|Indonesia Update | June 14, 2018
Authors: Kim Yaeger, Artha Sirait, Ian Saccomanno and Rocky Intan
June 26, 2018 - Roundtable with Indonesia's Minister for Energy and Mineral Resources Ignasius Jonan: The Council will host a roundtable discussion with H.E. Ignasius Jonan, Minister of Energy and Mineral Resources of Indonesia, on Tuesday, June 26, from 3:30 PM-4:30 PM EDT during his visit to Washington, DC for the 27th World Gas Conference (WGC). During the roundtable Minister Jonan will provide an update on energy and extractives industry policies and trends in Indonesia. Minister Jonan's official bio can be found here. You can register for the roundtable here
|THE COUNCIL'S TAKE|
Finance Ministry Lowers Economic Projection
Finance Minister Sri Mulyani Indrawati recently announced that her ministry is lowering Indonesia’s economic growth projection, putting it in a range from 5.17 to 5.4 percent, compared to the 5.4 percent economic growth projected in the 2018 state budget. Meanwhile, Bank Indonesia (BI) is keeping Indonesia’s growth projection at a minimum of 5.2 percent.
Weak domestic consumption continues to keep the growth rate from moving above 5 percent, which it has been for years. In an effort to keep inflation low, the government has announced price control measures on basic necessities such as fuel and rice, aimed at keeping inflation lows and purchasing power high Sri Mulyani remains hopeful that household consumption is expected to grow by more than 5 percent due to the disbursement of holiday bonuses to civil servants, police officers, and military personnel, as well as the Asian Games and the upcoming IMF-World Bank Meeting. Another encouraging sign for growth is high credit growth, reaching 8.9 percent according to estimates by the Financial Services Authority (OJK). This is in addition to consumer confidence edging higher and the manufacturing Purchasing Manager’s Index reaching an over one-year high in April.
Yet, several challenges remain. Indonesia’s central bank has had to raise domestic interest rates in an effort to help stabilize the rupiah. The subdued prices for key commodities continued to weigh on export growth. Exports increased by 6.2 percent while imports accelerated almost twice faster by 12.8 percent from a year earlier, expanding the trade deficit. This continuing trade weakness is another source of downward pressure on the rupiah, already bogged down by U.S. dollar’s strength from the Federal Reserve rate increases.
West Java to Get Single Industrial Area
On June 8, the Government of Indonesia announced that it will establish a national strategic zone in West Java consisting of Bekasi, Karawang, and Purwakarta. Administrative and Bureaucratic Reform Minister Asman Abnur stated that spatial planning, water management, processing of licenses for investment in the three regions, and all services will be integrated. A board to oversee the strategic zone will be established, in which the three regions would be involved in supervising the integrated industrial zone.
This development is in accordance with President Joko Widodo’s Industry 4.0 plan to enhance connectivity and digitize the manufacturing sector. Five industries are expected to be the centerpiece of this plan: manufacturing of food and beverage, textiles, automotive, electronics, and chemicals. During the Indonesia Industrial Summit 2018 in May, Industry Minister Airlangga Hartarto asserted that the plan would improve the competitiveness of Indonesian products in the global market, create more employment, and assist Indonesia in its goal of becoming one of the 10 largest economies in 2030.
Indonesia’s manufacturing sector has recently recovered. The Nikkei-Markit Purchasing Manager’s Index for Indonesia recorded its fastest growth in 22 months in April nearly a point to 51.6, above the 50-point line indicating expansion, the highest level since June 2016. Stronger domestic demand was pointed as the reason behind the third straight month of rising output. However, companies have expressed concerns over weak export demand and rising input costs due to the U.S. dollar’s strength.
Indonesia Wins UN Council Seat
On June 8, Indonesia won the only contested election for a seat on the United Nations Security Council, its most powerful body. It will join the Security Council starting on January 1, 2019 along with Germany, Belgium, South Africa, and the Dominican Republic. Indonesia overwhelmingly defeated the Maldives, a small country in the Indian Ocean that has never served on the council, by a ballot vote of 144-46.
The Security Council has five permanent members—the United States, Russia, China, Britain, and France—and 10 non-permanent members elected by the General Assembly for two-year terms. The five non-permanent members are elected every year. Foreign Minister Retno Marsudi stated that Indonesia would strive to promote peace-keeping and peace-building, conflict prevention, and UN development and environmental protection goals for 2030. The country would also prioritize “combatting terrorism and radicalization through developing a global comprehensive approach that addresses their root causes.”
Winning a seat at the Security Council is a crowning diplomatic feat for many countries as it provides a platform with a strong voice in matters of international peace and security. Research by Kuziemko and Werker (2006) of Harvard University found that non-permanent membership in the Security Council is associated with a 59 percent increase in total aid from the United States and an 8 percent increase in total development aid from the United Nations.
|IN THIS UPDATE|
Diesel oil subsidy will rise to Rp 2,000 per liter: Sri Mulyani The Jakarta Post 5th Jun 2018
Govt. Updates Procedures for Complete Systematic Land Registrations Hukum Online 13th Jun 2018
Jokowi issues single window regulation to boost exports The Jakarta Post 12th Jun 2018
Gov't Plans to Buy 5 New Hercules Military Transporters: Defense Minister Jakarta Globe 6th Jun 2018
World Bank projects economy to grow 5.2% this year The Jakarta Post 6th Jun 2018
H&M, Gap to Probe Violence, Sex Abuse in Indonesian and Other Asian Factories Jakarta Globe 6th Jun 2018
Government, House revise down growth target for 2019 The Jakarta Post 5th Jun 2018
Parts of trans-Java ready for Idul Fitri exodus The Jakarta Post 1st Jun 2018
Government appoints 5 operators for $292m oil and gas blocks The Jakarta Post 11th Jun 2018
West Java to get single industrial area The Jakarta Post 11th Jun 2018
Chevron demands higher split for Rokan block extension The Jakarta Post 8th Jun 2018
Government hands over oil blocks in gross split scheme The Jakarta Post 8th Jun 2018
Government removes income tax for sugar The Jakarta Post 8th Jun 2018
Chevron wishes to extend Rokan block contract: Luhut The Jakarta Post 7th Jun 2018
Go-Jek backers said to offer $1 billion funding to fuel growth The Jakarta Post 7th Jun 2018
Indonesian Government revokes controversial cabotage legislation CMS Law-Now 13th Jun 2018
Indonesia making preparations to join TPP Nikkei Asian Review 12th Jun 2018
Indonesia to impose excise tax on liquids for e-cigarettes U.S. 5th Jun 2018
Indonesia’s New Attack Helicopters Put Spotlight on US-Indonesia Defense Ties The Diplomat 4th Jun 2018
Foreign exchange reserves slide to US$122.9b The Jakarta Post 10th Jun 2018
Demographic trends favour economic growth: IMF - ANTARA News Antara News 6th Jun 2018
Cisokan hydropower plant project needs $800m in investment The Jakarta Post 13th Jun 2018
Gov't to Foot Rising Fuel and Electricity Subsidy Bills Jakarta Globe 5th Jun 2018
Indonesia plans to raise diesel subsidies four-fold The Business Times 6th Jun 2018
Inflation Bogeyman Prompts Fuel Subsidies Across Southeast Asia Bloomberg.com 5th Jun 2018
Indonesia’s Looming Energy Challenges The Diplomat 1st Jun 2018
Licensing, Approvals and Reporting for Conventional and Sharia Insurance Companies via Electronic Means Hukum Online 13th Jun 2018
Tax Treatment for Capital Participation by Venture-Capital Companies Updated Hukum Online 11th Jun 2018
Indonesia won’t impose tax for foreign funds anytime soon: BI The Jakarta Post 11th Jun 2018
Indonesia Tries to Get Companies to Hold More Rupiah to Stem Weakness Jakarta Globe 11th Jun 2018
$1b Loans From ADB to Support Indonesia's Fiscal, Investment Reforms Jakarta Globe 9th Jun 2018
BI Updates Provisions on Licensing for Participants in Monetary Operations Hukum Online 7th Jun 2018
Business Risk in Indonesia Amidst Upcoming Uncertainty AJOT Insights 7th Jun 2018
Deposit insurance firm increases rates The Jakarta Post 7th Jun 2018
Southeast Asian Country Will Now Consider Cryptocurrencies As Commodities HiBusiness 6th Jun 2018
OJK Asserts Cryptocurrencies, Bitcoins Barred for Trade Tempo 5th Jun 2018
Import restrictions ripple across Southeast Asia Resource Recycling News 5th Jun 2018
Bank Indonesia to relax loan-to-value ratio The Jakarta Post 4th Jun 2018
A Long Way to the Psychiatrist's Couch: Mental Illness Treatments in Indonesia Jakarta Globe 1st Jun 2018
Aiming for a malaria-free region by 2030 The Jakarta Post 13th Jun 2018
Tobacco consumption at emergency level: Commission The Jakarta Post 10th Jun 2018
‘Mudik’ should be safe, healthy: Minister The Jakarta Post 6th Jun 2018
Top US Health Scientist In Aging Research And Healthcare innovation Visits Jakarta Jakarta Globe 1st Jun 2018
New Environmental Provisions for Ocean Waste Dumping Hukum Online 11th Jun 2018
Darmin’s office request additional funds to implement OSS The Jakarta Post 7th Jun 2018
Provisions Relating to SKK Migas Redefined Hukum Online 7th Jun 2018
Government revokes requirement to use local ships for commodity export-import The Jakarta Post 6th Jun 2018