Embassy of India Jakarta. No: Jak/Com/201/4/ January Monthly Economic and Commercial Report for November-December 2011

Transcription

1 Embassy of India Jakarta No: Jak/Com/201/4/ January 2012 Monthly Economic and Commercial Report for November-December 2011 Economy and Trade Indonesia to lead SE Asian growth The Organization for Economic Cooperation and Development (OECD) has estimated in its South-East Asian Economic Outlook that Indonesia will experience the highest growth among ASEAN country members with an average of 6.6% from 2012 to World Bank s quarterly report has also stressed that amid global crisis, Indonesia is well positioned to navigate the economic turbulence because of its natural economic resilience. According to the report, the growth of Indonesia s manufacturing sector was encouraging due to rapidly growing domestic market and low labour cost which led to a significant increase in investment in the country. Meanwhile, Bank Indonesia lowered its estimate for GDP growth for 2012 for the second time from 6.5% to 6.3% in view of ongoing economic crisis in Europe and the US. The initial growth estimate was 6.7%. BI is optimistic that domestic consumption and other investments remain strong. In 2011, the Indonesian economic growth is estimated to be 6.3% below the government s estimate of 6.5%. New tax breaks for 5 pioneer industries According to the Industry Climate and Quality Policy Board new investments in 5 industries will receive tax holiday facility for up to 10 years. The break would be given to companies producing 87 product items, which comprise 35 base metal products, 17 machinery items, 10 renewable energy products, and 4 types of communication equipment, under the base metals, oil refining and basic petrochemicals, machinery, renewable energy and telecommunication equipment industries. To be eligible for the facility, the companies need to invest at least US$110 million and place at least 10% of this amount in local banks. The tax facility could be applied only until Trade Ministry plans import barriers The Indonesian Government plans to expand trade barriers to limit unnecessary imports. The measures would include mostly non-tariff barriers such as an expanded quarantine policy mandatory use of the Indonesian National Standards (SNI) system and requiring all agricultural imports to be loaded at designated ports equipped with stricter quarantine centers. Indonesia saw a 40% increase in non oil and gas imports in 2010 against Indonesian businesses have voiced concerns that the imports include basic goods which are produced domestically, including fruits, vegetables, salts, footwear and textiles. Automotive industry continues to lead industrial growth The automotive industry is expected to achieve growth of more than 6% in 2012, despite global economic downturn. In the 3 rd quarter of 2011, the automotive industry recorded a growth rate of 7%, among the highest in the overall industrial sector. The growth of the automotive industry is supported by sharp increase in motorcycles and car sales. Retail to grow 15% in 2012 Indonesia s retail sector will continue to grow despite the global economic uncertainty, with expected revenues to rise 15% to US$15.04 billion in Global retail brands, including Sogo, Carrefour, Giant, and Lotte are planning to expand in the country due to its big market and the rising purchasing power. Inflation November headline inflation in Indonesia was 0.34%, making the year-on-year figure down to 4.15%. From January to November, inflation grew 3.2%, below the

2 government s and central bank s target. The Deputy Chief of Central Bureau of Statistic said that inflation might end the year at below 4.15%. To mitigate the impact, BI has cut its overnight policy rate to 6% in November from 6.75% in September to provide lower borrowing costs and stimulate people s consumption and business expansion. Investment Indonesia s investment grade restored Fitch Ratings restored Indonesia s sovereign rating after 14 years and raised it from BB+ to BBB-. The upgrades reflect the country's strong and resilient economic growth, low and declining public debt ratios, strengthened external liquidity and a prudent overall macro policy framework. The rating upgrade is likely to result in increased FDI into Indonesia. Increasing local demand fuels iron and steel expansion Three iron ore plants with a combined investment of US$470 million are to begin operations in the first half quarter of 2012 to meet surging local demand. The plants belong to PT Meratus Jaya Iron and Steel, a joint venture of state steel-maker PT Krakatau Steel and PT Aneka Tambang (Antam), state mining company; PT Mandan Steel in collaboration with Chinese Zhengzhou Yong Tong Special Steel Corporation; and PT Indoferro, a subsidiary of Growth Steel Group. Currently, Indonesia s annual demand for steel is around 10 million tonnes, while the national production is only 6 million tonnes. Chinese company to build cement plant State Development and Investment Corporation (SDIC), is considering to set up a cement plant in West Papua with a total production capacity of 1 million tonnes of cement per year. The output is expected to reduce cement prices in the area by 30%. The plant is expected to be operational by Two other Chinese companies, Anjui Conch Cement Company Ltd. and China Triumph International Engineering Co. Ltd (CTIEC), have also announced plans to build cement plants in Indonesia. China to develop Sumatra coal railway PT Bukit Asam Transpacific Railways (BATR) signed a financing deal worth US$1.3 billion with the China Development Bank to launch the much-delayed railway construction in Sumatra. According to BATR the total funding needed for the project is $2 billion, with the remaining $700 million to come as equity and initial paidup capital from shareholders. The railway, which will transport coal mined by PT Bukit Asam Banko, will cover 300 kms from Tanjung Enim to Bandar Lampung, passing through eight regencies. The construction is expected to begin in 2013 and operation will begin in % of the coal from the Banko mine will be purchased by Chinese companies, 30% by other international buyers, and the remaining 20% by domestic buyers. Garuda targets more passengers in 2012 PT Garuda Indonesia, the national carrier, expects to have at least 20 new planes operating in 2012 to boost total number of passengers to 20 million. Garuda would allocate about US$400 million to purchase the new planes. Garuda has plans to open new international routes to Taipei, Haneda and New Delhi in Infrastructure Law on land acquisition passed by Parliament The Indonesian House of Representatives has endorsed the land acquisition law for public development. The new law is expected to solve conflicts that have often resulted in delays of public infrastructure projects. According to the law, all legal proceedings pertaining to land acquisition for government-commissioned infrastructure projects should be completed within 436 working days at the most. It aims at a more democratic process for providing 60-day public consultation period before acquiring the land.

3 Telkom spends US$233 million on broadband access PT Telekomunikasi Indonesia, stateowned telecommunication company, has allocated US$233 million until 2015 to build a national broadband network called True Broadband, which will allow customers to access a high speed data service. The network will cover 497 cities nationwide by the end of The company is targeting 13 million connections with True Broadband access. True Broadband is a part of Telkom s effort to build a backbone of ICT infrastructure based on an optical network platform called the Nusantara Super Highway. Mining Land disputes between locals and mining companies Business associations from both palm oil and mining sectors have said that the current arrangements have resulted in confusion and conflicts involving mining and plantation companies and locals. They have suggested that the Central Government should reclaim the authority to issue operating permits to private companies. The Indonesian Mining Association (IMA) called on the Government to review the 2009 Minerals and Coal Law because it granted exclusive authority to local government to manage natural resources in regions as well as issuing operating permits. Meanwhile, environmental groups have called on President Yudhoyono to immediately audit the operation of palm oil and mining companies. The Mining Advocacy Network (Jatam) found that Ministry of Energy and Mineral Resources had issued 5,374 mining licenses up to November 2011, although Jatam found about 8,000 mining companies were operating in the country. Energy Indonesia to set up 4,000 MW power plants in Batam The government plans to build new power plants in Batam with a total capacity of 4,000 MW. Of the total production, as much as 3,000 MW will be exported to Singapore, to reduce gas exports to the country, which has caused shortage for local industries. The plants would utilize coal as the primary energy source. Commodity Rattan export ban The Indonesian Government has issued notifications banning export of raw and semi-processed rattan as part of efforts to revive the ailing local rattan industry. The ban will result in increased opportunities for value addition by the local industries. Rattan shortages were seen as the main cause for lower exports and a decline in rattan furniture firms. In 2008, Indonesia, the largest rattan producer with the potential supply 80% of global output, exported US$300 million worth of rattan, which dropped to US$167 million in 2009 and to US$138 million in Before the export ban was introduced, the bulk of Indonesian raw rattan went to China and Vietnam. The Indonesian Industry Minister has expressed the hope that this step will result in increased foreign investment and will give in a boost to the industry. Fiscal Rupiah redenomination The Indonesian government has approved a proposal to omit three zeros off the Indonesian currency. The Government would submit a draft law on the redenomination plan to the House of Representatives (DPR) in 2012 to support the programme. Bank Indonesia announced that the redenomination would be carried out in four stages over 10 years to minimize public confusion: information campaign ( ), transition period ( ), gradual withdrawal of the old rupiah ( ), and the use of the new rupiah ( ). BI is proposing the redenomination because its exchange rate is too low against other currencies and as a part of the country s efforts to comply with regional economic reform to coincide with he establishment of the ASEAN Economic Community in Govt plans to tax export of minerals and base metals Indonesian government plans to levy export tax for minerals and base metals in order to encourage value additionto commodities

4 as well as contributing to national energy security. For local miners the proposed export tax would be an additional burden which will affect their financial performance as they already pay 13.5% of their total sales as royalties to the government on top of the income and value added taxes. Regional Cooperation ASEAN Business and Investment Summit The ASEAN Business and Investment Summit (ASEAN BIS) was held on November, 2011 in Bali on the sidelines of the ASEAN and EAS Summits. The ASEAN BIS was organized by ASEAN Business Advisory Committee (BAC) to promote public and private sector partnership in the region. The ASEAN BIS highlighted the current position of ASEAN Economic Community vis-a-vis the global community. The Summit focused on how to maintain growth, sustainability and inclusion at a time of significant global uncertainty as ASEAN puts the final shape to its Economic Community by The Summit looked into three crucial areas that will shape the environments in which ASEAN business operate. These included: climate change and the global food crisis; ASEAN connectivity in the context of infrastructure development; and entrepreneurship and role innovation plays in the region s economic development. ASEAN BIS explicitly included global and East Asia perspectives in its plenary session with specific bilateral sessions examining the opportunities from ASEAN s trade and investment partnerships with Australia, India, Japan, Korea, and the US and their impact on growth. The sessions in ASEAN BIS aimed at identifying priorities and ideas and promoting dialogue between panelists and participants. The ASEAN-India Session at the Summit was held on 18 November 2011 and had as Moderator Mr Syed Amin, Chair of ASEAN-BAC Malaysia Chapter and as panelists Dr Ganesan Natarajan, President & CEO of Ennore Coke Ltd., Mr Noharuddin Nordin, CEO of Malaysian Investment Development Authority (MIDA) and Mr Tom Aaker, CEO of Standard Chartered Indoensia. Dr. Natarajan gave an overview of the Indian economy and investment opportunities in India, specifically with regard to mining. The panel discussed ASEAN-India business cooperation and emerging business and investment opportunities in ASEAN and India. A 10-member business delegation mounted by FICCI attended Summit. *** Business Visa issued in 2011 S. No Month Visa issued 1. January February March April May June July August September October November December 338 Total 4,920

5 Trade Figures (latest available) Bilateral Trade between India and Indonesia (January October 2011) (In US$ million) Period India s Exports India s Imports Total Trade During Oct ,274.5 During Jan Oct ,662 11, ,870.4 During Jan Oct , , ,375.8 Percentage Variation (+ or -) 42.6% 43.6% 43.3% Foreign Trade of Indonesia (January November 2011) (In US$ billions) Period Indonesia s Exports Indonesia s Imports Total Trade During Jan Nov During Jan Dec Top 5 Export Destinations (Non oil & gas) No Country Jan Nov 2011 Percentage of total exports (US$ billions) (%) 1 China Japan United States India Singapore Top 5 Import Sources (Non oil & gas) No Country Jan Nov 2011 Percentage of total exports (US$ billions) (%) 1 China Japan Singapore United States Thailand (Rakesh K. Arora) First Secretary (Eco & Com)