s economy to grow 6% in 2014: VP | The Jakarta Post

I hope so, Indonesia need more productivity in service and technological sector to push economic growth next year

RI at middle-income crossroad

Satria Sambijantoro, The Jakarta Post, Nusa Dua, Bali | Headlines | Fri, December 13 2013, 10:55 AM

Indonesia is now racing against the clock to boost its manufacturing sector and strengthen its supply-side economy as the nation is on the brink of falling into the middle-income trap, a state that has afflicted other emerging market economies.

Government officials have acknowledged that Indonesia now needed bold policy measures to prevent the country from falling into the middle-income trap.

“Is there a risk that Indonesia will get trapped in the middle-income group? Unfortunately, the answer is yes. Indonesia has grown to become a lower middle-income country since the 1990s, and we are still there now,” Finance Minister Chatib Basri said Thursday in his keynote speech delivered during an international seminar held in Nusa Dua, Bali.

With its gross domestic product (GDP) per capita of US$4,790, Indonesia is now classified as a lower middle-income country and — just like its peers at this level — is aspiring to become a high-income country, classified as the one with GDP per capita of more than $11,750.

However, some countries never get there, and instead see stagnation in GDP growth due to rising labor costs and decreasing productivity, leaving their citizens’ income “trapped” in the middle level.

A study from the World Bank showed that out of 101 middle-income countries in 1960, only 13 graduated to become high-income countries by 2008.

Countries that were seen as case studies for falling into the middle-income trap were South Africa and Brazil. Both countries used to post strong economic growth, yet recently have seen a significant drop in GDP growth. In the third quarter, South Africa expanded by only 0.7 percent while Brazil contracted by 0.5 percent.

“Brazil and South Africa stayed at the middle-income level because they, just like us, continued to depend on natural resources and cheap labor,” Chatib said. “If Indonesia wants to climb up the ladder, then we have to give more support to innovation and technology.”

Signs that Indonesia might be falling into a middle-income trap have been apparent, with the economy already having slowed for five consecutive quarters to touch 5.6 percent in the third quarter, its slowest growth rate in nearly four years.

The slowdown has been attributed to Indonesia’s weak supply-side economy, which is beleaguered with insufficient infrastructure and an underdeveloped manufacturing sector that cannot cope with increased demand from the growing middle class.

To fill the gap between supply and demand in the domestic economy, Indonesia has been forced to depend on imports, causing a large deficit in the current account that has created economic instability and prevented the country from posting higher GDP growth.

To deal with the issue, Chatib said that he had prepared a slate of possible tax breaks for companies that produced intermediate goods, seen as the missing link in Indonesia’s industry, as well as for firms allocating funds to research and development, which could generate more skilled labor in the domestic economy.

Indonesia is also preparing to ban raw mineral exports starting next year, a move that is aimed at developing the local manufacturing sector, which would be expected to produce more value-added goods and fewer raw resources.

Deputy Finance Minister Bambang Brodjonegoro highlighted the need for Indonesia to push down burdensome energy subsidies, which have prevented the government from allocating more spending for productive use.

“To avoid the middle-income trap, we need to have enough fiscal space — if we have enough fiscal space in the budget, we can do everything from expanding infrastructure to improving productivity,” Bambang said in the seminar.

“The dependence on subsidies, which are more a political tool rather than fiscal tool, has become a big burden,” he added.

RI at middle-income crossroad | The Jakarta Post

Just take out those subsidies, we don't need it. Indonesian people must know if those subsidies will hurt them a lot in future than helping them

Japan to lend ¥150b for
Indonesia’s infrastructure
projects
Linda Yulisman, The Jakarta Post, Jakarta | Headlines | Tue, December 17 2013, 9:44 AM

Japan will provide Indonesia with a total of ¥150 billion (US$1.46 billion) in loans for the country to boost development of vital infrastructure in the coming years.

Industry Minister MS Hidayat said Monday that the loan, made available through Japan’s Overseas Development Agency (ODA), would help finance dozens of projects under the Metropolitan Priority Area (MPA) program, including their feasibility studies. The cooperation under the MPA program was signed by both governments in 2010.

The flagship projects in the program include the development of a port in Cilamaya, Karawang, West Java, and mass rapid transportation (MRT) system in Jakarta.

“With all its drawbacks, Indonesia will still attract investment from Japanese firms. That encourages the Japanese government to assist with the development of infrastructure here,” Hidayat said.

Citing Tanjung Priok Port in North Jakarta as an example, Hidayat said that the backlog and inefficiency at the country’s main port hampered export and import activities.

The industry minister, along with some other Cabinet members including Coordinating Economic Minister Hatta Rajasa and Trade Minister Gita Wirjawan, headed by President Susilo Bambang Yudhoyono, paid a visit to Japan last week where both sides expressed their intentions to forge closer economic links.

Hidayat said that during a roundtable meeting with a number of top Japanese firms, including Mitsubishi, Toshiba, Marubeni IHI and Inpex, some business executives conveyed their interest in expanding their businesses in Indonesia, injecting between $3.5 billion and $4 billion in multi-year investments.

Toshiba, for example, aims to make Indonesia its regional production base for electronics products, while Marubeni wants to set up a power plant with local firms, including Indika Energy.

This fits the estimate of the Japan Bank for International Cooperation pointing out that Indonesia would become Japan’s main investment destination next year, according to Hidayat.

“We ask Japanese investors to disperse their investments outside Java to develop our industries on other islands ,” Hidayat said.

Investments from Japanese firms totaled $2.46 billion in 405 projects last year, while in January-September this year they reached $3.64 billion in 646 projects.

The Industry Ministry’s director general for international industry cooperation, Agus Tjahajana, said that during the visit, Indonesia also requested a review of its economic partnership agreements amid rising concern the deal did not benefit both parties equally.

A recent study by the Centre for Strategic and International Studies (CSIS) suggested that Indonesia had not taken full advantage of increased market access due to a lack of product diversification.

Exports of manufactured products expanded by 78.08 percent to $12.58 billion in 2011 from 2009, but imports jumped by 97.07 percent to $19.23 billion in the same period, the study reveals.

“We’ve followed up by sending a formal letter to Japan for the review,” he said.

Overall trade between Indonesia and Japan stood at $52.9 billion last year, with exports from Indonesia amounting to $30.14 billion and imports $22.77 billion. From January to August this year, it settled at $31.24 billion with Indonesia exporting $18.19 billion and importing $13.05 billion.

Paper Edition | Page: 3

Japan to lend ¥150b for Indonesia’s infrastructure projects | The Jakarta Post

Indonesia need more money to build her infrastructure projects

Pertamina, SK Energy build
asphalt refinery
The Jakarta Post, Jakarta | Business | Fri, December 13 2013, 8:45 AM

State-owned oil and gas giant PT Pertamina has agreed to work with South Korean SK Energy Co. Ltd. to develop an asphalt-oriented refinery plant to meet growing demand in Indonesia.

The two companies signed a memorandum of understanding (MoU) on Thursday in Seoul, regarding a plan for a feasibility study for the plant, which is expected to have a capacity of 1.5 million tons per year.

The location of Pertamina’s refinery unit IV in Cilacap, Central Java, will be chosen for the project’s study due to its ease of access to supply both for the domestic and export market.

Both companies also agreed that a joint venture would be established following a good result of the feasibility study.

Pertamina said the country’s national consumption of asphalt reached 1 million tons in 2012, increasing by about 26 percent compared to the level a year earlier of 802,850 tons.

“When the project [with SK Energy] is realized, we can secure supply for domestic demand of asphalt particularly to boost infrastructure development,” Pertamina director Chrisna Damayanto said.

Pertamina, SK Energy build asphalt refinery | The Jakarta Post

 

[Nike]

Ore export ban will force
Freeport to halt most operations

Raras Cahyafitri, The Jakarta Post, Jakarta | Business | Fri, December 13 2013, 8:38 AM

Troublesome times ahead?: Freeport Indonesia’s Grasberg mine complex in Papua is one of the largest copper and gold mines in the world, but the company will have to cut production by at least 60 percent if the government does not ease a regulation on a raw mineral export ban. (AFP/Olivia Rondonuwu)

PT Freeport Indonesia, a subsidiary of US-based Freeport McMoRan Copper and Gold Inc., says it may have to shut down most operations at its Grasberg mine in Papua if the ban on raw ore exports set to take effect in January goes through as planned.

Freeport Indonesia president director Rozik Soetjipto said on Thursday that the company would have to cut its production by 60 percent, since the existing smelting plant it used would not be able to process the company’s entire ore output.

He also said that the copper and gold mining giant would have to lay off more than half of the company’s employees, or around 16,000 workers. “If forced, we are ready with production adjustment. However, we don’t know how long that can last.

The overhead cost will be huge, and layoffs will happen,” Rozik said over the phone on Thursday.

Currently, Freeport Indonesia delivers 40 percent of its annual production of around 2.5 million tons of copper concentrates to a local smelter belonging to PT Smelting in Gresik, East Java. The company has a 25 percent stake in Smelting, which produces 300,000 tons of copper cathode per year.

Rozik said that the 60 percent cut in production would cause a 65 percent drop in its sales, a loss of about US$5 billion a year. The fall in revenue would result in the government missing out on roughly $1.6 billion from taxes, royalties and dividends.

Rozik said that Freeport was petitioning the government to allow it to continue to export its copper concentrates, which the company said had been half-processed to add value.

He said that allowing Freeport to export its copper would not breach the law. “We are trying to convince the government that the impact of this will be tremendous, for the company, government and society,” he said.

Industry players are waiting to see whether the government will fully implement the 2009 Mining Law, which requires mining companies to process their ores domestically before export. The law, which is to go into force Jan. 12 next year, will consequently prohibit the export of unprocessed ore.

The government failed to persuade lawmakers last week to allow an exemption for miners that had shown a commitment to building smelters. The government is still looking for a way to sidestep the law, possibly by adjusting the minimum purity level for processed ores.

Mining companies have known since 2009 that they would have to build smelters to comply with the law, but so far few have.

Indonesia is a major supplier of several minerals needed for industries around the world. Consequently, any ban in ore export will tighten the world’s supply and drive up prices, which have been falling due to the weakened global economy.

In anticipation of the ban, large Japanese nickel producers are seeking to increase ore purchases from the Philippines and New Caledonia, Bloomberg reported on Thursday. Sumitomo Metal Mining Co. will secure 40 percent of its imports from the Philippines and 60 percent from New Caledonia. Pacific Metals Co. and Nippon Yakin Kogyo Co. will make similar moves.

“No doubt it’s going to be chaos in January if Indonesia stops ore shipments. Because of the concern, we’ve halted imports from Indonesia from this month through next March,” Nippon Yakin spokesman Yusuke Takahashi said.

Indonesia supplied 44 percent of Japan’s nickel ore imports of 4.7 million metric tons last year, trade data quoted by Bloomberg shows. Indonesia also provided more than half of China’s nickel ore imports of 65 million tons in 2012, along with 47 percent of the Philippines’.

Three-month futures on the London Metal Exchange rose 0.9 percent to $14,150 a ton at 2:03 p.m. in Tokyo after touching a one-month high of $14,180 yesterday. Prices may average $14,750 a ton in the first quarter and $15,250 in the final, Barclays Plc estimates.

Ore export ban will force Freeport to halt most operations | The Jakarta Post