| Embassy of Indonesia - Ottawa Canada | August 10, 2004 |
| NEWS ON TRADE AND INVESTMENT IN INDONESIA Edition 9 August 2004
While the benchmark one-month SBI rate did rise at an auction Wednesday (4/8/04), it moved up only to 7.37% for one-month paper, up from 7.36% at the previous auction. BI Governor Burhanuddin Abdullah indicated Tuesday (3/8/04) that the bank is considering two policy options to curb inflation: money market operations or raising interest rates. A decision is expected at the coming week's board of governors meeting. Burhanuddin accepted that inflation could rise above the budget target of 7% as the elections produced a high level of spending and as oil prices stay high. "We are monitoring all the pressures,” he said, although he added that BI researchers continued to say inflation would come in for the full year at 6.4%. Bank Indonesia is "open to using interest rates while keeping absorbing liquidity as part of efforts to curb inflationary pressure." Amid all the figures, Bank Indonesia Governor Burhanuddin said it appeared the economy could achieve 5% growth this year, above the budget forecast of 4.8%. BI said Thursday it did not intend to change its policy on maintaining relatively low interest rates, The Jakarta Post reported. "We still want to absorb more liquidity from the market, but on the other hand Bank Indonesia will try to minimize the impact of the interest rate increase," said Budi Mulya, director for monetary management. He said the high rate of absorption of funds at Wednesday’s auction had been above the government’s expected rate. It absorbed Rp63.6 trillion compared to the target of Rp61 trillion. Finance Minister Boediono brushed aside fears that the oil price, which hit a new record high of $44 per barrel on Tuesday, twice as high as the estimate in the 2004 state budget, would have an impact on the state budget. "We don't need to worry about its impact. The state budget can still be controlled," the minister said on the sidelines of a seminar on fiscal policies here, according to Antara. He said it would be up to the next government to consider the impact of surging oil prices on the state budget. He added that his ministry has revised the budget oil price to $34 per barrel from $22 per barrel. Export figures continued to grow, with the total non-oil and gas figure staying well above the $5 billion level in June. Just as importantly, imports of industrial basic and auxiliary materials grew by 29.42% year-on-year to $16.5 billion in the first half of the year. Imports of capital goods increased 17.94% to $2.22 billion, pointing to stronger activity in manufacturing industry. Officials of the Central Bureau of Statistics said the strong growth of imports of basic materials and capital goods gave rise to hope of an increase in capacity utilization in the second half of the year. Tourist arrivals were up close to 35% compared to 2003 levels, proof that the scares of terrorist activity and last year’s Severe Acute Respiratory Syndrome (SARS) are behind us. With positive news on the top of the menu for Indonesia, although only partly disguising the continuing mix of problems that need attention, there were also reports that international finance markets were look more closely as this and other emerging markets. A Dow Jones Newswires column found that investors were upbeat on Indonesia after the successful election process so far. Low yields in developed markets are prompting them to accept more risk in the hope of double-digit returns. That’s good news for the government with the approaching sale of 51% of Bank Permata, the last large bank on its books, with a number of major investors still in the ranks for the sale. POLITICS The decision confirmed last month's rulings by the Constitutional Court in a number of electoral disputes. Some 60% of the new legislators announced by the KPU are first timers. The Commission will announce the composition of the provincial and local legislative councils by September 30 at the latest after fully considering the rulings of the Constitutional Court in the electoral disputes that came before it. KPU chairman Nazaruddin Sjamsudin said 550 House and 128 DPD candidates would be sworn in as members of the new bicameral legislature on October 1. The KPU will forward the list of the new House and Regional Representatives Council members to the State Secretary for the approval of the President, who is then expected to issue a presidential decree sometime before Oct. 1 formally appointing the new legislators. Another Militant on Trial Prosecutors said Adi Suryana, a chemical engineering graduate who learned military skills and worked as an instructor in Afghanistan between 1986 and 1993, led a meeting in February 2003 to set up teams and prepare for attack. The participants, all graduates of Afghan military training, were tasked with collecting explosives, surveying targets and making bombs, they said. "During the meeting the defendant stressed the importance of practicing the skills the participants had learned," prosecutor Helmi Tadjuddin told the hearing at the South Jakarta district court. Suryana, who could face a life sentence if convicted, was also accused of giving several bomb-making classes for the Afghan alumni in 2003. Tadjuddin said Suryana had joined the al Qaeda-linked Jamaah Islamiyah (JI) extremist group after returning to Indonesia from Afghanistan. ADB Grant for KPK The ADB said the grant aims to prepare and equip the Corruption Eradication Commission (KPK) to carry out its tasks. The commission was established in December 2003 to prevent, investigate and prosecute corruption cases. The ADB said the grant would help promote cooperation with the police and public prosecutors, design training for the commission's staff, and draw up an information campaign on the agency's role. Staffan Synnerstrom, from ADB's office in Jakarta, said anti-corruption efforts were particularly important following the decentralization of most government sectors.
Maksum told a press briefing that all CPI components were higher in July compared to the previous month. Education, recreation and sports prices were up 1.0% month-on-month. Food prices were up 0.43%; processed food, beverage and tobacco prices were up 0.23%; housing, water, electricity, gas, and fuel up 0.51%; clothing up 0.21%; healthcare up 0.30%; and transportation, communication and financial services up 0.03%. Tourist Arrivals up Strongly The performance showed that neither the implementation of a visa-on-arrival policy over the past five months, nor the presidential election campaign in June had a negative impact on tourist arrivals, BPS said in a statement. "This shows that the tourism sector, in particular foreign tourism, has shown very good development and has returned to normal during the past six months," the bureau said. The number of foreign tourist arrivals at Bali's Ngurah Rai airport rose by 65% year-on-year to 679,983 in the first six months, making Bali the second largest entry point after Batam, which recorded tourist arrivals of 738,658, an increase of 35.55% year-on-year. Deficit on Target A report estimated the full-year deficit at Rp23.85 trillion ($2.66 billion), under the target of Rp24.42 trillion, Antara reported. In the first half of this year, the deficit reached Rp18.55 trillion, or 75% of the target. The high deficit in the first half of this year was partly caused by an extra month’s salaries for for civil servants, teachers, police and military. The projected deficit for 2004 is 1.2% of Gross Domestic Product (GDP). The report said the deficit in the second half of this year is estimated to reach only Rp5.29 trillion, and is expected to be covered by funds from the privatization of state companies, bonds and foreign loans. Tight Liquidity Policy Stays "The central bank policy remains tight bias because we see the inflation ahead could be relatively high ... We see that (inflation) higher than 7% remains a possibility for this year," Bank Indonesia (BI) Governor Abdullah told Reuters. He also said that the central bank's policy would be aimed at achieving a medium- to long-term inflation rate of 6-7%. The central bank defines its tight-bias policy as draining excess liquidity from the banking system while keeping interest rates relatively stable. Burhanuddin Abdullah also said Indonesia's economy could grow by 5% or more this year, compared to the budget forecast of 4.8%. Tax Target in Sight Tax revenue included Rp58.6 trillion from non-oil and gas income taxes, Rp12 trillion from oil and gas income taxes, Rp42.5 trillion from value-added taxes, Rp6.5 trillion from land and building taxes, and Rp1.1 trillion from other taxes. Hadi said he expected tax revenue to surpass the full-year target of Rp260 trillion, with an expected boost during religious holidays later this year when consumption typically rises. Director General of Excise and Customs Eddy Abdurrachman said excise revenue reached Rp15.49 trillion as of July, with import duties contributing Rp6.6 trillion. The figure was 13.33% higher than the Rp13.207 trillion in excise
receipts in the same period last year. Cigarette producers bought a total of Rp2.6 trillion ($283.4 million) worth of excise stamps last month, compared to Rp2.3 trillion a year earlier, according to the data obtained by Reuters. SBI The three-month SBI weighted average discount rate was 7.31%, up from 7.29%. The three-month SBI auction absorb Rp9.54 trillion, or 87,93% of bids. Forex Base money as of July 30 amounted to Rp174.54 trillion, Rp7.40 trillion more than the preceding week, on seasonal factors related to salary payments.
Total exports as of June reached $31.41 billion compared to $30.45 billion during the same period in 2003, BPS head Choiril Maksum said Monday (2/8/04). "The decline in the rupiah has to some extent made our products more competitive in the international market but strong demand from the US, Japan and Singapore also helped," Choiril said. He said there were good prospects for exports in the coming months. Despite expectations for a rebound in the rupiah, continuing recovery in the global economy should further increase demand for exports. In June, total exports stood at $5.69 billion, the fourth consecutive month exports were above the $5 billion level. The country remains on track to meet its full-year export target of $60 billion. Non-oil and gas exports grew by close to 3% during the first half of the year, mainly on the back of the higher exports of mining products (8.4%) and industrial products (1.9%). Agricultural products export declined by 2.8%. Industrial products remained the strongest export item, accounting for 65.5% of total exports, with gas and oil exports at 23.6%. Imports rose 9.9% in June to $3.54 billion from $3.22 billion the previous month. During the first half of the year, imports were up by 27.2% to $20.38 billion compared to the same period last year. The trade surplus fell slightly to $2.15 billion in June from $2.28 billion in May and $2.85 billion in the same month last year. Head of the National Agency for Export Development Diah Maulida said it was hoped non-oil and gas trade with China would grow to Rp10 billion next year. Trade with China came in last year at $5.15 billion, with exports valued at $2.81 billion and imports from China at $2.33 billion. Indonesia will hold an exhibition in Beijing from August 30 to September 3 in which around 100 Indonesian companies will participate.
Malaysia's top car maker, Proton Holdings Bhd, said Thursday (5/8/04) a subsidiary will spend 68.4 million ringgit ($18 million) to set up a manufacturing plant in Indonesia, Reuters reported. PT Proton Tracoma Motors has agreed to pay $7.8 million for a piece of land from PT Bank Lippo and will pay $10.3 million to buy plant and machinery from PT Unggul Gunatama Mobil Industri. The plant will produce Proton cars for the Indonesian and export markets, a statement said. Samsung May Build Phone Plant The daily quoted Lee Kang Hyun, sales and marketing director of Samsung Electronics's Indonesian unit, as saying that the company may produce the handsets in Indonesia by 2006 if the local market for the products is big enough. "If in the next two years, the market size reaches 10 million to 15 million units per year, we will operate our own plant in Indonesia."
US Agency for International Development (USAID) director for Indonesia, William Frej, and deputy chairman of Indonesia's National Development Planning Agency (Bappenas), Soekarno Wirokartono, signed an agreement on the grant Wednesday (4/8/04). The grant will be used to prevent financial crimes, reform the financial sector, and restructure the energy sector, Frej said. The grant brings to $86.1 million the amount of US grants channeled to Indonesia under the government's post-IMF economic program. Banking Mediation Agency Planned If everything went well, the agency could be established sometime next year, he said, adding that BI will only provide guidance in the process. He said the move was in line with the Indonesian Banking Architecture (API) guidelines, notably on efforts to educate and empower banking customers. The mediation agency is to function like an independent arbitration body, and will provide support to the disputing parties and try to resolve commercial disagreements in the fairest manner.
Executive Director Sukatmo Padmosukarso said the performance is not far from the target for the full year of Rp549 billion. The bank’s capital adequacy ratio (CAR) stood at 21.97% by June 30, well above the minimum limit of 12%. Strong Growth at Bank NISP Pramukti said loans were expected to grow by only 15-20% on last year’s figures, because of weaker demand. Rather than aggressively looking for new loans, Bank NISP wants to focus on improving its asset productivity, he said. Indosat 1H Revenue Boost He added that the company plans to raise its target for additional mobile phone users this year to 3.5 million from 3 million. Purnama said the overall contribution to revenue from the company's mobile phone operation increased to 70% from 67%. From January to July, the number of cellular subscribers rose by about two million to around eight million. Last year, Indosat booked revenue of Rp3.88 trillion ($421 million) in the first half. The company is due to officially announce its full first-half results towards the end of this month. Air Traffic Up 19% He said the trend is expected to continue in future years as increased competition among new domestic airlines results in lower fares. Airlines are expected to carry 22 million passengers this year, up from 17 million in 2003. Burhanuddin said regular air travellers account for only 1.3% of Indonesians, meaning there is ample room for the industry to grow. Rights Issue for Bank Muamalat The bank said the Islamic Development Bank and two other major shareholders will buy the rights shares valued at Rp100 billion. Bank Muamalat plans to issue the shares to support expansion budgeted at Rp1 trillion in 2005.
The funds will be used to build telephone lines in 3,000 villages this year, the director for telecommunications and information with the Communication Ministry, Susilo Hartono, said Thursday (5/8/04). The scheme funded the construction of telephone lines in 3,010 villages last year at a cost of Rp45 billion. Susili said nearly 64.4% of 66,778 villages in the country had no telephone lines. The government intends to spend Rp2.14 trillion up until 2010 to enable all villages in the country to have access to telephone services. Interest in New Port One of the prospective investors is the operator of the Rotterdam port, sources close to the project said. The project meanwhile received support from the Association of Indonesian Importers (GINSI), which said it would save the country at least $520 million a year in transshipment cost in Singapore or Malaysia. Japanese investors are prominent in the project, and their ships
are expected to use it, GINSI chairman H. Amiruddin Saud said. PPA vice president Raden Pardede said potential bidders have until the first or second week of September to decide whether they will join the bid. The government, through PPA, plans to sell a 51% stake in Bank Permata to strategic investors this year, followed by a further 20% market placement. Local banks PT Bank Rakyat Indonesia, PT Bank Panin, and PT Bank Artha Graha have expressed interest in Bank Permata. Potential foreign bidders include Standard Chartered Bank, which has teamed up with PT Astra International to make a bid. HSBC Holdings Plc has dropped its plans to bid for the stake. "We have decided not to join. It was a decision by our headquarters," Bisnis Indonesia quoted HSBC Indonesia corporate affairs official Agung Laksamana as saying. United Overseas Bank (UOB) has confirmed its interest, a UOB statement said Wednesday. UOB recently acquired a 23% stake in Bank Buana.
It said ferronickel sales fell to 1153 tons from 3010 tons a year ago, while the average sale price jumped to $6.21 per ounce from $3.77 in the same period last year. Antam's ferronickel production in the second quarter declined to 2,357 tons from 2,629 tons a year earlier. Gold sales volumes increased to 1,111 kg in the second quarter, from 1,050 kg a year earlier, although production fell to 834 kg from 1076 kg in the same period. Antam said the decline in gold production was due to unfavorable conditions at a mining site and lower content of gold ores. |
Source : Office of the Coordinating Minister for Economic Affairs |