Indonesia Economy Forum

[Indos]

House hastily passes overhauled tax law

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House Speaker Puan Maharani (fifth left) and deputy speakers Rachmat Gobel (left), Azis Syamsuddin (third left), Sufmi Dasco Ahmad (fifth right) and Muhaimin Iskandar (second right) assemble at a hearing in Jakarta on June 15.(Antara/M Risyal Hidayat)


Vincent Fabian Thomas (The Jakarta Post)
PREMIUM
Jakarta ● Thu, October 7, 2021

The House of Representatives passed a bill on Thursday to overhaul the country’s tax system after what has been called one of the hastiest deliberations in Indonesia’s modern legislative history.

The Harmonized Tax Law (HPP), previously called the Amended General Taxation Law, raises income taxes on the rich, increases value-added taxes (VAT) and scraps a proposal to cut corporate income taxes. It also introduces carbon taxes, a second tax amnesty period and a plan to swap taxpayer identification numbers (NPWP) with identity card numbers (NIK) for easier tracking.

The government expects the changes to boost state revenue before the country reinstates the budget deficit ceiling of 3 percent of gross domestic product (GDP) in 2023. Lawmakers lifted the cap last year to accommodate more than a billion dollars of...

House hastily passes overhauled tax law

The new law, which was shielded from public scrutiny, raises income taxes on the rich, increases value-added taxes (VAT) and introduces carbon taxes, among other changes meant to increase state revenue.

www.thejakartapost.com

 

[Indos]

Investment Ministry is smart by start projecting Indonesia in Al Jazeera International through adds, just see it now after not seeing the adds for several years ( I am a fanatic AJ and CNN watcher). Maybe later they will put adds on CNN.

Previous adds from Industry Ministry, I havent found yet the newest adds that they use in recent promotion in Al-Jazeera International.

 

[Indos]

Indonesia’s Rupiah Could Become Asia’s Best-Performing Currency in 2021
By
David Finnerty
+ Follow
October 10, 2021, 5:00 PM PDT

• Indonesian currency was best Asia performer in third quarter
• Lower infections and carry trade are also in rupiah’s favor

The Indonesian rupiah could be Asia’s best-performing currency for the rest of the year with elevated commodity prices boosting the nation’s trade surpluses.

The exporter of coal and palm oil is benefiting from a global energy crisis that has roiled many of its peers that are net commodity importers. Indonesia is due to post September trade figures Friday, following a record $4.74 billion surplus in August -- its 16th in a row.

The rupiah rose 1.3% in the third quarter, even as Asian rivals weakened with rising Treasury yields. With the nation’s foreign reserves at a record, Bank Indonesia has plenty of ammunition to support the currency if U.S. yields rise further in coming months.

“We continue to lean positively on the IDR and expect it to remain one of the best performers across EM Asia on a total-returns basis in Q4,” said Divya Devesh, head of ASEAN and South-Asia FX research at Standard Chartered Bank in Singapore.

He noted that Indonesia was in a better position than before the 2013 taper tantrum, with a combined current account trade surplus of $13 billion in the last four quarters, compared with a $12 billion deficit eight years ago.

There are threats to the rupiah’s bid to remain at, or near the top, of Asia’s leadership board this quarter after topping it in the three months ended September. The currency’s inability to breach a technical resistance at 14,200 against the dollar last month despite all the bullish momentum could limit more gains.

Continued increases in Treasury yields -- which have climbed almost 20 basis points since the end of September -- will also weigh on the attractiveness of the rupiah’s carry trade. Foreign funds have sold the nation’s debt for 13 consecutive days through Oct. 5 on a net basis.

However, many of the rupiah’s regional rivals are facing even bigger headwinds.

The baht has been dragged down by Thailand’s slowing economy and a growing current account deficit, while the Philippine central bank has signaled that the peso could weaken more this quarter. The Singapore dollar’s upside, meanwhile, may be limited if the Monetary Authority of Singapore leaves its policy parameters unchanged at its upcoming monetary policy review, as is widely expected.

The Malaysian currency is the one outlier that could knock the rupiah off its perch. A high vaccination rate enabling authorities to roll back curbs and surging oil prices are buoying Malaysia’s growth. Its neighbor’s gains, however, don’t negate the strong case for the rupiah.

Bloomberg - Are you a robot?

www.bloomberg.com

 

[Indos]

Government needs to be prudent and has committed to bring back previous 3 % of GDP deficit cap into 2023 budget. The cap has been lifted to around 6.5 % in 2020 due to economic crisis after Covid Pandemic stuck the country since March 2020. The deficit then gradually decreased in 2021 budget into around 5.6 % of GDP and in 2022 budget it is reduced further into 4.8 % of GDP. It is mandated by law, so government doesnt have any option left beside tightening the spending and boosting the revenues.

The prudent deficit cap has been started after Indonesia experience Asian Financial Crisis in 1997-1999 where the effect with skyrocketing inflation and private sectors financial bleedings must be dealt until around 2004. Many reform have been made since BJ Habibie Presidency in 1998 where under his administration the Dollar can be stabilized from 18.000 IDR per USD into 8000 IDR per USD.

Despite the political reform that bring market confidence and people optimism after Soeharto stepping down, IDR was still weak and depreciate again into 12.000 IDR per USD due to higher import that weaken Rupiah after free trade agreement between ASEAN and China is effective since around 2010, then Rupiah get weaken again due to US tapering policy since 2013 and sit in 14.000-15.000 IDR per USD until now.

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Forgoing corporate tax cut may not hurt business much: Experts
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Finance Minister Sri Mulyani Indrawati speaks at the House of Representatives on Sept. 13 in a discussion on a bill regulating fiscal relations between the central government and the regions, as well as a bill on taxation.(Finance Ministry/Public relation team)


Vincent Fabian Thomas (The Jakarta Post) PREMIUM Jakarta ● Sun, October 10, 2021


A 20 percent corporate income tax rate remains a distant dream for businesses as the newly passed Harmonized Tax Law (HPP) stipulates no cut in the rate, contrary to an earlier government plan.

In the wake of the plan’s cancellation, some business groups have expressed concern that the move might harm Indonesia's business climate, but analysts say the impact will be minimal. The new law keeps the corporate income tax rate at 22 percent, where it has been since 2020.

Forgoing corporate tax cut may not hurt business much: Experts

A 20 percent corporate income tax rate remains a distant dream for Indonesian businesses as the newly passed Harmonized Tax Law (HPP) stipulates no cut in the rate, contrary to an earlier government plan.

www.thejakartapost.com

 

[Indos]

Currently there are 4 state owned universities (ITB, UI, UNPAD, UNAIR), 2 Government research Agencies (LIPI and Eijkman Foundation) which develop their own Covid Vaccines. They have different technology in developing the vaccines,

UNAIR has stated they have completed trial on animals and waiting National Drug and Food Control (BPOM) approval to do human trial starting in late October, UNAIR has said the vaccine effectiveness is above 90 percent and can handle Delta Varian. If anything goes as plan, the mass production will be started in March 2022 where state owned pharmacy company, Biofarma, is expected to do the production.

Eijkman Foundation also target middle of 2022 for mass production of their vaccine

 

[Indos]

This file photo shows Tanjung Jati B Power Plant project, Java Power Plant 4 (PLTU Jawa 4) in Jepara. (JG Photo/Yudha Baskoro)


Indonesia to Impose Carbon Tax in April 2022, Starting With Coal Power Plants

BY :JAKARTA GLOBE
OCTOBER 08, 2021

Jakarta. Indonesia will begin to carbon tax coal-fired power stations in April 2022 to start the measure implementation that eventually would reach all sectors in the economy to reduce national greenhouse gas emissions.

The carbon tax was part of the country's tax reforms, the latest in a series of legislation overhauls that seek to make the country more attractive for investment.

On Thursday, the House of Representatives passed into law the 2021 Law about Tax Regulation Harmonization. Under the law, every kilogram of carbon equivalent emissions that exceed a certain cap will be subjected to Rp-30 (0.21 cent dollar) tax, Minister of Law and Human Rights Yasonna Laoly said. That is roughly equal to about $2.1 per metric ton of carbon equivalent.

"In the early stages, starting in 2022, a carbon tax will be imposed on the coal-fired power plant sector using a tax mechanism based on emission limits, or cap and tax," Yasonna said on Thursday.

He said Indonesia's carbon tax was a strong signal that would encourage the development of carbon markets/carbon emissions trading, technological innovation, and more efficient and eco-friendly investments in the country.

Additionally, the government hopes the tax would restrict greenhouse gas emissions, which contributes to an increase in global temperature, and would ultimately reduce the risk of climate disasters in Indonesia.
"The imposition of carbon taxes to restore the environment is part of Indonesia's commitment to reduce carbon emissions," he said.

According to Indonesia's Nationally Determined Contribution (NDC) plan, the country aimed to reduce carbon emission without outside help by 29 percent compared to the business-as-usual level by 2030. With international support, Indonesia aimed to reduce its emissions by 41 percent of the business-as-usual level.

Carbon Tax Roadmap
The government set has been working on a carbon tax roadmap since the beginning of this year. The inclusion of carbon tax in the country's tax code was its first milestone. Next, the government plans to finalize a presidential decree on the economic value of carbon and develop a carbon tax and carbon exchange technical mechanism.

Lastly, the Ministry of Energy and Mineral Resources will launch a pilot project for carbon trading in the power sector by the end of this year.

Under the trading scheme, the emission-producing organization above the cap must purchase an emission permit certificate (SIE) from another party whose emissions are below the limit.

The government targets the carbon tax to be fully implemented by 2025 through the carbon exchange, where companies can trade their emissions permit. That will be done by the gradual expansion of the carbon taxation sector depending on its readiness and the creation of carbon tax management regulations.

Indonesia to Impose Carbon Tax in April 2022, Starting With Coal Power Plants

The government plans all companies to pay carbon tax by 2025 or buy emissions permits from their peers in a domestic carbon exchange.

jakartaglobe.id

 

[Indos]

Waiting IMF latest report

 

[Indos]

Freeport breaks ground on $3 billion copper smelter in Gresik
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Norman Harsono (The Jakarta Post)
PREMIUM
Jakarta ● Tue, October 12, 2021


Gold and copper mining giant PT Freeport Indonesia (PTFI) has begun constructing its copper smelter in Gresik, East Java, ending months of uncertainty over the fate of the US$2.8 billion project.

President Joko “Jokowi” Widodo inaugurated on Tuesday the project for the smelter slated to begin operations in 2023 or 2024. PTFI said in a statement that progress on the construction had reached 8 percent.

The smelter will process 1.7 million tons of copper concentrate annually into 600,000 tons of copper cathode, which can be further processed into electrical wiring, pipes and car batteries, among others products.

Freeport breaks ground on $3 billion copper smelter in Gresik

President Jokowi said the facility was "the biggest" single line copper smelter in the world.

www.thejakartapost.com

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PT Freeport Indonesia majority stake (51 %) is owned by state owned MIN ID, as MIN ID is part of state owned battery consortium (IBC), this smelter output will likely be used to supply EV battery industry in the country that is currently lead by JV of Korean companies lead by LG and state owned consortium IBC.

 

[Indos]

AlhamduliLLAH

CATL Ready to Build Electric Battery Factory in December

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By Cahya Puteri Abdi Rabbi
September 21, 2021, 5:57 p.m.

CATL will be the second company to build an electric battery factory in Indonesia after PT Industri Battery Indonesia and the LG consortium.

Investment Minister/Head of the Investment Coordinating Board ( BKPM ) Bahlil Lahadalia said the process of building an electric vehicle battery factory in collaboration with an electric vehicle battery manufacturer from China, Contemporary Amperex Technology Co. Ltd. (CATL) will be conducted at the end of December 2021. "After the first phase yesterday we built with a capacity of 10 gigawatts, at the end of December we will start building in collaboration with CATL," said Bahlil in a webinar, Tuesday (21/9).

CATL is the second company to start the construction of an electric vehicle battery factory in Indonesia. Previously, on September 15, the groundbreaking of the electric battery factory owned by PT Industri Battery Indonesia and the LG consortium was carried out. Meanwhile, the investment value of the factory reached US$ 1.1 billion or Rp 15.68 trillion.

Currently, the Indonesian government is intensifying the nickel industry downstream program towards an integrated battery. The government is also trying to build the entire ecosystem of battery production for electric vehicles in Indonesia.

"We will build it from upstream, starting from the mine, the smelter, then the battery, then assembling the car, up to the recycle it will all be built in Indonesia," he said. Ecosystem development is carried out to utilize existing resources in Indonesia. The largest raw material for batteries is nickel and 25% of the world's total nickel reserves are in Indonesia. Therefore, he invites investors, especially Europe, to be part of the investment in the electric vehicle battery industry in Indonesia. The government will certainly be present to take care of the permits and incentives needed for investors.

“Even if it is necessary, we will take care of the land, we can also arrange the mine. The important thing is that there is good communication with the government and we believe that collaboration must be built both between investors, SOEs as well as with national entrepreneurs and MSMEs," he said.

He emphasized that not only the resources are abundant, but industrial development is also carried out with attention to environmental sustainability and climate improvement.

"We always try to make improvements in the context of providing certainty for investors, providing convenience, as well as providing transparency and efficiency," he said. Previously, Bahlil said that there were seven countries that were interested in investing in the national electric vehicle battery industry.

These investors include those from Europe, China, and Southeast Asia. One of the investors from Southeast Asia is targeted to sign an investment cooperation contract in October this year. In the near future, the government will also announce potential new investors from Europe.

With the inclusion of these seven countries' investments, Bahlil has the ambition to make Indonesia a center for electric car manufacturers.

CATL Siap Bangun Pabrik Baterai Listrik di Bulan Desember - Industri Katadata.co.id

CATL akan menjadi perusahaan kedua yang membangun pabrik baterai listrik di Indonesia setelah PT Industri Baterai Indonesia beserta konsorsium LG.

katadata.co.id

 

[Indos]

https://twitter.com/x/status/1447579142669709314

We continue our bilateral meetings before the G20 Trade and Investment Ministers meeting. We met with Indonesian Trade Minister Mohammed Lutfi. We held consultations to increase the trade volume between Turkey and Indonesia and to further strengthen our commercial relations.

 

[Indos]

Indonesia Records Trade Surplus of $4.37 Billion in September 2021


Eko Nordiansyah • 15 October 2021 10:57

Jakarta: Indonesia's trade balance experienced a surplus of USD4.37 billion in September 2021, according to the Central Statistics Agency (BPS).

The trade surplus occurred because exports reached USD20.60 billion, while imports stood at USD16.23 billion.

"Indonesia's trade balance has recorded a surplus for 17 consecutive months," said BPS Head Margo Yuwono in a video conference on Friday, October 15, 2021.

"The value of imports in September 2021 fell by 2.67 percent compared to August 2021," he said.

"But if we calculate the year on year (yoy) growth, our imports still increased by 40.31 percent," he added.

According to the BPS chairman, exports in September 2021 decreased by 3.84 percent compared to the previous month.

Cumulatively, Indonesia's trade balance recorded a surplus of USD25.07 billion from January-September 2021.

"This is very high compared to previous years. For example, in the same period in 2020, our surplus only reached USD13.35 billion, even in 2019 we experienced a deficit," he concluded.

(WAH)

Indonesia Records Trade Surplus of $4.37 Billion in September 2021

Indonesia's trade balance experienced a surplus of USD4.37 billion in September 2021, according to the Central Statistics Agency (BPS).

www.medcom.id

 

[Indos]

Manufacturing Out Put (2018 data)

Mapped: China's Manufacturing Superpower vs. the World

What’s in store for the world’s largest manufacturing producers?

howmuch.net

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Manufacturing Out Put (2020 data)

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IMF Recent Projection (October 12, 2021)

Nominal GDP (2021-2026)

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Growth Rate Projection 2021-2026

World Economic Outlook Database, October 2021

www.imf.org

 

[Indos]

My take on IMF

I am quite optimist that Indonesian GDP growth will be at least 6 % 2023 forward inshaAllah, unlike what is projected by IMF at its recent projection.

I have heard that Gupta, IMF Chief Economist, presentation few days ago. Asian Chief Economist is also an Indian. She even doesnt mention about energy crisis and only said supply bottle neck, higher commodities that can push inflation up across many nations.

As nation that has many coal production and reserve where domestic industry and utilities will get cheaper price than market price, just compared 70 USD per ton of coal in Indonesia and more than 200 USD per ton coal must be paid in international market, Indonesia will become more interesting in the eyes of foreign investors. I believe it is now a situation where investors will start to regard highly countries that has better shield in term of energy crisis that will likely last quite long, due to transition process from fossil energy into more sustainable one.

This is why I regard highly market assessment which is reflected in currency and stock market trading, as they are the ones who doesnt have vested interest in doing the projection and will not want to lose in doing the real transaction on the currency and capital market. So far Rupiah, Indonesian currency, shows strong position and it shows market confidence in our economy. The absorbent of Government bond is also going smoothly by foreign lenders with comparatively low interest rate despite I see we should get much lower than current rate due to better fundamental than many countries which has lower interest rate than Indonesia.

https://www.businesstimes.com.sg/co...uld-be-asias-best-performing-currency-in-2021

IMF Projection

What is basically done by IMF is just bringing back the previous trend that happen during the normal period for the last 5 years that ended in 2019. Where for India case they have optimist projection since India was slowing during that period into 4-5 % growth per year.

This energy crisis doesnt even become their main consideration and they think this problem will be gone next year forever, where for me I think it will likely stay for possibly next 6 - 8 years since oil and gas companies will split their investment fund from being concentrated on fossil fuel drilling and exploration and its supplies infrastructures ( oil tankers, refinery, etc) into sustainable energy investment in solar and others. The gap between this and the demand that make the energy crisis that we are currently happening.

I dont say next year we are going through the same level of energy crisis experience by Europe, India, China, and also several countries, but the supply will likely be tight and this will reduce the previous inventories of fossil fuel, this situation that IMO will make investors think that putting the investment in the country that can secure their energy demand will bring more certainty in their business planning. The degree of importance on this aspect will be greater, that will eventually effect their investment planning, this is what I am thinking

Even Singapore also has faced similar problem as well

https://www.theedgesingapore.com/ne...risis-hits-singapore-iswitch-energy-goes-bust

Structural Reform

And the 5 % projection during "normal" period for Indonesia doesnt also consider some structural reform that have been made by Indonesia which is Omnibus Law. The law is passed in early 2021 and the implementation is started around September this year. This factor is not there during previous period where Indonesia posted 5-5.7 % economic growth since around 2013-2019.

The implementation of the law in Indonesia is expected to make the level of ease of doing business in the country getting greater inshaAllah as projected by many economist and investment bankers around the world, including institution like World Bank and Fitch Rating.

Those combination of factors that make me optimist my country can still post economic growth at least 6 % in 2024-2026 period, following similar projection in 2023 by IMF inshaAllah

 

[Indos]

Indonesia a ‘natural winner’: Nomura​

Mark Lempp (The Jakarta Post)
PREMIUM
Jakarta ● Mon, October 18, 2021



Indonesia’s stock market has performed relatively well amid recent market volatility, but research analysts at financial services group Nomura Holdings suggests it is still punching below its weight.

While acknowledging that “potential stagflation and geopolitical tensions, along with tapering and likely ensuing interest rate hikes in Indonesia, can be a toxic concoction of risks,” a research report published on Sunday implies Southeast Asia’s largest economy has a leg-up on its regional peers.

“Although we view the economic environment as hardly enthusiastic to look forward to in the next year, we think Indonesia provides a relative shelter amidst the challenging mid-to-long term market outlook,” the equity strategists contend, pointing to Indonesia’s speedy recovery from the coronavirus-induced economic crisis.

Indonesia a ‘natural winner’: Nomura

Indonesia’s stock market has performed relatively well amid recent market volatility, but research analysts at financial services group Nomura Holdings suggest it is still punching below its weight.

www.thejakartapost.com

 

[Indos]

BI holds policy rate, expects muted inflation​

Tantrum trepidation: People leave a Bank Indonesia (BI) office building in Central Jakarta on Feb. 26, 2020. With inflation well under control, the central bank kept its key interest rates unchanged on Tuesday.(JP/Dhoni Setiawan)


Dzulfiqar Fathur Rahman
(The Jakarta Post)
PREMIUM
Jakarta, Tue, October 19, 2021

Bank Indonesia (BI) has decided to maintain the benchmark interest rate at a record low of 3.5 percent as the central bank sees the country’s inflation rate at the lower end of the target. BI also held the deposit facility and lending facility rates at 2.75 and 4.25 percent, respectively, after its two-day governors meeting on Monday and Tuesday.

“This decision is in line with the need to maintain exchange rate and financial system stability amid the low inflation forecast and efforts to support economic growth,” BI Governor Perry Warjiyo said in an online press briefing on Tuesday.

BI holds policy rate, expects muted inflation

Bank Indonesia has kept the seven-day reverse repo rate unchanged at a record low of 3.50 percent as the central bank sees full-year inflation at the lower end of its target range.

www.thejakartapost.com