Dutch FM to visit Indonesia for five days

Jakarta (ANTARA News) - Dutch Foreign Minister Maxim Verhagen is scheduled to visit Indonesia from January 13 to 17, 2009 to promote bilateral ties in several fields and discuss the latest situation in the Middle East, the foreign ministry said. 

During his stay in Jakarta, Verhagen would meet with his Indonesian counterpart, Hassan Wirajuda, and pay a courtesy call to President Susilo Bambang Yudhoyono. 

With Wirajuda, the Dutch foreign minister would discuss several bilateral and regional issues, among other things, cooperation in legal affairs, climate change, development of relations between ASEAN (Association of South East Asian Nations) and the European Union (EU), and international issues including the Middle East. 

Verhagen is also slated to hold talks with Law and Human Rights Minister Andi Matalatta before visiting Yogyakarta on January 15. 

During his stay in Yogyakarta, Verhagen would hold talks with Yogyakarta Governor Sri Sultan Hamengku Buwono X, observe two primary schools namely SDN 1 and 4 in Kalikebo village, Klaten district. 

Both schools which were seriously damaged by a devastating earthquake in May 2006, had been renovated by the country`s foreign ministry. 

Indonesian-Dutch relations in the political and economic fields continuosly impoved in recent years, the foreign ministry said in a statement. 

On economic cooperations, the two countries` trade value on January-September 2008 period reached US$3.31 billion, or up by 52.5 percent compared to the same period of the previous year amounting to US$2.17 billion. 

In 2007, the Netherlands was the tenth largest investor in Indonesia with the total value at US$147.2 million which involved 27 projects, the statement said. 

In addition, the Dutch government also provided humanitarian and development aid worth US$20 million to Nanggroe Aceh Darussalam (NAD) province and Nias district Island in North Sumatra province which were severely damaged by an earthquake and tsunami on December 26, 2004. 

The Dutch government had also promised another 141 million euro for the reconstruction process in the two provinces. 

The statement said further that the Dutch government extended other financial aid worth US$2.5 million for reconstruction process of damaged public facilities in Yogyakarta which was hit by an earthquake and 500,000 euro for the rehabilitation of 10 schools in Klaten and Bantul districts in Yogyakarta province and another one million euro for flood victims in Jakarta. 

Indonesia also received Dutch government assistance amounting to 20 million US dollars through the World Bank to improve basic education, the statement added.

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President asks business community to lower commodity prices

Jakarta (ANTARA News) - President Susilo Bambang Yudhoyono wants the business community to be "fair and just" with regard to basic necessary prices and transport fares in light of the domestic fuel oil price cuts the government announced in December last year. 

Finance Minister Sri Mulyani who is concurrently acting coordinating minister for economic affairs said the president had voiced the expectation at a limited cabinet meeting at his office on Friday. 

The meeting was also attended by MS Hidayat, chairman of the Indonesian Chamber of Commerce and Industry (Kadin). 

"Most importantly, the president asked the business community to be just and fair to the people at large by lowering the prices of basic necessaries and transport fares," Sri Mulyani said. 

The president at the meeting asked Kadin chief MS Hidayat to seriously consider the sharply reduced global oil price which should obviously have affected the business community`s production costs which, in turn, should have been reflected in the final prices of its products. 

The finance minister said all parties, the business community in particular, should be transparent and serious in helping to realize the government`s desire to have the basic necessary prices and transport fares in the country lowered. 

Therefore, Sri Mulyani said, a meeting between the government and the business community under the supervision of Kadin would be held at the presidential office on January 12 to facilitate good communication between the two sides. 

"It will be a two-way communication. The government has lowered domestic fuel oil prices and the business community should have reduced the prices of other commodities accordingly without any excuse," Sri Mulyani said. 

Commenting on Kadin`s proposal that the government reduce the premium gasoline and diesel oil prices by another Rp500, Sri Mulyani said it would be evaluated on January 15, 2009. 

Kadin chairman MS Hidayat said at the limited cabinet meeting, if the proposal to reduce the fuel oil prices by another Rp500 was accepted by the government, public transport fares and the prices of several basic necessaries would probably drop by 10 percent. 

If Kadin`s proposal was accepted, the premium gasoline price would be lowered to Rp4.500 per liter and the diesel oil price to Rp4.300 per liter. 

In addition, Kadin also asked that an economic stimulus be given to state electricity company PT PLN in the form of a subsidy so that the company could reduce its electricity tariff for industries.

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So far so good

Indonesia's economy and the election 

Jan 8th 2009 , The Economist | JAKARTA,  (From The Economist print edition) 

The president has quite a good crisis 

WITH only three months until parliamentary elections, Indonesia’s six-month-old campaign has moved up a gear. For once, thanks to the global economic slump, it as much about substance as about style and personalities. And, unlikely as it seemed six months ago, President Susilo Bambang Yudhoyono’s government can hold its head pretty high. 

The data suggest the fourth-quarter slowdown in Indonesia was much less pronounced than elsewhere in South-East Asia. Economic growth for 2008 as a whole is likely to exceed 6%. Many other indicators are also robust. The 2008 budget deficit was 0.1% of GDP and the government has earmarked $3.5 billion to spend on tax breaks and infrastructure projects. 

In late 2008 the currency, the rupiah, lost a fifth of its value against the dollar, but the slide has halted. The cost of insuring Indonesian government bonds against default has come down sharply. Inflation, still running at an annual rate of 11%, is falling, enabling the central bank this week to cut its benchmark interest rate by one-half of a percentage point, to 8.75%. 

Most banks are healthy, thanks to radical reform after the Asian crisis of a decade ago. And in 2008 the country achieved rice self-sufficiency for the first time in 24 years. Manufacturing is starting to feel the heat but only 25,000 workers have been laid off since November. And, according to research by the Asia Foundation, an American NGO, the huge informal sector has yet to feel much of an impact of the crisis. 

President Yudhoyono can certainly take some credit for all this. He courted unpopularity by raising the prices of government-subsidised fuel when oil was soaring last year, and has now been able to cut them twice. Measures have been taken to support the financial sector and the poorest in society, and his stimulus package will both offer tax incentives and finance additional infrastructure projects. Moody’s, a credit-rating agency, gave Indonesia a “stable” outlook in its annual report this week, expecting the authorities to manage the impact of the crisis competently. 

Factors that have nothing to do with the president’s policies are also helping. Domestic demand accounts for two-thirds of GDP, so though Indonesia remains vulnerable to sharp falls in the prices of commodities such as coal and palm oil, collapsing exports will not hit it as hard as its neighbours. The lack of infrastructure development in recent years means a few billion dollars will have a much greater impact than it might otherwise have done.

The government, however, needs to get the funds flowing fast and it is bad at disbursing money quickly. It also needs consumers to keep spending. Here the signs are ambiguous. Many Indonesians are not savers by nature. Yet carmakers, for example, are predicting a 25% contraction in sales. Food producers are less gloomy. 

However, Indonesia, which suffered worse than any of its neighbours in the crisis of the late 1990s, has not yet weathered this one. It is handicapped by the weakness of the rule of law, the poor investment climate, labour militancy and creeping protectionism. 

The elections pose another hazard: the extent to which government ministers are ready to put the country’s interests ahead of their parties’ electoral prospects is in doubt. And then there are the global unknowns that could wreak havoc. But Mr Yudhoyono is probably sleeping better these days than most of his regional counterparts; and better than he himself could have hoped just a few months back.

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Central bank responds to critics with sharp rate cut

Mustaqim Adamrah, The Jakarta Post, Jakarta | Thu, 01/08/2009 7:03 AM  

The central bank has given the corporate sector hope by slashing its benchmark interest rate for the third consecutive month in a bid to cushion the impact of the global economic slump and amid a recent slowdown of inflation. 

Bank Indonesia (BI) gave the first signs Wednesday it was willing to slacken its monetary policy, with a rate cut of 50 basis points to 8.75 percent, which according to analysts is the steepest single cut in more than 12 months. 

The central bank slashed the rate to 9.50 percent and later to 9.25 percent in November and December, respectively, after raising it for six consecutive months from 8 percent starting May last year.

“BI has made the decision after considering the country’s monetary condition and the economic prospect in 2009,” said BI governor Boediono. 

“It is possible that the rate will be lowered again later if inflation can stay at near 5 percent,” he said, adding that BI would evaluate the impact of the rate cut periodically. 

BI has been widely criticized by businesses for its defensive monetary policy at a time when the corporate sector is in dire need of access to low-cost loans to help spur the economy due to the global economic crisis. 

Indonesia is targeting to secure an economic growth of between 4.5 and 5.5 percent this year, with a key driver expected to be domestic consumption.  

Boediono said he believed the 0.04 percent deflation rate in December, which capped 2008 with an inflation rate of 11.06 percent, had in part encouraged BI to loosen its policy. 

BI has forecast an economic recovery will begin in the fourth quarter of the year, driven mainly by government spending and domestic consumption. 

“Spending on infrastructure and the general elections will bolster our economy this year,” said BI senior deputy governor Miranda Goeltom. 

Indonesian Employers Association chairman Sofjan Wanandi welcomed the cut, saying it was a “good signal” for the business climate. 

“But BI should have gone further by lowering the rate by 100 basis points as jitters over inflation no longer exist.” 

“Most importantly, banks should comply with the cut by lowering their borrowing rates for the manufacturing sector by around 10 percent to 13 percent,” Sofjan said, adding that borrowing costs now averaged between 14 and 18 percent. 

Indonesian Textile Association chairman Benny Soetrisno said commercial banks were still reluctant to lower their interest rates. (hwa)

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Government to Sell More Bonds, Despite Deficit Surprise

Muhamad Al Azhari, The Jakarta Globe, January 8, 2009

A client making transactions at Bank Permata, Jakarta, on Wednesday. (Photo: Safir Makki, JG)

The government will stick with its plan to resort to the debt market to finance this year’s national budget deficit as the unused funds left over from the 2008 budget are to be put towards a proposed fiscal stimulus program, a senior official at the Ministry of Finance said on Wednesday. 

Indonesia recorded a budget deficit of only Rp 4.2 trillion, or 0.1 percent of projected gross domestic product, in 2008, far below the Rp 94.5 trillion, or 2.1 percent of GDP, that had been predicted in the revised budget. 

Basing its calculations on the higher figure, the finance ministry borrowed Rp 55.5 trillion on the debt markets, with most of the money being the proceeds of government bond sales. Subsequently, as a result of the budget deficit coming in much lower than expected, the country was left with funds amounting to Rp 51.3 trillion. 

The government is predicting a deficit of 1.0 percent of GDP in 2009, the equivalent of Rp 51.3 trillion. 

“We will keep selling bonds this year, with a net proceeds target of Rp 54 trillion,” said Rahmat Waluyanto, the director general of debt management at the Finance Ministry, adding that the government would diversify its debt instruments and sales methods to anticipate likely weak demand in the debt markets amid the global recession. 

As to how the government will use the carried-over funds, Rahmat said: “I can’t give you much detail at present, but, as you know, some of the money will be used to finance the fiscal stimulus package.” 

The government announced a plan on Monday to pump Rp 50.5 trillion ($4.64 billion) into the economy in the form of a fiscal stimulus package to ward off possible major job cuts as international demand for Indonesia’s products dissipates. 

Part of the package, worth Rp 12.5 trillion — which will take the form of value-added tax and import duty exemptions for a number of sectors — will be funded by the national budget, while another Rp 38 trillion, made up of the carried-over funds from 2008, will be used to pay for labor-intensive programs and provide support to the private sector. 

But the government is still assessing which sectors are to receive incentives and assistance, saying that further details will be announced within the next two weeks. 

Rahmat explained that in diversifying its debt instruments, the government will issue the country’s first Islamic retail bond, or sukuk, to retail investors in the domestic market in February, and its first yen-denominated bond, or Shiboasai, in the middle of 2009. 

Indonesia will employ Japan-based financial firms to sell the bonds, he said, as Indonesian government bonds are still regarded as being below investment grade. “So, we need people to provide assurances, people to make the arrangements. Preferably, they should come from Japan.” 

One of the reasons the government is considering issuing yen-denominated bonds is because Indonesia’s exposure to the Japanese currency is quite significant, Rahmat said, adding that some 19 percent of the country’s total foreign debt is in yen. If the yen-denominated bonds are successful, he said, the government will attempt to refinance its yen-denominated debt. 

As another example of diversification, Rahmat said the Finance Ministry would also offer short-term debt papers to local governments enjoying budget surpluses as a result of windfall profits they earned when commodity prices hit record highs in the first part of 2008. 

Rahmat did not rule out the possibility of seeking standby loans from multilateral agencies and international donor countries should the government experience difficulties in selling its debt papers, given that the global recession is expected to persist throughout 2009.
 

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Local industry can't use nationalism as smokescreen: SBY

The Jakarta Post, Jakarta | Wed, 01/07/2009 8:00 PM  

President Susilo Bambang Yudhoyono said Wednesday local industries should remain competitive and not hide behind nationalism to keep their business thriving. 

"It is not acceptable to hide behind nationalism, hiding behind sentiments of love for local products, when our industry is not efficient," he said, at the Upakarti award ceremony, an award ceremony for small businesses and handicrafts. 

Yudhoyono added that in the midst of a global recession, it is important for local market to absorb local export products, which would lose its international market. 

Local industries would have to stay competitive with international products, and not increase the prices just because they are locally made he said. 

"If we build that strong base, then sure in a decade's time, Indonesia's economy and market will be strong. There we can sell and develop products for our own people. There is no need to worry about global recession anymore, because we can sell the product to our own market," said the President. (emh)

President Yudhoyono says Indonesian press among freest in Asia

Jakarta (ANTARA News) - In President Susilo Bambang Yudhoyono`s view, the press in Indonesia is one of the freest in Asia, presidential spokesman Andi Malarangeng said here on Tuesday. 

"According to the president, the press is one of the pillars of democracy, and Indonesia can pride itself in the fact that its press is among the freest in Asia," Mallarangeng said after accompanying the president at a meeting with top executives of the Globe Media Group at the presidential office here on Tuesday. 

Quoting the president, Mallarangeng said unlike other Asian countries, Indonesia now no longer had any rules restricting freedom of the press. 

Therefore the president expressed hope that the Indonesian press would be a benchmark in the Asian region. 

President Yudhoyono had also said that news reports in Indonesia were no longer censored and therefore the press had become freer and fairer in providing information to develop the nation`s mentality. 

The president, according to Mallarangeng, supported the existence of independent media that enlightened the people. 

He said the president also welcomed the new emerging media in Indonesia as an industry that created job opportunities for the people. 

"It is not correct to categorize the press in Indonesia as a `sunset industry`. Indonesia is an `emerging country`, a developing country with a developing media industry," Mallarangeng said citing the president. 

Meanwhile, Jakarta Globe manager Sigit Pramono said that at his meeting with President Yudhoyono, he had reported about the Globe Media Group`s activities, including the recent launching of an English-language daily called The Jakarta Globe. 

Sigit said it was the Globe Media Group`s hope that the The Jakarta Globe would be a medium to make Indonesia better known to English-speaking readers.

More companies resort to dismissals: Ministry

The Jakarta Post, Jakarta | Wed, 01/07/2009 11:17 AM  

Up to 700 workers have been laid off less than a week into the year, bringing total dismissed workers since November last year, when the global financial crunch first hit the country, to almost 25,000, says the Manpower and Transmigration Ministry. 

From early November to Jan. 5, the ministry recorded 24,452 workers had been laid off, confirming concerns often aired by businesses struggling to cope in the current adverse economic conditions. 

Myra Maria Hanartani, a director general at the ministry, said Tuesday the layoffs were reported mostly at companies operating in the garment, plantations and forestry industries. 

"Most companies have had to lay off workers because they haven't been able to secure sufficient orders," Myra told The Jakarta Post. 

Registered companies are required to report to the ministry any plans that could result in layoffs, especially of permanent employees. 

In addition to those permanently laid off, 11,703 workers have been temporarily laid off as of Jan. 5. Temporary dismissals mean workers still receive their basic monthly salaries and may be summoned back to work once the company's finances improve. 

Myra said other company reports showed 25,577 more workers could be axed very soon. 

While the government is committed to splashing out Rp 50 trillion (US$4.6 billion) in a stimulus package for industries to help mitigate the global economic fallout, companies hardest hit by the crisis are still expected to resort to layoffs. 

And with the government already forecasting slower growth for more industries this year, more dismissals are expected. 

According to data from the National Development Planning Board (Bappenas), growth in the forestry sector is estimated to fall to negative 1.5 percent this year, following on the negative 0.8 percent notched up in 2008. Meanwhile, growth in the plantations and non-oil-and-gas industries are to drop to 2.5 percent from 4 percent last year. 

Only the mining and oil-and-gas industries are still expected to grow this year, by 2.5 percent and 5 percent respectively. 

Earlier this week, the government announced plans to disburse Rp 50 trillion as a stimulus to keep the economy growing by at least 5 percent. 

The stimulus is expected to cut the open unemployment rate to 8.34 percent, compared to 8.87 percent without the stimulus, according to acting Coordinator Minister for the Economy Sri Mulyani Indrawati. 

National Development Planning Minister Paskah Suzetta said Tuesday the government could provide more than 2.1 million jobs in 2009 -- under the assumption that every 1 percent of economic growth would create 431,000 jobs. (hwa) 

Growth estimates for industries (%)

------------------------------------------------

2007   2008   2009

------------------------------------------------

• Forestry   -1.7   -0.8   -1.5
  
  
• Poultry   3.3   3.5   2.1
  
  
• Power, gas and tap water   10.4   10.5   6.5
  
  
• Plantations   3.5   4   2.5
  
  
• Non-oil-and-gas   5.2   4   2.5
  

------------------------------------------------

Central bank cuts interest rate to 8.75 percent

The Jakarta Post, Jakarta | Wed, 01/07/2009 3:15 PM  

Bank Indonesia (BI) cut its benchmark interest rate by  50 basis points to 8.75 percent on Wednesday on the back of growing deflation following the fall of commodity prices. 

“We made the decision with considering the country's monetary condition and the economy prospect in 2009. We consider that in 2009 the monetary authority needs to be more cautious,” BI Governon Boediono. 

Last month, BI had lowered its key interest rate 9.25 percent to help stabilize the country's macroeconomy. The central bank has estimated that the global economic declines may cause global economic growth to rise by 2.2 percent, slower than the previous 3 percent. (dre)

RI exports still grow by finding new markets

Mustaqim Adamrah, The Jakarta Post, Jakarta | Wed, 01/07/2009 11:18 AM  

Indonesia's exports of non oil and gas commodities will be affected as the global economic downturn slashes demand, although exports could still grow by up to 8 percent this year as firms diversify export destinations. 

Trade Minister Mari Elka Pangestu said Tuesday when delivering her ministry's assessment on export prospects for 2009 that non oil and gas exports would grow by between 4.3 percent and 8 percent. 

Those figures are much lower than the annual average 18.3 percent export growth achieved between 2003 and 2007. 

Even for 2008, when the global slowdown began to hit towards the end of the year, Mari said non-oil and gas exports were still estimated to grow by 18 percent for the year, well above the 14.5 percent target. 

"The estimated growth of 2009's non-oil and gas exports uses a macro model and is based on assumptions about global trade growth, rupiah depreciation (against the US dollar) and (the volatility of) commodity prices," she told a conference. 

Mari said the growth of non-oil and gas exports would much depend on the growth of world's economy. 

The country's non oil and gas exports would grow by 4.3 percent, 6 percent, or 8 percent if global trade grew by 3.4 percent, 3.6 percent, or 4.4 percent, respectively. 

Non-oil and gas exports contribute about 80 percent to the country's total exports. 

Mari also said the projected growth had taken into account government policies in responding to the global economic downturn and their effectiveness. 

"Of the projected 8 percent growth, 3 to 4 percent will be attributable to government policies in anticipating (the impact of) the crisis," she said referring to the government's Rp 50 trillion (US$4.85 billion) stimulus package. 

"The growth would be lower than projected if these policies were excluded, or end up with failure." 

Despite the fairly "small" growth projected in non-oil and gas exports this year, she said the country would still be able to book a surplus as imports would correspondingly follow the decline in exports. 

"Our (2009) trade balance will remain in surplus, with the same amount, or lower than that we booked in 2008," said Mari. 

In an effort to help realize the projected 2009 growth, she said the government would seek new export markets since Indonesia's main traditional export markets, including the United States, the European Union and Japan have all been severely affected by the crisis. 

New markets would include South Africa, Kenya, Nigeria, Egypt and Middle Eastern countries, she said. 

"Iraq and Iran have actually the potential to become our new markets." 

She said the government would redirect the country's top 10 goods categories, sales of which had begun dropping significantly in main export markets, to the new markets. 

The goods categories included furniture, textiles and garments, crude palm oil, construction materials, fisheries and shrimps and footwear. 

-----------------------------------------------------

Year Total exports non oil and gas exports

(US$ billion) ($ billion)

-----------------------------------------------------

• 2004 71.58 55.93
  
  
• 2005 85.56 66.31
  
  
• 2006 100.69 79.5
  
  
• 2007 113.99 91.94
  
  
• 2008* 128.09 100.45
  

-----------------------------------------------------

* Between January and November

Source: The Central Statistics Agency

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Stimulus to spur economy to 5%

Mustaqim Adamrah, The Jakarta Post, Jakarta | Tue, 01/06/2009 7:11 AM  

NEW YEAR, NEW HOPE: Motorcycle drivers park their vehicles near a giant display in front of the Indonesian Stock Exchange on Jl. Sudirman, Jakarta, on Monday. The exchange’s Composite Index surged 6 percent on its first day of trading after being closed for the holiday period. (JP/Arief Suhardiman) 
 

Having earmarked Rp 50 trillion (US$4.9 billion) for a stimulus package to help the country survive the economic crisis, the government said Monday the money could help the economy grow by as much as 5 percent this year and keep the unemployment rate flat. 

At a time when most economies in the world are suffering severe slowdowns, and others are plunging into recession, a 5 percent growth would represent quite an achievement for developing nation Indonesia, acting Coordinating Minister for the Economy Sri Mulyani Indrawati said Monday. 

“We take the moderate 5 percent as our working benchmark this year,” said Mulyani, who is also the Finance Minister, during a discussion with the media and analysts. 

The government had earlier forecast the economy would expand by 4.5 to 5.5 percent with several reputable financial institutions, including the World Bank, the International Monetary Fund and the Asia Development Bank projecting figures of 5 percent or below. 

On Sunday, President Susilo Bambang Yudhoyono said the government had allocated Rp 50 trillion this year to help the economy cope with fallout from the global financial crisis. 

Around Rp 38 trillion of that money will come from what is leftover from the government’s 2008 state budget, and Rp 12 trillion from the 2009 state budget. 

The stimulus will in part come in the form of tax reliefs, direct funding for certain business sectors worst hit by the crisis, additional financing schemes for infrastructure projects and net safety programs. 

“With this stimulus, we hope the economy will keep on running and secure jobs for many people,” Mulyani said. 

The government will ensure the stimulus be given only to industries that meet certain criteria, including industries that are mass employers or that produce primary goods or significantly contribute to exports, according to Industry Minister Fahmi Idris and Trade Minister Mari Elka Pangestu. 

Mulyani said the decline in exports and investment would be compensated by an expansion of government spending and consumption, which she forecast would grow by 10.4 and 4.8 percent, respectively. 

M.S. Hidayat, chairman of the Indonesian Chambers of Commerce and Industry, said the stimulus would help prevent a mass layoffs. 

“As long as it is used properly and reaches its targets, the stimulus will significantly reduce layoffs this year,” Hidayat told a media briefing. 

Mulyani said the stimulus would help reduce the unemployment rate to 8.34 percent by the end of this year, adding that the rate would reach 8.87 percent without the stimulus. 

The Central Statistics Agency announced the “open” unemployment rate increased to 8.39 percent of the country’s total workforce of 111.95 million in August last year from 8.46 percent of the 111.48 million at work in February. 

The open unemployment rate refers to the number of eligible workers aged between 15 and 64 that are unemployed. 

Indonesian shares surged 6 percent, helped by news of easing inflation in December, which could inspire the central bank to cut interest rates later in the week, dealers said. 

Traders also attributed buying to gains in most Asian markets amid hopes for strong action by the incoming administration of US president-elect Barack Obama to improve the US economy. 

On the first trading day of 2009 the Jakarta Composite Index rose 81.93 points to 1,437.34 in moderate volume, with gainers leading decliners 123 to 32. 

The rupiah ended at 11,125 to the dollar, the same level as the close of trade before the New Year break.

Indonesia’s inflation eased to 11.06 percent in December from 11.68 percent in November, mostly on lower fuel prices, which will likely prompt the nation’s central bank to cut interest rates when it meets Wednesday. (hwa)

First-Day Trading

Antara, Mon January 5, 2009, Jakarta 

President Susilo Bambang Yudhoyono (left) accompanied by Finance Minister Sri Mulyani (right) gives his speech after opening share trading at the Indonesian Stock Exchange (BEI) building in Jakarta, Monday (1/5). The composite index was closed 60.170 points higher at midday to 1,415.578. (ANTARA/Widodo S. Jusuf)

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Infrastructure projects key to safeguarding economy

Mustaqim Adamrah and Aditya Suharmoko, The Jakarta Post, Jakarta | Mon, 01/05/2009 11:05 AM  

The government and businesses seem to have agreed on one solution that could mitigate the impact of the global slowdown while also creating millions of new jobs -- to accelerate government-led infrastructure projects. 

Up to Rp 100 trillion (about US$$9.95 billion) of funds have been set aside to finance projects developing ports, turnpikes, railways, bridges, water irrigation systems and others, with the government already putting out the tenders for some of these projects. 

Sri Mulyani Indrawati, Finance Minister who is also acting Coordinating Minister for Economy, said recently that these ongoing tenders were mostly managed by the Public Works Ministry. 

"I'm asking other government and regional administrative units to follow suit so that infrastructure projects can start no later than Jan. 5," Mulyani said. 

Bambang Susantono, a deputy to the coordinating minister for the economy, in charge of infrastructure, recently said that: "We have begun to tender projects to speed up infrastructure development in 2009. Infrastructure determines (our) competitiveness (with other countries)." 

Funding for infrastructure projects comes from long-term investment, which may be difficult to obtain during an economic downturn as may investors prefer quick-yielding investments. Therefore it rests on the shoulders of government to push these projects, Bambang said. 

Indonesia's economy may grow by as little as 4.5 percent in 2009 due to the global economic downturn, which will hit exports and investment, a drop from the expected 6.1 percent economic growth this year. 

The government has said it will speed up government spending as early as January to boost the economy. In the first three quarters of 2008, the economy grew by 6.3 percent from a year earlier, according to the Central Statistics Agency (BPS). 

Mulyani said that Rp 24 trillion would be channeled to local administrations to strengthen their capacity to implement key infrastructure projects in the regions. 

"We will continue transferring infrastructure funds to regional administrations, and they should increase the share of their budgets on activities that create more jobs," she said. 

In addition to the Rp 24 trillion, the government also plans to spend Rp 72 trillion on numerous infrastructure-related projects conducted by central government units in early 2009. 

Of the total, Rp 25.8 trillion will be spent by the Public Works Ministry, Rp 12.6 trillion by the Transportation Ministry, Rp 4.5 trillion by the Energy and Mineral Resources Ministry, Rp 3.5 trillion by the Trade Ministry, Rp 2.8 trillion by the Finance Ministry, Rp 2.2 trillion by the Religion Affairs Ministry, Rp 1.1 trillion by the Fishery and Maritime Ministry and Rp 1 trillion by the Education Ministry. 

M.S. Hidayat, chairman of Indonesia's Commerce and Industry Chambers (Kadin), said that infrastructure projects were one way to help compensate for possible massive layoffs in 2009 as industries cut production capacity because of weakening demand. 

"The Rp 100 trillion of infrastructure projects would be one way to safeguard the economy from the impact of the global crisis. Kadin welcomes this initiative and will cooperate to help make this program a success," Hidayat said. 

The government has estimated that about $65 billion will be needed in new infrastructure investment in the next three years. It estimates that next year's infrastructure projects would be able to absorb up to 1.1 million new workers.

Govt to spend Rp 50t to stimulate growth

The Jakarta Post, Jakarta | Sun, 01/04/2009 8:11 PM  

 

MEET SUPPORTERS: President Susilo Bambang Yudhoyono greets visitors to the Ragunan zoo on Sunday. -- Courtesy of Presidential Office/Abror Rizki

President Susilo Bambang Yudhoyono said Sunday the government had allocated Rp 50 trillion (about US$4.9 billion) for next year to tackle the consequences of the global financial crisis. 

Speaking to a press conference on the sidelines of his visit to Ragunan Zoo in Jakarta, the President said Rp 38 trillion of the stimulus fund would come from what was left over from the 2008 budget and Rp 12 trillion from the 2009 state budget's reserve fund. 

He said the government's revenue for 2008 was higher than the forecast set in the budget, hence the available Rp 38 trillion. 

He said that consequently the 2008 budget deficit was lower than expected: 0.1 percent of GDP compared to the 2.1 percent stated in the budget.

RI's economy grows 6.2 percent : Ministry

The Jakarta Post, Jakarta | Sat, 01/03/2009 12:03 PM  

Ministry of Finance has said that the Indonesian economy grew 6.2 percent in the 2008 state budget despite global economic crisis influencing the country in the third and fourth quarter, tempointeraktif.com has reported. 

The ministry's spokesperson Harry Z. Soeratin said Saturday that such number was below the assumption 6.4 percent set in the state budget's change in 2008. 

“However, we have been able to achieve inflation at 11.4 percent thanks to the government's decision to lower subsidized fuel prices and enough food supply throughout the year,” he said. (ewd)

Bapepam to revise IPO rules to protect companies

Ika Krismantari, The Jakarta Post, Jakarta | Sat, 01/03/2009 10:33 AM  

The Capital Market and Financial Institution Supervisory Agency (Bapepam-LK) plans revision of the regulations on its initial public offering (IPO) scheme to ensure that firms wanting to go public are better protected from negative impacts of the global economic downturn. 

The revised regulation is expected to be issued in the first quarter of 2009, Bapepam chairman Fuad Rachmany said recently. 

Under the proposed regulation, companies planning to offer their shares to the public for the first time will be given a period of three months after securing Bapepam's approval to implement their plan. 

This is aimed at providing more time for reviewing the feasibility of their IPO, and to give time for reassurance that market conditions would be favorable for generating the expected proceeds despite the uncertainties in the global equity market. 

"We don't want that the market fails to absorb the shares due to unfavorable market conditions once the companies execute their plan for the IPO," Fuad said. 

Under the existing regulation, companies holding Bappepam's IPO approval are required to offer their shares to the public as soon as possible. 

The proposed regulation is a response to the October stock market collapse, in which several companies had to unexpectedly drop their IPO plans over concerns that the sales of their shares could not be fully absorbed by investors. 

While targeting some 25 companies to go public last year, the Indonesia Stock Exchange (IDX) only completed IPO procedures for 19 of them by the end of 2008. 

IDX president director Erry Firmansyah said earlier that 15 companies were planning to launch an IPO during 2009, with 11 of them already in the pipeline, including integrated oil and gas service provider PT Prime Petroservices and telecommunication network service provider PT Power Telecom. 

The stock market has yet to become a fully alternative financing option for the corporate sector in Indonesia, as the role of the banking sector is still considered predominant. 

Around 70 percent of funding for the corporate sector is still therefore being supplied by the banks, with the rest coming from the stock market and bonds. 

The revised IPO regulation will also require firms to get approval from the Bapepam before issuing a full public disclosure on their IPO plan, known also as the prospectus. 

The watchdog will examine the prospectus for any legal and future problems which may potentially cause losses to investors. 

Under the existing regulation, companies can distribute their prospectus to Bapepam and the public at the same time. 

"We don't want a case like PT Adaro Energy to reoccur, in which the public (has) already read the prospectus while Bapepam is still checking it, creating pressures on us later to grant the IPO approval," Fuad said. 

Bapepam drew criticism from analysts over its decision to give approval for the Adaro IPO, which was made in July last year. 

Although the IPO was a success for Adaro, gaining proceeds of Rp 12.3 trillion (US$1.08 billion), some investors thought the company did not merit the permit as it was still involved in a number of unresolved legal disputes. 

Bapepam will also shorten the selling period from a minimum of five days to only one day to make the IPO process more effective and efficient.

Rp 51.3t of unspents funds to cushion economic slump

Aditya Suharmoko, The Jakarta Post, Jakarta | Sat, 01/03/2009 10:33 AM  

After closing the 2008 account, the government still has in its coffers Rp 51.3 trillion (US$4.6 billion) of unspent funds due in part to higher-than-expected earnings and lower-than-estimated expenditure, the Finance Ministry says. 

The unspent funds will be partly used to ease the impact of the global economic downturn, in the form of stimulus for the real sector, and to help plug the 2009 budget deficit currently forecast at Rp 52.73 trillion or 1 percent of the gross domestic product (GDP). 

Projects financed by the unspent funds will be carried out this year, including programs for developing communities in rural areas (PNPM) and the operation of the General Election Commission (KPU) which will organize this year's election. 

Finance Minister Sri Mulyani Indrawati said Wednesday the unspent funds would count as an addition to the stimulus package already included in the state budget for helping industries hit hard by the economic downturn. 

The government may disburse Rp 20 trillion of the unspent funds to add to the Rp 12.5 trillion allocated in the state budget for waived income tax, value added tax and import duties, she said. 

The unspent funds accounted for 5.2 percent of the 2008 state budget which totaled Rp 985.3 trillion. 

In October last year, the government had Rp 120 trillion of idle funds in the central bank. 

While state revenue reached Rp 981 trillion, 9.6 percent higher than targeted, state expenditure remained lower than expected at Rp 985.3 trillion, 0.4 percent or Rp 4.2 trillion below expectations. 

Local governments and infrastructure projects sponsored by several ministries accounted to the unspent fund due to bureaucracy snags and intention by some officials to profit from the interest proceeds from the fund, which was stored in banks. 

Analysts has said a sluggish government spending may slow economic activities, which had been spurred by domestic consumption propelled in part by public fund. 

According to the Finance Ministry, Indonesia managed to post a 6.2 percent growth last year, slightly lower than 6.3 percent recorded in the previous year, despite a slowdown in the third and fourth quarters. 

The figure was based on the realization of the revised 2008 budget, said Harry Z. Soeratin, the ministry's spokesman. 

The Central Statistics Agency (BPS) will announce the official figure in February. 

Meanwhile, 2008 inflation is estimated to reach 11.4 percent, higher than 6.5 percent expected in the state budget assumption. 

"Inflation was managed at about 11.4 percent by controlling the flow and supply of goods and services, as well as by cutting (subsidized) fuel prices two times in December," Harry said. 

The BPS will make an official announcement on December's inflation on Monday. 

Meanwhile, the 2008 budget deficit stood at 0.1 percent of the gross domestic product (GDP), or Rp 4.2 trillion, far lower than the Rp 94.5 trillion earmarked at the start of the year.

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Foreign investors dominate Indonesia stock market

Ika Krismantari, The Jakarta Post,  Jakarta | Fri, 01/02/2009 10:29 AM  

Foreign businesses were still keen to invest in Indonesian stocks last year, shrugging off worries about the future of the bourse. 

A year-end report from the Indonesia Central Securities Depository (KSEI) reveals that foreign investors accounted for the largest portion of investment in the Indonesian stock market last year, with a 67 percent share up from 66 percent in 2007. 

The figures show that foreign investors have confidence in the Indonesian market as liquidity problems in their home countries have forced them to invest in emerging markets, KSEI president director Ananta Wiyogo said recently. 

"Maybe they sold their assets in other countries, but not in Indonesia. We are still attractive to them," he said. 

The Indonesian stock market, whose main index and capitalization fell last year by 49.3 percent and 45.9 percent respectively, will see the return of investment this year on fairly low share prices and still-attractive yields, analysts say. 

Foreign investors have been able to make 15 to 20 percent in yield from investments in the stock market, and will continue to look at Indonesia and other emerging countries as they earn less from investments in developed countries. 

Foreign investors had left the market during the October collapse, but had now started to return and this trend is likely to continue this year, analysts say. 

While still dominating the capital market portfolio, asset value held by foreign investors declined by 45.7 percent to Rp 646 trillion (US$60.07 billion) by the end of last year, from Rp 1,191 trillion in 2007, as impacts of the global financial downturn impacted stock value. 

Local investors accounted for 33 percent of the market in 2008 with stock assets worth Rp 210.2 trillion, down from Rp 400.9 trillion in 2007. 

According to unofficial reports, less than 1.5 million Indonesians have investments in the Indonesian stock market. 

The Indonesia Stock Exchange (IDX) has targeted to attract 2 million local investors last year and again this year. 

Indonesia's largest institutional investor in the local stock market is the PT Jamsostek state pension company.

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SBY issues decree on maintaining rice self-sufficiency

Aditya Suharmoko, The Jakarta Post, Jakarta | Fri, 01/02/2009 10:29 AM  

President Susilo Bambang Yudhoyono has issued a decree, effective from Jan. 1, 2009, raising the price the government pays to buy rice from local farmers in a bid to ensure national self-sufficiency amid a time of slowing economic activity and a global food crisis. 

The presidential decree, issued on Dec. 24, stipulates the government will pay Rp 4,600 per kilogram to buy rice from national farmers, or a 7 percent increase from the current price. The national rice stockpile is controlled by the State Logistics Agency (Bulog). 

Meanwhile, the price the government must pay for unhusked paddy (GKGP) increases 9.1 percent to Rp 2,400 per kilogram, and the price of husked paddy (GKG) by 7.2 percent to Rp 3,000 per kilogram. 

The government will stabilize domestic rice prices by exporting and importing the grain, thus benefiting farmers and consumers. 

Indonesia, Southeast Asia's largest economy, produced 38.6 million metric tons of milled rice in 2008, a 5.5 percent increase from 2007, enabling the country with 230 million people to meet national demand, which was 37 million tons last year. 

Bulog's total rice stockpile stood at 1.4 million tons at the end of 2008. 

Rice output may jump to 40 million tons this year, which would open the door for the country to export a maximum of 2 million tons, which would be the largest amount in 50 years. 

The government plans to maintain national rice self-sufficiency this year by encouraging farmers to use certified paddy seeds and fertilizer, according to deputy to the Coordinating Minister for the Economy, Bayu Krisnamurthi. 

Bayu said the government would continue disbursing rice to the poor in 2009. 

"We'll provide 15 kilograms of rice over 12 months to 18.5 million poor households," he said. 

The presidential decree also encourages investment in rice, but stipulates that owners of rice fields will remain under the supervision of the Investment Coordinating Board. 

Bayu said investors should not be allowed to convert existing paddy fields. 

Key points in the presidential regulation on rice policy: 

1. Encourages use of certified top-quality rice seeds and inorganic or organic fertilizers.
   
   
2. Guarantees aid for farmers suffering losses during post harvest and controls the reduction of irrigation areas.
   
   
3. Facilitates the rehabilitation of land and water catchment areas.
   
   
4. New incentives for investment in rice.
   
   
5. New price for government to buy rice and paddy.
   
   
6. New policies on stockpiling and distributing subsidized rice for the poor, and on the government's control of its rice reserve to stabilize national rice prices, as well as a policy to prepare for emergency situations and disasters.
   
   
7. A policy to stabilize the domestic price of rice.
   
   
8. New export and import policy designed to protect farmers and buyers.
   

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Indonesia Says Economy Probably Expanded 6.2 Percent in 2008

By Naila Firdausi, Bloomberg, January, 2009 05:57 EST

Jan. 1 (Bloomberg) -- Indonesia’s economy may have expanded 6.2 percent in 2008 from a year earlier, even as growth slowed in the second half, the Finance Ministry said. 

Inflation was 11.4 percent last year, higher than targeted, while the budget deficit was lower at 4.2 trillion rupiah ($378 million), the ministry said in a statement. 

In its latest 2008 budget, the government forecast 6.4 percent economic growth, driven by consumption and commodity exports. President Susilo Bambang Yudhoyono yesterday said Southeast Asia’s biggest economy probably expanded 6 percent. 

“Generally, economic indicators in 2008 were good although in the last few months they faced quite heavy pressure due to the global financial crisis,” the ministry said. 

To contact the reporters on this story: Naila Firdausi in Jakarta at nfirdausi@bloomberg.net

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