Indonesia Economy Forum

[Indos]

Krakatau Steel books first profit in eight years

• Adrian Wail Akhlas
  The Jakarta Post

Jakarta / Fri, May 29, 2020 / 02:33 pm

An employee finishes production of steel pipes at the Krakatau Steel plant in Cilegon, Banten. (JP/-)

State-owned steelmaker Krakatau Steel reported its first profit in eight years, thanks to its continuous measures to lower expenses.

The company booked US$74.1 million in profit in the first quarter this year, a major switch from the $62.3 million loss it suffered in the same period last year, as its cost of revenue as well as general and administrative expenses dropped 39.8 percent and 41.5 percent respectively.

Krakatau Steel president director Silmy Karim attributed the positive performance to the company’s concerted move to improve its performance since last year.


“The company has taken several measures to improve its performance such as through [debt] restructuring and transformation,” he said in a statement on Friday.

Earlier this year, Krakatau Steel received the green light from its creditors, mainly local banks such as state-owned Bank Mandiri and Bank Negara Indonesia, to restructure its loans totaling $2 billion in its bid to avoid bankruptcy.

Silmy said earlier this year that the debt restructuring would cut interest payments to $466 million from $847 million. It is also expected to slash costs by around $685 million until 2027.

The steelmaker also mentioned that the move to optimize its workforce, lower energy costs and slash spare part costs also contributed to the profit.

Krakatau Steel’s operating expenses in the first quarter this year dropped 31 percent year-on-year (yoy) to $46.8 million. In total, the company claimed it had saved $130 million between January and March this year.

However, Silmy expected the current economic condition induced by the COVID-19 pandemic to affect the company’s future performance this year.

“Second quarter performance is expected to be different as the steel market weakened by 50 percent amid COVID-19 pressure,” he said.

Steelmakers are facing severe blows to their business demand during the COVID-19 pandemic.

The low demand is partially due to the large-scale social restrictions (PSBB) imposed by the government to contain the virus, which has led to the closure of businesses, including major steel-consuming businesses in the automotive and construction industries.

“A weakening national economy has had a severe impact on the steel industry. If it continues further then we expect it will have a severe impact on [the company’s] full-year performance,” Silmy added.

Krakatau Steel shares had risen 7.5 percent in Friday trading as of 13:08 p.m.

https://www.thejakartapost.com/news/2020/05/29/krakatau-steel-books-first-profit-in-eight-years.html

Alhamdulillah

 

[Bungaterakhir]

INKA Speeds Up the Construction of New Factory in Banyuwangi
https://klikjatim.com/inka-kebut-penyelesaikan-pabrik-di-banyuwangi/

PT INKA (Industri Kereta Api/Railway Industry Ltd.), the largest rolling stock manufacturer and the only DMU and EMU manufacturer from South East Asia, speeds up the first phase construction of its new factory on 84 hectares of land in Banyuwangi, East Java. The progress rate is 82% as of May 2020 and it will be finished by August 2020. This new factory is built in JV with Switzerland' Stadler to supply the international market. Previously, INKA has exported rolling stocks to ASEAN countries, Australia, and Bangladesh, with future expansion to African markets.

 

[Nike]

Indonesia to get $300 million ADB loan for geothermal electricity generation

• News Desk
  The Jakarta Post
  

Jakarta / Thu, May 28, 2020 / 06:56 pm
A geothermal heat pump installation owned by state-owned PT Geo Dipa Energi is in operation in Batang, Central Java, in January. (Antara/Anis Efizudin)
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The Asian Development Bank (ADB) has approved a US$300 million loan for state-owned geothermal energy company PT Geo Dipa Energi (GDE) to expand its geothermal power generation capacity.

GDE will receive an additional $35 million loan from the Clean Technology Fund for the project managed also by the ADB, the bank announced on Thursday.

The company will use the loan to increase its generation capacity by 110 megawatts for its largest electricity grid in Java by constructing and commissioning two geothermal plants in Dieng in Central Java and Patuha in West Java.


“The project is a national strategic project, and it will provide environmentally friendly base-load electricity to the Java–Bali electricity grid,” GDE president director Riki Ibrahim said in a statement.

He went on to say that the project could reduce CO2 emissions by more than 700,000 tons per year and provide direct assistance to local communities, including women and other vulnerable groups.

“The project will build critical geothermal experience in Indonesia and contribute to the government’s efforts in attracting private investors to the sector by reducing early-stage project development risk,” he added.

ADB country director for Indonesia Winfried F. Wicklein said the geothermal project would help Indonesia combat climate change and make its electricity system more sustainable and efficient.

“It can also help businesses and consumers access affordable and modern energy,” he said.

ADB senior energy specialist for Southeast Asia Shannon Cowlin said the project would help ensure that Indonesia’s economic recovery after the COVID-19 pandemic would be green, sustainable and resilient.

“The project will create jobs for those supplying goods and services for drilling and construction and will create livelihood opportunities in the local area,” she said.

Indonesia has the world’s largest geothermal energy potential with an estimated 29 gigawatts, and the world’s second-largest installed geothermal capacity at 2.1 GW.

However, the development of geothermal power remains slow, largely because the exploration phase is costly, lengthy and high risk. (eyc)

If you want to help in the fight against COVID-19, we have compiled an up-to-date list of community initiatives designed to aid medical workers and low-income people in this article. Link: [UPDATED] Anti-COVID-19 initiatives: Helping Indonesia fight the outbreak

https://www.thejakartapost.com/news...an-for-geothermal-electricity-generation.html

 

[Indos]

Real Time PCR test developed and produced by Indonesian local companies have been tested in 10 province in Indonesia with almost 100 % accuracy. It is developed by start up company, Nusantic, and BPPT (Gov Research Agency).

State owned drug company (PT Biofarma) will be the producer. It has produced as much as 50.000 in 16 Mei. In the end of May, 100.000 kit has been produced. According to Indonesia Research Ministry latest twit, It will start its commercial production phase in June this year. The kit is designed to test Covid 19 viruses which is spread in Indonesia.

https://twitter.com/x/status/1267677324964556800

 

[Indos]

There are three prototype of local made ventilators that have passed the test. Two of them are made by state owned strategic companies, PT LEN Industry (with collaboration with Gov Research Agency/BPPT) and PT Dirgantara Indonesia (with collaboration of Bandung Institute of Technology (ITB), Padjajaran University, and Salman Mosque Foundation (Salman is a mosque in ITB). The last one is made by private owned PT Dharma (collaboration with BPPT)

The production have been started.

Ventilators made by Dirgantara Indonesia being assembled in Bandung, West Java, last month. (Antara Photo/M. Agung Rajasa)

 

[Indos]

Indonesia to develop 89 new 'strategic' projects in 2020-2024

• Riza Roidila Mufti
  The Jakarta Post
  

Jakarta / Wed, June 3, 2020 / 02:24 pm

The toll road connecting the provincial capital of Medan to Tebing Tinggi in North Sumatra, as seen in this undated file photograph, is one of the government's 223 national strategic projects. (Antara/Irsan Mulyadi)


The government has vowed to continue the development of national strategic projects during the COVID-19 health crisis with the addition of 89 new projects of an estimated Rp 1.422 quadrillion in investment value.

Coordinating Economic Affairs Minister Airlangga Hartarto said on May 29 that the new projects were an addition to the existing 223 national strategic projects., and were expected to employ around 4 million workers every year from 2020 to 2024.

“During the projects' development over the next five years, [the projects] are hoped to involve a total of 19 million [workers],” Airlangga told a virtual press briefing on Friday, following a Cabinet meeting.

Airlangga said that the 89 new projects comprised 15 road and bridge projects, 13 dams and irrigation systems, 13 border infrastructure projects and 12 energy projects.

The remaining projects comprised six railway projects, six clean water projects, five airports, five seaports, five industrial zones, three technology projects, three smelters, one seawall, one waste management project and one land procurement project in Central Kalimantan.

Read also: At least 50 major infrastructure projects to be completed this year

President Joko “Jokowi” Widodo said at the briefing that although Indonesia was facing the COVID-19 pandemic, the development of national strategic projects must go on while adhering to the relevant health protocols.

The government's statement on the planned projects comes on the heels of its plans to ease the large-scale social restrictions (PSBB) in COVID-19 "red zones" across the country and to introduce the “new normal” protocols for daily activities, despite the increase in confirmed cases. Official estimates show that the economy is likely to contract 0.4 percent in the worst-case scenario for the year.

The President also ordered the acceleration of programs that could drive the "people’s economy", such as the land certification, the transmigration land legalization and the social forestry programs.

Jokowi also instructed to “solve the problems in the field as soon as possible, because I still hear that land clearing is still a major problem” in developing the national strategic projects.

Public Works and Housing Minister Basuki Hadimuljono said at Friday's briefing that the five "super priority" tourist destinations was among the strategic projects that had been earmarked for continued development.

The "super priority" tourist destinations are Labuan Bajo in East Nusa Tenggara, Borobudur in Central Java, Likupang in North Sulawesi, Lake Toba in North Sumatra and Mandalika in West Nusa Tenggara.

Basuki added that several toll road projects would break ground this year, including the 14-kilometer section 4 of the Banda Aceh-Sigli toll road, the 33 km sections I and V of the Balikpapan-Samarinda toll road, and the 131 km Pekanbaru-Dumai toll road.

Indonesia currently has 223 national strategic projects worth around Rp 4.2 quadrillion on its priority list, which has seen several revisions since 2016.

The country completed 92 infrastructure projects in 2016-2019, against the 144 projects that the Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) has targeted for completion by 2020.

https://www.thejakartapost.com/news...p-89-new-strategic-projects-in-2020-2024.html

 

[Indos]

Indonesia need to use its local networking telecommunication company to build its 5 G network. Many graduates of Erricson Indonesia have been spread out and some of them make their own networking telecommunication companies. My brother after having experience working in Nokia, Siemens, and Ericsson as engineer, now working for local telecommunication networking company in Jakarta (private owned). One of my friends is also CEO of local telecommunication networking company (private owned).

We have our own local networking companies that should be nurtured and given priority, at least big state owned telecommunication companies like Telkomsel should give contract on their networking infrastructure to local companies instead of Huawei or European ones.

Indonesia need to have its own Huawei company. We also have a state owned one working in telecommunication equipment which is PT INTI and I think we need to make it big and give more money for their research.

For the sake of security, our future 5 G network should be built and maintained by local companies, either it is state owned or private owned ones. We need to grow our own industry rather than growing other nation companies, and dont forget that the telecommunication network is very vital for our security and must be secured.

 

[Indos]

Indonesia unveils bigger stimulus worth $47.6 billion to fight coronavirus impacts

• Adrian Wail Akhlas
  The Jakarta Post
  

Jakarta / Thu, June 4, 2020 / 07:43 am

Finance Minister Sri Mulyani Indrawati gestures during a press conference on the 2020 state budget in Jakarta on Feb. 19. (Antara/Puspa Perwitasari)


The government unveiled on Wednesday a bigger stimulus package worth Rp 677.2 trillion (US$47.6 billion) to anchor the virus-battered economy, the growth of which is expected to fall to a level similar to that of the 1998 Asian financial crisis.

The latest budget, which is higher than the Rp 641.17 trillion initially allocated, aims to strengthen the healthcare system, direct more spending toward social protection to boost consumption and provide incentives to rescue Indonesian businesses from bankruptcy and workers from layoffs.

Finance Minister Sri Mulyani Indrawati said the government had put in place support measures to counter an economic fallout from the coronavirus pandemic, adding that the government would again revise the macroeconomic assumption underpinning the state budget to cover for the larger stimulus package.


“This is a thorough stimulus package to support people’s purchasing power and businesses,” Sri Mulyani told reporters in a livestreamed news conference. “We are hoping that this stimulus can maintain our economic growth at above zero percent.”

The Indonesian economy grew 2.97 percent year-on-year (yoy) in the first quarter, the weakest in 19 years, as household spending and investment growth plunged as the outbreak hit economies around the world.

Read also: Experts, activists call for heightened public scrutiny of COVID-19 policies, funding

Sri Mulyani said gross domestic product (GDP) growth could be lower than the government’s projection of 2.3 percent this year. In the worst-case scenario, the government expects the economy to contract 0.4 percent.

Under the new stimulus budget, the government will provide Rp 87.55 trillion for the healthcare sector, Rp 203.9 trillion to strengthen social safety net programs and Rp 123.46 trillion in incentives for micro, small and medium businesses.

As much as Rp 120.6 trillion will be allocated for bigger tax incentives and Rp 97.11 trillion to support ministries and regional administrations, while Rp 44.57 trillion comprises the stimulus for state-owned enterprises (SOEs) and labor-intensive businesses.

The government now projects the state budget deficit to reach 6.34 percent of GDP, up from the previous estimation of 6.27 percent. It expects state revenue to reach Rp 1.4 quadrillion this year, while state spending is projected to increase by Rp 124.5 trillion to Rp 2.74 quadrillion.

“We will treat the widening budget deficit carefully in terms of sustainability and financing,” Sri Mulyani pledged. “We will look for financing sources with the lowest risk and costs.”

Read also: Indonesia may lose market confidence due to mounting debts: World Bank

Bank Indonesia Governor Perry Warjiyo pledged during the same briefing to continue buying government bonds in the primary market as the last resort and non-competitive bidder to help finance the government’s budget. The central bank has bought around Rp 26 trillion worth of bonds directly through auctions.

“Close coordination between the Finance Ministry and the central bank in budget financing has fueled confidence among market players,” Perry told reporters. “With growing market optimism, we expect that the needs of our bond buying program will be small.

“Bank Indonesia is also ready to minimize the government’s interest rate burden to support economic recovery if needed.”

BI has injected a total of Rp 583.5 trillion since the beginning of the year to carry out monetary operations to stabilize the financial market and boost bank liquidity, among other purposes.

World Bank senior economist for Indonesia Ralph van Doorn called on the Indonesian government to take steps to maintain market confidence as debt mounts amid the outbreak.

“The government must [provide assurances over its] fiscal strategy to raise revenues back to at least the 2018 level to flatten the debt curve,” Van Doorn said recently.

Read also: Explainer: Indonesia to finance coronavirus battle mostly through debt

It should unwind “exceptional measures” taken to battle the pandemic after the virus threat subsides, including by reinstating the deficit ceiling of 3 percent and ending Bank Indonesia’s partial financing of the deficit, he said.

Indonesia’s debt-to-GDP ratio would rise to 37 percent this year, from 29.8 percent at the end of last year, van Doorn projected.

Center of Reform on Economics (CORE) Indonesia economist Piter Abdullah, meanwhile, lauded the government's move.

"Although it may not be enough, the move signals that the government is flexible about adjusting the stimulus," Piter told The Jakarta Post on Wednesday. "This would boost market confidence and help strengthen the rupiah exchange rate."

https://www.thejakartapost.com/news...7-6-billion-to-fight-coronavirus-impacts.html

 

[Indos]

I think government doesnt need to disburse huge money for small and medium size companies. It can be another BLBI "moral hazard" just like happening during Asian Financial Crisis. Only after thorough research the money should be given to "some" needed businesses. Many small and medium businesses are still OK, no need for money.

One of my best friend who owns Padang food restaurant, for instant, feel like he doesnt need to get government help although I have insisted him to get it. My older sister and brother also work in medium size companies and so far the operation is still fine. What is needed for the government to do is to press rent price to be slashed into half. This economic activity should be borne (shouldered) by all people, including land/building owners. They cannot ask rent as if this is a normal situation. They also will not die if the rent price they get turn into half.

Interest rate for some effected businesses needs to be slashed as well and some one who have already borrowed some money from bank for their businesses and get difficulty to pay due to current economic crisis should be helped.

Anyway, many analyst believe our economy will be OK, this is why our banks stock are up in financial market and favored by foreign investors despite the outbreak. They have analyzed that NPL (Non Performing Loan) of our big banks will still relatively be at a safe rate despite what is happening now in real sector. Our economy will also be opened gradually starting next Monday, so no need for government to spend too much money to cushion the economic crisis except for vulnerable families (low income people), health sector, and effected state owned companies.

Rupiah also keep strengthening and Today closes at Rp 14.095 per USD. It can possibly penetrate Rp 14.000 mark Tomorrow. And if it does, it means Rupiah has come back to its previous pre-crisis range between Rp 13.000 into Rp 14.000 per USD. Market seems to appreciate Today announcement by Jakarta Governor, Anies, to relax the lock down so that economy can still run while it will not totally be reopened which show prudent and careful policy, not totally reckless like Jokowi administration wants with his new normal policy.

 

[Logam42]

I think government doesnt need to disburse huge money for small and medium size companies. It can be another BLBI "moral hazard" just like happening during Asian Financial Crisis. Only after thorough research the money should be given to "some" needed businesses. Many small and medium businesses are still OK, no need for money.

One of my best friend who owns Padang food restaurant, for instant, feel like he doesnt need to get government help although I have insisted him to get it. My older sister and brother also work in medium size companies and so far the operation is still fine. What is needed for the government to do is to press rent price to be slashed into half. This economic activity should be borne (shouldered) by all people, including land/building owners. They cannot ask rent as if this is a normal situation. They also will not die if the rent price they get turn into half.

Interest rate for some effected businesses needs to be slashed as well and some one who have already borrowed some money from bank for their businesses and get difficulty to pay due to current economic crisis should be helped.

Anyway, many analyst believe our economy will be OK, this is why our banks stock are up in financial market and favored by foreign investors despite the outbreak. They have analyzed that NPL (Non Performing Loan) of our big banks will still relatively be at a safe rate despite what is happening now in real sector. Our economy will also be opened gradually starting next Monday, so no need for government to spend too much money to cushion the economic crisis except for vulnerable families (low income people), health sector, and effected state owned companies.

Rupiah also keep strengthening and Today closes at Rp 14.095 per USD. It can possibly penetrate Rp 14.000 mark Tomorrow. And if it does, it means Rupiah has come back to its previous pre-crisis range between Rp 13.000 into Rp 14.000 per USD. Market seems to appreciate Today announcement by Jakarta Governor, Anies, to relax the lock down so that economy can still run while it will not totally be reopened which show prudent and careful policy, not totally reckless like Jokowi administration wants with his new normal policy.

Just to add, today's improvement in rupiah value has 2 other reasons than just the "New Normal" being enacted:

1) India has had their National Credit Rating downgraded by Moody's to Baa3, with negative outlook (they expect to downgrade further)

With that, all the big 3 Credit Agencies, Moody's, S&P, and Fitch hold's India's Credit rating at only a step above 'junk grade', while Indonesia's credit ratings are all 2 steps above junk. This is has eliminated our main competitor in the "Emerging Country" section of the international bond market, as now not only do we have a higher interest rate, but we are considered safer as well.

We are also expected to recover faster, as our current covid stimulus is about 6.9% of GDP, while India has only about 2% stimulus. While our debt to GDP is undoubtedly going to rise, since we started off with a ratio below 30% we have more flexibility compared to India which was already 75% pre-Covid.

Also, despite much, much more relaxed "lockdown" period, our success in combating Covid is about on par with India (read: not very successful), with much lower societal and economic damage. Unlike India that went full national Hard-Lockdown for 8 weeks before relaxing it and devolving Lockdown to state-by-state level, Indonesia in contrast went for a soft lockdown in the form of PSBB (Large Scale Social Distancing), that from the beginning was enacted in either a province-by-province level, or even at the District Level. So not only is Indonesia expected to recover faster, but the initial Covid economic impact is also expected to be smaller.

This along with a few other economic and societal reasons has made us a no-brainer destination for hot money previously parked in India.

2)
America is in chaos, as such objectively weakening against nearly all world currencies. Furthermore, interest rates of bonds in almost all developed countries have flatlined, causing the attractiveness of relatively stable emerging countries such as Vietnam and Indonesia to improve.

Elections are not till November, and as far as idiocy and dividing America goes, Trump has well and truly crossed the Rubicon with how he handled the George Floyd case. With the economy in shambles and anyone remotely mainstream hating him, his only re-election chance are the crazies. Unless the Republicans take a chill pill and pick to nominate someone else, this campaign will make 2016 feel peaceful.

_____________________________

Derail, but I would just like to express my gratitude to the communal and resilient spirit of Indonesia. In a time where the central government is barely able to keep things from falling apart, everyone else is taking up the slack. By and far local governments are showing that they are putting their autonomy to good use, private companies have proven flexible and innovative, while SOEs and other Government institutions have accepted and enacted their assigned mandates, proving that "Hadir untuk Negeri" is not just a slogan.

All the while communities and extended families are taking care of their own, with NGOs stepping in to fill in the cracks. Covid has given me yet more reason to be proud to be Indonesian.

 

[Indos]

Rupiah has reach its pre crisis range (Rp13.000-Rp 14.000) per USD and sit in Rp13.885. Alhamdulillah

Here is Bank of Indonesia Governor statement:

"Alhamdulillah dengan rahmat Allah SWT bagi ekonomi Indonesia, siang ini rupiah sudah tembus di bawah Rp 14.000. Bid over Rp 13.855 dan over Rp 13.960," kata Gubernur Bank Indonesia Perry Warjiyo dalam konferensi video di Jakarta, Jumat (5/6/2020).

Translation

Alhamdulillah, with the grace of Allah SWT for the Indonesian economy, this afternoon the rupiah has reached below Rp. 14,000. Bid over IDR 13,855 and over IDR 13,960, "Bank Indonesia Governor Perry Warjiyo said in a video conference in Jakarta on Friday

https://money.kompas.com/read/2020/...ulillah-rupiah-sudah-tembus-di-bawah-rp-14000.

 

[mejikuhibiu]

Nice moving from IDR.. mostly because a riot in US..maybe we need to wait and see on next week..

Rupiah has reach its pre crisis range (Rp13.000-Rp 14.000) per USD and sit in Rp13.885. Alhamdulillah

Here is Bank of Indonesia Governor statement:

"Alhamdulillah dengan rahmat Allah SWT bagi ekonomi Indonesia, siang ini rupiah sudah tembus di bawah Rp 14.000. Bid over Rp 13.855 dan over Rp 13.960," kata Gubernur Bank Indonesia Perry Warjiyo dalam konferensi video di Jakarta, Jumat (5/6/2020).

Translation

Alhamdulillah, with the grace of Allah SWT for the Indonesian economy, this afternoon the rupiah has reached below Rp. 14,000. Bid over IDR 13,855 and over IDR 13,960, "Bank Indonesia Governor Perry Warjiyo said in a video conference in Jakarta on Friday

https://money.kompas.com/read/2020/...ulillah-rupiah-sudah-tembus-di-bawah-rp-14000.

 

[Indos]

Rupiah to strengthen further as foreign investors make comeback: Bank Indonesia

• Adrian Wail Akhlas
  The Jakarta Post
  

Jakarta / Fri, June 5, 2020 / 08:02 pm

An employee shows rupiah and United States dollar banknotes at a Bank Mandiri Syariah office in Jakarta on April 20. (Antara/Nova Wahyudi)

Bank Indonesia (BI) expects the rupiah to strengthen even after the currency returned to levels seen before the COVID-19 crisis, as foreign investors make a comeback on the back of a global economic recovery.

The rupiah has rebounded by almost 15 percent since the end of March to reach 13,877 per US dollar on Friday, Bloomberg data shows, erasing most of the losses it recorded in the first three months of the year amid fears of the outbreak.

“Foreign investors’ confidence in Indonesia's economy is getting better as reflected by rising capital inflow into government bonds,” BI Governor Perry Warjiyo told reporters in a live-streamed news conference on Friday. “The rupiah remains undervalued and will strengthen further.”


The rupiah is still undervalued as the country’s credit default swap had yet to fall into pre-pandemic levels, while its current account deficit narrowed and inflation remained low, Perry explained.

The currency crashed to its worst level of 16,575 against the greenback during the 1998 financial crisis on March 23, when fears over political unrest prompted investors to dump Indonesian assets. They dumped US$10.34 billion worth of assets in the first quarter, according to Finance Ministry data.

The government and the central bank have pledged to strengthen its cooperation and measures to ensure macroeconomic and financial system stability. BI decided to hold its benchmark interest rate at 4.5 percent last week, despite room for further easing to maintain financial market stability.

The financial market is currently being buoyed by hopes of an economic recovery as Jakarta, Indonesia’s financial hub and an engine of growth for the economy, will begin to reopen the economy with offices, restaurants and retail outlets permitted to open from June 8 under strict health protocols.

The central bank reported Rp 18.67 trillion ($1.33 billion) in net inflows, mainly in sovereign debt papers, from the second week of May to the first week of June. From April 1 to May 14, BI recorded $4.1 billion in net inflows.

“Our foreign exchange reserves will increase this month, driven by a strengthened rupiah and capital inflows,” Perry said, adding that relatively better market conditions from three months ago reduced the need for the central bank to conduct a market intervention.

The central bank has bought up to Rp 166 trillion in government bonds in the secondary market during the first quarter of 2020 to stabilize the rupiah and another Rp 26.1 trillion to support budget financing needs, boosting the central bank’s ownership of government bonds to Rp 445.4 trillion.

“We believe that BI’s policy measures will continue to cushion the rupiah in the short-term,” researchers at Fitch Solutions wrote in a research note. “Moreover, a forecast narrowing in CAD in 2020 due to slightly cheaper imports will also add to investors’ confidence in Indonesia’s fundamentals.”

However, they warned that risks remained for the currency as Indonesia continued to record new COVID-19 cases while facing a limited healthcare capacity.

“The government’s initial mismanagement of the COVID-19 outbreak led to a collapse in investors’ confidence in the country’s assets, including the rupiah.

“Downside risks will continue to emerge from the COVID-19 outbreak in Indonesia. As we have noted, cases across Indonesia continue to rise at a rapid pace and the country has limited healthcare and financial resources to deal with a widespread outbreak.”

https://www.thejakartapost.com/news...n-investors-make-comeback-bank-indonesia.html

 

[Indos]

Just to add, today's improvement in rupiah value has 2 other reasons than just the "New Normal" being enacted:

1) India has had their National Credit Rating downgraded by Moody's to Baa3, with negative outlook (they expect to downgrade further)

With that, all the big 3 Credit Agencies, Moody's, S&P, and Fitch hold's India's Credit rating at only a step above 'junk grade', while Indonesia's credit ratings are all 2 steps above junk. This is has eliminated our main competitor in the "Emerging Country" section of the international bond market, as now not only do we have a higher interest rate, but we are considered safer as well.

We are also expected to recover faster, as our current covid stimulus is about 6.9% of GDP, while India has only about 2% stimulus. While our debt to GDP is undoubtedly going to rise, since we started off with a ratio below 30% we have more flexibility compared to India which was already 75% pre-Covid.

Also, despite much, much more relaxed "lockdown" period, our success in combating Covid is about on par with India (read: not very successful), with much lower societal and economic damage. Unlike India that went full national Hard-Lockdown for 8 weeks before relaxing it and devolving Lockdown to state-by-state level, Indonesia in contrast went for a soft lockdown in the form of PSBB (Large Scale Social Distancing), that from the beginning was enacted in either a province-by-province level, or even at the District Level. So not only is Indonesia expected to recover faster, but the initial Covid economic impact is also expected to be smaller.

This along with a few other economic and societal reasons has made us a no-brainer destination for hot money previously parked in India.

2)
America is in chaos, as such objectively weakening against nearly all world currencies. Furthermore, interest rates of bonds in almost all developed countries have flatlined, causing the attractiveness of relatively stable emerging countries such as Vietnam and Indonesia to improve.

Elections are not till November, and as far as idiocy and dividing America goes, Trump has well and truly crossed the Rubicon with how he handled the George Floyd case. With the economy in shambles and anyone remotely mainstream hating him, his only re-election chance are the crazies. Unless the Republicans take a chill pill and pick to nominate someone else, this campaign will make 2016 feel peaceful.

_____________________________

Derail, but I would just like to express my gratitude to the communal and resilient spirit of Indonesia. In a time where the central government is barely able to keep things from falling apart, everyone else is taking up the slack. By and far local governments are showing that they are putting their autonomy to good use, private companies have proven flexible and innovative, while SOEs and other Government institutions have accepted and enacted their assigned mandates, proving that "Hadir untuk Negeri" is not just a slogan.

All the while communities and extended families are taking care of their own, with NGOs stepping in to fill in the cracks. Covid has given me yet more reason to be proud to be Indonesian.

Countries whose economy dont rely too much on export like us will likely be favored by investors amid weakening global economy. I think Rupiah will keep strengthening for couple of weeks to come because of that before being quite stable. Trade data is also important, hopefully we can score another trade surplus in Q2 like our Q1 data. But we need to keep infection rate at medium level while buying some time until effective drug and vaccine are made and available inshaAllah.

------------------------------------------------------------------------------------------------------

IMF has predicted Indonesia nominal GDP to reach 1.6 trillion USD in 2024, but with this outbreak it will be difficult to reach that level. I hope at least we can reach 1.5 trillion USD GDP in 2024, or adding another 400 billion USD for the next 4 years.

 

[Indos]

Alhamdulillah.

Taiwanese CPC, Pertamina sign deal for $8b petrochemical plant

• Norman Harsono
  The Jakarta Post
  

Jakarta / Mon, June 8, 2020 / 02:21 pm

A Pertamina refinery is pictured. Pertamina signed on Friday a head of agreement with Taiwanese counterpart CPC to develop a petrochemical facility in Balongan, West Java. (Pertamina/Pertamina)

State-owned oil and gas giant Pertamina signed on Friday a head of agreement with Taiwanese counterpart CPC to develop a petrochemical facility in Balongan, West Java.

The US$8 billion petrochemical facility, slated for commercial operation in 2026, represents the third phase expansion of Pertamina’s Balongan oil refinery.

“This project is an important step in strengthening Pertamina’s petrochemical business such that, in the next 10 years, Pertamina can become a major petrochemical business player in the Asia- Pacific,” said Pertamina president director Nicke Widyawati in a statement that day.

The statement added that Pertamina and CPC had been in talks over the project since late 2018. The two companies completed a feasibility study the following year.

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Once expansion of the Balongan refinery is completed in 2022, the facility’s fuel output capacity is expected to rise by 20 percent to 150,000 barrels per day (bpd), excluding petrochemical production, in meeting Indonesia’s growing demand for transportation fuels. Pertamina is working to develop six other refineries for similar reasons.

Investment Coordinating Board (BKPM) head Bahlil Lahadali, who witnessed Friday’s signing, said his office had confirmed tax holiday incentives for the project in supporting the development.

“This is a government priority project. We will absolutely support it,” he said.

Pertamina previously said it planned for its Balongan facility to produce 1 million tons of ethylene each year. Ethylene, like most petrochemicals, is mainly used to produce plastics, allowing Pertamina to diversify revenue streams during periods of low fuel demand such as is happening amid the coronavirus pandemic.

Consumption plunged 35 percent to 65,678 kiloliters per day in April from the daily average in January and February — before the country introduced a physical distancing policy requiring people to stay at home to contain the COVID-19 outbreak.

Read also: Oil giant Pertamina delves into health industry amid drop in fuel demand

Due to the falling demand, Pertamina projects its revenue to fall by up to 45 percent below initial expectations under a worst-case scenario.

Pertamina spokeswoman Fajriyah Usman told The Jakarta Post on May 18 that the oil company would prepare the base ingredients for pharmaceutical production, then either state-owned pharmaceutical company Kimia Farma or Kimia Farma with Pertamina would process the ingredients into pharmaceuticals.

“We are still discussing the details,” Ganti Winarno, corporate secretary at Kimia Farma, told the Post Wednesday last week.

https://www.thejakartapost.com/news...ina-sign-deal-for-8b-petrochemical-plant.html