| National Affairs
BKPM Begins Trial Run of One-Door Investment Policy The Jakarta Globe 15th Jan 2015
Indonesia’s Investment Coordinating Board, or BKPM, began on Thursday morning the trial run of its one-door policy — an initiative that sets to process basic licenses under one roof aimed at improving the procedure for investing in the country. “All of the supporting factors for the one-stop service is ready … Investors will have more ease in applying for a license, since they only need to come to BKPM. They don’t have to go all around Jakarta,” BKPM chairman Franky Sibarani said in an official statement. There are currently 66 liaison officers from 19 ministries and government bodies at BKPM to assist potential investors, whether it’s for a consultation or to process licenses.
KPK Slaps Travel Ban on Police Chief Candidate Budi Gunawan and Son The Jakarta Globe 15th Jan 2015
Indonesia’s antigraft authority requested a travel ban for Comr. Gen. Budi Gunawan on Wednesday evening, a day after naming President Joko Widodo’s candidate for police chief a corruption suspect. “The travel ban request has been sent to the directorate general of immigration,” Corruption Eradication Commission (KPK) Deputy Chairman Bambang Widjojanto said on Wednesday evening. The ban applies to four people: Budi Gunawan; his son Muhammad Herviano Widyatama; police officer Iie Tiara, who used to be on Budi’s staff; and a former head of the police training academy, Ins. Gen. (Ret.) Syahtria Sitepu.
Boston Consulting Group: Top Talent Key for Civil Service in Indonesia The Jakarta Globe 15th Jan 2015
Indonesia must improve open government and talent management to establish clean and efficient governance, which is key for the country to improve the wellbeing of its people and ensure sustainable economic growth, the Boston Consulting Group said on Wednesday. The BCG report came as observers start to doubt the commitment of President Joko Widodo — who come to power on a promise to clean up the bureaucracy — in fighting corruption, after putting forward a graft suspect as the next National Police chief.
Foreign Workers in Indonesia ‘Must Take Local Language Test’ The Jakarta Globe 13th Jan 2015
A draft government regulation that will require foreigners to master the Indonesian language before they are able to obtain a work permit here has elicited incredulity and skepticism from members of the local expatriate community, who responded to the announcement with criticism. Earlier this month, Manpower Minister M. Hanif Dhakiri revealed that soon foreign workers would have to complete the Test of Indonesian as a Foreign Language, which is currently being developed by the ministry along with the University of Indonesia’s Language Development Center.
Arief Hidayat Appointed Constitutional Court Chief The Jakarta Globe 12th Jan 2015
Arief Hidayat, a law professor, was on Monday appointed the new chief justice of Indonesia’s troubled Constitutional Court. Arief, who only replaced former chief Mahfud M.D. to become a Constitutional Court justice in 2013, will take over the top role from Hamdan Zoelva, whose leadership term ended on Jan. 7. He was appointed chief justice at a plenary meeting between the nine court justices in Jakarta on Monday, news portal Kompas.com reported. He will lead the court until 2017.
Widodo’s Next Hurdle: What Indonesia Can Tackle Post Fuel Revamp Bloomberg 12th Jan 2015
The opening salvo in Indonesian President Joko Widodo’s bid to revitalize Southeast Asia’s biggest economy was a revamp of the country’s energy sector. His next hurdle is delivering the gains from the shake-up. In his first three months in office, Jokowi, as the leader is known, freed up 230 trillion rupiah ($18 billion) of budget funds for development by scrapping gasoline subsidies and capping government aid on diesel. He also moved to plug revenue leaks and improve efficiency in the energy industry, changing the management of the state oil company as well as setting up an oil and gas reform team.
Indonesia’s economy A good scrap The Economist 10th Jan 2015
INDONESIA’S president, Joko Widodo, began the new year knowing that he will now have trillions of fresh rupiah to spend that his predecessors have lacked. Having trimmed petrol subsidies in November, Mr Joko, who is universally known as Jokowi, scrapped them entirely from January 1st. Small subsidies (1,000 rupiah, or eight cents, per litre) will remain in place for diesel, used for public transport and by the country’s millions of fishermen. But for the first time in decades, the price of petrol will reflect global market prices. The move was not without political risk. Furious protests broke out when Jokowi’s predecessor as president, Susilo Bambang Yudhoyono, wanted to raise fuel prices. Smaller protests greeted Jokowi’s November move. But this time, there was not even a whimper. For that, thank falling global oil prices: even without subsidy, a litre of petrol now costs 7,600 rupiah, down from a subsidised 8,500 rupiah in December. Fortune has favoured Jokowi.
A good scrap The Economist 10th Jan 2015
Indonesia's president, Joko Widodo, began the new year knowing that he will now have trillions of fresh rupiah to spend that his predecessors have lacked. Having trimmed petrol subsidies in November, Mr Joko, who is universally known as Jokowi, scrapped them entirely from January 1st. Small subsidies (1,000 rupiah, or eight cents, per litre) will remain in place for diesel, used for public transport and by the country’s millions of fishermen. But for the first time in decades, the price of petrol will reflect global market prices. The move was not without political risk. Furious protests broke out when Jokowi’s predecessor as president, Susilo Bambang Yudhoyono, wanted to raise fuel prices. Smaller protests greeted Jokowi’s November move. But this time, there was not even a whimper. For that, thank falling global oil prices: even without subsidy, a litre of petrol now costs 7,600 rupiah, down from a subsidised 8,500 rupiah in December. Fortune has favoured Jokowi.
Jokowi doubles capital expenditure in revised 2015 state budget The Jakarta Post 10th Jan 2015
With a significant cut in the fuel subsidy, President Joko “Jokowi” Widodo will be able to double the government’s capital expenditure (capex) in the revised 2015 state budget, which will soon be submitted to the legislature for approval. The allocation of capex spending, which includes capital investment as well as growth-generating infrastructure projects, will be more than doubled from the Rp 139 trillion it was last year to Rp 290 trillion (US$23 billion) this year, according to the latest draft of the revised budget proposed to lawmakers on Friday. Due to the increase in capex spending, three ministries will see significant boosts in their new budgets. They are the Public Works and Public Housing Ministry, the Transportation Ministry and the Agriculture Ministry, each of which will receive an additional Rp 33 trillion, Rp 20 trillion and Rp 16 trillion, respectively.
Defense & Security
Govt to Give $134m Capital Boost to State Munitions Firm Pindad The Jakarta Globe 13th Jan 2015
State munitions firm Pindad will be among the first state firms to receive government aid as part of Indonesia’s plan to divert fuel subsidies. President Joko Widodo said Pindad will receive another Rp 700 billion ($134 million) in capital to modernize its collection and increase production output. “Once [Pindad] is given a capital boost, we will set a new target [for the state firm]. There is no way we will give money freely without setting a target,” the president said while touring the Pindad headquarters in Bandung, West Java. The president said Pindad has a sound management but lacks funding to increase production.
Police Chief Candidate Budi Named Corruption Suspect by KPK The Jakarta Globe 13th Jan 2015
The Corruption Eradication Commission (KPK) has named Comr. Gen. Budi Gunawan a graft suspect, just days after he was nominated by President Joko Widodo to become the nation’s next chief of National Police. “Comr. Gen. B.G. is a suspect in a graft case that took place when he was serving as the head of the [police's ] career-building office,” KPK chief Abraham Samad told a press conference on Tuesday. Abraham said KPK investigators, who have been studying the case since July last year, have found several irregularities in financial transactions involving Budi.
Economics
Bank Indonesia Keeps Benchmark Rate Unchanged The Wall Street Journal 15th Jan 2015
Bank Indonesia kept its benchmark rate unchanged at 7.75% Thursday, maintaining a tight stance to help control a current-account deficit and manage inflation, which is already being helped by lower oil prices. Annual inflation hit higher than 8% in December, largely the result of a decision to raise the price of subsidized fuels in November. Bank Indonesia in November raised its benchmark rate to the current level—its highest in years—to mitigate inflation resulting from those higher prices. The price of gasoline is now falling. The subsidy for gasoline was removed Jan. 1, and President Joko Widodo said Thursday that gasoline price would be trimmed by about 15% soon to reflect lower global oil prices. Declining oil prices will help the bank with its 2015 annual inflation target of 3% to 5%, spokesman Tirta Segara said.
World Bank Warns of ‘Global Tightening’ Jakarta Globe 13th Jan 2015
The World Bank has warned Indonesia against the risk of a sharp tightening of global financial conditions, which could hamper the country’s fragile recovery amid the push for structural reform. The Washington-based lender said that there is a chance that episodes of abrupt global financial tightening would repeat this year, stemming from, among others, an extended period of low oil prices, which would gradually erode oil producers’ fiscal and foreign exchange reserves. Asynchronous monetary policy tightening among high-income economies, such as the United States, Europe and Japan, would result in a currency swing. In turn, that would expose weaknesses in emerging countries with currency mismatches between export earnings and debts, the World Bank said. “Financial stress in one or more of [the emerging countries] could trigger a reassessment of emerging market assets more broadly,” the World Bank wrote in its “Global Economic Prospects” report, released on Tuesday.
Energy
Johanes Widjanarko Discharged From SKKMigas The Jakarta Globe 15th Jan 2015
Energy and Mineral Resources Minister Sudirman Said has discharged Johanes Widjonarko from his position as deputy chairman of upstream oil and gas regulator SKKMigas. “I signed the letter that honorably discharged Johanes Widjanarko. It was the recommendation from SKKMigas chief Amien Sunaryadi,” Sudirman said on Thursday. He did not elaborate.
BKPM to Facilitate More Investment in Petrochemical, Pharmaceutical and Steel The Jakarta Globe 15th Jan 2015
Indonesia’s Investment Coordinating Board, or BKPM, will be facilitating more investments that are focused on developing the raw materials needed in petrochemical, pharmaceutical and steel industries, in another attempt to boost the country’s manufacturing industry. Himawan Hariyoga, the deputy director for promoting investment at BKPM, said that there’s been a downward trend in realized investments in the petrochemical, pharmaceutical and steel industries specifically in the past five years, and that has been largely due to the challenge in finding access to raw materials in the country.
Indonesia Scraps Land & Building Tax for Oil Companies The Jakarta Globe 15th Jan 2015
The Indonesian government has scrapped the tax on land and buildings for oil and gas companies that are still in the exploration stage, as part of efforts to encourage more investment in the sector. “We have been wrong in taxing land and buildings on them during the exploration stage. There was no production, and yet they have to pay tax,” said Finance Minister Bambang Brodjonegoro on Wednesday.
Financial Services
Banks upbeat on investment, working capital loans Jakarta Post 13th Jan 2015
Domestic lenders are confident about loan disbursement this year, especially in investment and working capital lending segments, data submitted to the banking regulator shows. “Banks have submitted their banking business plans [RBBs] and from what we have observed, it seems they are more optimistic about their businesses,” Financial Services Authority (OJK) chairman Muliaman D. Hadad told The Jakarta Post recently. According to the RBBs, the banking industry is eyeing 16 to 17 percent lending growth this year, higher than the expected achievement in 2014. “We predict lending grew 13 percent last year, even though lenders have not completed their full-year calculations,” he added.
Pressure on Asia sovereign ratings weakens, says Fitch Jakarta Post 12th Jan 2015
Positive pressure on ratings is ebbing, following a run of upgrades since 2011, with Vietnam the latest, in which the country was raised to BB-/Stable on Nov.3, 2014, says Fitch Ratings in its latest outlook. Fitch says in its 2015 Outlook for Emerging Asian Sovereigns that eight of 10 emerging Asian sovereigns have a stable outlook, with two, namely Malaysia and Mongolia, having a negative outlook. A deeper look at the credit profiles using Fitch Ratings’ four main categories for analysis reveals marginally more negative than positive momentum, it adds. “Market volatility in December 2014 could be a foretaste of what is to come in 2015 as the US Federal Reserve moves toward raising interest rates while other major central banks may ease policies further,” said Fitch in a release made available to The Jakarta Post on Monday.
Bank Mandiri reviewing expansion plans in M’sia, S’pore The Jakarta Post 12th Jan 2015
State-owned lender Bank Mandiri, the nation’s biggest bank by assets, is reviewing plans to expand in Malaysia and Singapore as Indonesian banks are expected to enjoy easier access to operating in neighboring countries as part of the so-called ASEAN Banking Integration Framework. Indonesian financial regulators, the Financial Services Authority (OJK) and Bank Indonesia (BI), signed an agreement late last year with Malaysia’s central bank, Bank Negara Malaysia (BNM), easing restrictions on Indonesian banks to operate in Malaysia and committing to reciprocal principles. “We see the agreement as a positive step, which offers an opportunity for us to look deeper at our business potential as Bank Mandiri plans an expansion in neighboring countries,” Bank Mandiri vice president director Riswinandi said.
2014’s Controversial Regulations: Tough Year for Financial Service Providers Hukum 12th Jan 2015
Year 2014 was as a busy year for financial service providers. Following the commencement of the operations of the Financial Services Authority (OJK) at the end of 2013, businesses were required to make major adjustments to their businesses and regulatory compliance as the OJK relentlessly redefined significant aspects of the financial service industry. These businesses also had to increase their workloads when Bank Indonesia (BI) tightened its monetary policies and regulation of payment systems. While both the OJK and BI are aiming to establish a better financial industry environment, criticisms and complaints surfaced from various financial sector stakeholders in response to several regulations issued by both institutions during 2014. Some complaints even went as far as judicial review petitions being lodged with the Supreme Court and the Constitutional Court.
Banks Expect Lending to Rebound on Demand Jakarta Globe 12th Jan 2015
Indonesian banks expect their lending to rebound this year driven by rising demand in construction financing, while standing strong against capital outflow risks, central bank surveys show. The survey of 42 commercial lenders that account for 80 percent of the country’s banking assets, estimates that lending will increase by 15.7 percent this year. That is compared to 11.9 percent year-on-year as of November last year, according to the latest data from Bank Indonesia. The central bank estimates Indonesia’s economy to grow between 5.4 percent and 5.8 percent this year, up from an estimated 5.1 percent last year. President Joko Widodo plans to spend Rp 290 trillion ($22 billion) in this year’s revised state budget to drive infrastructure development across Indonesia. This is a 48 percent increase from the original budget allocation of Rp 196 trillion. A separate Bank Indonesia survey on financial stability in the country showed lenders could withstand a bond price decline of up to 20 percent, which could occur during potential capital reversals.
Govt raises $4 billion in oversubscribed bond offering Jakarta Post 10th Jan 2015
The Indonesian government raised US$4 billion in a sale of dollar-denominated notes on Friday that was oversubscribed fivefold, as it expedited their issuance very early this year in anticipation of tighter global liquidity caused by a possible US interest rate hike. The latest sale of Indonesia’s global bonds attracted $19.3 billion worth of bids from investors, while a similar issuance last year drew $17.5 billion. “We are seizing the momentum during the early-year period when the global financial market still has ample liquidity,” Robert Pakpahan, the head of the Finance Ministry’s debt management office, said via a text message.
Banks cautious on loan growth The Jakarta Post 9th Jan 2015
The official calculations of domestic lenders’ business plans for this year showed that loans were expected to grow no more than 16 percent, according to an official at the Financial Services Authority (OJK). OJK commissioner on banking supervision Nelson Tampubolon said lending growth ranging between 14 and 16 percent had been calculated based on the business plans submitted by banks at the end of November last year. “The range is not too different for third-party funds [DPK], which are slightly above loan growth. We are trying to narrow the gap with the credit range,” he said recently. The OJK’s calculation is slightly lower than Bank Indonesia’s prediction of between 15 and 17 percent loan growth this year, while third-party funds would range between 14 and 16 percent.
KEB Hana to offer retail products, eyes top 20 banks The Jakarta Post 9th Jan 2015
Bank KEB Hana, part of South Korea’s Hana Financial Group, will enter the retail business in Indonesia and expects to become one of the country’s top 20 banks. Bank KEB Hana consumer business director Bayu Wisnu War-dhana said the lender was ready to push its assets to at least Rp 60 trillion (US$4.72 billion) to reach the top 20 list. As of December last year, the bank posted around Rp 22 trillion in total assets and was on the list of the country’s top 50 banks, he added. “We hope to grow our total assets to reach Rp 30 trillion this year, with around Rp 2 trillion going to our new retail segment,” he said on Thursday.
ICT
Ooredoo hopes IoT tech can change Jakarta into a smart city Tech in Asia 14th Jan 2015
Qatar-based international communications firm Ooredoo, the parent company of local telco Indosat, hopes to one day transform the chaotic mega-city of Jakarta into a “smart city,” one which uses ICT solutions to address mobile, transport, energy sustainability, infrastructure, governance, and security issues. In December, Ooredoo was named lead partner in the Smart Cities Council, an international coalition formed to cooperate with governments and speed up the move to sustainable cities. The firm joined global leaders in the smart cities sector, including IBM, Microsoft, MasterCard, and Cisco.
Indonesia is the fastest growing market for games in Southeast Asia Tech in Asia 12th Jan 2015
Total revenues from Southeast Asia’s gaming industry reached nearly US$1.1 billion last year, with six key countries accounting for 99 percent of the revenues generated from the entire region. According to gaming market research firm Newzoo, which released a 75-page report last week on the opportunities of the region’s gaming industry, Indonesia is now the fastest growing market. Firms like Facebook, Microsoft, Baidu, and Electronic Arts assisted Newzoo with the study, and the company claims the research is the largest of its kind in the region to date.
Infrastructure
Weak Rupiah Delays Bandung Monorail Project’s June Construction Start The Jakarta Globe 12th Jan 2015
The $1.8 billion Bandung monorail project may miss its June start of construction, as the rupiah’s depreciation forces contractors to recalculate their costs. Endi Roswendi, director of Jabar Moda Transportasi, said that the company is now targeting a feasibility study that would be completed by June to take into account the rise in expenses stemming from the weak rupiah. The rupiah trades at around 12,600 against the US dollar, compared to around 11,000 when the monorail’s initial plan was brought up. “A lot of factors need to be recalculated,” Endi said over the weekend.
Agung Podomoro Land Raises Capital Spending by Half for Big Projects The Jakarta Globe 12th Jan 2015
Agung Podomoro Land, one of Indonesia’s biggest property developers, is raising capital spending this year by 50 percent to Rp 7.5 trillion ($591 million), to help finance large projects. Much of the spending will be allocated toward two of the company’s big projects, which include land reclamation for Pluit City — a 160-hectare township in North Jakarta — and a 5.2-hectare superblock in Medan, South Sumatra, said Indra Wijaya, the vice president director of Agung Podomoro Land, on Sunday.
Bosowa Sets Aside $500m for 2015 Cement Plant Expansion The Jakarta Globe 12th Jan 2015
Bosowa Group, a Makassar-based conglomerate with interests ranging from cement making to car distribution, is setting aside $500 million this year to build several cement plants in 2015 to boost production capacity as the company seeks to take advantage of an anticipated pick-up in construction projects across the country. The company is building cement plants in Maros, South Sulawesi; Ciwandan, Banten; Banyuwangi, East Java; Rembang, Central Java; and Sorong, West Papua. The plants would boost the group’s cement production capacity to 12 million metric tons over the next three years from just 3 million tons now.
Indonesian Air-Traffic Control Is Unsophisticated, Pilots Say The Wall Street Journal 15th Jan 2015
Pilots in Indonesia say the archipelago nation’s air-traffic control system is unsophisticated and doesn’t do enough to help airliners contend with poor flying conditions, concerns that are getting more attention after last month’s crash of an AirAsia plane over Indonesian waters. Indonesia’s air traffic control technology remains basic by industry standards despite a boom in air travel as its middle class expands and budget carriers slash fares to compete for passengers. To improve the state of its air traffic control infrastructure, the country formed AirNav, a state-owned air traffic control company in 2013. But Indonesia still lacks computer systems that integrate the tracking of aircraft and weather patterns, as well as technology that crunches data to automate suggestions for safe flight paths in crowded skies. Indonesian air-traffic controllers often leave pilots to identify potential weather problems and suggest flight diversions themselves, a role controllers should be more aggressive in playing, pilots and aviation experts say. New technology could help controllers do this, as they do in many developed air markets, experts say.
ADB Commits to $1.5b in Loans for Indonesia’s Infrastructure Development Jakarta Globe 13th Jan 2015
The Asian Development Bank pledged its support for Indonesia’s development plan and is committed to disburse at least $1.5 billion in loans to the country to help fund various infrastructure projects, the multilateral lender’s president said on Tuesday. ADB president Takehiko Nakao said the lender’s future support for Indonesia will be closely tied with the government’s five-year national development plan, which means the support will mainly go to infrastructure sector, achieving food and energy security. The president of the Manila-based multilateral lender was in Jakarta where he was scheduled to meet with President Joko Widodo and Vice President Jusuf Kalla as well as with some senior cabinet ministers, including Finance Minister Bambang Brodjonegoro. “There are so many projects [that will be financed],” Nakao said, adding that the projects include infrastructure in water resource management for farms, sanitation infrastructure and energy sector.
ADB president pledges stronger support for Jokowi Jakarta Post 13th Jan 2015
The president of the Asian Development Bank (ADB) says his assistance to the new Indonesian government will extend beyond hard cash, as the bank seeks to play a stronger role in improving transparency and governance in the development of the country’s infrastructure. “We are not just financing the projects. We will also discuss with the authorities which project should be prioritized and which resources [utilized] to make it happen,” ADB president Takehiko Nakao said Monday in Jakarta. The Manila-based bank has expressed interest in supporting and advising the new government on how to improve the existing tender and procurement system in order to foster transparency and accountability in executing government projects.
State-Owned Enterprises to Get $4b to Encourage Infrastructure Spending Jakarta Globe 12th Jan 2015
President Joko Widodo unveiled plans on Monday to inject nearly $4 billion into state companies in the infrastructure sector and the biggest bank by assets, in a bid to begin allocating funds after slashing fuel subsidies. As much as Rp 48 trillion ($3.7 billion) will be injected into state-owned enterprises this year, the president said on Monday. The funds will be allocated to state companies such as port operator Pelabuhan Indonesia, construction firm Wijaya Karya and airport operator Angkasa Pura, Joko told reporters. “After we redirect the fuel subsidies, there’s a lot of room in our budget,” Joko said. Later on Monday, State-Owned Enterprises Minister Rini Soemarno said Indonesia will increase the capital of state-owned Bank Mandiri by Rp 9 trillion partly to fund infrastructure expansion. Bank Mandiri will raise Rp 5.6 trillion through a rights issue and the government will inject Rp 3.4 trillion into the bank, she said. This will be subject to approval from the House of Representatives, she added.
Monorail Projects Hit Obstacles Jakarta Globe 12th Jan 2015
The development of two major monorail projects in Indonesia — one in Jakarta and one in Bandung, West Java — could be facing serious constraints over difficulties in terms of financing and poor business feasibility. On Monday, Jakarta Governor Basuki Tjahaja Purnama said he would inform the developer of the city’s monorail project, the Jakarta Monorail consortium, about the city administration’s intention to scrap the project. “I’ve asked [the Jakarta administration] to draft a letter that says we will not allow JM to build a monorail in Jakarta with such route,” Basuki said at City Hall on Monday. The project broke ground in October 2013, which was witnessed by the former governor, Joko Widodo. The renewed project was estimated to cost $900 million to build two routes — the green line, a 15-kilometer monorail line with 15 stations connecting Kuningan, Senayan and Dukuh Atas, and a blue line spanning 14 kilometers and connect Kampung Melayu and Tanah Abang. The Jakarta administration allowed JM to resume the project after stalling in 2011.
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