A worker walks past crates at the Coca Cola Amatil plant in Cibitung, Indonesia, on May 14, 2013. The nation’s strong consumer market is expected to drive investment, the Investment Coordinating Board (BKPM) said. (EPA Photo/Adi Weda)
Growth in the consumer goods and manufacturing sectors will push actual investment in Indonesia to a record high next year, up one-third on the expected 2013 result, a senior government official says.
There will be Rp 504 trillion ($51 billion) in domestic and foreign investment realization next year, a 29 percent increase from this year’s Rp 390 trillion, predicted M. Chatib Basri, the chief of the Investment Coordinating Board (BKPM). The figures do not include the oil-and-gas sector.
Investments already in the pipeline give the government confidence the target will be achieved, said Chatib, who was also last month appointed as finance minister.
“As of last year, the cumulative amount of investment in the pipeline was Rp 860 trillion. Adding to that the first quarter this year, it should be around Rp 1,000 trillion,” he said after meeting with legislators at the House of Representatives building on Monday. “Generally, it takes two or three years for investment to be realized.”
Chatib admitted that the 2014 national elections could put investors in a “wait-and-see” mode, but he said ongoing difficulties in mature economies overseas would make Indonesia appear a more attractive destination.
Chatib said foreign investors would constitute 75 percent to 77 percent of total realized investment next year. “I want domestic investors to contribute 30 percent, but apparently they still need more support,” he added.
Chatib said that Singapore would remain the top source of foreign direct investment in Indonesia due to its status as a financial hub.
“Number two is Japan and followed by South Korea, with the possibility of South Korea surpassing Japan as they are very aggressive [in investing in Indonesia],” he said.
Much of the investment will go to the consumers goods sector, he added, with the mining sector losing its attractiveness due to falling global commodity prices.
The minister said the government hoped that investment from Foxconn, a Taiwan-based electronics maker, is among the Rp 504 trillion in realized investment expected next year.
“Negotiation on Foxconn’s investment is nearing its end. They will start by making phones and then more will follow,” he said of the company that last week signed a deal with Indonesian mobile phone distributor Erajaya Swasembada.
The Jakarta Globe
State-controlled cement maker Semen Indonesia is preparing to set aside $200 million next year to buy a cement company in Myanmar, part of its plans to expand in Southeast Asia region.
“We want to expand in overseas markets and make Semen Indonesia a regional-scale cement enterprise,” president director Dwi Soetjipto said last week in Surabaya.
Dwi said that in overseas ventures, Semen Indonesia prefers to acquire other cement companies that already have factories than to build its own from scratch.
The state-owned cement company is now reviewing three Myanmar cement makers with a capacity of at least 1 million mettrc tons, one of which it expects to acquire. “We are studying three cement companies that have expressed interest in working together. We are cooperating with the Embassy of Indonesia in Myanmar to obtain in-depth information about these companies,” Dwi said.
Semen Indonesia has earmarked $200 million for the acquisition. Dwi said that the company is also seeking external financing, possibly from bank loans or a bond sale. “[Further] external funding this year may not go through, because the acquisition of the Myanmar factory will be completed next year,” Dwi said, adding that the company will have its loan disbursed or bonds issued after the Myanmar acquisition is certain.
Acquiring a cement company in Myanmar could raise Semen Indonesia’s production capacity to 26 million tons a year from its current 25 million tons per year, the largest in the country. “The factory in Myanmar would supply the export market, which is not being met due to the high demand for cement domestically,” he said.
The prospect of purchasing a Myanmar plant marks the largest cement maker in Indonesia’s latest foray into regional expansion.
Last year, the Semen Indonesia acquired a 70 percent stake in Thang Long Cement, a Vietnam-based cement manufacturer, for $157 million.
The company may withhold acquisition of cement companies in Thailand and the Philippines as capacity in the two countries are already excessive, Dwi said.
Domestically, Dwi said, Semen Indonesia aims to complete construction of the plant in Rembang, Central Java and Indarung VI in West Sumatra no later than 2016. Total investment value for the two plants is Rp 7 trillion ($716 million), drawn from Semen Indonesia’s internal cash and bank loans.
The company is currently seeking an export credit agency loan of $300 million to $400 million for the two plants.
“The company has sent loan proposals to several ECAs based in Europe. A European ECA is preferred, since the factory’s machines will be imported from the region,” Agung Wiharto, Semen Indonesia’s corporate secretary, said.
(The Jakarta Globe)
Among Southeast Asia’s main oil and gas producers, Malaysia was ranked 34th in the latest global index that measures the quality of governance in oil, gas and mining sectors of 58 countries, tailing neighbours Indonesia, the Philippines and even poverty-plagued Timor-Leste.
According to the 2013 Resource Governance Index (RGI) published earlier this month, Malaysia’s performance was judged as “weak” by the New York-based Revenue Watch Institute (RWI), a non-profit organisation, monitors policies in resource-rich countries in addressing poverty, corruption and violent conflict.
The index grades each country on four areas: institutional and legal setting; reporting practices; safeguards and quality controls; and enabling environment with the latter looking at how the government manages income from the country’s natural resources based on state-owned companies, natural resource funds and subnational revenue transfers.
Malaysia scored 46 composite points out of 100, on par with west African countries such as Gabon, Guinea and Sierra Leone and just ahead of China, which scored 43 points and ranked 36th out of the 58 countries.
The world’s top performers were Norway which bagged the top spot with its composite score of 98 points out 100, followed by the US (92 points), the UK (88 points) while Myanmar bottomed out with four points.
Timor-Leste which scored 68 points was the highest-ranking Southeast Asian nation, beating Indonesia (66 points) by one step to take the 13th spot. The Philippines came in at No. 23, followed by Vietnam (43) and Cambodia (52).
While Malaysia’s “partial” score of 60 points under its enabling environment, one of the four grading points set by the institute, which it said reflects a satisfactory ranking for government effectiveness, but it noted the country scored low on budget openness and democratic accountability.
The RWI criticised the opaqueness over Petronas’s decision-making policies and the management of the National Trust Fund, set up in 1988 to conserve resource wealth for future generations and which can only be used for development projects.
“While the fund is managed by the central bank, policy decisions are made by the Finance Ministry, which publishes the fund’s balance in annual reports. Its legal framework does not specify the percentage of revenues Petronas is required to contribute,” RWI said.
The federal government also does not report the transfer of the agreed five per cent share of profits to the four oil-and-gas-producing states, also the poorest out of the 13 states, the RWI said.
Malaysia’s performance was also dragged down by its “failing” scores in institutional and legal setting, which was poorer than Guinea’s 86 points, Gabon’s 60 points. Even Sierra Leone scored higher in this aspect, drawing 52 points against Malaysia’s 39 points.
“Malaysia’s ‘failing’ score of 39 reflects an inadequate legislative framework,” the institute reported.
RWI highlighted that the Petroleum Development Act of 1974 gives Petronas the exclusive right to hand out licences and collect payments that include taxes, but noted that the broad policy protected the state-owned oil and gas company from independent scrutiny.
“Some of these revenues cover Petronas’ expenses and are never deposited in the treasury. There is no independent regulator,” RWI said.
The RWI also remarked at the lack of disclosure policies and checks on licensing authorities, which led to it awarding Malaysia a failing grade of 39 points for safeguards and quality controls.
“The legislature does not play a significant oversight role in the petroleum sector,” the institute said, pointing out that Petronas is accountable only to the prime minister, and the licensing process is often used to advance national interests and favour Malaysian companies.
“There is no procedure to appeal licensing decisions,” it added.
It also observed that the Auditor-General reviews the finance ministry’s accounts, but raised eyebrows over the absence of specific audit of oil revenues.
It observed that while Malaysian laws require companies to produce environmental impact assessments, “it is possible for projects to begin before assessments are complete”.
“There is no freedom of information law and the Official Secrets Act restricts disclosure of information deemed crucial to national security,” RWI said.
Selangor state lawmaker Yeo Bee Yin has urged the Barisan Nasional (BN) government to take a leaf from the Pakatan Rakyat’s book and pass into federal law the Freedom of Information Act, as has been done in Penang and Selangor.
Petronas may be among the world’s most profitable firms but the Damansara Utama assemblyman said that the Malaysian public had been denied the trickle-down effect from the state-oil company’s wealth.
“Given the sheer size of monies involved – hundreds of billion of ringgit annually, they [sic] must be legislation to ensure greater transparency and accountability in the petroleum sector,” the DAP’s social media strategist said in a recent statement.
Malaysia is one of Southeast Asia’s leading oil and gas producers and was world’s third-largest exporter of liquefied natural gas in 2010.
The petroleum sector contributed 14 per cent to federal coffers and represented 10 per cent of the national gross domestic product and 20 percent of exports in 2011, the RWI reported.
Indonesia has reformed its clothing industry since the sweatshop-plagued 1990s, and may offer a model for Bangladesh to improving labor standards while also remaining competitive.
While much of the world was reacting to the collapse of the Rana Plaza garment factory in Bangladesh, another clothes-making country, Indonesia, was gripped by its own labor nightmare – the discovery of a kitchenware factory that had held dozens of employees locked in small rooms and deprived them of pay for months.
The case was an extreme example of abuse, but workers’-rights groups say it revealed how even countries that have made progress on improving labor standards are under pressure to cut costs and remain competitive.
A mix of government support and binding agreements between unions and foreign companies have helped give Indonesian workers a voice and improved health and safety, say activists, meaning workers here are more concerned with salaries than ceiling collapses. “We’re much better than Bangladesh in many ways; we have one of the best minimum wages in Asia, and we’re relatively free to form trade unions,” says Surya Tjandra, a labor laws expert at Jakarta’s Atma Jaya University.
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Like much of Asia, Indonesia built its garment industry on the back of a large pool of low-cost labor, starting in the 1970s. But factory conditions have improved since the sweatshop-plagued 1990s. And after Indonesia’s autocratic leader Suharto stepped down 15 years ago, ushering in democracy, labor reforms accelerated.
Former President Megawati Sukarnoputri supported several worker-friendly laws, including a 2003 law that mandates high severance payments. In the past year, minimum wages shot up by as much as 40 percent.
Indonesia’s unions also have grown noisy, frequently taking to the streets to protest low wages and other grievances. They’ve had some success, but still face challenges organizing. Government officials worry that disruptive protests, which occasionally result in violence, could drive away foreign investors.
That’s why big-name brands have a critical role to play in improving factory conditions, say labor activists.
They point to a freedom of association protocol [FOAP] signed in June 2011 by trade unions, supplier factories, and six international sportswear brands – including Adidas, Nike, and Puma – which helps ensure that workers can organize in factories to push for better pay and working conditions. It’s the first such accord worldwide to involve commitments between local labor groups and suppliers and global retailers.
After the accord was signed, a factory making goods for Nike agreed to pay more than $1 million in unpaid overtime to nearly 4,500 workers as part of a settlement with a local union. In April, a supplier for Adidas came to a similar compensation agreement.
An agreement with six companies may be small when compared with the new accord on fire and building safety in Bangladesh signed by dozens of companies. But the six represent the bulk of the global athletic footwear market, which means they have an important role to play in setting industry standards, says Jeroen Merk, a policy coordinator at the Clean Clothes Campaign, one of the organizations that advocated for the protocol.
Accords like the FOAP are important, says Scott Nova, executive director of the Worker Rights Consortium, a labor-monitoring group, because they are binding agreements “that speak to the obligations of factory owners and the brands and retailers.”
Implementation however, remains a challenge. Factories still prevent workers from carrying out union activities; the law allows unions to form but does not set out specific rights that allow them to function. “There have been huge problems with workers being robbed of severance pay,” Mr. Nova says, “and while the minimum wage is substantially higher due largely to massive worker protests, it’s still a poverty wage.”
The minimum wage, set by local governments, ranges from $80 to $160 a month, compared with $37 in Bangladesh and $75 in Cambodia. Indonesia is the world’s 12th-largest exporter of textile products, accounting for roughly 1.8 percent of global demand. In recent years it has lost market share to Vietnam and Cambodia, but its relatively better working conditions could start to draw more orders from foreign retailers.
“We’re well proven in quality and delivery times,” says Ade Sudrajat, the chairman of the Indonesian Textile Association, adding that factories also comply with buyers’ codes of conduct on health and safety, which most major retailers have drafted.
Nike was one of the first companies to create codes governing the conditions at its supplier factories following a series of public scandals in the 1990s that partly involved unpaid workers in Indonesia.
Top 3 and Top 5 of Azerbaijan’s key trading partners for April 2013 formed in non-standard combination – Italy, Indonesia and Germany, and Italy, Indonesia, Germany, Thailand and Russia respectively.
The State Customs Committee (SCC) informs that for Jan-Apr 2013 Azerbaijan’s foreign trade turnover with the ‘out-block countries’ (states out of EU and CIS) totaled $11.567 bn or 49% of country’s overall foreign trade turnover ($5.67 bn), EU countries ($4.603 bn) or 39.7%, and CIS countries $1.29 bn or 11.3%.
For comparison, in 2012 Azerbaijan’s foreign trade turnover with the CIS counterparts made up 10.82%, 15.1% in 2011, 14.47% in 2010, 16.15% in 2009 and 7.21% in 2008 (pre-crisis for Azerbaijan).
At the same time the ‘out-block countries’ became the main commercial counteragents of Azerbaijan for the first time.
For Jan-Apr 2013 Azerbaijan exported to the CIS countries commodities for $3.69 bn (43.83% of entire export ($8.419 bn), although with a fall of 8.7%) and imported for $913 million (rise of 13.5% and 29% of entire import of $3.148 bn). As a result, the country had positive balance of $2.776 bn in trade with the EU countries or 52.7% of net surplus of country’s foreign trade ($5.27 bn).
Over Jan-Apr 2013 export to the “non-aligned countries” increased by 4.7% up to $4.238 bn or 50.4% of total export, while import grew by 6.2% up to $1.4 bn or 45.5% of the total import. As a result, the country received $2.808 bn of positive balance with these countries.
Exports to CIS countries amounted only to $490 million (5.8% of total export) with an increase of 1.4-fold and import $804 million (25.5%) with a rise of 7.3%. As a result, the country had negative balance of trade with them for $314 million.
As of 1 May 2013 Top 5 of key trade partners of Azerbaijan is as follows: Italy with total turnover of $1.707 bn (import from Azerbaijan for $1.6 bn and exports for $67.7 million), Indonesia – $978.725 million ($972.99 million and $5.7 million), Germany – $939.339 million ($707.4 million and $231.908 million), Thailand – $934.768 million ($926.99 million and $7.77 million) and Russia – $904.315 million ($426.696 million and $477.618 million respectively).
Turkey was the sixth trade partner of Azerbaijan with mutual trade turnover of $616.097 million (import from Azerbaijan for $183.457 million and export for $432.639 million).
Then follow Taiwan ($475.819 million, $467.306 million and $7.9 million), India ($430.57 million, $413.88 million and $16.935 million), UK ($410.57 million, $115.05 million and $295.518 million) and U.S. ($359.858 million, $243.9 million and $115.946 million respectively).
Last year Top 3 composed Italy, Russia and the U.S. In 2011, it included Italy, France and Russia, in 2010 – Italy, Russia and France in 2009 – Italy, the U.S. and Russia, and in 2008 – Italy, the U.S. and Israel.
By Susan Fenton
(Reuters) – Indonesia overtook India as the most optimistic consumer market globally, according to a survey by global information and insights company Nielsen.
Japan, where the central bank has aggressively boosted economic stimulus, reported its highest consumer confidence score since 2006 although Japanese were still very cautious about the outlook.
Global consumer confidence rose in the first quarter, with a marked increase in sentiment in the United States, Japan and northern Europe, the survey showed.
Consumers in Europe’s south, where austerity imposed to tackle the region’s debt crisis has helped push unemployment to record levels, remained among the most pessimistic.
Confidence improved in 60 percent of markets globally, compared to only 33 percent in the fourth quarter of last year.
By region, consumers in North America were most upbeat about their spending intentions for the next 12 months, with 42 percent of respondents there saying they planned to spend on discretionary items during the year. That was much higher than the North American average of 33 percent over the past three years and compared with 39 percent in the Asia Pacific region.
Canadians were in the top 10 most optimistic consumers in the latest poll but Nielsen was cautious about the outlook for consumers in the United States.
“Americans are in phase two of the economic recovery, however for many it just doesn’t feel that way,” said Nielsen’s senior vice president, Global Consumer Insights, James Russo.
“Three years of strong gains in the equity market are balanced by five years of declining median household incomes, which highlights the economic divide and precarious state of the recovery.”
The Nielsen Global Consumer Confidence Index rose 2 points in the first quarter to 93, after dipping 1 point in the previous quarter. A reading below 100 signals consumers are pessimistic about the outlook.
Portugal was the most pessimistic market, followed by Greece, although Greece’s score improved from a quarter before.
“We suspect that fears of the European debt crisis spreading beyond recession-stricken southern European countries may have eased in the first quarter,” said Venkatesh Bala, chief economist at The Cambridge Group, a part of Nielsen.
“However, weak labour market conditions in troubled economies, including Greece, Ireland, Italy, Portugal and Spain, and the recent Cyprus financial crisis are further indications of the fragile state of the European economy, which continue to hinder a full recovery in the region.”
Confidence fell in parts of the Middle East and Africa and dipped in Latin America. Egypt’s reading plunged 20 points to 74 while in Saudi Arabia it fell by 17 points to 95.
The Nielsen survey was conducted between February 18 and March 8 and covered more than 29,000 online consumers across 58 markets.
Nielsen Global Consumer Confidence Index in the first quarter, 2013 (change from Q4, 2012 survey in brackets):
Indonesia expects gross domestic product to expand 6.5 percent this year despite a slowdown in the global economy, acting finance minister Hatta Rajasa said on Tuesday.
He estimated 2014 growth at 6.4-6.9 percent, due to increased economic activity during next year’s general and presidential elections.
The economy expanded 6.23 percent in 2012.
Rajasa, who is also chief economic coordinating minister, said the G20 economy’s budget deficit will dip to 1.5 percent in 2014, from 1.65 percent this year.
The rupiah, emerging Asia’s worst performing currency last year, is seen at 9,600-9,800 per dollar next year, around current levels.
The net oil importer estimates oil liftings at 840,000 barrels per day this year, rising to around 900,000-930,000 barrels in 2014.
When Marcos A. Purty arrived here in 2011 as the chief of General Motors’ Indonesian operations, he found a mothballed auto plant.
Marcos A. Purty, the chief of General Motors Indonesia, which has invested $150 million to reconstruct and expand a factory complex in Bekasi.