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Economic Updates:
Optimism on Direction
Singapore-Indonesia Sign
on Economic Coop to Develop SEZ
FDI Up Slightly in First
5 Months
StanChart, Astra to Buy More Bank
Permata
US Exim Bank Provides Trade Facility
Bank Mandiri Targets 257000 EDCs
Indonesia May Host OPEC Summit: Report
Chinese Seek Majority in Tuban Refinery.
LPG to Replace Kerosene by 2012 –
Minister
Rio Tinto Plans to Invest $1 billion
Optimism on Directions
Credit Suisse upgraded its real GDP
growth forecast for Indonesia this year
and Standard Chartered said that despite
slower growth there were indications
that the economy was picking up. Credit
Suisse raised its estimate for growth
this year to 5.6% from its previous
estimate of 5.0%, citing expected
acceleration in consumer spending growth
in the second half of the year, XFN-ASIA
reported.
In what the news agency described as a
bullish report on Indonesia, Credit
Suisse said falling interest rates and
inflation are predicted to boost
consumption. It predicted 6% growth in
2007.Simon Morris, CEO of
Stanchart's Indonesian operations, said
the bank is optimistic about expanding
its business in Indonesia despite slower
than expected economic growth.
"Although slow, the economy is showing
signs of picking up, both from the
consumer and the corporate side. The
retail and consumer banking sector is
very attractive to us. It is a
competitive space to occupy," Morris
told XFN-ASIA in an interview. "We are
generally optimistic about the business
environment and the business prospects
here. We have positioned ourselves so
that we are able to serve our clients as
their business expands," Morris said.
Loan demand from corporations,
particularly for financing new projects,
continues to grow. Figures released by
the Investment Coordinating Board (BKPM)
for the first five months of the year
said actual investment by local
investors jumped by 55% to Rp10.47
trillion compared to the same period
last year. Actual foreign direct
investment (FDI) rose by 5.1% during the
same period.
Trade Minister Mari Pangestu also
presented reason for optimism when she
said that Indonesian and China are
planning to expand bilateral trade to
$30 billion by 2010 from about $12.54
billion last year, The Jakarta Post
reported.
"We're optimistic we can achieve the
target. Our trade has been increasing
significantly during the last 10 years,"
said the minister in a speech read for
her at a seminar organized by the
University of Indonesia on Thursday.
Bilateral trade jumped 43.64% from $8.72
billion in 2004 to $12.50 billion last
year. Indonesian exports to China
climbed 44.68% in 2005 to $6.66 billion.
Imports from China rose 42.46% from
$4.10 billion in 2004 to $5.84 billion
last year.
At the House of Representatives, the
annual budget was being reviewed by the
budget committee, with the GDP growth
forecast for the year downgraded to 5.9%
and setting a target of 6.5% for next
year.
A meeting of the committee with senior
government and central bank officials on
Wednesday (21/6/06) also agreed on a
projected inflation rate of between 6%
and 8%, the exchange rate at Rp9000 to
Rp9500 per US dollar, the interest rate
of three-month Bank Indonesia promissory
notes at 8.5% to 9.5% per cent, the oil
price at $57-65 per barrel, and oil
production at one million barrels per
day, Antara reported.
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Singapore-Indonesia Sign on Economic
Coop to Develop SEZ
Indonesia
and Singapore signed on Sunday
(25/6/06) a framework agreement on
economic cooperation by which the two
nations will establish special economic
zones (SEZ) on the islands of Batam,
Bintan and Karimun. The agreement,
signed by Coordinating Minister for
Economic Affairs Boediono for Indonesia
and Minister for Trade and Industry Lim
Hng Kiang for Singapore, also allows for
cooperation on development of SEZs in
other areas.
"The two leaders believed that the
successful implementation of the
Framework Agreement is important to
guarantee the development of
internationally competitive special
economic zones in the region, and to
serve as a model for the development of
additional special economic zones In
other parts of Indonesia, ft a statement
said. “It is a clear sign of the
political commitment from both sides to
develop this area into a viable and
dynamic center of growth with clear
mutual benefits for both countries.”
Indonesia is developing the SEZ concept
as a means of fast-tracking identified
investment areas. The SEZs will provide
industrial sites with clear
institutional structures, consistent
policy framework, streamlined investment
procedures and other attractions that
are taking time to establish in the
country as a whole. The SEZs planned for
the three islands near Singapore are
expected to concentrate initially on the
development of shipyards and oil service
industries.
"Indonesia won't try to build a
brand-new city from scratch," said the
Wall Street Journal in an
editorial. "Rather, policy makers are
searching for 'economically viable'
areas that have a cluster of businesses
in certain industries and keen local
officials.
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FDI Up Slightly in First 5 Months
Actual foreign direct investment (FDI)
in Indonesia rose by 5.1 % during the
first five months of the year compared
to the same period last year, the
Investment Coordinating Board (BKPM)
reported Tuesday (20/6/06).
The number of mobile phone users is
expected to grow strongly this year,
after expanding by 50% in 2005. Many
experts in the industry predict the
number of mobile phone customers will
hit 100 million by 2010.
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StanChart, Astra to Buy More Bank
Permata
Standard Chartered Bank and PT Astra
International are planning to increase
their stakes in Bank Permata by
acquiring additional shares from state
asset management firm PT PPA, a source
who declined to be Identified told
Bisnis Indonesia.
“They have expressed their intention to
raise their stakes in Permata because in
the near term. PPA will sell its
remaining stake in the two banks (Permata
and Bank Internasional Indonesia),” the
source said recently. PPA plans to
dispose of its remaining 26.16% stake in
Bank Permata and 5.53% holding in BI to
raise funds for the country's budget,
the report said. Standard Chartered and
Astra each holds 31.55% of Bank Permata.
The report also quoted PPA president
Mohammad Syahrial as saying that Astra
and Standard Chartered have requested
information about the method of the
stake sale though he did not confirm if
the two investors are willing to buy.
"We told them that it will be executed
via a market placement, which we think
is the best option:' Syahrial said.
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US Exim Bank Provides Trade Facility
The US Exim Bank has announced a change
in its import policy toward Indonesian
importers and exporters. For the first
time since 1998, export-import funds
will be provided on one – to seven-year
terms depending on commodities imported
and exported by private Indonesian
companies, US Ambassador to Indonesia B
Lynn Pascoe was quoted as saying by
Antara.
The new policy took effect last May 31,
Pascoe said in a statement issued on
Monday (19/6/06). He said the US has
become the largest market for Indonesian
non-oil and gas commodities. He said the
policy is expected to have a positive
impact on opening more jobs both in
Indonesia and the US.
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Bank Mandiri Targets 257000 EDCs
The country's largest state bank, Bank
Mandiri aims to run 25,000 electronic
data capture (EDC) terminals to support
its plan to become a Dominant
Multi-Specialist Bank by 2010, Antara
reported. Bank Mandiri information
technology director Sasmita said on
Wednesday (21/6/06) the bank has 10,974
EDCs installed in 909 branch offices,
2,660 automatic teller machines (ATMs)
and 29 outlets. Next year, it will focus
on some development projects, including
those on customer relationship
management and the Basel II-based
management system.
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Indonesia May Host OPEC Summit: Report
Indonesia has offered to host a summit
of the Organization of Petroleum
Exporting Countries (OPEC) in November,
according to Abdul Gafur, the chairman
of the parliament's team in charge of
Indonesia-Venezuela relations. He told
reporters of the offer after a meeting
with Minister of Energy and Mineral
Resources Purnomo Yusgiantoro, Dow Jones
Newswires reported. “Indonesia is
willing to host the OPEC summit,” he
said. Gafur said he will convey
Indonesia's offer to host the meeting to
Venezuela, a fellow OPEC member, during
his visit to the country later this
month.
Saudi Arabia is also seeking to host the
summit, but some hawkish OPEC members
are resisting the offer of the de-facto
OPEC leader, said an Indonesian official
at the Energy and Mineral Ministry,
according to the Dow Jones report. The
official said Indonesia was regarded as
neutral by other OPEC members.
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Chinese Seek Majority in Tuban Refinery.
Chinese investors want to have a
majority 51 % stake in a $5 billion oil
refinery to be built in Tuban, East
Java, which also involves investors from
Iran and Indonesia. Under a recent
agreement, Indonesia's PT Elnusa is to
own 20% of the project, the National
Iranian Oil Refining and Distribution
Company (NIORDC) will own 30%, and the
remaining 50% will be split
between China National Offshore Oil Corp
(CNOOC) and China National Petrochemical
Corp (Sinopec), Antara reported on
Monday (19/6/06).
Elnusa president Rudy Radjab said the
Chinese investors want the majority
stake to secure supply of the products
to that country. He said negotiation is
underway with CNOOC and Sinopec to
determine the shares for the Chinese
investors. Construction of the project
will start in 2007 and operation will
begin in 2010. Radjab said a final deal
is expected to be signed in August to be
ready for construction next year.
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LPG to Replace Kerosene by 2012 –
Minister
The government plans to fully phase out
the domestic household use of kerosene,
and replace it with liquid petroleum gas
(LPG) by 2012, Mines and Energy Minister
Purnomo Yusgiantoro was quoted as saying
by Dow Jones Newswires last June 16. He
said in the event of a deficit between
domestically produced LPG and local
demand, Indonesia would import the
needed supply from other Asian markets.
The government wants to cut the use of
kerosene to reduce fuel subsidy costs
amid surging prices of crude oil on the
global market. The substitution of
kerosene with LPG as cooking fuel will
help save the government Rp. 21 billion
in fuel subsidies in 2006, government
predictions issued in May indicated.
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Rio
Tinto Plans to Invest $1 billion
The government will not allow
UK-Australian mining group Rio Tinto to
sell its nickel mine in Lasamphala,
Central Sulawesi before the mine has
begun production, a Mines and Energy
Department official said. The
restriction is in the contract that will
be awarded to Rio Tinto in September,
director for mineral resources and coal
management, Mangantar S. Marpaung, said,
XFN-Asia reported on Wednesday
(21/6/06). It is the first contract to
be awarded by the government to have
such a clause. The government will
charge a royalty of 3% of sales, he
said.
Rio Tinto is planning to invest $1
billion in the nickel mine. With the new
investment, the world's third largest
mining company is expected to produce
46,000 metric tons of nickel and employ
about 5,000 workers, the company's chief
executive for copper and exploration,
Tom Albanese, said. “We have been
successful with exploration, but before
we can move to the next stage, we need
to put together a contract of work in
conjunction with the government of
Indonesia and the provinces of
Sulawesi,” he was quoted as saying by
The Jakarta Post after a meeting
with Vice President Jusuf Kalla on
Monday (19/6/06). The government hopes
that the Rio Tinto investment would lure
more investments to the country's mining
industry.
French mining firm Eramet SA recently
announced that it would invest $1.5
billion in a nickel mining project in
Halmahera, North Maluku, through its
newly acquired subsidiary, Weda Bay
Mineral Inc. Indonesia supplies about
16% of the world’s nickel.
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