Update News January 19, 2017

In The News

World Bank Estimates Indonesia To Grow At 5.3 Percent
Antara News, 19/01/2017

In the Indonesia Economic Quarterly report released here on Wednesday, the World Bank has forecast that Indonesias gross domestic product will reach 5.3 percent in 2017.

According to the report, Indonesias fiscal policy credibility has been improving coupled with more realistic revenue setting mentioned in the Budget 2017.

"In the Budget 2017, there has been an improvement in the quality of government spending, and fund allocation has been maintained for development in areas of infrastructure, health, and social assistance," World Bank Country Director for Indonesia Rodrigo Chaves stated.

He believes that the government budget is allocated to realize better targets for energy subsidies and social assistance programs for the poor.

"It is important for Indonesia to maintain the momentum of the reforms in order to achieve development targets effectively," Chaves noted.

According to the World Bank report, two steps can be taken to improve the quality of government spending.

Firstly, expenditure should be relocated to the priority sectors of infrastructure, health, and social assistance, with low-level expenditure that can have a positive impact on poverty reduction and growth.

Secondly, maximizing the impacts of spending in all sectors, including agriculture, education, and social assistance.

The report also highlighted that better growth in 2017 will be supported by private investment, which has shown an increase, due to the monetary policy in 2016 and a better investment climate. Private consumption is also expected to increase in 2017 due to low inflation and improving consumer confidence, which is supported by the stable value of the rupiah.

However, low revenue poses risks in lowering the growth due to global policy uncertainty and financial turmoil in financial markets. To increase tax revenues, Indonesia needs to accelerate administrative reforms and tax policies. Meanwhile, continuous recovery in the commodity prices can increase growth risk.

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Indonesia to Closely Monitor Developments in U.S., China
Tempo, 19/01/2017

Global risk management through close monitoring of developments in the US and China would be the key to overseeing the performance of the country`s 2017 budget, Indonesian Finance Minister Sri Mulyani stated.

"We remain optimistic but must also be careful with regard to the global conditions," she remarked at a meeting with House Commission XI to evaluate the 2016 budget and national economic outlook in 2017 on Wednesday.

The minister explained that the US has yet to outline a clear policy with regard to the protectionist program that President-elect Donald Trump had pledged to adopt during his campaign.

Mulyani said this could pose risks and create uncertainty, as there was a lack of clarity, and it would affect global trade and developing countries.

"The plans to ban US companies from relocating their operations overseas and to impose huge tariffs on imported goods would not only affect the US economy but also the world, as its market has been the source for developing countries," she pointed out.

The minister stated that the plans to reduce international trade cooperation could also affect conditions in China and Indonesia, which have, so far, been its main trade partners.

"In connection with China, the impact will be visible through tax receipts from export-import activities and import duty. We will continue to monitor it in terms of volume and prices," she emphasized.

Other risks are linked to the Feds plan to adjust its reference rate in 2017, which needs to be anticipated carefully, she noted.

"If the Fed witnesses growth in the US economy and inflation, it would raise its interest rate, as it had forecast thrice this year," she stated.

Mulyani said she believes that the combination of the US trade policy and fiscal can raise inflation and the prices of global commodities, which in turn can affect the nations economic performance.

In the 2017 national budget, the Indonesian government has set the assumptions for economic growth at 5.1 percent; inflation, at four percent; the three-month rate of state securities, at 5.3 percent; and the exchange rate of Rp13,300 against the US dollar.

The Indonesia Crude Price has been set at US$45 per barrel; oil lifting, at 815,000 barrels per day; and gas lifting, at 1,150,000 barrels of oil equivalent per day.

"I consider the three-month rate of SPN (state securities) to be the riskiest, as it will increase higher in the US, while on the other hand, we have assumed it to remain lower. Hence, this is what we must evaluate again. We have urged the Directorate General of Financing and Risk Management to monitor it," she added.

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Government To Issue Regulation On Concentrate Export Taxes
Antara News, 19/01/2017

The government, through the Finance Ministry, will soon issue a regulation on taxes on concentrate exports.

"The old tax system, which is based on the progress of the smelters development, will likely be readopted," Suahasil Nazara, head of the fiscal policy affairs of the Finance Ministry, stated.

The finance ministrys official made the remarks during the launch of the Indonesia Economic Quarterly reports of the World Bank at the auditorium of the Center for Strategic and International Studies in Jakarta on Tuesday.

Nazara, however, chose not to divulge the amount of the new concentrate export tax tariff, saying that the old scheme was likely to continue.

"In the old regulation, the amount of exit fees for concentrate exports was fixed in accordance with the construction progress of the exporters smelters. It is likely that we will continue the scheme," Nazara noted.

The Ministry of Finance will discuss the tariff level with the Ministry of Energy and Mineral Resources through an assessment of the level and its influence on the development of the mineral purification process.

It will be adjusted to the efforts to increase the added value of metallic minerals through processing and purification of mineral metals for the realization of purification facilities in the country.

"The policy of export duty is not solely for government revenues but rather also for encouraging purification as much as possible," Nazara remarked.

Earlier, Energy and Mineral Resources Minister Ignatius Jonan had proposed a 10 percent export tax for concentrate exports to the Finance Ministry. Government Regulation (PP) No. 1 of 2017 on the Fourth Amendment to PP No. 23 of 2010 on the Implementation of Mineral and Coal Mining has been issued.

With the revision, mining companies will still be allowed to export concentrates, but they have to change their business licenses from work of contract to a special mining license.Currently, a five percent export tax is applicable on concentrate exports. The final decision of the proposals would be left entirely on the Ministry of Finance.

Jonan explained that the regulation was being amended to provide significant added value to the state revenue in the management of coal and minerals.

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Indonesia Encourages Increased Singaporean Investment
Antara News, 19/01/2017

Deputy Foreign Affairs Minister Abdurrahman Mohammad Fachir has encouraged Singaporean businesspersons to increase investment in Indonesia in line with the commemoration of five decades of diplomatic relations between both nations.

According to a press release from the Indonesian Embassy in Singapore on Wednesday, some 250 businessmen from Singapore gathered at the Hotel Mandarin Orchard to attend a business meeting themed "Indonesia-Singapore Business Partnership 50 Years and Beyond" on Tuesday.

The event to commemorate the 50th anniversary of diplomatic relations between the two countries offers the necessary momentum to boost economic cooperation in the midst of the continuing sluggish global economy.

This momentum was supported by a significant increase in Singaporean investment in the last 10 months in 2016, totaling US$7.1 billion, or 44 percent as compared to that in the previous period.

Organized jointly by the Indonesian Embassy in Singapore and Singapore Manufacturing Federation, the business meeting was inaugurated by Singapores Trade and Industry Minister Lim Hng Kiang and the Indonesian deputy foreign affairs minister.

Members from the Industry Ministry, Capital Investment Coordinating Board, Indonesian Chamber of Commerce and Industry, and Singapores business players addressed the meeting.

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Indonesian Govt Approves Rp6.43 Trillion For Infrastructure Improvements
Antara News, 19/01/2017

The Ministry of Public Works and Public Housing has approved 952 contracts for infrastructure improvements in Indonesia worth Rp6.43 trillion.

Minister of Public Works and Public Housing Basuki Hadimuljono, said on Wednesday that at least 68 contracts out of the 952, worth RP1.58 trillion, have been approved by committee officers and contractors at the ministrys working meeting last Tuesday.

The approved construction projects include road maintenance, bridge construction, road construction at border areas, as well as some housing projects. Other projects including extension of fresh water pipeline and restoration of irrigation channels have also been approved. The contracts were allocated during a project auction held in October 2016.

Hadimuljono appointed staff from his ministry to oversee all project auctions, where 10,403 contracts worth RP69.61 trillion up to March 2017 are up for auction.

He said his target for the ministry is to allocate 1,523 construction projects, worth RP11.58 trillion, by the end of January 2017.

He added that many local contractors participated and won construction projects at the auction. He hoped that these local contractors can improve both the quality of their work and their competitiveness.

The signing of the contracts also reflects an acceleration of infrastructure developments in Indonesia.

Hadimuljono hopes that his ministrys efforts can provide additional employment and improve Indonesias national development, as well as support its economic growth.

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Govt. To Finish Revised Strategic Project List Next Week
The Jakarta Post, 19/01/2017

The government expects to finish the revised list of national strategic projects next week, a move that will help speed up the country's infrastructure development.

Currently, there are 225 priority infrastructure projects included in presidential regulation No. 3/2016, covering toll roads, railways, airports, seaports and power plants, among others.

"We have scheduled the ministerial meeting next week to decide the matter," the program director of the Committee for the Acceleration of Priority Infrastructure Development (KPPIP), Rainier Haryanto, said by text message on Wednesday.

So far, 100 projects had been proposed for inclusion to the list, but not all of them would be eligible, he added.

Previously, officials from Industry Ministry, Transportation Ministry, as well as Public Works and Public Housing Ministry, suggested several projects proposed as national strategic projects.

The Industry Ministry, for instance, has proposed the mid-haul aircraft construction project, while the Transportation Ministry came up with Benoa Port in Bali and Syamsudin Noor Airport in Banjarmasin, South Kalimantan.

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Fiscal, Investment Climate Reforms Put Indonesia's Growth on Solid Footing: World Bank
The Jakarta Globe, 19/01/2017

The World Bank lauds Indonesia for its fiscal policy and investment climate reforms, saying they should accelerate the country's economic growth this year, despite increasing uncertainties in global economy.

The Washington-based development lender said in its latest Indonesia Economic Quarterly report that Indonesia, like many of its neighbors in the region, is exposed to increased volatility of global financial markets.

However, the country has set credible revenue targets in the 2017 budget, which should shield it against shocks stemming from the financial market and keep the right pace of its infrastructure development.

"The 2017 budget improves Indonesia's quality of spending, including sustained higher allocations for infrastructure, health and social assistance, and better targeting for energy subsidies and social programs for the poor," World Bank country director for Indonesia Rodrigo Chaves said on Tuesday (17/01).

The report suggested that the government has reallocated spending toward the priority sectors "where public spending is low and additional spending can have the greatest impact on poverty and growth" as well as maximized the effectiveness of spending. It's very important for Indonesia to sustain this reform momentum so that the country can meet its development goals."

World Bank now expects Southeast Asia's largest economy to expand by 5.3 percent in 2017 from 5.1 percent last year. Indonesia's gross domestic product growth was 5 percent in the third quarter last year, slowing slightly from 5.2 percent in the previous quarter.

The report also highlighted Indonesia's success in moving up in the World Bank's Ease of Doing Business ranking to 91 from 106, thanks to reformed regulations on setting up businesses, buying electricity and paying taxes.

"The government's investment climate reforms have made it easier for businesses to open and operate, but boosting private investment for economic growth will require policymakers to move now on medium-term structural reforms," said Hans Anand Beck, acting lead economist at the World Bank.

Acknowledging Risks

Finance Minister Sri Mulyani Indrawti said the government is focusing on global risks that could creep into Indonesia's economy through trade and investment.

"Even though the prices are improving, volume-wise [Indonesia's export] is a little bit stagnant. That's a message for us, because this could be our weak side in competition with others," Sri said.

"The imports of raw materials and capital goods are still negative. This also tells a lot for projections on Indonesia's growth," she added.

Sri said that the government is well aware that markets remain jittery mainly due to the United States's monetary and fiscal policies, which affect the flow of capital into and out of Indonesia's stocks and bonds market.

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Jakarta Prepares Rp93bn to Build SWRO in Thousand Islands
Tempo, 19/01/2017

The Jakarta Provincial Government is budgeting up to Rp93 billion to build Water Management with Sea Water Reserve Osmosis (SWRO) system in eight locations in Thousand Islands this year.

Acting Jakarta Governor Sumarsono said that the eight points of SWRO construction are a continuation from last year's failed projects.

"This year we budgeting Rp93 billion to continue the construction," he said at City Hall, Wednesday (1/18).

He is optimistic that the failure last year will not happen again this year because he will tighten the tender process.

"I want the chosen contractor know the project well," he added.

He expressed that SWRO construction plan in eight points this year just reached five percent only. Because of that, The Jakarta government cut work contract with the tender winner.

"We budgeting it again at least similar to this year which is given by Ministry of Public Infrastructure and Housing (KemenPU-PERA)," he continued.

For information, KemenPU-PERA gave Drinking Water Supply System (SPAM) to Jakarta. SPAM itself was build in Untung Jawa Island with SWRO technology.
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EARTH WIRE -- UNESCO Mission To Evaluate Ciletuh Geopark By April 2017
Antara News, 19/01/2017

UNESCOs Fact Finding Mission will evaluate Ciletuh Geopark in Pelabuhan Ratu, West Java before it can be named as one of UNESCOs Global Geoparks by the end of 2017.

"That team will check every single aspect of Ciletuh Geopark, including the local transport infrastructure, the signage on the roads and the quality of the official guide materials," said the Administration Assistant for Economic Affairs and Development for West Java, Denny Juanda, on Wednesday.

He added that the team from UNESCO will also check three main criteria; geodiversity, biodiversity and cultural diversity.

According to Denny, 13 main tourist sites from a total of 24 are usually frequented by visitors to the geopark. Ciletuh Geopark has many natural attractions for visitors, including beaches, mountains, waterfalls and rivers.

As well as being a popular tourist attraction, Ciletuh Geopark is also a place of interest for the study of natural science and geology.

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Banyuwangi To Adopt Concept Of Chatuchak`s Integrated Tourism Market
Antara News, 19/01/2017

The Banyuwangi district government is developing an integrated tourism market in the citys south side entrance that would resemble Thailands Chatuchak weekend market.

Banyuwangi District Head Abdullah Azwar Anas stated on Wednesday that the market will be integrated with a bus terminal and lodging facilities to cater to the needs of local and foreign tourists.

"We expect this market to be the main destination for tourists looking for Banyuwangis typical souvenirs and items. Using the same concept as Thailands Chatuchak market, which is segmented for tourists, we are trying to develop this market using a new design that will combine a tourist terminal and lodging facilities," Anas noted.

The bus terminal will serve as a transportation hub for tourists keen on visiting other tourist sites in Banyuwangi, while merchants in the public market will sell various items, such as "batik" traditional fabric, crafts, souvenirs, and also daily food items.

In a bid to create a tourism ecosystem, Anas expects the modern-go green market, designed by national architect Andra Matin, to be opened to the public by the end of 2017 or in early 2018.

The market has two main four-floor buildings; a parking area, with a capacity for 200 vehicles; prayer room; offices for travel agents; and a Tourist Information Center.

The modern market, which costs Rp27 billion, has been developed since 2015 using funds from Banyuwangis budget, and currently, 60 percent of the construction work is complete.

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