Category Archives: BusinessEconomy

BI: Rupiah gains temporary on US debt impasse

Indonesia's central bank said on Wednesday a weakening U.S. dollar due to worries over debt has pushed up the country's rupiah , but sees the gains as temporary since it expects the U.S. to reach a deal soon to avoid a default.

"I view the rupiah strengthening as more because of a weakening U.S. dollar rather than inflows, which are still at a normal level. I also view that there soon will be an agreement between the U.S. government and parliament," said Bank Indonesia deputy governor Hartadi A. Sarwono, who is in charge of monetary policy.

The rupiah hit a seven-year high of 8,480 per dollar on Wednesday, having already gained around six percent this year on strong capital inflows

Krakatau Steel invests trillions of rupiah

State-owned steel manufacturer PT Krakatau Steel (KS) has again invested trillions of rupiah after establishing a joint venture with a Korean steel plant, Posco.

"Besides developing and revitalizing the Krakatau-Posco enterprise, we are also building a 1.2 million TPY blast furnace with an investment of Rp5.92 trillion," President Director of PT KS Fazwar Bujang said Tuesday.

The undertaking, Fazwar said, was for production revitalization and facilitation as well as business expansion this year. "We are expanding the business to see that PT KS remains competitive in the current increasing market conditions," he added.

He added that some PT KS projects and its subsidiaries being developed and revitalized, namely the PT KS-POSCO joint venture which is currently preparing 388 hectares of land for the steel plant worth Rp600 billion.

"In addition, we are also revitalizing the DR Plant to modify gas reformers worth Rp650 billion," he said.

Other projects include SSP-1 to boost productivity and production quality at a cost of Rp850 billion, HSM to boost productivity and production quality at a cost of Rp750 billion.

PT KS, Fazwar said further, established cooperation with state mining company PT Aneka Tambang to process local raw materials into sponge iron as alternative raw material for PT KS.

"The project is estimated at Rp1.38 trillion. And other projects included HSM 3,5 million TPY to boost production of HRC into 3.5 million of TPY at a cost of Rp1.30 trillion," he added

Jakarta stock index hits another record high

Major Southeast Asian stock markets were mostly higher on Tuesday as  investors bought financial stocks and big caps at the start of the reporting
season but caution prevailed, with the U.S. debt ceiling negotiations still in deadlock.
The positive outlook for the economy and corporate earnings in the region helped sentiment and strong buying sent stocks in Indonesia 1.1 percent higher to a record high, with turnover double the 30-day average.

Others posted more limited gains in moderate volume, with Singapore edging up 0.5 percent to three-month highs and Malaysia inching up 0.14 percent. Thai and
Philippine shares erased early gains to end lower.

Indonesia gained a slim $9.6 million in foreign inflows on Tuesday after a modest $12 million in outflows on Monday and $69 million in net inflows last week, according to Thomson Reuters data.
Indonesia is Asia's best performer this year, ahead of second-ranked Thai stocks and number-three Philippine shares

Change on day
 Market             Current     Prev Close    Pct Move
 Singapore          3186.57       3171.55       +0.47
 Kuala Lumpur       1561.77       1559.60       +0.14
 Bangkok            1121.63       1127.58       -0.53
 Jakarta            4132.77       4087.09       +1.12
 Manila             4465.87       4480.50       -0.33
 Hanoi               409.39        409.36       +0.01

Nissan to invest $313 mln in expanding Indonesia factory

Nissan Motor Co , Japan's No.2 carmaker, plans to invest around $313 million to expand its existing factory in Indonesia to increase output, said Takayuki Kimura, Nissan's Indonesian chief, on Monday.

Kimura said the firm plans to more than triple its output by 2013.

This is a larger expansion than it planned last year, when Nissan said it aimed to double its car production and market share in Indonesia by 2013.

Indonesia likely to become East Asia auto parts industry base

The inceasingly bright growth prospects of Indonesia`s automotive market are boosting the government`s belief that the country can eventually become a car parts industry base for East Asia, chief economic minister Hatta Rajasa said.

"If we consistently entertain the idea that Indonesia is an ideal place for automotive companies to base their car parts industries in, and continue to maintain our automotive market growth, it is not impossible that in the not too distant future our automotive industry will become the biggest not only in Southeast Asia but East Asia," the coordinating minister for economic affairs said here on Friday.

He made the statement in his address opening the 19th Indonesia International Motor Show (IIMS) 2011.

But Indonesia could become a strong automotive parts industry base in the world and maintain its bargaining position as such only if it could forge a good connectivity between automotive and infrastructure industries, heighten efficiency at production levels and ensure the continuity of industrial feed stock supply lines, he said.

"Therefore, cooperation is needed between business and the government. This is good for the self-reliance and resilience of our automotive industry," he said.

Hatta also said Indonesia should draw maximum benefit from its present position as the chair of the Association of Southeast Asian Nations (ASEAN) and as the coordinator of the integration of the automotive sectors of ASEAN member countries - an area being prioritized in the formation of an ASEAN Economic Community by 2015.

"This is a good momentum for Indonesia to accelerate its automotive industry development," he said.

Meanwhile, Bambang Trisulo, chairman of the advisory council of the Association of Indonesian Automotive Industries (Gaikindo), said he was optimistic Indonesia could become a strong automotive parts industry base for East Asia.

"I believe for 80 percent that we can achieve it so long as we can carry out what Hatta has outlined," Bambang told ANTARA.

He said Japan as the biggest automotive producer in Asia had become more aware of the risks of keeping its car parts industry in Japan following the recent earthquake and tsunami there and might relocate its production facilities to Indonesia.

Another country that was eyeing Indonesia as a possible base for its auto parts industry was South Korea, and so was China, according to Bambang

Yudhoyono Plans Big, Bold Steps for Next Five Years

Indonesia has immense potential and ambitions as an emerging-market superstar, but is stymied by basic infrastructural potholes. Choked roads, overcrowded ports and unstable electricity supply make it difficult for businesses to operate as well as move their products. But Indonesia plans to change all that in the next five years.

The government intends to step up the building of modern infrastructure, pouring billions of dollars into new roads, ports and electricity networks as part of a push to eradicate the main bottlenecks that stand in the way of the country's economic growth.

A long-awaited law allowing the government to acquire land for public use more easily will be passed this year.

The plans were laid out by Indonesian President Susilo Bambang Yudhoyono this week, in a rare interview with The Straits Times.

"In the next five years or so, we will be able to accelerate the process of our infrastructure building," he said. "It is strongly needed for improving our investment."

It was an upbeat tone that the President maintained throughout the wide-ranging interview, which he gave on the sidelines of a meeting of Asean leaders in Bali this week.

But the Indonesian leader also tempered his optimism about the development plans with an acknowledgment of the many challenges Indonesia faces, including the need to get local politicians on board and to put in place a clear legal framework and "responsive bureaucracy".

Yudhoyono's plans come on the heels of an ambitious economic masterplan that he laid out in May, aimed at turning Indonesia into one of the world's top 10 economies by 2025.

The masterplan is part of his vision of "strong, balanced and sustainable growth", under which the government wants to draw more investments and promote exports, so that the country can generate revenue to fund more programs for the poor and help small businesses grow with micro-credit and other schemes.

A key plank is to attract US$468 billion (S$ 568 billion) in investments over the next 14 years, including for infrastructure.

Economist: Crucial Role of the Indonesian Middle Class

Like Brazil, but unlike China and India, Indonesia owes much of its success to nothing smarter or more high-tech than a commodities boom. Coal and gas go to China and India, palm oil to the world. Money is pouring into the country, yet little goes into fixing long-term problems that impede growth. Indonesia has a once-in-a-generation chance to move beyond its commodities-based economy. It is not clear it will take it.

At the moment, consumption accounts for almost half of GDP growth. Nomura, a Japanese bank, reckons Indonesia is creating a middle class (defined as one with disposable household income of over $3,000 per year) helter-skelter. The country’s bourgeoisie, 1.6m in 2004, now numbers about 50m. On Nomura’s measure, that is more than India and bigger than elsewhere in the region (see chart). The number could reach almost 150m by 2014, representing one of the world’s most enticing markets. Newly affluent Indonesians are certainly spending.

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Google ‘to open Indonesia office before 2012’

Google plans to open an office in Indonesia soon as it looks to tap the country's huge growth in Internet users, the office of the country's vice president said Friday.
The announcement came after talks between Eric Schmidt, chairman of the US Internet giant, met Vice President Boediono in Jakarta, a spokesman said.
"The Vice President and Google's chairman held a meeting where Google expressed their interest to invest here and open a local office before 2012," the spokesman Yopie Hidayat told Dow Jones Newswires.
However, he did not give an exact time frame for opening.
Of Indonesia's population of more than 230 million, just 40 million were connected to the Internet, making the country an attractive market for web firms.
A study by Google rival Yahoo! found that Indonesia is the largest and fastest growing online market in Southeast Asia, with online usage growth of 48 percent in 2010, compared to 22 percent in 2009.
The country is also ranked third with the most registered Facebook users -- after the US and Britain -- with more than 22 million users.
"You already have large Facebook and Twitter communities. You have very high Google use already," he told reporters after the meeting.
"There are 50 million small businesses in Indonesia, I had no idea it was that large. Those (small businesses) will be the engine of growth for the future economy," he added.
Google Asia Business Development director Emmanuel Sauquet said last year that Indonesia was "the right place for us to come" due to its fastest economy growth.

Foreign direct investment up 21 pct in Q2 y/y

Foreign direct investment (FDI) in Indonesia rose 21 percent in the second quarter of 2011 from a year ago, as strong commodity prices attracted investors into the mining sector, the government said on Thursday.

FDI from April to June was 43.1 trillion rupiah ($5 billion), which followed $4.6 billion of foreign investment in the first quarter, the country's investment board (BKPM) said.

This took FDI in the first six months to just short of a half of its full year target for a record 156 trillion rupiah this year. Last year foreign investment into Indonesia reached a record 148 trillion rupiah.

Southeast Asia's largest economy has been a hot destination for foreign investors in the past two years due to its resilient economic growth, abundant resources, emerging middle class and political stability.

Indonesia to renegotiate oil and gas contracts

The Indonesian government is looking to renegotiate oil and gas contracts with foreign companies it believes should be paying a higher branch profit tax rate.

A number of British and Malaysian companies are paying branch profit tax rates of 10% and 12.5% respectively which were based on bilateral tax treaties between Indonesia and the companies' home countries.

However Indonesia’s Development Finance Comptroller insists the branch profit tax rate should be 20% in line with 2003 Law on Oil and Gas which was ratified in 2004, the Jakarta Post reported.

Last week Indonesia’s Corruption Eradication Commission said 14 multinational companies faced tax arrears of up to 1.6 trillion rupiah (US$187.2 million).

The Finance Ministry’s director general for taxation, Fuad Rahmany, said the tax debts were the result of disputes between the Development Finance Comptroller and the foreign companies, which he would not name.

“This is a problem of prior contracts and tax treaties that no longer comply with today's [regulations]. The finance minister has indeed ordered reviews of tax treaties with those countries,” Fuad said.

"But renegotiation won't be easy because this involves other nations. We will need diplomacy to try to tell them that their tax treaties are outdated."

Faud added the Finance Ministry would work with the Foreign Ministry to renegotiate the contracts with talks with the companies concerned expected to start by the end of the year.

It is understood the dispute mainly concerns contracts that were signed before the Oil and Gas Law took effect in 2004