Indonesia Economy Forum

Indos · Aug 25, 2020

I can say better we delay this project until 2025. Indonesia is not in a rush to get more revenue and USD from this huge gas field since fundamentally Indonesia economy is still quite strong, alhamdulILLAH. Better we wait for better deal and better gas price before starting the project. 10 years from now Indonesia economy is also projected to be double than in 2020 so the gas out put can give more contribution to our economy and industry.

Shell begins divestment of Masela block

Shell’s plan to exit the Masela block dealt a major blow to Indonesia’s energy ambitions as the block, which holds 10.7 trillion cubic feet of proven gas reserves, carries the biggest investment value among Indonesia’s four nationally-strategic oil and gas assets.

www.thejakartapost.com

Bungaterakhir · Aug 25, 2020

The construction of the Trans Sumatra Toll Road (JTTS) for the Sigli-Banda Aceh (Sibanceh) section 4 (Indrapuri-Blang Bintang) has been 100 percent complete and inaugurated by the President of the Republic of Indonesia, Joko Widodo (Jokowi).

The Sibanceh Toll Road is part of the National Strategic Project (PSN) through the Ministry of Public Works and Public Housing (PUPR). The Indonesian government continues to strive to improve road and bridge infrastructure services, both toll roads and national roads, to support logistics lines in the context of national economic recovery.

Logam42 · Aug 26, 2020

Hello all,

I would like to post a quick discussion on a few trends that can be found in the January-July 2020 BKPM report.

The first of all is that Semester 1 was the first time since at least the Reformation Era where DDI (Domestic Direct Investment) was higher than FDI (Foreign Direct Investment). While this is partially due to falling FDI during Corona, it must be noted that DDI growth has been accelerating faster than FDI growth for quite some time.

Direct Investment is when an investor puts in investments that grant them direct ownership of assets and equity. So setting up companies, buying furniture, and building a shop are considered Direct Investment. Buying bonds and stocks on the other hand is Indirect Investment.

This means the following 2 things:
1) Some Indonesians are no longer channeling their investments from outside countries such as Singapore. Might be because of the sunset policy or improving bureaucracy.
2) More Indonesians are comfortable in setting up companies and opening businesses than before.

As seen in below graph, DDI has skyrocketed in the last 3 years. Hopefully this signals an unlocking of Indonesia potential as Indonesians are take a more proactive role in developing and diversifying their economy. As summarized by the World Bank here, FDI enhances domestic investment by providing better quality jobs, transfer of technology, and innovative technical skills. Despite that though, Domestic Investment usually provides more jobs and also allows better accessibility of FDI.

FDI alone cannot hold up economic growth in Indonesia. Especially considering the great amount of unemployment in SMK graduates and the general low-skill of our labor force. As such this DDI will hopefully lead to better job access and accelerated economic growth in the future.

This graphs shows us that only 51.9% of all direct investment is centered in Java. Considering that 59% GDP in 2019 was generated in Java, it means that at least in investments non-Javan Territories are receiving investment larger than their proportion of the national economy. As investment causes long-term growth, this would lead for faster economic growth outside of Java and also push economic diversification. Hopefully the end result is a more geographically balanced economy along with better prosperity and job market outside of Java.

The final graph gives the breakdown of the Non-Java areas. Based on the regional GDP data in 2019 from kontan here, all areas outside Java (with exception of Bali & Nusa Tenggara) are receiving investment share above their GDP proportion.

Below I have made a quick list comparing each region's economic share in 2019, their investment share in Jan-June 2020, and by how much percent is their investment share higher than their 2019 GDP share.

Region	GDP Share 2019	Jan-Jun 2020 Investment Share	Investment/GDP Share Proportion
Non-Java	41%	48.10%	117%
Sumatera	21.32%	24.20%	114%
Sulawesi	8.05%	8.50%	106%
Kalimantan	6.33%	8.30%	131%
Maluku & Papua	2.24%	4.60%	205%
Bali & Nusa Tenggara	3.06%	2.50%	82%

Also please note that although Papua is receiving investment of twice its proportion in the national economy, nearly all of it is FDI. This show's that people there are not yet able to set up businesses and that the grand majority of investment are still 'big ticket' projects that might not yet have a strong affect on the prosperity of people living there.

Alright, thats the end of the overview of Direct investment trends in Indonesia for the first half of the year. Thank you for reading!

Indos · Aug 27, 2020

Logam42 said:
Hello all,

I would like to post a quick discussion on a few trends that can be found in the January-July 2020 BKPM report.

The first of all is that Semester 1 was the first time since at least the Reformation Era where DDI (Domestic Direct Investment) was higher than FDI (Foreign Direct Investment). While this is partially due to falling FDI during Corona, it must be noted that DDI growth has been accelerating faster than FDI growth for quite some time.
View attachment 664077

Direct Investment is when an investor puts in investments that grant them direct ownership of assets and equity. So setting up companies, buying furniture, and building a shop are considered Direct Investment. Buying bonds and stocks on the other hand is Indirect Investment.

This means the following 2 things:
1) Some Indonesians are no longer channeling their investments from outside countries such as Singapore. Might be because of the sunset policy or improving bureaucracy.
2) More Indonesians are comfortable in setting up companies and opening businesses than before.

As seen in below graph, DDI has skyrocketed in the last 3 years. Hopefully this signals an unlocking of Indonesia potential as Indonesians are take a more proactive role in developing and diversifying their economy. As summarized by the World Bank here, FDI enhances domestic investment by providing better quality jobs, transfer of technology, and innovative technical skills. Despite that though, Domestic Investment usually provides more jobs and also allows better accessibility of FDI.

View attachment 664078

FDI alone cannot hold up economic growth in Indonesia. Especially considering the great amount of unemployment in SMK graduates and the general low-skill of our labor force. As such this DDI will hopefully lead to better job access and accelerated economic growth in the future.

View attachment 664080

This graphs shows us that only 51.9% of all direct investment is centered in Java. Considering that 59% GDP in 2019 was generated in Java, it means that at least in investments non-Javan Territories are receiving investment larger than their proportion of the national economy. As investment causes long-term growth, this would lead for faster economic growth outside of Java and also push economic diversification. Hopefully the end result is a more geographically balanced economy along with better prosperity and job market outside of Java.

The final graph gives the breakdown of the Non-Java areas. Based on the regional GDP data in 2019 from kontan here, all areas outside Java (with exception of Bali & Nusa Tenggara) are receiving investment share above their GDP proportion.

View attachment 664082

Below I have made a quick list comparing each region's economic share in 2019, their investment share in Jan-June 2020, and by how much percent is their investment share higher than their 2019 GDP share.

Region
GDP Share 2019
Jan-Jun 2020 Investment Share
Investment/GDP Share Proportion
Non-Java
41%
48.10%
117%
Sumatera
21.32%
24.20%
114%
Sulawesi
8.05%
8.50%
106%
Kalimantan
6.33%
8.30%
131%
Maluku & Papua
2.24%
4.60%
205%
Bali & Nusa Tenggara
3.06%
2.50%
82%

Also please note that although Papua is receiving investment of twice its proportion in the national economy, nearly all of it is FDI. This show's that people there are not yet able to set up businesses and that the grand majority of investment are still 'big ticket' projects that might not yet have a strong affect on the prosperity of people living there.

Alright, thats the end of the overview of Direct investment trends in Indonesia for the first half of the year. Thank you for reading!

Investment realization which show more decline in Java compared to non Jav during first semester IMO is due to more strict lock down measure implemented in Jakarta and West Java compared to non Java region like Sumatra.

Indos · Aug 27, 2020

Nicle Ore price keep climbing and Today it has reached 9 months higher after Indonesia supprisse the world by expediting Nicle ore ban into January 2020, from previous 2023 time table. Most of nickle being traded Today comes from China inventory. Once the inventory is run out, nicle ore price will climb much higher and there could be shortages happen for demand outside Indonesia.

UPDATE 1-Indonesia nickel ore export ban to remain -mining ministry director

JAKARTA, June 4 (Reuters) - Indonesia will keep in place a ban on the export of nickel ore even as it relaxes exports of some other minerals under revisions to its mining law, the director of minerals at the country’s energy and minerals ministry said on Thursday.
Indonesia’s parliament passed revisions to its mining law last month, allowing miners building smelters to export ore for the next three years. But the revisions stipulated that the government can rule against the export of specific ores under a separate regulation.
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“This will not be applicable to nickel, nickel ore exports will continue to be banned,” director Yunus Saefulhak told Reuters by text message.
The new mining law will also allow miners to extend permits and seek expansion of mining areas beyond current legal limits, stoking concern and protests among environmentalists and transparency watchdogs.

UPDATE 1-Indonesia nickel ore export ban to remain -mining ministry director

Indonesia will keep in place a ban on the export of nickel ore even as it relaxes exports of some other minerals under revisions to its mining law, the director of minerals at the country's energy and minerals ministry said on Thursday.

www.reuters.com

Indos · Aug 29, 2020

This power plant is necessary to provide electricity for 2 large industrial parks in North Sumatra. It is gas power plant and I think it will use the gas which is currently supplying Singapore where the gas contract will end in 2023, the time table which is match with the completion of this power plant. So the gas distribution infrastructure should be built as soon as the power plant project is started in January next year according to the plan.

North Sumatra is very strategic for development of our industry since it has major port in Malacca strait thus will give better competitive advantage for the industry to seek export market since the location is near sea transportation hub in Singapore port and Port Klang in Malaysia.

The minimum wage IMO is also still competitive. As the biggest economy in Sumatra, I hope many talents from across Sumatra also seek opportunities in North Sumatra that can make human power who run the industry in Sei Mangkei and Kuala Tanjung Industrial Zone will be competitive and skill full, so that many foreign and local companies are willing to set up factories there.

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South Korean investor to build ‘largest power plant’ in North Sumatra

Apriadi Gunawan
The Jakarta Post Medan, North Sumatra /
Fri, August 28, 2020 / 06:26 pm

The new 10 Megawatt gas-fired power plant (PLTMG) is pictured in Timika town, Mimika, Papua, on June 25. (PLN/PLN)

PT Hanlim Power Corporation, the local arm of a South Korean company, plans to build a 4,800 megawatt (MW) gas-fired power plant (PLTGU) in Batubara regency, North Sumatra, which is touted to be the largest in the province.

The company signed a deal with North Sumatra Governor Edy Rahmayadi on Wednesday to expedite the issuance of land and administrative permits for the plant, which will power is the Sei Mangkei Special Economic Zone (SEZ) and Kuala Tanjung Industrial Zone.

“I understand we will face many challenges but seeing the governor’s enthusiasm, I decided to invest in North Sumatra,” said Hanlim chairman Paul Han R Lee. “This deal marks the first step to beginning construction.” Construction will begin in January 2021 at the latest, Edy said.

The plant will be built in three equal stages of 1,600 MW each and is slated for full-capacity operations before Edy’s term ends on Sept. 5, 2023. He noted that the plant’s power would be directly distributed to the two zones, a decision that circumvents the legally sanctioned distribution monopoly of electricity giant PLN. The state-owned firm has been unable to guarantee the distribution of the plant’s power as it had not finished its latest electricity procurement plan (RUPTL), Edy explained, adding that Hanlim would have moved the project to Vietnam unless development began soon.

The North Sumatra governor expects the plant’s operations to attract 250 investors, which would, in turn, create more job opportunities for the locals. The province has 345,000 unemployed residents, according to latest available Statistics Indonesia (BPS) data in February.

Indonesia is banking on several SEZs and industrial zones to stoke the growth of domestic industries, which has seen its share of gross domestic product (GDP) steadily decline over the past few decades.

President Joko “Jokowi” Widodo in his annual speech on Aug. 14 reiterated his commitment to eliminating overlapping regulations and to building more industrial zones across Indonesia.

The government is currently developing several industrial parks, such as the Batang industrial park in Central Java and one in Majalengka regency, West Java, to solve land acquisition issues usually faced by investors. It is planning to develop at least 27 industrial parks, according to the 2020-2024 National Medium-Term Development Plan (RPJMN). Most of them will be developed outside Java Island. (nor)

This article was published in thejakartapost.com with the title "South Korean investor to build ‘largest power plant’ in North Sumatra - Business - The Jakarta Post". Click to read: https://www.thejakartapost.com/news...ild-largest-power-plant-in-north-sumatra.html.

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Indos · Aug 29, 2020

West Java, despite currently become the concentration of industry in Indonesia, still has huge potency for its future industrial development. Particularly after the government build Patimban port and Kertajati airport. The areas in Majalengka which is near those main infrastructures become very interesting to be the manufacturing base.

I will post one company that has tapped the opportunity and set up a factory there. This is state owned construction company, Wijaya Karya, that is currently building steel fabrication factory in the area. By looking to the vast land around the factory which is still relatively empty and probably has been cleared for making an industrial zone, I can say the opportunities are huge for further industrialization of the areas there.

Despite, so I still hope the other vast areas in the right and left side of access road of Patimban port should still be used for agriculture industry.

Wijaya Karya steel fabrication factory up date, April 2020

Nike · Aug 29, 2020

Logam42 said:
Hello all,

I would like to post a quick discussion on a few trends that can be found in the January-July 2020 BKPM report.

The first of all is that Semester 1 was the first time since at least the Reformation Era where DDI (Domestic Direct Investment) was higher than FDI (Foreign Direct Investment). While this is partially due to falling FDI during Corona, it must be noted that DDI growth has been accelerating faster than FDI growth for quite some time.
View attachment 664077

Direct Investment is when an investor puts in investments that grant them direct ownership of assets and equity. So setting up companies, buying furniture, and building a shop are considered Direct Investment. Buying bonds and stocks on the other hand is Indirect Investment.

This means the following 2 things:
1) Some Indonesians are no longer channeling their investments from outside countries such as Singapore. Might be because of the sunset policy or improving bureaucracy.
2) More Indonesians are comfortable in setting up companies and opening businesses than before.

As seen in below graph, DDI has skyrocketed in the last 3 years. Hopefully this signals an unlocking of Indonesia potential as Indonesians are take a more proactive role in developing and diversifying their economy. As summarized by the World Bank here, FDI enhances domestic investment by providing better quality jobs, transfer of technology, and innovative technical skills. Despite that though, Domestic Investment usually provides more jobs and also allows better accessibility of FDI.

View attachment 664078

FDI alone cannot hold up economic growth in Indonesia. Especially considering the great amount of unemployment in SMK graduates and the general low-skill of our labor force. As such this DDI will hopefully lead to better job access and accelerated economic growth in the future.

View attachment 664080

This graphs shows us that only 51.9% of all direct investment is centered in Java. Considering that 59% GDP in 2019 was generated in Java, it means that at least in investments non-Javan Territories are receiving investment larger than their proportion of the national economy. As investment causes long-term growth, this would lead for faster economic growth outside of Java and also push economic diversification. Hopefully the end result is a more geographically balanced economy along with better prosperity and job market outside of Java.

The final graph gives the breakdown of the Non-Java areas. Based on the regional GDP data in 2019 from kontan here, all areas outside Java (with exception of Bali & Nusa Tenggara) are receiving investment share above their GDP proportion.

View attachment 664082

Below I have made a quick list comparing each region's economic share in 2019, their investment share in Jan-June 2020, and by how much percent is their investment share higher than their 2019 GDP share.

Region
GDP Share 2019
Jan-Jun 2020 Investment Share
Investment/GDP Share Proportion
Non-Java
41%
48.10%
117%
Sumatera
21.32%
24.20%
114%
Sulawesi
8.05%
8.50%
106%
Kalimantan
6.33%
8.30%
131%
Maluku & Papua
2.24%
4.60%
205%
Bali & Nusa Tenggara
3.06%
2.50%
82%

Also please note that although Papua is receiving investment of twice its proportion in the national economy, nearly all of it is FDI. This show's that people there are not yet able to set up businesses and that the grand majority of investment are still 'big ticket' projects that might not yet have a strong affect on the prosperity of people living there.

Alright, thats the end of the overview of Direct investment trends in Indonesia for the first half of the year. Thank you for reading!

There is several smelter projects on going in outside area of Java island. The one big project is happened in Central Sulawesi province and North Maluku. Beside smelter projects there is EV battery factory projects which running on the premise of Indonesia strategic project for bauxit processing industry.

Just wishing we got more knack to invite FDI for equipment and precision industry after we are able to handle the smelter projects.

Logam42 · Aug 29, 2020

Nike said:
There is several smelter projects on going in outside area of Java island. The one big project is happened in Central Sulawesi province and North Maluku. Beside smelter projects there is EV battery factory projects which running on the premise of Indonesia strategic project for bauxit processing industry.

Just wishing we got more knack to invite FDI for equipment and precision industry after we are able to handle the smelter projects.
View attachment 664992 View attachment 664993 View attachment 664994

I suspect one of the reasons is that we need skilled workers to operate precision machinery and foreigh workers find it very very hard to obtain working permit unless it is a big ticket infrastructure project. Even then they tend to be politicalized a lot.

As such since there is no one to train and supervise the workers, people don't invest in that sector.

Its good to see that a lot of investment is going into the petrochemical and pharmaceutical sector though.

Nike · Aug 30, 2020

Logam42 said:
I suspect one of the reasons is that we need skilled workers to operate precision machinery and foreigh workers find it very very hard to obtain working permit unless it is a big ticket infrastructure project. Even then they tend to be politicalized a lot.

As such since there is no one to train and supervise the workers, people don't invest in that sector.

Its good to see that a lot of investment is going into the petrochemical and pharmaceutical sector though.

Without precision industry and similar sector, it is quite hard to pass through developing barriers. Japan, German, South Korean, UK, US, France, Italy, and so on all had working and robust precision industry sector Made them able to get high value added products to sell at. No wonder China is very eager to increase the contribution of this sector into their industry

nufix · Aug 30, 2020

Nike said:
Without precision industry and similar sector, it is quite hard to pass through developing barriers. Japan, German, South Korean, UK, US, France, Italy, and so on all had working and robust precision industry sector Made them able to get high value added products to sell at. No wonder China is very eager to increase the contribution of this sector into their industry

Honestly, one of the biggest headache for some of my German clients is the expectation/requirement that investors would create padat karya factories. The problem is, production capacity and quality of such factory will greatly vary depending on the workforce. For products that are expected to generate waste such as garments or simple electronics, this could still be tolerated, but for products like chips, microelectronics, the factory will strife for production efficiencies.

Nike · Aug 30, 2020

nufix said:
Honestly, one of the biggest headache for some of my German clients is the expectation/requirement that investors would create padat karya factories. The problem is, production capacity and quality of such factory will greatly vary depending on the workforce. For products that are expected to generate waste such as garments or simple electronics, this could still be tolerated, but for products like chips, microelectronics, the factory will strife for production efficiencies.

Well, some of my friend who became liaison for South Korean and Japanese companies all had Made the same complaints. China did away to create massive factory for utility products, like needle,plastic toys and so on but they carefully nurture the precision industry and Made loose of requirement for the investor even let them hire foreign worker at number.

Indos · Aug 30, 2020

Just dont get it. Instead of distributing maskers to people exercising in GBK where mostly coming from upper middle class people, government should rather distribute maskers to people in traditional markets where majority of lower middle class people and maids are present. These are also the people that are less discipline on mask regulation measure.

Maybe they (Health Ministry and Coordinating Minister) just want to spend as Jokowi only stress on disbursing rate and dont look on the effectiveness of the spending :disagree:

Giving mask during holidays in GBK will also be much easier than giving masks to traditional markets where the giver needs to wake up early and meet relatively not a convenience environment compared to GBK stadium. Look like I know the reason already :disagree:

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"A total of 22,500 face masks from the Coordinating Minister for Economic Affairs and 20,000 face masks from the Health Ministry were distributed to people exercising in the GBK area during the campaign.

The government will later also organize campaigns to promote hand washing and maintaining physical distancing."

Indonesia's economy starts to move: Minister Hartarto

Coordinating Minister for Economic Affairs Airlangga Hartarto has said Indonesia's economy has started to move positively again after being badly impacted ...

en.antaranews.com

Indos · Aug 31, 2020

Alhamdulillah

Boss of Krakatau Steel (KRAS): Subsidiary's Profit as of July Soared to US $ 30 Million
As of July 2020, the overall performance of the subsidiary, PT Krakatau Steel (Persero) Tbk. able to exceed the 2020 target

M. Nurhadi Pratomo - Bisnis.com26 August 2020 | 11:34 WIB

State owned enterprise Minister Erick Thohir (second left) walks with the President Director of PT Krakatau Steel (Persero) Tbk Silmy Karim (left) during the Public Expose of Krakatau Steel 2020 at the Ministry of State Owned Enterprise Office, Jakarta, Tuesday (28/1/2020). - ANTARA / Indrianto Eko Suwarso

Bisnis.com , JAKARTA - PT Krakatau Steel (Persero) Tbk. claiming the performance of all subsidiaries is able to exceed the target by July 2020.

President Director of Krakatau Steel Silmy Karim said the subsidiary showed a good contribution with a profit contribution of US $ 30.04 million as of July 2020. The realization increased from US $ 791,968 in the same period last year.

With an estimated exchange rate of IDR 14,500 per US dollar, the profit per July 2020 is equivalent to IDR 435.58 billion.

Also read: Krakatau Steel (KRAS) transfers shares of Krakatau Hospital to BUMN Hospital Holding

"As of July 2020, the overall performance of the subsidiaries has been able to exceed the 2020 target and has increased compared to the realization in the same period last year. The application of cost efficiency that we also apply to our subsidiaries has proven to have a significant effect on performance, ”he said in a press release, Wednesday (26/8/2020).

Silmy reported that the subsidiary's total revenue reached US $ 296.96 million as of July 2020. The highest sales up to that period was pocketed by PT Krakatau National Resources which reached US $ 59.38 million.

Meanwhile, the highest profit was obtained by PT Krakatau Bandar Samudera, valued at US $ 8.15 million. The issuer coded as KRAS shares said the ability of the subsidiary to meet short-term obligations was quite good as indicated by the current ratio of 133 percent.

Also Read: 75 Years of Indonesia: Restructuring to Remove 'Rust' of Krakatau Steel (KRAS)

KRAS claims performance improvements by making another profit booked by PT KHI Pipe Industries and PT Krakatau Wajatama. As an illustration, KHI Pipe Industries posted a profit of US $ 5.79 million until July 2020 or reversed from a loss of US $ 5.95 million for the same period last year.

Furthermore, Krakatau Wajatama made a profit of US $ 2.05 million. This achievement reversed the loss of US $ 7.93 million in July 2019.

"The Krakatau Steel Group continues to improve and during this pandemic we are using it to carry out internal consolidation to the subsidiaries. After this pandemic is over, we are confident that the Krakatau Steel Group's performance will continue to improve, "added Silmy.