Indonesia Update: September 20, 2018

Indonesia Raises Import Tax

On September 6, the Ministry of Finance released Finance Ministerial Regulation (PMK) No. 110/2018 as a revision to Finance Ministerial Regulation (PMK) No. 34/2017. The new regulation raises import taxes on over 1,000 consumer goods. The Government of Indonesia hopes that implementing these measures that will reduce the current account deficit amidst a weak rupiah and investor selloffs due to rise in U.S. rates and fear of contagion from Turkey. Imported personal care items and electric appliances which have domestic substitutes will be charged a 10 percent tax as opposed to the previous rate of 2.5 percent. Luxury cars will also be taxed at 10 percent. Items such as alcohol, textile products and electronic audiovisual appliances will see a 5 percent increase to 7.5 percent under the new regulation. Tariffs for imported raw materials used by the manufacturing industry will be maintained at 2.5 percent due to their important role in domestic production. Despite the steep increase, the government predicts that the impact on inflation will be minimal. Full text and the complete list of taxable items can be found here in Bahasa Indonesia. This is not the first time that the government has introduced regulations which raised import tariffs, having acted similarly in 2013 and 2015. In 2013, the government issued PMK No. 175/2013 to control imports during the Taper Tantrum by raising tariffs for over 500 consumer goods from 2.5 percent to 7.5 percent. In 2015, PMK No. 107/2015 was issued to impose a 10 percent tax on over 200 goods which were previously charged a luxury goods tax.

The government’s decision to raise import taxes along with other measures has been motivated by the latest foreign sell-off of Indonesian assets that followed reports showing the current account deficit had widened in the second quarter, putting further pressure on interest rates and the Rupiah. On September 12, Indonesia’s Rupiah dropped to its weakest level since the 1998 Asian financial, closing at Rp14,930 per dollar. The current account deficit was US$8 billion in the second quarter, twice the total value of consumer goods imported in the same period. Imports for July 2018 far outstripped exports at 24.5 percent to 11.4 percent. Because the tariffs are so small and on such a narrow range of products, mostly in the relatively small consumer sector, it is unlikely they will have a significant short-term effect on the deficit. Bank Indonesia has in recent months raised its benchmark interest rates to prop up the Rupiah. OJK has collaborated with the Finance Ministry and Bank Indonesia to monitor market players to prevent speculative transactions that may have impacted the current negative sentiment. Ordinarily, Indonesia’s current account deficit and reliance on foreign portfolio investment to finance it is not a significant challenge. However, it did leave the country particularly exposed to last quarter’s instability in developing markets, which the government fears will continue. At the same time, foreign direct investment, which is much steadier during periods of turbulence, has been falling as election season begins.

Indonesia-Australia Comprehensive Partnership Agreement Update 

On August 31, Australian Prime Minister Scott Morrison and President Joko “Jokowi” Widodo announced the substantive conclusion of negotiations on the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) which began in 2010. IA-CEPA is expected to deepen economic and security cooperation, launching a new chapter between the two countries.

On goods, over 99 percent of Australian goods exports by value to Indonesia will enter duty free or under significantly improved preferential arrangements by 2020. Indonesia will also guarantee automatic issue of import permits for Australia’s key products such as live cattle, frozen beef, sheep meat, feed grains, rolled steel coil, citrus products, carrots and potatoes. Import licensing is currently a major issue for Australian businesses operating in Indonesia. Indonesia will be able to export goods to Australia duty free as Australia will immediately eliminate all remaining tariffs on Indonesian imports.

On services and investment, IA-CEPA will provide certainty to market access. Indonesia is committed to not limit the level of Australian ownership or requiring divestment below the agreed percentages. As a result, Indonesia’s Negative Investment List might need to be modified to comply with this term under the IA-CEPA. Indonesia will also encourage more investment to Australia and in addition, both countries agreed to a reciprocal skills exchange in which Australia will allow a number of Indonesian citizens to engage in work trainings in Australia to support Indonesian government’s human capacity development program.

Both governments are hopeful that IA-CEPA will improve the conditions and climate for a more conducive two-way investment. Following the conclusion of negotiations, both governments will now study the full text of the agreement to verify its consistency with current regulations. Once finalized, the agreement will be signed and released to the public although the time frame has yet to be released. Last but not least, the agreement will need to follow domestic treaties in Indonesia and Australia to bring it into force.

Jokowi, S. Korea`s Moon Jae-in Sign 6 MoU Tempo 11th Sep 2018
President Joko `Jokowi` Widodo and South Korean President Moon Jae-in signed six memoranda of understanding at the meeting in Changdeokgung, Seoul on Monday, Sept. 11. 

Jokowi’s Vietnam visit to boost cooperation The Jakarta Post 10th Sep 2018
President Joko “Jokowi” Widodo will visit Hanoi from Sept.11 to 12 to develop economic cooperation and expand market access between Vietnam and Indonesia.

Singapore, Indonesia agree to conclude investment pact talks The Straits Times 8th Sep 2018
Singapore and Indonesia have agreed to conclude talks on a bilateral investment treaty between their countries before their leaders hold a retreat next month.

City to hire 7,000 new civil servants The Jakarta Post 12th Sep 2018
The Jakarta Employment Agency (BKD) has planned to fill in 7,000 vacancies for civil servant posts in the Jakarta administration this year, following approval from the Administrative and Bureaucratic Reform Ministry.

Yudhoyono to be named special advisor for Prabowo's election bid The Jakarta Post 12th Sep 2018
Democratic Party patron and former president Susilo Bambang Yudhoyono will be named a special advisor to presidential candidate Prabowo Subianto, a contender to President Joko "Jokowi" Widodo in the 2019 presidential election, a party executive said on Wednesday.

Jokowi launches citizen protection portal in South Korea The Jakarta Post 11th Sep 2018
Only three days after submitting an online application, Indonesian citizen Daya had the birth certificate for her son, who was born on Sept. 4, issued directly by President Joko “Jokowi” Widodo while he was in Seoul.

Jakarta administration at risk of losing more land in disputes The Jakarta Post 9th Sep 2018
The Jakarta administration continues to face land disputes, with the city battling a lawsuit over land owned by the forestry agency recently.entral Jakarta.

Liquor among goods to face further import restrictions The Jakarta Post 19th Sep 2018
Indonesia Trade Minister Enggartiasto Lukita has announced that the government will tighten import restrictions on a number of goods, namely alcoholic beverages, tires, iron, steel, textiles and textile products. He said the imported goods would have to enter the country through bonded logistic centers (PLBs) in an attempt to prevent smuggling.

It’s official: Tobacco excise to help cover healthcare deficit The Jakarta Post 18th Sep 2018
President Joko “Jokowi” Widodo has signed a presidential regulation allowing the use of regional tobacco excise duty to help finance the national healthcare program, which has been beset by a growing deficit.

Indonesia to lower overseas online shopping limit to $75 The Jakarta Post 17th Sep 2018
The Finance Ministry’s Customs and Excise Office has issued a regulation to lower the import limit for online shopping to only US$75 from the initial $100.

S. Korea-Indonesia Commit to US$5.76bn Investments Tempo 11th Sep 2018
Corporates and government institutions of Indonesia and South Korea signed 15 memorandums of understanding for investments. The investment commitment value amounts to US$5.76 billion. The B2B partnerships cover energy, property, machinery, technology, and cosmetics.

Government pushes for SOEs to boost exports The Jakarta Post 7th Sep 2018
The State-Owned Enterprises Ministry will push for the export of products in the strategic industry to strengthen the rupiah amid strong dollar appreciation.

Indonesia Aims at Exporting Electric, Hybrid Cars to Oz Tempo 7th Sep 2018
Indonesia is planning on exporting electric-powered and hybrid vehicles to Australia following the completion of the Indonesia-Australia comprehensive economic partnership agreement (IA-CEPA).

Government to increase import tax for 1,147 consumer goods The Jakarta Post 6th Sep 2018
The government announced on Wednesday a new regulation, which is to replace Ministerial Regulation No. 34/2017 next week, which imposes an import tax of 10 percent from the previous from 2.5 percent on imported personal care products like shampoo, soap and cosmetics, along with 215 other consumer goods.

Toyota Indonesia marks 1 millionth car export The Jakarta Post 5th Sep 2018
Toyota Motor Manufacturing Indonesia (TMMIN) marked on Wednesday its one millionth car export over the last 30 years with its shipment of 1,879 completely built up (CBU) cars from the IPC car terminal at North Jakarta's Tanjung Priok port.

Indonesian Government Plans Various Measures to Curb Imports Lexology 5th Sep 2018
The rising interest rates in the United States, higher oil prices and the full-blown US-China trade war have affected Indonesia’s economic and investment growth. In order to improve its trade balance, the current account balance, and strengthen the rupiah, the Indonesian government plans to impose several measures to stem the flow of imports into the country.

New import tariff policy to be issued within two days The Jakarta Post 4th Sep 2018
The government will issue a finance minister regulation on new import tariffs within two days, said Coordinating Economic Minister Darmin Nasution after a meeting in Jakarta on Tuesday.

Indonesian steel products get tariff exemption from US The Jakarta Post 3rd Sep 2018
The United States has made the decision to exempt 19 Indonesian steel products, namely carbon and alloy and stainless steels, from its 25 percent tariffs, Trade Minister Enggartiasto Lukita has said.

Indonesian fast missile boat KRI Rencong-622 catches fire in Papua waters The Jakarta Post 11th Sep 2018
An Indonesian Navy official confirmed that the fast missile boat KRI Rencong-622 caught fire while patrolling the waters of Sorong, West Papua, around 20 miles from the harbor of Navy Command III in Sorong.

Police take delivery of CN295 plane ahead of schedule The Jakarta Post 7th Sep 2018
State-owned aircraft manufacturer PT Dirgantara Indonesia (PTDI) handed over on Friday one CN295 plane to the National Police in a ceremony at the Air Police headquarters in Pondok Cabe, South Tangerang, Banten.

Bank Indonesia Projects External Turmoils to Ease in 2019 Tempo 11th Sep 2018
Bank Indonesia (BI) senior deputy governor Mirza Adityaswara believes that a number of global economic turbulence will subside next year. One of them is the uncertainties stemming from Federal Reserve, regarding their interest rates.

Sri Mulyani: State Budget Deficit Down to Rp150tn Tempo 10th Sep 2018
Finance Minister Sri Mulyani said that the state budget deficit had declined. As of August 2017, the deficit was Rp220 trillion.

State Budget Can Weather Rupiah's Fall: Finance Minister Sri Mulyani Jakarta Globe 10th Sep 2018
Finance Minister Sri Mulyani Indrawati said on Monday (10/09) that a slump in the rupiah would be a net benefit for government income this year, seeking to reassure the national legislature that the country's budget would not be thrown out by an emerging market rout.

Indonesia posts lower state budget deficit in August: minister - Xinhua | English.news.cn Xinhua 10th Sep 2018
Indonesia posted state budget deficit of 150 trillion rupiah (about 10 billion U.S. dollars) in August this year, lower than 220 trillion rupiah (about 14.8 billion U.S. dollars) in the corresponding period last year, Indonesia Finance Minister Sri Mulyani said here on Monday.

New import tax could mean higher inflation: Indef The Jakarta Post 7th Sep 2018
An economist at the Institute for Development of Economics and Finance (Indef) has said the government policy on imposing a higher import tax on foreign-made products would push up prices and thus increase inflation.

Indonesian consumers most optimistic globally: Survey The Jakarta Post 6th Sep 2018
The Consumer Confidence Index (CCI) of Indonesia remains stable with 127 percentage points (PP) in the second quarter of 2018, the same as the previous quarter, according to a Conference Board Global Consumer Confidence survey, in collaboration with Nielsen.

Bank Indonesia spends Rp 7.1t since Friday to help rupiah The Jakarta Post 4th Sep 2018
Bank Indonesia Governor Perry Warjoyo said on Tuesday the central bank had spent Rp 7.1 trillion (US$476 million) since last Friday to help the rupiah, which stood at Rp 14,930 per US dollar at 3:30 p.m. on Tuesday.

Smart buildings for an energy-efficient Indonesia The ASEAN Post 20th Sep 2018
Indonesia is now looking at the construction of buildings that are energy-efficient so as to minimise negative environmental impacts and to be more cost-effective in the short and long run. This is in line with a greater and more far-reaching plan of establishing smart cities within the country.

 PLN told to convert fossil diesel power plants to CPO-diesel fuel The Jakarta Post 18th Sep 2018
Energy and Mineral Resources Minister Ignasius Jonan called on state-owned electricity firm PLN on Monday to covert energy plants powered by fossil diesel fuel to plants powered by crude palm oil-based biodiesel.

Higher oil price to boost state revenue, increase subsidies The Jakarta Post 18th Sep 2018
The increase of the global crude oil price has changed Indonesia’s outlook for revenue and subsidies, estimated to grow 50 percent to Rp 240 trillion (US$16 billion) and Rp 148 trillion, respectively by the end of this year.

B20 expansion reaches 80 percent of target, official says The Jakarta Post 17th Sep 2018
Energy and Mineral Resources Ministry oil and gas director general Djoko Siswanto has said that a program introduced in August on the mandatory use of 20 percent blended biodiesel ( B20 ) has reached 80 percent of its target.

Pertamina sends bid for Corridor block in South Sumatra The Jakarta Post 16th Sep 2018
State-owned energy holding company Pertamina has sent a proposal for South Sumatra's Corridor block, which is currently under the operation US-based oil firm ConocoPhillips, a government official said on Friday.

Drilling to start of 2nd well for Baturraden/ Gunung Slamet geothermal project Think GeoEnergy - Geothermal Energy News 14th Sep 2018
Reported yesterday from Indonesia, geothermal developer PT Sejahtera Alam Energy (SAE) is about to start drilling the second well for the Baturraden / Gunung Slamet geothermal power project in Indonesia, according to PT SAE Director Bregas H. Rochadi. “The preparation of the area will be completed in the coming days. Before the start of drilling an inspection by the government is required and that is planned to take place on September 17,” he said on the project site of PLTPB Gunung Slamet Project, Paguyangan, Regency Brebes, Central Java.

New regulation requires all crude to be offered to Pertamina The Jakarta Post 10th Sep 2018
As part of its measures to reduce fuel imports, the government last Thursday issued a ministerial regulation that requires private oil companies to offer all crude oil to state energy holding company Pertamina.

Hyundai, LG to construct biodiesel factories in Indonesia The Jakarta Post 10th Sep 2018
West Kalimantan Governor Sutarmidji has said Korean companies  Hyundai and LG will construct biodiesel factories in the province amid the government’s effort to expand the domestic use of the fuel through its mandatory 20 percent blended biodiesel ( B20 ) policy.

No increase in subsidized fuel prices, government says The Jakarta Post 10th Sep 2018
The government has assured there will be no increase in subsidized fuel prices amid calls from economists who say a fuel-price hike would help ease the current account deficit (CAD).

Indonesian Minister of Finance highlights great role of geothermal for Indonesia Think GeoEnergy - Geothermal Energy News 10th Sep 2018
In her keynote speech at the 6th Indonesia International Geothermal Convention & Exhibition (IIGCE), Minister of Finance Sri Mulyani Indrawati, highlighted the important role geothermal energy can play for Indonesia supporting its economic growth by e.g. cutting back on fossil fuel imports for energy generation.

PGN appoints Pertamina's Gigih Prakoso as new president director The Jakarta Post 10th Sep 2018
State-owned gas subholding company PT Perusahaan Gas Negara (PGN) replaced on Monday outgoing president director Jobi Triananda Hasjim with Gigih Prakoso, who was formerly the investment planning and risk management director at state-owned oil and gas holding company Pertamina.

Electricity producers upset over postponement of power projects The Jakarta Post 7th Sep 2018
The Indonesian Private Electricity Producers Association (APLSI) has expressed concern over the government's plan to postpone the construction of power plants worth US$23.9 billion.

Pertamina profit plummets as govt insists on cheap fuel The Jakarta Post 6th Sep 2018
The profit of state-owned oil and gas holding company Pertamina has reportedly dropped to less than Rp 5 trillion (US$335 million) in the first half of 2018 from Rp 18.73 trillion in the same period last year.

Pertamina officially takes over SES Block from CNOOC The Jakarta Post 6th Sep 2018
Through its subsidiary, PT Pertamina Hulu Energi (PHE), state-owned oil and gas holding company Pertamina has officially taken over the operatorship of the Southeast Sumatra (SES) Oil and Gas Block from CNOOC SES Ltd.

Govt postpones 15,200 MW power projects The Jakarta Post 5th Sep 2018
The government has decided to postpone its plan to construct 15,200 megawatt (MW) electricity projects due to the rupiah weakening against the US dollar and the government’s policy to reduce imports.

Indonesia Implements Expanded B20 Program on 1 September 2018 | Indonesia Investments Indonesia Investments 31st Aug 2018
Starting from Saturday (01/09), non-subsidized diesel fuels will contain FAME, hence becoming biodiesel. All Indonesian fuel stations will not be allowed to sell unblended diesel fuel from this day.

MEMR Regulation on Geothermal Data Protection Finally Issued Lexology 6th Sep 2018
Since geothermal survey and exploration activities were first mandated in 1974 by the then President of Indonesia, to subsequent changes to the geothermal legal framework up to late June this year, protection of data obtained from geothermal activities has only been regulated in general. 

Indonesia's bourse to launch tech segment The Business Times 7th Sep 2018
Indonesia's stock exchange plans to launch a dedicated technology section in 2019 to host initial public offerings (IPOs) by startups, in the hope of landing a Go-Jek listing. 

Higher Risk Still Means Higher Interest in Fintech Lending Jakarta Globe 31st Aug 2018
For platforms that boast superior debtor risk assessments and aim to compete with conventional banks, online peer-to-peer lending services have so far fell short of their promises. 

Indonesia won't need to import rice through June 2019: Logistics chief The Jakarta Post 19th Sep 2018
Indonesia will not have to import rice through June 2019 as the country has enough of the commodity in stock, said Budi Waseso, head of state-owned logistics firm Bulog. 

East Nusa Tenggara invites investors to develop seaweed industry The Jakarta Post 13th Sep 2018
East Nusa Tenggara is inviting businesspeople to build factories to process seaweed, of which the province has enough resources to supply the food industry. 

Jokowi campaigns for MR vaccine amid low coverage The Jakarta Post 16th Sep 2018
President Joko “Jokowi” Widodo has campaigned for the measles-rubella (MR) vaccine amid rejection of it in several regions. 

West Lombok declares health emergency for malaria The Jakarta Post 14th Sep 2018
The West Lombok administration in West Nusa Tenggara has declared a health emergency following a surge in malaria cases after multiple powerful earthquakes rattled the region last month.

Overdue debt causes medicine shortage at Jakarta hospitals The Jakarta Post 12th Sep 2018
Several Jakarta regional hospitals are no longer able to buy medicine because the Healthcare and Social Security Agency (BPJS Kesehatan) is often late in paying their bills, says city secretary Saefullah.

Heathcare agency awaiting govt funds to cover Rp 3.5t debt The Jakarta Post 7th Sep 2018
The Healthcare and Social Security Agency (BPJS Kesehatan) is waiting for government funds to pay debts of Rp 3.5 trillion (US$234.65 million) that had been used to purchase medicines, it said in Jakarta on Thursday.

BPJS may backpedal on breast cancer drug policy The Jakarta Post 7th Sep 2018
The Healthcare and Social Security Agency (BPJS Kesehatan) is considering overturning its controversial decision to stop covering trastuzumab for breast cancer patients treated under its state-funded National Health Insurance-Healthy Indonesia Card scheme.

Ministry prepares new ride-hailing regulation The Jakarta Post 16th Sep 2018
The Transportation Ministry is preparing a regulation on ride-hailing apps after the Supreme Court’s ordered the ministry to revoke Ministerial Regulation No. 108/2017 on non-route public transportation services.

Go-Jek in talks to raise at least $2 billion in funding The Jakarta Post 16th Sep 2018
Go-Jek, Indonesia’s most valuable technology startup, is in talks to raise at least $2 billion to fuel an accelerated expansion overseas, according to a person with direct knowledge of the matter.

Go-Jek kicks off maiden operation in Vietnam The Jakarta Post 12th Sep 2018
Go-Jek, the Indonesian ride-hailing app, kicked off its maiden operation in Vietnam on Wednesday, the first step of the company’s plan to expand into Southeast Asia. In Vietnam, Go-Jek is collaborating with a local team led by digital entrepreneur Nguyen Vu Duc under the brand Go-Viet.

Indonesia's Go-Jek invests in online media startup as part of expansion Channel NewsAsia 10th Sep 2018
Indonesian ride-hailing and online payment company Go-Jek has invested in digital media startup Kumparan as part of its expansion into online content, it said.

Keppel, Salim Group to jointly develop and operate data centre in Indonesia The Business Times 10th Sep 2018
Keppel Corporation said early Monday that it has entered into signed conditional agreements to jointly develop and operate a high-availability data centre in Bogor near Jakarta with Indonesian conglomerate The Salim Group.

Ads spending on TV reaches Rp 4.98t during 2018 Asian Games The Jakarta Post 10th Sep 2018
The successful implementation of the 2018 Asian Games in Jakarta and Palembang boosted television advertisement spending, which was recorded at Rp 4.98 trillion (US$333.77 million).

Grab, HappyFresh to Launch GrabFresh Tempo 7th Sep 2018
Grab Indonesia, in collaboration with a grocery delivery service provider HappyFresh, will launch an on-demand delivery service dubbed GrabFresh. It is intended to provide a more convenient way to shop for the daily necessity for Indonesian consumers.

The role of e-Commerce in Indonesia’s digital economy OpenGov 5th Sep 2018
The Indonesian government is on the right track in developing ecosystems and is competitive enough to welcome the era of digital economy according to a research from McKinsey & Company. 

Indonesia leads Asia-Pacific in AI implementation, study shows The Jakarta Post 5th Sep 2018
A recent study shows that Indonesia ranks first in the Asia-Pacific region in implementing artificial intelligence (AI), with 65 percent of respondents saying that they had either implemented AI in their business or were expanding or upgrading their AI capacity. 

Indonesia's Go-Jek to partner with peer-to-peer lending firms Reuters 4th Sep 2018
Indonesian ride-hailing and online payment company Go-Jek said on Tuesday it will partner with three peer-to-peer (P2P) lending firms as the startup looks to expand its financial technology services in Southeast Asia’s biggest economy.

Tax office to spy on taxpayers’ social media activity The Jakarta Post 30th Aug 2018
The Taxation Directorate General will spy on people’s activities through social media in trying to boost tax revenue, an official has said. “Social media covers wide range of activities […] We still need to prepare the infrastructure to support the plan,” Taxation Directorate General communication and information technology transformation director Iwan Djuniardi said in Jakarta on Wednesday. 

AP II, Waskita agree to develop new Minangkabau Airport terminal The Jakarta Post 17th Sep 2018
State-owned airport operator PT Angkasa Pura II has signed an agreement with state-owned construction company PT Waskita Karya to construct a new terminal at Minangkabau International Airport in Padang, West Sumatra.

Government may postpone infrastructure projects for up to six years The Jakarta Post 14th Sep 2018
Coordinating Economic Minister Darmin Nasution has said that the construction of national strategic infrastructure projects may be postponed for up to six years as the government is trying to reduce the current account deficit (CAD).

Jakarta Forestry Agency gets Rp 104 billion for expansion of public cemeteries The Jakarta Post 14th Sep 2018
The Jakarta City Council’s budget committee agreed on Thursday to provide the Jakarta Forestry Agency with Rp 104 billion (US$7 million) in funds for the expansion of public cemeteries and to add more cemetery facilities. 

Airport operator invites investors to develop 11 airports The Jakarta Post 10th Sep 2018
State-owned airport operator PT Angkasa Pura II (AP II) is inviting private investors to take part in the development of 11 airports under its management.

Tourism vital to Indonesia economy Phnom Penh Post 10th Sep 2018
The Indonesian government has increasingly realised the crucial role of tourism and the hospitality industry in reducing the current account deficit (the balance of trade in goods and services), one of the main drivers of the rupiah’s sharp depreciation over the last eight months.

Indonesia Sees Increasing Tourists Arrival from Malaysia Tempo 10th Sep 2018
The Tourism Ministry has revised upward the number of Malaysian tourists visiting Indonesia this year to 2.6 million from 1.4 million.

While people told to spend holidays at home, more foreign tourists expected The Jakarta Post 7th Sep 2018
Tourism Minister Arief Yahya has called on Indonesians to delay overseas holidays to help the government save the foreign exchange, while at the same time he said the ministry was working to increase tourist arrivals.