By Palash R. Ghosh | October 2, 2010

Indonesia is one of the “rising stars” of emerging Asia and some economists believe this vast nation will one day become a regional superpower, behind only China and India, as global economic activity increasingly shifts towards east Asia, away from the faltering developed nations of the west and Japan.

The country is delivering a torrid 6 percent annual GDP growth rate. Indeed, the Jakarta Stock Exchange has soared almost 40 percent this year, recently touching a new record closing high.

The Asian Development Bank expects Indonesia to grow its economy by 6.1 percent this year, and 6.3 percent in 2011.

“Economic recovery in many Western countries affected by the global financial crisis is uncertain,” Deloitte Asia Pacific CEO Chaly Mah told The Jakarta Post in a recent interview. “It’s relatively patchy. They are still struggling with economic challenges, and the unemployment rate remains high. There is still no clear sign of economic growth there.”.

Oil company Pertamina employee walks beside oil drums at oil pump station, Jakarta.

Indonesia, boasting a population of 240-million, also features a huge working class population (estimated at 58-million), an expanding manufacturing base, moderate labor costs, a sound financial services sector, tremendous natural resources (including oil and gas reserves), as well as a relatively stable political system.

Exports of commodities are booming, buoyed by reforms and free trade agreements with China and other Asian countries.

“Indonesia has been an open economy for many years, even before the 1998 Asian crisis.” Mah noted. “This is a strong point when compared to other emerging markets.”

Milan Zavadjil, the International Monetary Fund’s representative in Indonesia, said the country ranks just below China and India in attracting foreign investment.

The nation withstood the recent global crisis fairly well, due to its significant domestic demand, and because its banking sector did not participate in mortgage debt securities or other complex financial instruments.

“Indonesia had a very small fiscal deficit, very small borrowing requirements, a low external government and consumer debt, [and] adequate foreign exchange reserves,” said Zavadjil. “The banks were well capitalized and liquid.”

When the central bank of Indonesia convenes next week, it is likely to keep its key interest rate unchanged at 6.5 percent.

“GDP growth remains strong, but the economy is expanding close to its trend rate of 6 percent [per annum] rather than at a faster pace,” said a note from Capital Economics (CE) in London. “In addition, the annual gain in consumer prices has slowed due to lower food inflation at a time when the soaring rupiah is holding down import costs.”

Bank Indonesia said it thinks the 6.5 percent level is high enough to keep inflation pressures contained over the next 12 months. Moreover, 6.5 percent is already high for the region while bank reserve requirements will be lifted from 1 November, to 8 percent from 5 percent.

However, CE believes the tightening strategy adopted by BI is potentially dangerous and demand-side inflation pressures will climb at some point, meaning the current reference rate at 6.5 percent “looks to be on borrowed time.”

CE expects the central bank to start raising rates in early December and that by the end of 2011 this rate will in the 7-8 percent range. Also, CE believes the rupiah currency — which has been allowed to soar more than any other currency in the region in real effective trade-weighted terms — will rise further against the US dollar over the next 12 months.

“Inflation risks are probably being under-played,” CE noted. “The annual gain in headline consumer prices slowed to 5.8 percent in September from 6.4 percent in August. It is probable that food inflation has peaked and will continue to cool.”

However, CE added, core inflation should continue climbing higher on the back of resilient domestic demand.

Source: ibtimes.com

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Indonesia recorded exports of US$13.71 billion in August, while imports reached US$12.22 billion, resulted in a trade surplus of US$1.49 billion, against trade deficit of US$130 million in July, the Central Bureau of Statistic (BPS) announced on Friday.

The country’s exports rebound by 9.8 percent in August from US$12.29 billion in July, and up 30 percent from August 2009.

The August imports dropped by 3.21 percent from July figure of US$12.63 billion, but up 25.89 billion in August last year. Non-oil and gas imports in August totaled US$10.01 billion, down 4.8 percent from July.

In June, the country recorded trade surplus of US$580 million and US$2.47 billion in May.

Non oil-and-gas exports reached US$11.77 billion in August, up 10.94 percent from July and was 32.35 percent higher than in August 2009.

The value of exports in the first eight months to August reached US$98.71 billion, up 40.42 percent from the same period last year, while non-oil and gas exports reached US$81.73 billion, or up 36.25 percent.

The biggest non-oil and gas exports destination in August was Japan worth US$1.4 billion (compared to US$1.37 billion in previous month), followed by China at US$1.24 billion against US$920 million in July and the U.S. at US$1.14 billion (dropped from US$1.28 billion in July).

The combined export value of the three exports destinations in August was 32.17 percent of total exports value. The exports to the EU (27 countries) were valued at US$1.62 billion, up from US$1.52 billion in July.

In the first eight months to August, imports reached US$87.78 billion, or increased 46.9 percent from the same period last year. Non-oil-and gas imports totaled US$70.35 billion, or up 43.56 percent from a year earlier.

Given the above eight months exports and imports data, Indonesia still posted trade surplus of US$10.93 billion, rose from trade surplus in the first seven months of US$9.45 billion.

Source: The Indonesia Today ( roffie@theindonesiatoday.com)

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Are you Mercedes-Benz car owner? Did you know that one of the essential parts of your car is made in Indonesia? Without publicly known, Mercedes-Benz and BMW use exhaust brands made in Indonesia, called Van Volker, whose process is done in Purbalingga, Central Java.

Van Volker variants

The German luxury car company has ordered thousands of units of homemade exhaust (each unit consisting of two pieces) since 2004.

Besides the Benzs and BMW, Van Volker exhausts have also been installed in Japanese car brands.

Credit: CiputraEnterpreneurship.com

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GNFI has posted earlier than Jakarta Tower was being redesigned to make it better-looking and a bit taller. It will be somewhere around 565 m tall now, and make it the tallest building in Southeast Asia. Please also note that Jakarta will also host more tallest buildings, even up to 900 m high (will inform you later on this). Meanwhile, please find the new face of Menara Jakarta, early 2011, it’s hoped that the building work will be started.

Menara Jakarta among other tall buildings - far right

The new face of Menara Jakarta

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Remember GEA? A car brand prototyped by PT Inka in Madiun, and it was one among many brands to be expected to be Indonesian next national car. Even Indonesia has long been known as a car-producing country, and still produces international brands. And PT Inka knows that many Indonesians want to have a home-grown brand.

Then they created GEA, a city-car stands for Gulirkan Energy Alternatif (Rolling-over the Alternative Energy). GEA seems to be a serious player as it then redesigned their prototype to Surabaya-based design-house VORDAVA. Care enough to see how it looks like? Here we go:

GEA's new look

Let’s roll on the road!

Photo source: Vordava

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GNFI once made entry about ZYREX, Indonesia’s very own brand of PC/Laptop/notebook, it got lotsa responses, as many did not realize that it’s and indonesian brand. Indonesia is actually home to some brands of such products, and we’ll deliver them one by one. Let’s start with this one.

Got this from their site www.elevo.co.id

“ELEVO is an independent technology-based company which name is taken from the acronym of EL and EVO. EL is the initial of the belated Mr. Eddy Liew, the founder of Dragon Computer & Communication Group, while EVO is the evolution, vision and mission of which he always believes that to succeed in this computer & communication business, we always have to evolve.

Mr. Eddy liew was also the one of the first men who brought in computer tecnology to Indonesia in the beginning of 1980s era. Eleo in English (noun:elevator) and also in latin (elevo) means to elevate, to raise up, to enlighten.

The brand “elevo” was born in Jakarta on 8th August 2008 (08/08/08) where a team of solid experts who are dedicated and havemany years experience in computer technology were gathered and decidedto collaborate and to realize Elevo vision and mission. PT Elevo TechnologiesIndonesia (ETI) always beleve that the quality of product and the quality of service are two things that you cn not separate. We are here From You and we are here For You.

Elevo simply different!”

Elevo has recently launched a netbook at very low price, onoy Rp.998,000 ro about $100. Let’s grab ‘em.

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Manado city is the provincial capital of North Sulawesi, in the north tip of Sulawesi Island, it is where to start to explore the Minahasa land’s many attractions. Fun-loving and extroverted, the Minahasa people live in neat wood frame houses, with fences and flower gardens, giving Manado a European feel. I myself have never been to Manado, but I heard that it is a place looks like the Caribbean, with people look like Filipinos, and a feel like in southern Europe.

The city’s numerous shops and markets are filled with an abundance of consumer goods and agricultural produce, while behind every building are glimpses of emerald hills and azure sea.

Those with an adventurous palate should try the famously hot and spicy Minahasa cuisine. Time magazine even mentioned in their last edition that Manado is the New Thai for its spicy food. Let’s see the article below:

Manadonese: The New Thai

By Steve Mollman Thursday, Sep. 23, 2010

“With its vivid flavors and tongue-scorching spiciness, Manadonese cuisine might be the new Thai — if only the world knew about it. Good luck with that: tiny Manado city, on the northern tip of Indonesia’s Sulawesi island, is unlikely to produce an international diaspora of restaurateurs anytime soon.

But there is one metropolis where the fare needs no introduction: Jakarta. Options for Manadonese food abound in the capital city. At Chamoe-Chamoe, tel: (62-21) 720 8294, one sip of kuah asam — a sour soup with tasty salmon and hints of lime, basil and lemongrass — instantly reveals a formidable competitor to Thailand’s tom yum.
(See pictures of Indonesia noodle factory.)

For an even better all-around introduction to the full spectrum of the cuisine, head straight to South Jakarta’s Beautika, tel: (62-21) 722 6683, the city’s must-try Manadonese joint. Brace for chaos if you go on a typical weekend afternoon: regulars crowd around metal buffet counters indicating what they want delivered to their tables. Grab a waiter and start pointing.

The key ingredient in Manadonese cooking is chili, which dominates the sambals and marinades (like rica-rica, in which it’s ground with ginger and lime). The fiery must-try dishes include pepes (spicy chicken or fish cooked in banana leaves), cakalang saos (smoked pieces of skipjack tuna smeared with a searing red sambal) and ayam ternate (a dark red chicken with plenty of burn and a hint of palm sugar). The tude daun pepaya mixes smoothly flavored fish with bitter papaya leaves, while the sayur acar — carrots, green chili, cucumbers, shallots and bengkuang fruit all pickled in a vinegar yellowed with ground turmeric — offers plenty of bite. If you want relief from spice, go for the mellow ayam kecap or chicken in sweet soy sauce. Expect to gorge for less than $10 a head.

Beautika’s decor is unremarkable — simple wood furniture, plastic gray silverware containers — and the dining spaces are a little cramped. (A section upstairs feels roomier but gets hot at times.) No matter. As you take one last bite of savory grilled marlin and wipe the perspiration from your brow, you’ll see your satisfaction reflected in others’ faces — and know you won’t be the first to return for more spicy punishment.”

Care enuff to visit Manado, anyone?

Source: TIME Magazine

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Indonesian Special Forces (Kopassus) is arguably on of the best special forces in the world with high capabilities and strength. I was sure it should be in par with SAS of UK, or Navy Seals of the US. Well, you might argue with that, but what I wanna assure you is that you can’t find a special forces with such capacity easily

I think GNFI has posted enough entries regarding Kopassus, now i’d like to share you how one vehicle Kopassus possesses, it’s called the Casspir.

Casspir

Wikipedia says:
“The Casspir is a landmine-protected personnel carrier (APC) that has been in use in South Africa for over 20 years. It is a four wheeled armoured vehicle, used for transport of troops. It can hold a crew of two, plus 12 additional soldiers and associated gear. The Casspir was unique in design when launched, providing for passive mine defence. The main body of the vehicle is V-shaped and raised above the ground, so that if a mine is detonated, the explosion is less likely to damage the crew compartment and kill the occupants. The cross-section of the hull is V-shaped, directing the force of the explosion outwards, further protecting the occupants. The vehicle is also armoured for added mine safety, as well as protection from small arms fire. The Casspir was the inspiration and prototype for the US Marines MRAP project.”

Kopassus with the Casspir (Photo: Kaskus Militer)

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State-owned Garuda Airlines and Krakatau Steel are among a clutch of Indonesian firms planning public offerings as investors clamor to gain a foothold in Southeast Asia’s emerging giant.

Foreigners have been pouring money into the region’s biggest economy, which was largely unaffected by the global financial crisis due to strong domestic demand and limited reliance on wobbly Western export markets.

The Jakarta Composite Index has soared threefold from its low in October 2008, hitting historic highs as the country’s improving prospects continued to attract foreign capital, dealers said.

“Stable economic and political conditions in Indonesia continue to be attractive to international investors,” Sucorinvest Central Gani analyst Gifar Indra Sakti said.

The World Economic Forum’s 2010-11 Global Competitiveness Index rankings, released this month, showed Indonesia as the third biggest mover, up 10 notches to 44th place.

A survey of business leaders from 523 companies by UK Trade and Investment and the Economist Intelligence Unit, published last week, put Indonesia fourth behind China, Vietnam and India as a destination for investment capital over the next two years.

“As (Asia’s) third-fastest growing economy, with huge upside potential for our markets, Indonesia is one of those exciting growth stories and our companies are increasingly receiving wider access to financing,” Indonesia Coordinating Investment Board chief Gita Wirjawan said.

Foreign direct investment in the archipelago of 240 million people — the fourth biggest country in the world by population — soared 53 percent on-year to 35.6 trillion rupiah (four billion dollars) in the April-June period, official figures show.

But analysts said concerns about corruption and the rule of law made equities — rather than direct investments in plant and infrastructure — a more attractive entry point.

Around 20 local companies will have raised more than five billion dollars on the sharemarket by the end of the year if current plans come to fruition. Many say they want to pay off debt and cash up for expansion.

Fourth-ranked lender Bank Negara Indonesia is targeting 10 trillion rupiah in a December rights issue, while another state-owned bank, PT Bank Mandiri, is marketing a 14-trillion-rupiah issue in the same month.

Indofood Sukses Makmur is expecting to raise about 700 million dollars from offering 20 percent of its subsidiary PT Indofood CBP in October.

State-owned Krakatau Steel, the country’s biggest steel producer, aims to list in November.

“Hopefully we can get fresh funds up to 600 million dollars. We plan to use the funds to expand our business and modernize our machinery,” Krakatau president director Fazwar Bujang said.

Another state-owned enterprise, flag carrier Garuda, wants to raise around 300 million dollars to strengthen its capital structure and help fund six new Airbus A330-200 aircraft valued at 1.15 billion dollars.

The airline — which was on an EU safety blacklist from 2007 to 2009 — has announced aggressive expansion plans, codenamed “Quantum Leap”, running through to 2014.

Equities are seen as the easiest way to get into the Indonesian market, with investors regularly citing legal uncertainty, chronic corruption and poor infrastructure as obstacles to direct investment in the mainly Muslim country.

In a major review of Indonesia’s financial stability, the International Monetary Fund warned last week that foreign investors would be cautious until more is done to fight corruption and improve the rule of law.

“Lingering concerns over weak enforcement of the rule of law, transparency, and governance issues weigh on market perceptions. Addressing these weaknesses should be a priority,” it said.

Source: AFP

Popularity: 2% [?]

Author: Thee Kian Wie, Indonesian Institute of Sciences

The Indonesian economy continues to surprise with its very healthy growth rate through the period of global financial crisis. The growth rate, driven by consumer spending, investment, and exports, has surpassed most predictions at 6.2 per cent during the second quarter of 2010. Domestic consumption is robust, investment figures are encouraging and exports are expanding at least as fast as global growth. While monetary policy and financial regulatory concerns remain, Indonesia is well-positioned for broad-based economic growth.

Perception indicators increasingly support the view that Indonesia’s economy is on an upswing. The Japan Credit Rating Agency has upgraded Indonesia’s investment grade from BB+ to BBB; the first in 13 years. Other credit rating agencies, including Fitch, Standard and Poor’s and Moody’s, have also upgraded Indonesia’s sovereign rating. Last year Indonesia was the only member of the G20 to lower its public debt-to-GDP ratio: a very positive economic management indicator.

What is responsible for Indonesia’s surprising growth performance?

Prices have been reasonably stable although inflation is still a worry. Even so, the inflation rate in August 2010 was lower than previously estimated, at 0.76 per cent month-on-month, or 6.44 per cent year-on-year. A major factor accounting for Indonesia’s generally higher inflation was the increase in electricity tariffs in July. And here, even though the direct impact of this increase was higher than expected, the indirect impact appears to have been relatively mild so far. For this reason, the Bank of Indonesia’s decision to keep the policy interest rate at 6.5 per cent for the time being seems sensible.

Meanwhile, Indonesia’s banking sector is in good shape and has successfully weathered the global financial crisis (GFC). It was protected by prudential guidelines and sound banking practices, and is strongly solvent, with contained risk exposure, and solid profitability. The most recent World Bank and International Monetary Fund assessment of Indonesia’s financial system concluded that it is generally healthy, as demonstrated by its success in recovering quickly from the GFC.

On the trade side, there is good news too. Indonesia’s balance of payments during the second quarter recorded a big surplus of US$ 5.4 billion, $6.6 billion during the first quarter. This was due to the good performance of non-oil and gas sectors, a positive natural gas balance, and a surplus in the capital and financial account due to inflows of FDI and portfolio investment.

More specifically, Indonesia’s exports to the developed nations have not substantially weakened, despite apparent signs of a slowdown in these markets. Indonesia also increased its level of imports, with higher capital goods (machinery, mechanical and electrical appliances, and aircraft) inflows.

Unfortunately, green field investment in manufacturing has not mirrored the performance of other sectors. Foreign direct investment (FDI) amounted to US$ 3.7 billion the second quarter of 2010. Near-zero FDI was directed towards manufacturing.

FDI predominantly flowed into the transport, storage and communication sectors (US$ 1.5 billion); mining (US$ 0.6 billion), trade (US$ 0.4 billion) and electricity, gas, and water supply (US$ 0.3 billion). While this is good, more direct investment into the manufacturing sector would lead to higher employment and a faster reduction in absolute poverty. Government estimates identify $210 billion of infrastructure development over the next 5 years, of with almost $100 billion to be funded by the private sector. Strong foreign investment flows are vital Indonesia’s economic expansion plans.

The IMF and World Bank report identified two major issues that urgently need government attention: protection and support of financial regulators, and weak creditor rights.

The creditor rights issue is seen in the ability of large corporate borrowers to challenge contracts through long and arduous court battles. This in turn leads banks to focus on small and medium-scale (SME) lending. Indonesia is ranked 146 out of 183 countires surveyed in the 2010 Ease of Doing Business Index, with outstanding claims taking 570 days to enforce, for 120 per cent of the claim’s cost.

The financial regulator issue specifically refers to the political decision earlier this year to bail out the corruption-tainted Bank Century (now Bank Mutiara). It culminated in the ‘resignation’ of then Finance Minister Sri Mulyani Indrawati, now a World Bank Managing Director). As a result, the pending adoption of the Financial System Safety Net law, which would clarify the responsibilities of various regulatory agencies, is crucial to achieving greater financial stability.

All in all, Indonesia’s economy is in a solid position. While inflationary and regulatory issues remain, with robust growth of the economy Indonesia is poised for increased economic and political influence within Southeast Asia.

Thee Kian Wie is a senior economist at the Indonesian Institute of Sciences (LIPI) in Jakarta and will be presenting the Economics Update at the Indonesian Update [1], to be held at the ANU, September 24-25.

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Source (article printed from): East Asia Forum

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