Special Report: Slowdown jolts RI's commodity-heavy economy

The Jakarta Post, Fri, 11/14/2008 11:04 AM  

The Indonesian economy has been generating lucrative profits from the soaring prices of agricultural commodities during the last two years. Following increasing dependency on this business, the recent slump in commodity prices has severely impacted on the economy. The Jakarta Post business section features a special report on commodity sector problems. Here are the stories:  

For seasonal farmer Alex Sinaga of Tanjungjabung Barat regency, Jambi, the world is tumbling down around his ears after knowing that his October revenue has dropped by a factor of 10 times following the plummeting global prices for palm oil. 

Having previously enjoyed a monthly income of Rp 5 million (US$434 million), six times higher than a university-graduate civil servant in his province, Alex now has to end his shopping spree earlier than expected. 

In Jambi, fresh oil palm fruit bunches are now sold at Rp 200 per kilogram, having dropped like a stone from Rp 1,500 per kilogram a few months ago. 

Alex is just one example of how Indonesians living in rural areas have already taken a severe knock from the global economic crisis earlier than the government has estimated, since the government initially concluded that the full negative impact would not be felt until the first quarter of next year. 

As one of the world's top producers of palm oil, rubber, cocoa and coffee, the Indonesian economy, Southeast Asia's biggest, was making good profits from high agricultural commodity prices earlier this year. 

In the first nine months of the year, exports of crude palm oil (CPO), for example, reached $12.12 billion, or 14.5 percent of the country's non-oil and gas exports, according to the Central Statistics Agency. 

"Commodity prices soared since 2007 up until early 2008. Clearly, Indonesia benefited significantly from commodity trade, as proven by exports and industry expansion," said World Bank chief economist and senior vice president Justin Yifu Lin recently, 

The magnitude of agricultural commodity business is even more significant when remembering that it is estimated to have employed 99.9 million workers, both seasonal and permanent, according to Siswono Yudhohusodo, chairman of the Indonesian Farmers Union (HKTI) advisory board. 

Producing an estimated 18.5 million tons of palm oil this year from more than six million hectares of plantation, Indonesia is the world's largest producer of the commodity. 

However, with slumping demand from the world's largest importers of palm oil -- China, India and Europe -- local palm oil farmers are now likely to seek more loans from the pawnshop to help ends meet. 

The slowing demand has sent the Malaysian CPO benchmark price down to 1,505 ringgit ($419.89) per ton on Wednesday from its peak of 4,486 per ton on March 4, as reported by Bloomberg. 

Indonesian Association of Oil Palm Producers (Gapki) chairman Akmaluddin Hasibuan said the plummeting prices had been exacerbated recently by moves from several countries to intentionally default on purchase contracts due to slow demand. 

Among the importers carrying out this practice are 30 Indian companies. 

"The Indian companies are being unethical by defaulting on their import contracts that have consequently affected our exporters as well as our farmers," Akmaluddin told The Jakarta Post recently. 

"We have filed complaints with the Indian government and Indian oil palm-related trade associations but we haven't received any response yet," he said. 

There are also contract defaulters in the European Union countries and China. 

Indonesia and Malaysia together produce around 85 percent of the world's CPO and account for 88 percent of global CPO exports. 

Last year, Indonesia and Malaysia produced about 17 million tons and 15.7 million tons of CPO respectively. 

Indonesia recorded exports of $5.5 billion in 2007, with more than 75 percent of its palm oil output being exported as CPO, while by contrast Malaysia posted a higher export revenue of $10.4 billion, with 80 percent of its output exported as value-added products. 

In a bid to help bolster the CPO price, Indonesia and Malaysia agreed last week to cut palm oil output by 75,000 tons and around 500,000 to 600,000 tons respectively next year, according to the Agriculture Ministry's director general for plantations, Achmad Manggabarani. 

Indonesia also plans to replant 50,000 hectares of oil palm trees while Malaysia plans to replant 250,000 hectares next year. 

Achmad hoped the prices of palm oil could then reach its commercially viable level of around $700 to $800 per metric ton. 

Meanwhile, Indonesian Vegetable Oil Producers Association (Gimni) executive director Sahat Sinaga said the export drop had actually been developing since 2006 when European countries began to use soybean and sunflower oil as alternatives to CPO for feedstock for biofuel. 

Furthermore, he said, the financial crisis and economic downturn had led some foreign buyers to stop ordering CPO due to the drying up of liquidity in their banks, which had previously helped to finance CPO purchases. 

"Capacity utilization of CPO production is expected to decline to 48 percent by the end of this year, from 52 percent forecast earlier," said Sahat. 

Rubber, coffee and cacao are all experiencing similar problems to those experienced by the CPO sector. 

Indonesian Rubber Association (Gapkindo) executive director Suharto Honggokusumo said the price of natural rubber reached its peak at $3.3 per kilogram on June 27 before slumping to its lowest point at $1.53 per kilogram on Sept. 16. 

The price has since failed to recover. 

With rubber production amounting to 2.7 million tons last year, Indonesia is the world's second biggest rubber producer after Thailand. 

Last week, Indonesia, Malaysia and Thailand , which produce between them 70 percent of global natural rubber production, jointly agreed to cut rubber production by 210,000 tons next year by replanting trees. 

Robusta coffee also fell to its lowest point at $1.5 per kilogram after peaking at $2.5 per kilogram around three months ago, according to the Indonesian Coffee Exporter Association (AEKI) chairman Hassan Wijaya. 

Indonesia is the fourth largest producer of coffee after Vietnam , Colombia and Brazil, producing around 450,000 tons per year of which 250,000 tons are exported. 

Cacao also dipped to around $1,930 per ton from a record high of $3,200 per ton around August, according to Indonesian Cacao Association (Askindo) secretary general Zulhefi Sikumbang. 

Zulhefi, however, said cacao farmers were relatively safe from price volatility. 

"Our farmers are still able to earn profits by selling cacao for around Rp 15,000 to Rp 16,000 per kilogram. They would suffer losses if the price dipped below Rp 11,000 to Rp 12,000 per kilogram," he said. 

Indonesia is the world's third largest cacao producer with an estimated production of 500,000 tons. Ivory Coast and Ghana are the first and second largest. JP/Mustaqim Adamrah

Business community wants government to provide economic stimuli

Jakarta (ANTARA News) - To anticipate the negative impact of the global financial crisis on the domestic economy, the business community in Indonesia is hoping the government will provide economic stimuli, the leader of businessmen's group said. 

"We hope the government can give us economic stimuli to face the possible impact of the global financial crisis on business and industry in Indonesia," Erwein Aksa, chairman of the Association of Young Indonesian Businessmen (Hipmi), said during a dialog on "Economic Outlook 2009" here Wednesday evening. 

According to Aksa, the impact of the global crisis wos already being felt through the tightening of national banking liquidity. 

He said the economic stimuli businessmen expected were among others a cut in the interest rate, and a "blanket guarantee" or "full guarantee" against all funds deposited in banks. 

With the so-called blanket guarantee, businessmen would be able to keep their money in Indonesian banks with confidence. 

The Hipmi chairman said a full guarantee would give the banking world certainty about the availability of funds and thus enable them to allocate more funds for credits. 

Aksa also expressed hope that the economic stimuli would ease the burden of businessmen in facing the impact of the present global economic crisis.

Deutsche Bank does not expect recession in much of SE Asia

Manila (ANTARA News/Asia Pulse) - Deutsche Bank (DB) on Wednesday said a recession can be foreseen for 2009 but not in the Philippines or in Indonesia, Malaysia and Thailand amid the continued spiraling down of the global economy. 

In its Equity Research dated November 12, DB said that despite this projection it forecast these four Asian economies to suffer weaker exports, which in turn would result in slower economic growth.

SBY to join G-20, APEC meets

Desy Nurhayati, The Jakarta Post, Jakarta Thu, 11/13/2008 10:38 AM  

Indonesian President Susilo Bambang Yudhoyono will visit the United States and several countries in South America to attend the G-20 high-level conference in Washington D.C and the APEC Economic Leaders meeting in Peru. 

The prominence of country leaders scheduled to attend the Group of 20 meeting reflects the severity of global concerns, including the need to conduct joint measures to cope with the U.S.-led financial crisis. 

On Wednesday, presidential spokesman Dino Patti Djalal said the conference would produce a joint statement built on discussions involving finance and central bank representatives from the countries in a meeting in Sao Paolo, Brazil, on Nov. 8 and 9. 

In the ministerial meeting, he added, the country members had agreed with Indonesia's recommendation to establish a scheme to finance development in emerging markets. 

G-20 is a dialogue forum of finance ministers and central bank governors of 20 advanced and emerging countries established in 1999 to tackle the Asian economic crisis in the late 1990s. 

The country members represent 85 percent of the world's GDP, two-thirds of the global population, and 80 percent of ownership in the World Bank and the International Monetary Fund. 

The members are Indonesia, Argentina, Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom and the United States. The meetings are also attended by representatives of the European Commission. 

Dino said Yudhoyono would visit Mexico from Nov. 16 to 17 to meet with President Felipe Calderon and chair bilateral meetings. He will also sign with the country a memorandum of understanding on trade, energy, education and agriculture. 

Yudhoyono will visit Brazil from Nov. 18 to Nov. 20, and Peru from Nov. 20 to Nov. 23, he said. 

"This will be the President's first visit to Brazil. It is a response to Brazilian President Inacio Lula da Silva visit here last July." 

Yudhoyono will also visit the ethanol industry center in Riberio Preto and attend a ceremony to mark the 55th anniversary of Brazilian-Indonesian relations in Rio de Janeiro. 

Yudhoyono will also attend a business forum with prominent Brazilian businessmen in the country's capital. 

Yudhoyono will attend the 16th APEC Economic Leaders meeting in Peru's capital Lima, during which he will deliver a keynote speech on economic growth and poverty alleviation during the meeting themed "A New Commitment to Asia-Pacific Development", he said. 

"The President will also hold bilateral talks with Australian Prime Minister Kevin Rudd and Colombia President Alvaro Uribe Velez," Dino said.

 

OECD says developed world in recession

The Jakarta Post 

Pan Pylas, The Associated Press, London | Thu, 11/13/2008 7:06 PM  

The world's developed economies have slid into recession and will shrink further in 2009, a top international organization said Thursday. 

In its latest economic forecasts, the Paris-based Organization for Economic Cooperation and Development said gross domestic product was likely to fall by 0.3 percent in 2009 for its 30 member countries, representing democracies with market economies. 

It said the U.S. economy would contract by 0.9 percent, Japan's by 0.1 percent and the euro area by 0.5 percent. 

Additionally, it was the first time since 1974-5, when they were suffering from the Arab oil embargo and a severe bear market for stocks, that the U.S., Europe and Japan have fallen into recession. 

This time, all three are shrinking in the same year; in the wake of the first oil price shock in 1973, Japan saw negative growth in 1974 folloed a year later by the U.S. and Europe. 

And it was the first time the organization has seen an aggregate shrinkage in its members economies since it started keeping records in 1970. 

The latest forecasts represent a sharp downgrade since the last set in June, when the OECD forecast OECD growth of 1.7 pecent in 2009 and indicated that the worst of the financial crisis might have passed. Since then though, the outlook for the world economy has deteriorated sharply in the wake of the banking crisis, which is rapidly spreading to the wider economy. 

For the fourth quarter, the organization said its members wold likely see a contraction of 1.4 percent on a year-on-year basis, with the U.S. down 2.8 percent, and Japan and the euro area 1.0 percent lower. 

"The OECD area economy appears to have entered recession," said Jorgen Elmeskov, director of the policy studies branch and the OECD's economics department. H said that while the picture was uncertain "projections point to a protracted downturn" with recovery not likely before the second half of next year, with the U.S. leading the way out of recession. 

Key risks include a longer than anticipated return to normal in financial markets, which have fallen sharpl. The OECD's projections assume that the financial stress since the banking crisis exploded in mid-September will prove to be "short-lived" but be followed by an "extended period of financial headwinds" through the end of next year, with conditions then returning to near normal. 

Other hazards include frther failures of financial institutions; emerging market economies being hit harder by the downturn in global trade, and foreign investors turning even more more risk-shy. 

More hopeful possibilities included a quicker than expected adjustment in bank baance sheets following concerted measures by management, central banks and governments around the world to shore up their finances, and more substantial fiscal stimulus measures from governments in the form of higher spending and lower taxes. 

However, Elmeskov said any government measures should be "timely and temporary and designed to so as to ensure maximum effectiveness" and that a credible framework is in place to ensure budget responsibility in the long-term. 

Tax cuts aimed at credit-starved consumers might prove effective, he added. 

This weekend's meeting of the Group of 20 industrialized and emerging economies in Washington is expected to back coordinated tax cuts or spending boosts around the world. 

The OECD also put its weight behind efforts to bolster the regulatory framework for the financial world, in particular to increase transparency and prevent a recurrence of the financial aspects of the crisis, which started with the collapse of the market for bonds based on U.S. mortgages to people with shaky credit.

 "It will also be necessary to re-examine the features of the regulatory and supervisory framework that created incentives for excessive risk-taking and led financial institutions to increase leverage in non-transparent ways to levels that proved to be unsustainable," said Elmeskov. 

Though the leaders of the G-20 will be discussing reform proposals, final agreements on concrete measures are expected to wait until after President-elect Barack Obama enters the White House in January.

Rabobank growth up despite crisis

The Jakarta Post, Wed, 11/12/2008 10:44 AM  

Rabobank International Indonesia is on track to hit 30 percent growth in lending this year despite adverse global economic conditions, having posted a solid third quarter financial performance. 

Loans outstanding as of the end of the third quarter stood at Rp 9.64 trillion (around US$885 million), 30 percent up on the Rp 7.47 trillion booked in the equivalent period a year earlier. 

Of total loans, 52 percent of credits were channeled to small and medium enterprises (SMEs) said Danny Hartono, bank vice president director. 

"We will try to increase the development of our corporate loan sector and we will also continue to concentrate on SMEs," Danny said of the bank's full-year growth target. 

He was speaking during the launch of a new branch office in Jakarta, which was also attended by visiting Dutch Finance Minister Maria Van der Hoeven and Indonesian central bank deputy governor Siti Fajriyah. 

Geert Embrechts, Rabobank's chief financial and risk officer, said that SMEs, food and agriculture, including crude palm oil (CPO) would remain the most promising sectors for credits despite the global financial turbulence and downturn. 

"We expect that the CPO price will stay volatile for six months, but the outlook for this sector remains positive," he said, referring to recent falls in CPO prices. 

Rabobank International Indonesia is the local affiliate of the Dutch financial giant Rabobank, which earlier in the year acquired Haga Bank and Bank Haga Kita. 

After the merger, the new entity's assets became worth a total of Rp 10.2 trillion and it is now considered to be Indonesia's largest international bank in terms of network coverage with around 95 branches, mostly spread outside of Java. -- JP/dis 

 

RI, Dutch business makers encouraged to increase partnership

Jakarta (ANTARA News) - Dutch Economic Affairs Minister Maria van der Hoeven has encouraged Indonesian and Dutch business makers to step up business contacts and partnership among them, although global economic development was at its slow pace. 

"We want to improve Dutch and Indonesian bilateral relations and therefore the business makers of the two countries should as well step up their business contacts and partnership," van der Hoeven said at a banquet here on Tuesday evening. 

Present at the banquet, hosted by the two countries businessmen, were among others Indonesian Trade Minister Mari Elka Pangestu, State Minister for State Enterprises Sofyan Djalil, Dutch ambassador to Indonesia Nokolaos van Dam, and Indonesian ambassador to the Netherlands J E Habibie. 

On the occasion, the Dutch economic affairs minister said the businessmen of the two countries should strengthen their business contacts because there were a lot of business opportunities in various sectors that they could develop. 

She said the Netherlands had a lot of investors in Indonesia with a total investment of US$147.2 million from 36 projects in 2007. 

The Dutch investors in Indonesia were investing in various sectors such as dairy product, oil and gas, and mineral including their supporting services. 

Dutch companies such as Shell and Unilever have been operation in Indonesia for a long time. 

The country also has a good reputation at technological sector in Indonesia such as water management, sanitation, agriculture, finance and service, and food products. 

Meanwhile, Dutch Ambassador to Indonesia Nikolaos van Dam said the two countries businessmen could complete each other in stepping up business contacts and parnership. 

"The presence of Dutch businessmen in Indonesia will further strengthen economic partnership between the two countries," van Dam said.

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Indonesia to be self-sufficient in rice, corn in 2009: President

Sukabumi (ANTARA News) - President Susilo Bambang Yudhoyono said he expected Indonesia to become self-sufficient in rice and corn this year. 

"If nothing intervenes, we are going to be self-sufficient in rice and corn this year," Yudhoyono said when attending a Bernas hybrid rice grand harvest at Jerung Nyelap hamlet in Situmekar village, Sukabumi district, on Wednesday. 

The head of state said in its efforts to make the country self-sufficient in food, the government was continuing to provide farmers with sufficient land for rice planting, watering facilities, high-yield variety seeds, subsidized fertilizer, and agricultural extension. 

"To prevent national development activities from using up all available land, the government is also building agricultural infrastructure facilities, including irrigation works," the president said. 

The head of state said domestic rice production had increased dramatically in the past four years , namely from 51 million tons of unhulled rice in 2005 to 54 million tons in 2006, 57 million tons in 2007, and a target of 60 million tons for this year. 

"If the target of 60 million tons of unhulled rice is reached this year, it will be a new rice production record in the history of Indonesian agriculture," he said. 

Yudhoyono said the government had a high commitment to striving to achieve self-sufficiency in food, rice in particular. 

"The global food situation is not safe enough so we should be able to meet our own food needs and if we have more than we need, we can help neighboring countries," Yudhoyono said. 

He added that if Indonesia imported rice, it would lose foreign exchange. 

"The uncertain world food situation has caused food prices to soar, and if we do not import rice trade will be more lively," the president said. 

He said government subsidies in the agricultural sector had also continued to rise from year to year, namely from Rp9 trillion in 2005 to Rp29 trillion in 2008, with the figure for 2009 predicted to rise by Rp33 trillion.

Fertilizer subsidy alone rose from Rp2.5 trillion in 2005 to Rp3 trillion in 2006, Rp15 trillion in 2008, and was expected to total Rp17 trillion in 2008.

 

Indonesia May Expand 5% in `Very Challenging' 2009

By Shamim Adam 

Nov. 10 (Bloomberg) -- Indonesia's economy may expand less than expected next year as the world tilts toward a recession, and the government will study ways to provide fiscal stimulus to sustain growth, Finance Minister Sri Mulyani Indrawati said. 

Signs of a slowdown in Southeast Asia's largest economy may emerge by the year-end after ``very strong'' expansion last quarter, Sri Mulyani said in an interview in Sao Paulo yesterday where finance officials from the Group of 20 nations met. Growth may be as little as 5 percent in 2009, from a previous estimate of between 5.5 percent and 6.5 percent, she said. 

``It will be very, very challenging for us to maintain growth under the current circumstances,'' Sri Mulyani said. ``Just like other developing countries, we have to be prepared for a longer period of weakening in the economy.'' 

The International Monetary Fund last week predicted the first simultaneous recession in the U.S., Japan and euro region in the post-World War II era next year. Central banks in Asia and around the world have slashed interest rates as inflation worries ease, and governments are boosting spending as the world battles the threat of prolonged slowdown. 

``If the U.S. falls into a deep recession then it's possible for Indonesia's growth to slow to as low as 4.5 percent,'' said Purbaya Yudhi Sadewa, chief economist at Danareksa Research Institute in Jakarta. ``I am more optimistic as our economy depends on domestic activity more than before, so even if the U.S. falls into deep recession, we will be the least affected compared with others in the region.'' 

Commodity Prices 

The rupiah has declined 9.7 percent in the past month making it the worst performing among Asia's 10 most traded currencies. It dropped 1.2 percent to 11,025 against the dollar at 10:39 a.m. in Jakarta. 

Indonesia's central bank expects the $433 billion economy to expand as much as 5.9 percent in the fourth quarter, little changed from an estimated 6.3 percent in the third quarter, Deputy Governor Hartadi Sarwono said on Nov. 5. 

Inflationary pressures are easing as commodity prices decline, Sri Mulyani said. Indonesia plans to reduce gasoline prices by 8.3 percent from Dec. 1 on lower crude costs, she said last week. Prices of kerosene and diesel may be cut within two months, according to a newspaper report today citing an Indonesian energy ministry official. 

The decline in fuel costs will probably spur domestic consumption, which the government predicts will support growth next year amid expectations of a weaker agricultural industry hurt by declining commodity prices and as company revenues fall, Sri Mulyani said. 

Fiscal Stimulus 

Indonesia has the resources to provide a fiscal boost to the economy if the government decides to do so, Sri Mulyani said. 

China, the world's largest developing economy, yesterday announced an economic stimulus package worth 4 trillion yuan ($586 billion), or almost a fifth of its output to sustain domestic demand as the global credit shortage drags down growth. 

Still, there is no rush to introduce more of such measures as the government still subsidizes food and fuel costs for many Indonesians and helps the poor among its populace by distributing cash, Sri Mulyani said. 

``In our budget for 2009, we have already provided an allocation that can be used by the government to respond to any worsening situation that may come up from this crisis,'' she said. ``We are still evaluating and looking at the experience of other countries on what is the most effective way to address this situation.'' 

Bond Market 

While emerging economies such as Indonesia can play a part in boosting global growth at a time when advanced countries are slowing or entering a recession, the costs of financing such expansionary policies may be prohibitive, Sri Mulyani said. 

``It used to be very easy for emerging countries with high growth like Indonesia to get capital inflows so they can support economic activity,'' she said. ``Now, capital is quite scarce and it's going to be very costly if we have to issue bonds when the bond market is not functioning normally.'' 

Indonesia will continue to sell debt and ``maintain'' its presence in credit markets as long as rates and the costs of selling such bonds remain ``reasonable,'' Sri Mulyani said. The country has standby loan arrangements with development partners and multilateral organizations that it can tap on if required, she said. 

To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net

Govt supports 3 industries: Shoes, sugar, and textiles

Yuli Tri Suwarni, The Jakarta Post, Bandung | Mon, 11/10/2008 11:17 AM  

The government is expanding its industry revitalization program next year, with footwear manufacturers the latest to join a list of industrial sector subsidy recipients -- in addition to textiles and sugar -- to help renew machinery and boost output. 

The Industry Ministry will facilitate the disbursement of Rp 55 billion in interest subsidies for footwear manufacturers, as part of a total of Rp 360 billion set aside in subsidies for the three industries, director general Anshari Bukhari said Saturday in Bandung, West Java. 

"The funds are allocated on the government's 2009 state budget and have been approved by the House of Representatives," Anshari told a discussion forum. 

This is the expansion of a program started two years ago designed to help targeted strategic industries to bolster production capacity. 

Under this program, which originally only covered the textile industry, the government would subsidize part of the interest rate which banks charged on loans so that manufacturers could buy new machinery. It disbursed Rp 175 billion (US$18.77 million) to 78 textile and garment manufacturers in 2007 and expects to disburse another Rp 210 billion this year. 

For next year, textile and garments makers will be entitled to another Rp 255 billion in subsidies, while sugar factories will be entitled to Rp 50 billion. 

"We expect that this expanded program will not only stimulate investment in the three sectors, but also help improve competitiveness," Anshari said. 

Businesses have welcomed this government program, saying it will definitely help them increase production capacity and benefit their industry as a whole. 

The Association of Indonesia Textile Producers (API) has said that with the program, the industry is optimistic that it can cope with any decline in traditional export markets despite the current global economic downturn. 

It expects total exports to still grow by at least 7 percent next year, mostly resulting from export market diversification. Last year the value of textile exports reached $10.06 billion. 

The Indonesia Footwear Producer Association (Aprisindo) meanwhile said that even this year, the industry was doing relatively well and remained on course to achieving a 10 percent export growth target by end year, probably reaching an export volume of $1.76 billion. 

Meanwhile, ministry director Budi Irmawan said up to 380 footwear makers have so far applied to make use of the subsidy scheme and this volume of demand would likely continue. 

He added that most of the machinery now used by footwear manufacturers dates back to the 1980s. 

Anshari added that the government would in the near future further expand its revitalization program. 

"We're considering providing subsidies for targeted industrial cluster areas in the country. This would not be via an industry-based subsidy, but via industrial clusters. But, we're still working out the details," he said.

 

China Announces 4 Trillion Yuan Economic Stimulus

By Li Yanping and Chia-Peck Wong, Bloomberg 

Nov. 9 (Bloomberg) -- China announced a 4 trillion yuan ($586 billion) stimulus plan to spur expansion in the world's fourth-largest economy, helping sustain global growth as the U.S., Europe and Japan teeter on the brink of recession. 

The funds, equivalent to almost a fifth of China's $3.3 trillion gross domestic product last year, will be used by the end of 2010, the Beijing-based State Council said today on its Web site. China will adopt a ``pro-active fiscal policy'' and pursue a ``moderately loose'' monetary policy, it said. 

China is taking steps to bolster its economy less than a week before Premier Wen Jiabao goes to Washington for talks with global leaders on ways to alleviate the world's biggest financial crisis since the Great Depression. People's Bank of China Governor Zhou Xiaochuan said yesterday boosting domestic demand is the best way China can help stabilize the economy. 

``The downside risks to economic growth are significantly greater now than just a few months ago,'' said Ma Jun, chief China economist at Deutsche Bank AG in Hong Kong. ``China needs an aggressive fiscal stimulus package.'' 

The spending announced today, of which 100 billion yuan is earmarked for this quarter, will cover low-rent housing, infrastructure in the rural areas, as well as roads, railways and airports, the State Council said. The government will also allow tax deductions for purchases of fixed assets such as machinery to stimulate investment, a move that will reduce companies' costs by an estimated 120 billion yuan. 

Manufacturing, Property Slump 

Wen is trying to stop China's economic slowdown from deepening as exports wane, manufacturing contracts and a property slump undermines domestic demand. The central bank has already cutinterest rates three times in two months, reducing the one-year lending rate to 6.66 percent. 

Manufacturing contracted by the most since at least 2004 in October and export orders dropped to their lowest, according to CLSA Asia Pacific Markets. Home sales have plunged in major cities including Beijing and the stockpile of unsold new vehicles was at a four-year high in September. 

China's economy may grow 7.5 percent or less, the slowest pace in nearly two decades, in 2009, according to UBS AG and Credit Suisse AG. Last year, the expansion was 11.9 percent. 

``The golden years have shuddered to a dramatic halt,'' said Stephen Green, head of China research at Standard Chartered Bank Plc in Shanghai. 

To contact the reporters on this story: Li Yanping in Beijing at yli16@bloomberg.net

Standard & Poor's retains stable outlook on Indonesia's debt rating

The Jakarta Post, Jakarta | Sat, 11/08/2008 11:47 AM  

Global rating agency Standard & Poor's (S&P) has maintained its outlook on Indonesia' debt rating as stable, thanks partly to a declining level of debt and improvements in monetary policy management. 

The agency affirmed Monday the country's foreign currency debt rating BB-, which is still third level below investment grade. 

A stable rating outlook means the agency will be more inclined to retain or even raise its rating for Southeast Asia's largest economy. 

A rating upgrade would mean lower borrowing costs for the government and the private sector. 

Central bank governor Boediono welcomed Friday the agency's move, especially as the world is being hit by a devastating financial crisis which has now raised the prospect of a global economic recession. 

"Bank Indonesia sees this as a positive news in particular amid the ongoing turmoil in the global financial system, which has caused international rating agencies to downgrade ratings of both corporations and sovereigns," Boediono said in a statement. 

He said that the affirmation of the rating was down to S&P's favorable opinion on the declining debt level and improvement in monetary policies, in particular those in relation to the country's flexible foreign exchange regime. 

The flexible forex regime allows the central bank to maintain enough liquidity to cushion external shocks. 

The rupiah gained after the agency's announcement. 

The rupiah climbed 0.3 percent to 10,900 per dollar as of 5 p.m. in Jakarta, from 10,938 Thursday, according to data compiled by Bloomberg. It fell as low as 11,225 Friday.

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Poll: Indians, Indonesians most positive in Asia in face of slump

Hong Kong (ANTARA News/dpa) - India and Indonesia have Asia's highest levels of consumer confidence in the face of the global economic slump, according to a survey published Friday.

India ranked first in the global survey of consumer confidence conducted in September and October while Indonesia finished third behind Denmark, the South China Morning Post reported. 

Australia ranked fifth in the survey of 52 countries and territories while New Zealand was joint eighth, Vietnam ninth and mainland China joint 10th. 

The survey was conducted by the market research company Nielsen and ranked consumer confidence on a scale of one to 200. India scored 114, Denmark 112 and Indonesia 110, compared with an average of 84. 

Other countries in the top 10, which included 18 countries because of a high number of tied positions, were the United Arab Emirates, Norway, Brazil, the Philippines, the Netherlands, Switzerland, Canada, Columbia and Venezuela.

Garuda remains optimistic over profit despite crisis

Garuda remains optimistic over profit despite crisis 

The Jakarta Post, Fri, 11/07/2008 10:52 AM  |  Business 

Garuda Indonesia, the nation's flagship airline, remains optomistic that it can improve on last year's profits in spite of the recent sharp devaluation of the rupiah against the U.S. dollar. 

"We are still positive about our operating profit despite the depreciation of the rupiah. Thus far, we have recorded a substantial income," Garuda's president director, Emirsyah Satar, said. 

The value of the rupiah depreciated from Rp 9,330 on Sept. 24 to Rp 10,920 on Wednesday. 

"However, we have not calculated the foreign currency loss due to the rupiah depreciation in our budget," said Emirsyah, an elementary school buddy of U.S. president-elect Barack Obama. 

According to Pujobroto, Garuda's vice president corporate secretary, during the first eight months of this year Garuda gained a net profit of Rp 272 billion (US$27.2 million), an increase on the Rp 259 billion made in 2007. 

Pujobroto said the company had also benefited from the decline in fuel prices, which allowed it to lower the fuel surcharge paid by passengers. 

International crude oil prices plunged from a record high of $147.27 a barrel in July to $68 a barrel on wednesday. 

"We have not felt the impact of the global economic crisis yet, but we must be alert to an expected slow down in demand for flights in the foreign market," Pujobroto said. 

Garuda, which has received approval from the House of Representatives to go public next year, might delay the sales of its shares on the capital market due to the global economic crisis, he added. 

According to the plan, Garuda is to sell 30 percent of its shares in 2009 in order to improve the company's financial state. (JP/dis)

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Singapore Airlines profit drops on fuel costs

SBY congratulates Obama

The Jakarta Post, Jakarta |  Wed, 11/05/2008 3:03 PM  

President Susilo Bambang Yudhoyono congratulated Barack Obama after the U.S. senator successfully won the presidential elections on Wednesday. 

In a statement delivered at the Presidential Palace, President Yudhoyono went on to congratulate the American public for the successful running of the elections, Antara news agency reported. 

"On this opportunity, I would like to congratulate Senator Barack Obama for his success in becoming the President of the United States in the coming term and I also congratulate the American public who have used their political rights in supporting the presidential elections," Yudhoyono said. 

Yudhoyono added that he looked forward to enhancing bilateral relations in a just and constructive manner so as to deliver justice and prosperity for both parties under the Obama administration. 

Yudhoyono said he was also hoping Obama's connection with the country --Obama had lived part of his childhood in Jakarta--would facilitate the delivery of a new chapter in U.S.- Indonesia ties. 

The congratulation address was given right after Senator John McCain conceeded to Obama's victory. 

Yudhoyono applauded the political maturity of the American public, which he had deemed politically ethical.

Regions told tender early, help growth

The Jakarta Post, Jakarta | Tue, 11/04/2008 10:36 AM

The government urged local administrations Monday to start by the end of this year the tender processes for procurement for projects allocated in the 2009 regional budgets, to help bolster national economic growth, despite the global financial crisis.

"The government's spending is needed to keep growth at above the 6 percent level," said State Minister of National Development Planning Paskah Suzetta, Monday, during a meeting with leaders from provinces, including governors, spokespersons of local councils and regional treasurers.

"Although the budget will be effective from January (next year), we can prepare all tender requirements from now on," he added.

The global economic downturn, triggered by the sub-prime mortgage crisis in the United States, is drying up market liquidity and weakening the national economy. Early government expenditure (on projects) can be expected to help keep the economy running.

However, director general of financial balance at the Finance Ministry, Mardiasmo reminded local authorities to complete all the requirements needed to get their annual budget support from the central government.

"For example, this year's budget support will expire if regions don't submit their progress reports on local projects," he said.

Only 53.94 percent of the Rp 21.20 trillion (US$1.9 billion) special allocation funds (DAK) for this year, a special budget allocated by central government to support regions in developing their infrastructure projects, had been distributed by October due to late reports on previous projects.

Mardiasmo said that local governments failed to submit project progress reports because they had been late in opening the previous project tenders.

For next year, central government has agreed to allocate Rp 24.8 trillion of DAK and Rp 186.4 trillion of general allocation funds (DAU), another annual budget allocated for regions.

The Central Statistics Agency (BPS) chairman, Rusman Heriawan, another speaker in the meeting, agreed that local administrations had to spend their annual budgets more efficiently and effectively.

"Local administrations tend to spend most of their budget near the end of the year. They should instead spend their budget continuously (during the year) like 10 percent every month," he said. (hwa)

China, Indonesia vow to deepen cooperation

www.chinaview.cn  2008-11-04 13:44:15     

JAKARTA, Nov. 4 (Xinhua) -- Senior leader of the Communist Party of China (CPC), Zhou Yongkang, on Monday pledged to deepen China's all-round cooperation with Indonesia. 

In a meeting with Indonesian Vice President Yusuf Kalla, Zhou, one of the nine-member Standing Committee of the Political Bureau of the CPC Central Committee, reviewed bilateral relations. 

"As two big developing countries in Asia and the world, China and Indonesia share extensive common interests in regional and global issues. The two also have important responsibilities to ensure and promote the regional peace, stability and development," Zhou said. 

On the economic front, the two countries are highly complementary and enjoy a broad outlook for cooperation, he said. 

Zhou said the CPC and the Chinese government valued the strategic partnership with Indonesia and would like to make joint efforts to deepen cooperation in all fields and benefit the two nations. 

Yusuf Kalla said bilateral relations had progressed rapidly in recent years particularly thanks to the joint efforts of the two presidents. 

Yusuf spoke highly of the role of Chinese corporations in Indonesia's energy development, power, telecommunications and other infrastructure. 

He said the stronger economic and trade relations between the two countries would be of special significance to tacking the difficulties resulting from the global financial crisis. 

Later on Monday, Zhou also met with Speaker of the Indonesian House of Representatives Agung Laksono. 

Zhou said the inter-party relationship and legislative ties are important parts of bilateral relations and play a very import role. 

"China pays much attention to developing friendly cooperation with parties and the parliament in Indonesia," he said. 

He said he hoped the two countries would carry out their policies and enhance exchanges in both bilateral and multilateral arenas so as to further promote understanding and friendship. 

Agung said Chinese corporations' investment in Indonesia had kept a robust growth despite the global financial crisis. 

He said Indonesia has seen a huge potential in bilateral trade cooperation. 

The parliament and parties in Indonesia would like to work more closely with Chinese counterparts and make due contribution to deepening bilateral strategic partnership. 

Editor: Yao

President Yudhoyono appreciates Prince Charles` efforts to save forests

Jakarta (ANTARA News) - President Susilo Bambang Yudhyono has expressed appreciation for the efforts of Britain's Prince Charles to save tropical rain forests and his other activities in the nature conservation field. 

President Yudhoyono also appreciated Prince Charles' efforts in finding alternative sources to finance the preservation of tropical forests, presidential spokesman Dino Patti Djalal said at Merdeka Palaca here on Monday, after accompanying President Yudhoyono at a meeting with the British crown prince. 

"The President also appreciated Prince Charles' message to intensify efforts to save forests, not only in Indonesia but also in other countries having tropical rain forests. The presidential lecture (by the Prince) focused on efforts to find a creative way for funding, including from advanced countries and the private sector," Djalal said. 

To follow up Prince Charles' suggestions, President Yudhoyono would assign a high ranking official of the forestry ministry to join a tropical rain forest task force set up by the prince. 

At the meeting, Yudhoyono and the prince also discussed the bilateral ties between Indonesia and Britain and the latter's interest in studying Islam and its relations with the West's civilization. 

"There is a UK-Indonesia Islamic advisory group comprising Indonesian and British Muslim figures to discuss the best ways in introducing moderate Islam and the relations between Islam and the West," he said. 

Prince Charles is on a five-day visit to Indonesia since Saturday.

Medco may postpone 6 mega-projects

The Jakarta Post,   Jakarta   |  Mon, 11/03/2008 9:08 PM 

Indonesia's largest publicly-traded oil company, PT Medco Energi Internasional Tbk., may postpone its plans to construct six energy projects worth US$3 billion (Rp 30 trillion) due to the global economic recession.

The company's chief commissioner, Hilmi Panigoro, said here on Monday that banks should provide 70 percent of the funds needed for the projects, while the remaining 30 percent would be taken from the company's internally generated funds.

"Because of the crisis, banks have tightened their liquidity. Thus, we will possibly reschedule the big projects," Hilmi said, as quoted by Antara news agency.

Although the banks' liquidity was in fact still sufficient, Hilmi said the company was considering postponing the projects because of the possible high bank interest rates resulting from the crisis.

Hilmi said the company had yet to officially review the projects, and that it would keep working on the Senoro Liquefied Natural Gas (LNG) plan that is being financed by the Japan Bank Indonesia's largest publicly-traded oil company, PT Medco Energi Internasional Tbk., may postpone its plans to construct six energy projects worth US$3 billion (Rp 30 trillion) due to the global economic recession.

The company's chief commissioner, Hilmi Panigoro, said here on Monday that banks should provide 70 percent of the funds needed for the projects, while the remaining 30 percent would be taken from the company's internally generated funds.

"Because of the crisis, banks have tightened their liquidity. Thus, we will possibly reschedule the big projects," Hilmi said, as quoted by Antara news agency.

Although the banks' liquidity was in fact still sufficient, Hilmi said the company was considering postponing the projects because of the possible high bank interest rates resulting from the crisis.

Hilmi said the company had yet to officially review the projects, and that it would keep working on the Senoro Liquefied Natural Gas (LNG) plan that is being financed by the Japan Bank for International Cooperation. (ewd)

S'pore looks to Southeast Asia for steadying

Lilian Budianto, The Jakarta Post, Singapore   

The future of Singapore's economy, now teetering on the brink of recession, will rely heavily on how well its Southeast Asian neighbors weather the crisis, says the city-state's trade minister. 

"Singapore's economy depends much on its external trade, so as long as our Southeast Asian neighbors can maintain their growth at 4 to 6 percent, Singapore can avoid any further slide," Trade and Industry Minister Lim Hng Kiang said last week during a press briefing with Indonesian journalists. 

Lim said the Singaporean economy had started to slip into a significant slowdown, with the global financial crisis affecting almost all sectors in the most-developed economy in the Southeast Asian region. 

The government predicts economic growth next year will likely slump to 1.5 percent, half of the 3 percent projected for GDP growth in 2008. 

"Our economy relies on external trade with our G3 partners -- the United States, the European Union and Japan -- as well as with Southeast Asian countries. With the U.S. crisis likely to drag that country down and with recovery unpredictable, we put much hope in our Southeast Asian partners," Lim said. 

Singapore's trade with regional partners accounts for one-third of its external trade, with Malaysia topping its trade list, followed by Indonesia and Thailand. In 2007 Singapore's total trade reached S$847 billion (US$576 billion). 

Lim said that with domestic consumption in the region yet to show signs of slowing down, there was high optimism that growth predictions of 4 to 6 percent were reasonable despite the global downturn. 

Indonesia, the biggest economy in the region, is aiming for a growth rate of 6 percent in 2009. 

Lim said Singapore's recovery would also rely on the resiliency of two other rising Asian economies: China and India. The former is now Singapore's third biggest trading partner. 

"Greater Asia is still very promising, with China predicting growth of between 8 and 9 percent and India between 6 and 7 percent. We hope they are able to keep that momentum going and keep projecting positive growth," Lim said. 

He said 2009 would be a slow year for Singapore, with the global economy continuing to see a downturn. 

"Confidence in the economy will remain low next year around the world as fears of credit-card and mortgage defaults will continue," he warned. 

In addition, Lim said he was wary of the slight rise in the unemployment rate, with the manufacturing and financial-service sectors among the first to be affected. Last year Singapore's unemployment rate stood at 2.1 percent. 

As it seeks to avoid financial havoc, Lim said the government would look for new markets to compensate for the slowing demand from its Western markets. 

"China, India, Latin America and the Middle East still have big potential. We are turning to countries with about 6 percent growth," he said. 

Singapore, with a population of around 4 million and no natural resources, has established its economic empire though its manufacturing industries. The manufacturing sector contributes 25 to 30 percent on average to its GDP. 

The crisis in Singapore has started to take its toll on daily life, with consumers cutting spending despite the upcoming Christmas sales season.

The 'Post' wins award for best business reporting

Mon, 11/03/2008 10:26 AM  |  Business 

The Jakarta Post daily newspaper has won an award from The University of Indonesia's School of Economics for the quality of its business reporting and news impact. 

The award was presented by the school's dean Bambang Brodjonegoro to the Post's managing editor Riyadi Suparno in a ceremony at the university's main campus in Depok on Saturday. 

"The Jakarta Post has been chosen for its quality and its high news impact. The stories are concise, exact and explicatory," said one of the judges, Mirza Adityaswara of Credit Suisse, who is also a faculty alumnus. 

Besides the Post, other media outlets awarded for best business reporting include Tempo in the general magazine category, Neraca in the business newspaper category and Investor in the business magazine category. 

The faculty also awarded its alumni for outstanding achievements. The most prestigious award, the Wirakarya Adhitama, was awarded to Widjojo Nitisastro for a lifetime of dedication and extraordinary achievements. 

During the birth of the New Order in the sixties, Widjojo was one of a group of young economists, later dubbed the Berkely Mafia, assigned by then president Soeharto to come up with economic policy recommendations. 

The faculty also awarded its alumni, Sri Mulyani Indrawati, for her achievements as an economic policy maker. Mulyani currently chairs as both acting coordinating minister for the economy and finance minister. 

Recently, Mulyani won the Bung Hatta Anti-Corruption Award for her efforts in laying the ground work for bureaucratic reform within the Finance Ministry, especially in the tax and customs offices. 

The award for the alumni with extraordinary achievement as a businessman was given to Sofyan Wanandi. Sofyan currently manages his business conglomeration, the Gemala Group, and also chairs the Indonesian Employers Association. 

Other faculty alumni that received awards were Arwin Rasyid of Bank CIMB Niaga for the economic professional category, Dhoho Ali Sastro for his social activism and Andrea Hirata for his contribution in arts and culture. Andrea is the author of Laskar Pelangi, a novel recently adapted into a block buster movie with the same title. -- JP

Most Indonesians satisfied with SBY's performance: Survey

The Jakarta Post | Mon, 11/03/2008 4:10 PM  

A recent survey by The Indonesian Research and Development Institute (IRDI) has revealed most Indonesians are satisfied with the performance of President Susilo Bambang Yudhoyono and Vice President Jusuf Kalla. 

The third national survey interviewed 2,000 respondents between Oct. 6 and Oct. 13. 

IRDI's director Nofrida Mandica said here Monday most respondents were pleased with the education, health and security programs implemented by the pair, Antara news agency reported. 

When asked about health and security agendas respectively, 57.9 and 57.6 percent of those surveyed responded positively;  55.5 percent gave positive marks to programs on education; and 52.7 percent approved of corruption eradication efforts. 

Dissatisfied responses clustered around rising prices on necessities and ongoing poverty issues: 63.5 percent of respondents were dissatisfied with programs to control staplefood prices, 52.4 percent were displeased with efforts to solve poverty and unemployment problems, while 49.3 percent were dissatisfied with fuel and gas distributions in the past six months. 

The survey also demonstrates that a large portion of respondents were unfamiliar with initiatives targeting low-income families such as the schoolbook subsidy program (30.3 percent) and the microenterprise credit fund (39 percent). 

"On the positive side, 75.9 percent of respondents were aware of the school operational funds (BOS) program," Nofrida said. (ewd)

RI, Japan turn to bilateral ties amid global crisis

Mustaqim Adamrah and Desy Nurhayati, The Jakarta Post, Jakarta    

Indonesia and Japan are enhancing their bilateral ties with a nine-day Indonesia-Japan Expo held in Jakarta to mark 50 years of bilateral partnership. 

In a speech delivered at the opening ceremony Saturday, President Susilo Bambang Yudhoyono said the two countries' close relationship could be an answer to challenges resulting from global economic turmoil.

 A TOUCH OF TOKYO: Three women clad in the traditional Japanese kimono chat while walking near the venue of Celebrating the 50th Anniversary of Indonesia-Japan Friendship at Kemayoran, Central Jakarta, on Saturday. (JP/P.J. Leo)

"Our bilateral relationship has been getting stronger since its establishment in 1958," he said. 

"This is an asset to us in dealing with global challenges resulting from the energy crisis, food crisis and climate change crisis, among others." 

Among those attending the ceremony were Trade Minister Mari Elka Pangestu, Transportation Minister Jusman Syafii Djamal, Energy and Mineral Resources Minister Purnomo Yusgiantoro, and Culture and Tourism Minister Jero Wacik. 

Former Japanese prime minister Yasuo Fukuda, who is also the Indonesia-Japan Friendship Association chairman, attended the ceremony. 

Bachrul Chairi, head of the Trade Ministry's National Export Promotion Agency (BPEN), which is participating at the expo, said the government would not set any transaction targets at the expo. 

"We only want to show the people how vast the Indonesia-Japan relationship that has been going on for 50 years is," he told The Jakarta Post. 

"With many huge Japanese firms operating here and the high value of Indonesia's exports in Japan, it is affirmed that the two countries depend on each other." 

He said Indonesia imported semifinished products, such as steel for auto components, from Japan, while Japan imported oil, gas, iron ores, nickel, tin, coffee, tuna and shrimp from Indonesia. 

According to the Central Statistics Agency (BPS), two-way trade reached US$30.16 billion in 2007, with Indonesia's non-oil-and-gas exports to Japan standing at $13.09 billion. 

The BPS recorded $18.68 billion in bilateral trade in the first eight months of this year, a 28.5 percent increase from the same period last year. 

Citing the bilateral relationship, Indonesian Chamber of Commerce and Industry chairman M. S. Hidayat said the economic ties had improved, as evident with the August signing of the Indonesia-Japan Economic Partnership Agreement (EPA). 

"Japan has proven its commitment through JBIC (Japan Bank for International Cooperation), which has been financing numerous Japanese projects in Indonesia," he told the Post. 

A Japanese government organization, Japan External Trade Organization (JETRO), also helped Indonesian small and medium enterprises (SMEs) develop their businesses, he said. 

"What the Indonesian government needs to do now is lobby the Japanese government so our SMEs can penetrate the Japanese high-end market equipped with tough requirements."

President: good public services may boost economic growth

Jakarta (ANTARA News) - President Susilo Bambang Yudhoyono has said good public services may boost the country`s economic growth. 

Speaking at a function marking the conferment of prime service awards at the State Palace here late Friday, President Yudhoyono said the economy would grow significantly if the bureaucracy was able to provide public services in a good and transparent way. 

"The economy grew by around 6 percent in the past seven quarters. The economic growth can be boosted by good public services. If good bureaucracy has been formed, I believe the economic growth will increase further," he said. 

Therefore, he called on all sides to take part in creating good public services. 

"In addition, good public services will also help common people get access to cheap, good and transparent services," he said. 

The head of state further asked state apparatuses to make self improvements and abandon the paradigm of being served. 

"Stay away from the paradigm of being served. Instead, you must serve the public well," he said. 

On the occasion, the president conferred prime service awards on representatives of 80 public service units. 

The president also presented tokens of appreciation to 11 chiefs of government agencies for their services in taking the lead in innovating prime services. 

Also present at the ceremony were State Minister for Administrative Reforms Taufiq Effendi, Coordinating Minister for People`s Welfare Aburizal Bakrie, Attorney General Hendarman Supandji, Minister/State Secretary Hatta Radjasa and Cabinet Secretary Sudi Silalahi.