Update News November 28, 2016

In The News

Indonesia in Good Shape to Weather Shaky Global Finance: IMF
The Jakarta Globe, 28 November 2016

The International Monetary Fund said the Indonesian economy will remain stable in the medium term, and expects the country to be able to weather easily increasing uncertainties in the global economy thanks to prudent fiscal and monetary policies and an effective reform in its bureaucracy.

The Indonesian government has so far managed to maintain strong economic growth, low inflation and healthy current account deficit, according to an end-of-mission statement from the IMF released on Thursday (24/11).

These would serve Southeast Asia's biggest economy well, especially against risks from policy uncertainties in the United States under the new administration of President Donald Trump next year, tight financial conditions globally, slower-than-expected growth in China and a renewed fall in commodity prices.

"The authorities have skillfully navigated the changing currents in international economy," Luis E. Breuer, IMF Article IV Mission to Indonesia's team leader, said in a statement.

The latest report from Indonesia's statistics agency said its economy expanded 5.02 percent in the third quarter this year, a dip from 5.19 percent in the previous quarter. The government and the central bank expect a 5 percent full-year growth in 2016 and 5.1 percent next year.

Inflation stood at 3.31 percent in October with an average of 3.58 percent in January-October, lower than the 4 percent target in the 2016 revised state budget. Indonesia's current account deficit reached $4.5 billion in the third quarter — about 1.8 percent of its GDP — lower than the $5 billion in the previous quarter, reducing the country's dependency on financing from abroad. "The government's fiscal strategy [...] will anchor stability and support medium-term inclusive growth," Breuer said.

Breuer was referring to the 2016 revised state budget in which the government set a less ambitious revenue projection and spending commitments while still keeping its priorities.

The 2017 state budget, according to Breuer, also offers a fiscal buffer by targeting a lower deficit of 2.4 percent of GDP, compared to the 2.7 percent of GDP expected this year.

"The team welcomed the budget plans to expand the taxpayer base, improve targeting of subsidies, increase transfers to local governments and ensure financing for public investment and social programs," he said.

Breuer, however, underlined the weak tax revenues that continue to constrain spending. The government reported that it has only managed to collect Rp 871 trillion ($65 billion) in taxes by the end of October, only 64 percent of its target this year. On the monetary side, Breuer said Bank Indonesia's current monetary policies are "appropriate" to the government's efforts.

Bank Indonesia, the central bank, has reduced its policy rate by 150 basis points so far this year in an attempt to lower lending rates, boost demand and prop up economic growth.

It has also changed its benchmark rate to the 7-day reverse repo rate for the same reason, hoping it could influence money-market rates more directly.

Breuer and his team lauded the central bank's decision to maintain the 7-day reverse repo rate steady at 4.75 percent in the latest policy meeting this month, and to keep its policy to allow the exchange rate and government bond yield to adjust with some intervention to ensure orderly operation of markets. "Keeping this flexibility will be important to allow the economy to adjust smoothly to volatile external conditions," he said.

The statement came at the end of an IMF staff team's visit to Indonesia on Nov. 7-18 to conduct the annual Article IV Consultation, which assesses every country's economic conditions in order to foresee global economic risks. The IMF Executive Board is tentatively scheduled to discuss the staff report in January next year.

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Indonesia Has Big Franchise Business Potential: Jokowi
Antara News, 28 November 2016

President Joko Widodo (Jokowi) said Indonesia has big franchise business potential that could be developed to advance the peoples economy.

"Our country has 34 provinces with 515 districts and municipalities. These regions domestic potential is very big that could be developed to advance the franchise business in the country," Jokowi said when opening the Indonesian Franchise and SME Expo (IFSE) in Jakarta on Friday.

He said businesses which have been developing could be further advanced through the franchise business system. The presence of a franchise business in a district reflects the progress of district in the business sector.

The president had a small discussion with the winner of the Indonesian Franchise Award, Odi Anindito, who is the owner of PT Coffee Toffee.Jokowi asked Odi about the growth of his company in Indonesia and its links to penetrate the overseas markets.

"It has run business for 36 years. It has not yet gone international and is now still focusing at home. It already has a big market and so, it should enter the world market," he told Odi.He hoped that other franchise business would develop and trigger the development of the peoples economy.

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Indonesia To Enhance Economic Partnership With Iran
Antara News, 28 November 2016

Indonesia will enhance its trade and investment in the Islamic Republic of Iran. Currently, both trade and investment were far below the two countries economic potential.

"Trade and investment have gone down over the years (due to the economic sanctions against Iran), but we hope that these can recover within two or three years," Coordinating Minister for Economy Darmin Nasution said here on Friday.

Therefore, he said, the two countries have agreed on new ways of cooperation in trade and investment through the Economic Joint Commission Session (SKB) on economic cooperation and trade.

Darmin led the Indonesian delegation at a session of the commission, the first since the implementation of the Joint Comprehensive Plan of Action (JCPOA) under which economic sanctions against Iran were revoked.

The session was also attended by Irans Communication and Information Technology Minister, Mahmoud Vaezi, who led the Iranian delegation, Iranian ambassador Valioah Mohammadi, and Indonesian ambassador to Iran Octaviano Alimudin.

Darmin noted that under this new commitment, Indonesia could seek a new export market in Iran in a bid to recover its sluggish trade due to the global economic slowdown.

"This would help our trade with Iran to recover, particularly in view of the current unfavorable situation in some countries. For us, it is important to increase our export to Iran," he stressed.Darmin named palm oil, textile, garments and other manufactured products as among those which could be exported to Iran.

On the potential to increase investment, Darmin reminded that Iran was keen to invest in the oil and gas sector, although it has not made any commitment regarding an investment plan.

"They have yet to specify such investment but they wanted to invest in refinery development. They also have a chance to invest in the 35,000 MW power plant projects," he added.

Investment in oil refinery development would benefit Indonesia as it could help in securing national energy supply in the long term."This will be good for Indonesia as it could be backed-up by a long term contract on oil supply. It would be too risky if we only have an oil refinery, without a long term contract to ensure supply," he explained.

Indonesias bilateral trade with Iran was recorded at US$273.1 million in 2015, down 38.51 percent compared to 2011 when it had reached US$1.8 billion.

As of August 2016, the bilateral trade was recorded at US$150 million, below the US$195 million worth of trade during the same period of 2015.

In the investment sector, data from the Coordinating Board of Investment (BKPM) showed that Iranian investment in Indonesia during 2011-2014 had amounted to US$6.3 million in 16 projects.

There is a potential of new cooperation in energy, such as through cooperation between Indonesias Pertamina and National Iranian Oil Company (NIOC) to supply 88,000 tons of LPG in 2016. The volume would be increased in 2017.

In the future, this cooperation can be expanded to other areas such as crude oil, refinery development, and petrochemical products, Darmin observed.

During the session, the two parties signed the Agreed Minutes of the 12th Session of Joint Commission on Economic and Trade Cooperation that covered various strategic cooperation programs between the two countries.

"We hope that bilateral economic cooperation between Indonesia and Iran could be improved further to serve the goal of mutual welfare," Darmin underlined.

After the meeting, Iranian delegation paid a courtesy call on President Joko Widodo. The president plans to visit Iran on a state visit in December.

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Transport Ministry to Speed Up Development of Manggarai-Cikarang DDT
The Jakarta Globe, 28 November 2016

The transportation ministry plans to speed up construction of a 38 kilometer long double double-track, known as DDT, railway system connecting passengers from Manggarai station in South Jakarta to Cikarang, on the outskirts of Jakarta, a minister said.

Transport Minister Budi Karya Sumadi said the Rp 5.5 trillion ($406 million) project will be accelerated as the government seeks to improve services for passengers.

Currently, the system for commuter train, or rail transport service from outer suburbs to the middle and city center in Jakarta, is still mixed with the intercity rail transport system, which serves passengers seeking to go long distances.

All are connected to Manggarai station, the biggest train station in the capital city. The government seeks to differentiate the rails for commuter and intercity.

"Right now, there are about 850,000 passengers a day using commuter trains. You can imagine if there is one train late for a couple of minutes, how many passengers would arrive late [to their destinations]," Budi Karya told reporters on Friday (25/11). The Manggarai-Cikarang DDT project has been developing slower than scheduled.

The project kicked off in 2013, but slow land acquisition progress and a concurrent project to improve stations and railways in existing commuter lines in Jakarta and its surrounding area has hampered the 38 kilometer-long DDT railway project.

Budi Karya said the government has identified some administrative problems that constrain developments for the DDT project and has also called for Kereta Api Indonesia, state-owned train operator that manages the project, to be more cooperative to contractors to allow them to finish the project faster.

On Friday, acting Jakarta Governor Soni Sumarsono said the city administration is ready to help the government speed up the DDT project, including land acquisition.

The Manggarai-Cikarang consist of three phases, first the Managgarai-Jatinegara network, which represent about 30 percent of the total project; Jatinegara-Bekasi (10 percent) and Bekasi-Cikarang that makes up the bulk of the project, or 70 percent.

Minister Budi Karya is optimistic the project will be completed in 2019. Director General for Train Transportation Prasetyo Boeditjahjono said the government to renovate Manggarai station and build a 2-storey building to differentiate the commuter and intercity routes.

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Gov`t to Develop Four Airports in Southern West Java
Tempo, 28 November 2016

Transportation Minister Budi Karya Sumadi said the government would develop four seaports in southern West Java namely Pangandaran, Tasikmalaya, Garut, and Sukabumi.

“In Pangandaran and Tasikmalaya, the airports are finished. The ones in Garut and Sukabumi, they are not finished yet. We hope that in 2017, the construction can begin and they can be finished in 2018,” said Budi in Bandung on Saturday (26/11).

Nusawiru airport in Pangandaran and Wiriadinata airport di Tasikmalaya owned by the Air Force are already in operation while airports Garut and Tasikmalaya will be developed.

Budi added that development of the four airports is aimed at developing economic potentials in southern West Java.“In that region, tourism and fisheries potentials are very big,” Budi said.

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Indonesia To Maintain Saudi Arabian Military Aircraft
The Jakarta Post, 28 November 2016

Starting in 2017, state-owned aircraft manufacture PT Dirgantara Indonesia (DI) will maintain Saudi Arabian military helicopters and aircraft.

“We are still processing the contract,” Brig. Gen Jan Pieter Ate, the Defense Ministry’s director of the defense industry and technology, told The Jakarta Post on Friday.

Jan said DI was among defense companies in Indonesia ready to offer maintenance services for foreign military helicopters and airplanes.“We have a good track record in cooperation with Airbus and the ability to produce aircraft for foreign countries,” he said.DI previously provided maintenance services for Columbian and Panamanian aircraft.

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Minister Urges ASEAN to Boost Digital Economy Innovation
Tempo, 28 November 2016

Communication and Information Minister Rudiantara urges countries of ASEAN members to offer commitment and collaborate in boosting innovation in digital economy by making use of information and communication technology.

"Innovation is not only intended to generate new ideas, but also to perform alternations for the people’s welfare and economy growth," Rudiantara said in the 16th ASEAN summit of Information and Communication ministers in Brunei (25/11).

Rudiantara added that Indonesian government are serious in developing digital economy, among others by launching XIV Economic Policy Package that focuses on Indonesia e-commerce road map. The map is expected to create digital technopreneurs.

To support such an initiatve, the Ministry implements 1,000 Digital Startup National Movement to help create 1,000 digital start ups. Such movement also supports the goal of making Indonesia as The Digital Energy of Asia.

The summit resulted in the proposal of affordable international roaming and an agreement to manage demand study data in relation to the increase and the us of broadband to create ASEAN interconnected.

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Spatial Planning a Solution for Palm Oil Industry: Minister
The Jakarta Globe, 28 November 2016

The Indonesian Palm Oil Association has implored an improvement in spatial planning to tackle social issues faced by the industry, particularly land use.

Minister of Agrarian and Spatial Planning Sofyan Djalil promised his office would revise the current spatial plan. “One of the most important solutions for these [social] issues is through spatial planning, which we are still lacking in the agriculture sector,” Sofyan said during the 12th Indonesian Palm Oil Conference in Nusa Dua, Bali on Thursday (24/11).

He said he fully supports the palm oil industry, which boasts and indirect labor force of 40 million, and said reform in forestry and land use laws will be examined ahead of a push into the global market.

He highlighted the importance of the One Map Policy, which integrates the archipelago’s land use into one map, especially as he found that many palm oil companies still operate without the proper cultivation permit (HGU), which in turn slows down the process for ISPO certification.

“The ministry also requests palm oil companies with land use of more than 25 hectares complete the legal status of their plantations,” he said. In addition, the ministry promises help the industry by accelerating HGU permit processes to take only up to 90 days.

With the acceleration, he hopes that it will push smallholder farmers to become certified for both land and ISPO in order to empower them for an improvement in the industry.

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Minister Encourages Private Company to Develop Geothermal Energy
Tempo, 28 November 2016

Energy and Mineral Resource (ESDM) Minister Ignasius Jonan said that the investment value of geothermal energy is still high.

Therefore, Jonan expects national or foreign private companies can participate in developing geothermal energy as electricity plants. By doing so, the targeted 2.300 megawatt from geothermal-fueled power plants (PLTP) by 2025 can be met.

"As President’s direction, people’s participation in the form of national and foreign private companies are expected. By having such participation, we do not have to rely solely on state budget (APBN) and state-owned enterprises (BUMN), Jonan said in Tomohon, North Sulawesi on Saturday (26/11).

Private companies’ participation in electricity sector investment is expected to be able to meet 35 thousand megawatts electricity project.Despite so, Jonan believes that geothermal-fueled power plants have different challenges compared to other energy sources.

Compared to other electricity power plants, the amount of electricity capacity from geothermal cannot be predicted before exploration is conducted.In addition, the use of geothermal is still limited to generating electricity.As a result, Jonan said, both Pertamina as a producer and PLN as a buyer has to further negotiate on the tariffs involved.

Furthermore, regulatory policies can also help to attract investors to make investment in geothermal sector."What’s certain is geothermal has to be used," Jonan added.

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Indonesia Set to Become World's 2nd Largest Geothermal Power Producer
The Jakarta Globe, 28 November 2016

Indonesia is set to become the world's second largest geothermal power producer, overtaking the Philippines, with its capacity to generate geothermal electricity expected to increase by 385 megawatts next year.

Despite siting on the world's largest geothermal energy reserves, Indonesia today generates only 1,647 megawatts from geothermal wells, less than half of the United States' geothermal power output (3,450 megawatts) and still behind the Philippines (1,870 megawatts).

Yunus Saefulhak, director of geothermal energy at the Ministry of Energy and Mineral Resources, said that by the end of this year Indonesia's geothermal power capacity will have increased by 130 megawatts, and by 255 megawatts next year.

"If everything goes to plan, our capacity will soon reach 1,908 megawatts, higher than the Philippines'," Yunus said. "We will hopefully catch up with the US in 2021," he said, adding that the superpower is unlikely to expand its geothermal power capacity.

Next month, the Lahendong geothermal power plant in North Sulawesi will open a sixth unit that will increase its output by 20 megawatts.

The Sarulla geothermal power plant in North Tapanuli in North Sumatra, with a capacity of 255 megawatts, will also open next month.
The power plant is being developed by Medco Power Indonesia, Japan's Itochu Corporation and US-based Ormat Technologies.

Indonesia has a total of 28,994 megawatts in geothermal power reserves — the largest in the world — but conflicting laws, complicated pricing scheme and opposition from local communities have posed difficulties in harnessing them effectively.

A recent government decision to allow geothermal exploitation in conservation areas — a successful practice learnt from the Philippines — is likely to speed up the process and prove that conservation and power generation can go hand in hand.

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North Sulawesi Offers Sports Tourism
Tempo, 28 November 2016

The provincial government of North Sulawesi, home to 2.5 million people, expects to attract tourists through sports tourism."North Sulawesi continues to develop its tourism sector and attracts many people, including local and foreign tourists," North Sulawesi Deputy Governor Steven Kandouw in Manado on Sunday, November 27, 2016, as quoted by Antara.

Kandouw said that North Sulawesi's "beautiful scenery has been utilized by foreign tourists to engage in sports tourism, including Chinese tourists." Kandouw added that tourists from other countries have also started to show interest in sports tourism.

Deputy Governor of North Sulawesi Steven said that 16 international cyclists from various countries, such as the Netherlands, Singapore, France and Indonesia had participated in a bicycle touring on November 26 to November 27, 2016.

"They ride around Manado City, North Minahasa District, Bitung City and Minahasa District," Steven said."We are grateful that participants chose North Sulawesi as their touring venue. The opportunity has helped promote [North Sulawesi] to participants from various countries," Steven added.

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Trenggalek Promotes its Tourism Potential in Colombia
Tempo, 28 November 2016

The government of the Indonesian District of Trenggalek has taken up tourism promotion in Colombia on the sidelines of the World Peace Forum being held in Bogota, Colombia.

"We have started promoting Trenggalek's tourism potential in Colombia so that the local communities become aware of this interesting destination," deputy head of Trenggalek District, Mochammad Nur Arifin, said in a written statement received here on Saturday.

The tourist destinations in Trengalek include the Goa Lowo, beaches of Pantai Perigi, Pantai Karanggoso, Pantai Damas, Pantai Blado, Pantai Ngadipuro, Pantai Ngulungwetan, Pantai Ngampiran, Pantai Pelang, Pantai Taman Kili-kili and Pantai Konang.

Apart from that, Arifin stated that they were also promoting small and medium enterprises (SMEs), leveraging on the attraction that batik holds for foreigners.

The promotional event was also enlivened by the Trenggalek batik designing activity, showcased by the renowned Colombian fashion designer, Karen Merlin, before participants and guests. "Obviously, we are very proud of the Trenggalek batik clothes worn by the local models," he added.

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