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Discussion Starter · #1 ·
Indonesia Rupiah Ends At 21-Mo High; Foreign Fund Inflows
311 words
20 April 2006
20:46
Dow Jones Chinese Financial Wire
English
Copyright (c) 2006, Dow Jones & Company, Inc.
JAKARTA (Dow Jones)--The Indonesian rupiah closed at a 21-month high against the dollar Thursday as foreign investors seeking high yields, continued to park their money in Indonesian stocks and bonds, dealers said.

The dollar closed at IDR8,890, versus IDR8,940 Wednesday. Thursday's close is the dollar's lowest since July 12, 2004 when its ended at IDR8,811.

'The equity market has been doing very well lately, and we saw some dollar selling by foreign names to cover their (stock) transactions,' a dealer with a foreign bank said.

The Jakarta Stock Exchange's Composite Stock Index rose 0.8% Thursday to 1,464.528 points, yet another record closing high.

Since October last year, short-term money has been flowing into Indonesia after the government took steps to improve the health of the economy. These funds have been parked in stocks, Bank Indonesia money market securities, and bonds.

Bank Mandiri's chief economist Martin Panggabean told reporters Thursday that Indonesian bond yields are currently around 12%, the highest in the region.

However, he warned that the rupiah is currently overvalued, adding that although it may continue to rise toward IDR8,500 in the near future, it may eventually correct to its 'fundamental value' of between IDR9,700 and IDR10,000 later this year.

Dealers said profit-taking may take place Friday as the market has been caught short on the dollar. But they added that they will sell back the greenback at higher levels.

'I'm still quite bullish on the rupiah,' a dealer with a U.S. bank said.

The U.S. currency is expected to trade between IDR8,850 and IDR8,950 Friday. -By I Made Sentana; Dow Jones Newswires; 62-21 39831277; [email protected]

-Edited by Murugesan Suppayyan
 

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Discussion Starter · #2 ·
Indonesia plans reform to tackle bureaucracy
By Shawn Donnan in Jakarta

Published: April 20 2006 12:52 | Last updated: April 20 2006 12:52

Indonesia is preparing to appoint a special presidential commission to oversee a politically-charged reform of the civil service, the chief economic minister said on Thursday.


The plan is aimed at removing bureaucratic logjams facing foreign investors in south-east Asia’s largest economy. It would mark the latest reform effort by the 18-month-old administration of President Susilo Bambang Yudhoyono, which is seeking to reassure investors who fled following the 1997-98 Asian financial crisis.

However, analysts are already expressing concern about the stalling of other government reforms, often because of opposition from the bureaucracy, a powerful legacy of the Suharto regime.

Boediono, Indonesia’s chief economic minister, said the government planned to appoint a special presidential commission within the next three months.

The commission would not just “make studies and studies,” he said. “This is going to be an institution that is going to deliver things.”

Among the models for the commission is a panel appointed by the Blair government in the UK to oversee civil service reform, the minister said.

Senior Indonesian officials have long cited bureaucratic opposition as one of the biggest barriers to implementing reforms, and the country’s often-maddening bureaucracy can baffle even the biggest of foreign investors.

Amongst those asking questions of Mr Boediono on Thursday was an advisor for BHP-Billiton, the Anglo-Australian mining giant, who complained of confusion over regulations governing mining in protected forests. Those regulations have for years stalled a major nickel project the company wants to develop on a remote island in eastern Indonesia.

Mr Boediono said the government had itself succumbed to bureaucratic opposition. Efforts this year to bring forward government capital spending to stimulate the economy ran into bureaucratic delays and failed, he said.

Jakarta backed down on a business-friendly labour law revision after recent protests and has yet to shepherd amended tax legislation through parliament. A $150bn infrastructure drive is also stuck, contractors say, because of slow efforts to reform land and other regulations.


As of the end of 2005 the Indonesian government employed 3.7m civil servants ,with more than 14,000 new employees joining the public payroll in the past two years, according to official figures.

In a country with rising unemployment – and endemic cultures of corruption and patronage - the job security offered by the civil service is so alluring that annual entrance exams are regularly held in stadiums around the archipelago.
 

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Discussion Starter · #3 ·
Despite slowdown, Indonesia auto sales can motor
Thu Apr 20, 2006 12:26 PM BST
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By Harry Suhartono

JAKARTA (Reuters) - Indonesia's auto industry has plenty of growth potential and could increase by half in the next four years, despite a slump in car sales so far this year due to high fuel prices, the head of the country's second-largest auto distributor said on Thursday.

Gunadi Sindhuwinata, president director of PT Indomobil Sukses Internasional, said car, truck and motorbike sales should grow 10-15 percent a year because of the low number of vehicle owners in a country of 220 million people -- the world's fourth most populous nation.

Sindhuwinata, whose company sells mainly Suzuki Motor Corp. cars and bikes, forecast annual car sales could hit 800,000 by 2010, with motorcycle sales reaching 7-8 million a year by then.

Indonesia's auto sector has been battered since the government more than doubled domestic fuel prices last October, with vehicle sales slumping nearly 45 percent to below 80,000 units in January-March.

"The market can revive. As long as the economy keeps growing, the market will expand by at least 10-15 percent a year. That's the minimum level assuming economic growth of around 6 percent," Sindhuwinata told Reuters in an interview.

"Indonesia's market potential with its 220 million population is still huge, the current problem is about purchasing power."

Motorbike sales fell by more than a quarter to 873,808 units in January-March. Total 2005 sales were a record 5.1 million.

The government hiked domestic fuel prices in an attempt to ease pressure on its budget due to a ballooning fuel subsidy bill caused by soaring world oil prices. That move helped push up inflation to a six-year peak and drove up interest rates, curbing enthusiasm for car loans that had fuelled the market.

Before then, Indonesians had snapped up vehicles at a record pace thanks to a strong economic outlook and low interest rates.

JOBS RISK

Industry executives fear vehicle sales could slump more than a quarter this year, threatening jobs in Southeast Asia's biggest economy. Some forecast 2006 car and truck sales will be below 400,000 units, compared with a record 533,910 units last year.

Sindhuwinata, however, expects the government to take steps to improve economic conditions and boost purchasing power, moves that should rev up the industry and see sales volumes hit 480,000 units this year -- down just 10 percent on 2005.

Sindhuwinata said Indomobil opted not to engage in aggressive marketing to counter last year's big fuel price hike which kept buyers away from dealers' shops.

"I don't think we can force this declining market," he said.

"We have to consolidate and manage our resources ... so when the market recovers, we can exercise our marketing and financial resources to push it further," he added.

Suzuki's vehicle market share, which accounts for nearly 90 percent of Indomobil's sales volumes, dropped to around 11 percent in January-March from nearly 17 percent, as its sales slumped nearly 65 percent. Suzuki's share of the motorbike market almost halved to 12 percent in the first quarter from 21.5 percent for the whole of 2005.

Indomobil is ranked behind PT Astra International, controlled by Singapore's Cycle & Carriage, which holds nearly 60 percent of the domestic market.

Indomobil's thinly-traded shares, valued at just $92 million (52 million pounds), have fallen nearly 20 percent so far this year against a 27 percent gain on the broader stock market to record highs.
 

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60-Km Bridge Across Melaka Strait Proposed

Source from Malaysia thread...

60-Km Bridge Across Melaka Strait Proposed
Updated : 18-04-2006


MELAKA, April 18 (Bernama) -- The Melaka government Tuesday suggested the construction of a 60-km bridge linking Melaka to Dumai in Sumatra, Indonesia following the cancellation of the scenic bridge that links with Singapore.

Chief Minister Datuk Seri Mohd Ali Rustam said the project was estimated to cost between RM1 billion and RM2 billion.

It would have greater economic potential because the Sumatra population had reached 70 million compared to Singapore with only four million, he told reporters here.

Earlier, he attended a briefing and had a dialogue with Agriculture and Agro-Based Industry Minister Tan Sri Muhyiddin Yassin at Seri Negeri.

Mohd Ali said the Melaka-Dumai bridge had been pondered over when Tun Dr Mahathir Mohamad was the prime minister.

"It was mulled in 1995 or 1996 but died down because of the financial crisis hitting hard both countries in 1997," he said.

He said the the project could be undertaken by the governments or the private sector.

Mohd Ali said he had conveyed the proposal to Prime Minister Datuk Seri Abdullah Ahmad Badawi last Saturday when attending the Negeri Sembilan and Johor Umno Divisions Leadership Course at a civics camp in Rembau, Negeri Sembilan.

"I believe the bridge can boost the tourism and trade sectors between the two countries," he said.

The scenic bridge to replace the Johor Causeway was called off by the Prime Minister for the best interest of the nation.
 

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Discussion Starter · #7 ·
Indonesia Rupiah Ends At New 21-Mo High; May Rise Further
271 words
21 April 2006
19:31
Dow Jones International News
English
(c) 2006 Dow Jones & Company, Inc.
JAKARTA (Dow Jones)--The Indonesian rupiah closed at a fresh 21-month high Friday as foreign funds continued to pour into Indonesia, dealers said.

The dollar closed at IDR8,880, versus IDR8,890 Thursday. Friday's close is its lowest since July 12, 2004 when it ended at IDR8,810.

"Foreign investors who bought local stocks recently sold dollars to settle their deals," a dealer with a foreign bank said.

Indonesian shares fell slightly Friday after hitting a record high Thursday.

An investment banker with a European investment house told Dow Jones Newswires that some of the capital flowing into Indonesia is part of the money that rich Indonesians had parked overseas.

"These Indonesians are getting more confident about bringing back their money to Indonesia amid improving political stability and the government's efforts to improve investment climate," the investment banker said. "They are putting their money in (stock and bond) portfolios for now and later will use it for business expansion when they are convinced that things are indeed improving here."

President Susilo Bambang Yudhoyono has vowed to improve the business climate to boost annual economic growth above 7% in the coming years as part of his strategies to reduce poverty.

Dealers said the rupiah may continue to rise next week although profit-taking is likely to slow its climb.

They predict the greenback will trade between IDR8,850 and IDR8,950 Monday.

-By I Made Sentana; Dow Jones Newswires; 62-21 39831277; [email protected]
 

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Discussion Starter · #10 ·
STOCK MARKETS AND CURRENCIES
Indonesia must reform to maintain its charm for investors
EMERGING MARKETS.

21 April 2006
Financial Times

English
(c) 2006 The Financial Times Limited. All rights reserved
This year is so far turning out to be a charmed one for Indonesian financial markets.

With a 2.3 per cent surge yesterday the Jakarta Stock Exchange did what it has been doing more often than not this year - hitting record closes.

It also capped what by Bloomberg's calculations has been its best six-day run in almost 18 months thanks in part to the decision this week by Calpers, the US pension fund giant, to add Indonesia to its list of emerging markets it invests in. The Jakarta Composite Index has risen 7.7 per cent in the past six days and is up 26 per cent this year.

The Indonesian rupiah hit a 19-month intraday high against the US dollar and, not to be left out, Indonesian bonds posted their own gains.

The key fact in all of this might be that the last time Indonesian markets were recording these sorts of performances it was on excitement over the election of former general Susilo Bambang Yudhoyono and his promise of economic reforms.

The reality is that 18 months after he took office investors are still waiting for Mr Yudhoyono to deliver. Spending of Dollars 150bn on infrastructure that he announced in January last year has stalled. A pro-business labour law introduced to parliament last month has succumbed, for the time being, to protests and investors are still awaiting both an investment law and revisions to a controversial tax bill.

Meanwhile, many Indonesian blue chips - in spite of the trajectory of their share prices - continue to report what can only be called disappointing earnings. Bank Danamon, one of the country's largest private banks, yesterday said its net profit in the first quarter of this year slumped 61 per cent. But it seems to matter little to foreign portfolio investors who are buying into the Indonesian market in the hope of a stellar second half to this year.

By the middle of this year, the reasoning goes, Indonesia's economy will have digested the high inflation and the resulting monetary tightening that followed Jakarta's move last October to raise fuel prices by an average of 126 per cent to rein in subsidies.

"It's pure liquidity flow," is how Laksono Widodo, head of research for Macquarie Equities in Jakarta, reads the stock market's performance this year. "People are banking on the second half. They are already forgetting about the first half. The first half is already a bygone."

By Mr Widodo's calculations the equities market - at a valuation of 13 times 2006 forecast earnings - remains attractive compared with the 20-25 times earnings that it traded at prior to the 1997-98 Asian financial crisis.

Government officials, too, are doing their best to appear unconcerned by the surge in the markets, although advisers say that behind closed doors some central bank officials have expressed concern over the flows of so-called "hot money" into Indonesia.

Addressing foreign journalists yesterday, Boediono, Indonesia's chief economic minister, said he continued to be optimistic that the economy would grow by almost 6 per cent this year, up from 4.9 per cent in the final quarter of 2005.

He remained confident that Indonesia would not suffer sudden outflows of that hot money, which had arrived in recent months as part of a global search for yield.

The amount that has landed in Indonesia also remains manageable, he said, with net inflows in the past seven months of about Dollars 1bn a month.

There are people, however, who are more cautious.

Foreign portfolio flows into Indonesia have increased the pressure on the government to get things right, something Jakarta has not always been good at in the past.

Rizal Prasetijo, JPMorgan's lead equity strategist in Jakarta, thinks that the sort of valuations seen now mean it is behaving a lot like it was in 1993.

That situation, he says, makes sense "if you believe that, in the next two years, Indonesia will become a sexy investment destination like back in 1993 to 1995".

But it also, Mr Prasetijo says, remains "a kind of blue sky scenario". In large part because it depends on the ability of the government to implement reforms.
 

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Discussion Starter · #11 ·
Keeping the rupiah strong
2573 words
22 April 2006
Business Times Singapore
English
(c) 2006 Singapore Press Holdings Limited
OVERVIEW

FUELLED by the flow of hot money into Indonesia's equity and bond markets, the rupiah has been the world's best performing currency this year, gaining nearly 10 per cent against the US dollar in the first three months of the year.

But concerns are growing over the sustainability of the rupiah's current strength and Indonesia's macroeconomic stability, particularly as high interest rates are choking the real sector.

What then is the outlook for the rupiah, inflation and interest rates in the country? Can the government balance the need to lower interest rates so as to lessen operating costs for industry while keeping the rupiah at current levels? The Business Times assembled a panel of experts to tackle these questions.


PARTICIPANTS

in the roundtable:

Moderator: Shoeb Kagda, BT's Indonesia correspondent

Panelists:

Fauzi Ichsan, Indonesian economist, Standard Chartered Bank

Roosniati Salihin, deputy president, Bank Panin

David Chang, director of research, UOB Securities

Shoeb Kagda: Let's start with the rupiah. It is the best performing currency in the world this year. But can it sustain its momentum or are we looking at another up and down scenario?

Fauzi Ichsan: I think most analysts agree that the strengthening of the rupiah over the past four, five months has been due to the inflow of hot money into the equity and bond markets so there is a concern that such a rapid appreciation is not going to be sustainable in the long run.

However, there is also an argument that the strengthening of the rupiah has been created by a fundamental factor, which is the government's decision to raise domestic fuel prices by 126 per cent last October.

In doing so, Indonesia's fuel imports collapsed by about 25 per cent which increased the trade surplus dramatically. On top of that, because domestic fuel prices are closer to international prices, smuggling has also been curbed.

In that sense, while the rupiah's appreciation was created by the inflow of hot money, it is also supported by fundamental factors.

Roosniati Salihin: We follow closely what Bank Indonesia (BI) does and we are a bit surprised by the rupiah's strengthening. From a banker's perspective it's both good and bad in the sense that fewer people are interested in holding US dollars from our side, but the country's exports will be affected and I think we are still dependent on exports to strengthen our economy.

But mostly I think the credibility of the government's current economic team has helped a lot in terms of strengthening the economy. Indonesia's economy has always been quite deep but the credibility has been a positive factor. Whether this is sustainable or not will depend on where SBI (Bank Indonesia depository notes) rates will be in the second half of this year. We expect both interest rates and inflation to fall and only after this can the real sector start to expand again.

David Chang: In some ways the rupiah's strength has been fuelled by the stock market which has been quite strong this year. And stocks have done well because the equity market is driven by future expectations. Although the outlook for the first six months of this year is pessimistic, most investors are expecting a turnaround in the second half. That is still three months from now but the indications we get from the market are that most investors are confident of the Indonesian story and believe the economy will pick up.

So, yes, I am confident that the current rupiah level is sustainable. We are a long way away from the 2,500 level before the crisis and the 17,000 level at the worst, but I think the rupiah can continue to appreciate to below the 9,000 level against the US dollar. The key is how well the government continues to push for structural reforms and improve the investment climate.

Shoeb: In terms of where the rupiah is today and given that it has moved within a certain band since 2000, is this its real value?

Fauzi: We have always been bullish on the rupiah. Even when it was trading near 12,000 five to six months ago, we believed that it could strengthen back towards 9,500. Subsequently, we revised down our forecast to 9,000 and we've revised our forecast again to 8,500 by the end of 2006, basically on the back of capital inflows. And we believe the hot money inflow will continue because there is so much liquidity in the global financial markets.

Secondly, foreign direct investments are likely to rise for two reasons: Indonesia is the biggest market in Asean and it has abundant natural resources. And we haven't even taken into account the government's efforts to improve the investment climate. Now, if the government can pull it off and implement the investment package, then we can expect foreign direct investments to accelerate in the second half of the year. So there are several factors that have forced us to revise our rupiah forecast for this year.

At the moment we believe that the risk is mainly political because there is a widening gap between market expectation and reality on the ground. Markets were happy about the government's decision to raise fuel prices and President (Bambang) Yudhoyono's decision to reshuffle his Cabinet in December. However, the real economy is suffering, especially from higher inflation and high interest rates. Whether you like it or not, the economy operates on reality and not on market expectations so the challenge for the government is to narrow this widening gap. We do think that given the credibility of the current economic team, the government will manage to do this.

Roosniati: Many of our clients, especially the small and medium businesses, would like to see a more stable rupiah, instead of these ups and downs, because it makes it harder for them to calculate their costs and manage expectations. However, having said that, if the central bank continues with its strict money policies, and they seem to be doing a good job so far, I think the rupiah's current level is sustainable. For market players, the most important factor is sustainability and the government's seriousness in cutting the high cost economy, especially the unaccounted costs.

If this problem is not tackled, people will continue to prefer leaving their money in deposit accounts because of the high interest rates instead of using their funds to expand their business.

David: For the rupiah to continue to strengthen from this level, it will depend on how the government is able to implement changes in the investment programme. At the moment, the kind of investments we see coming in are in the areas of mining, plantations and agriculture. These are relatively simple capital-intensive investments that do not require a lot of workers.

To go beyond that, Indonesia has to compete with its neighbours for capital. When we go into the manufacturing and consumer sectors, I think the government has a very challenging task of changing the investment climate and one of the key aspects is the current labour law which the government is having difficulty submitting to Parliament. That would determine whether the rupiah stays at this level or strengthens.

Shoeb: The government has in the past used interest rates to manage the rupiah. How sensitive is the rupiah to current interest rate levels? And if interest rates do fall, what happens to the rupiah?

Roosniati: The government will be very careful in lowering interest rates and I think from the current signals, Bank Indonesia is not going to push down interest rates as fast as they raised them, and will take its time doing so. I think if interest rates are clearly going down in line with US interest rates, it should be manageable.

Fauzi: It depends on two things. First, on how much interest rates pick up, and we believe Bank Indonesia is unlikely to cut before the second half. We believe that at 12.75 per cent, the BI rate is at the peak of its cycle and it will be cut gradually to 11.25 per cent by the end of this year.

Secondly, assuming US Fed rates go up by another 25 basis points, that would still leave enough margin differential of 6-6.5 per cent which is fine as long as the investment climate is attractive enough to attract portfolio flows.

We believe that the government will improve the investment climate over the next nine months, maybe not as fast as investors might wish but they are moving in the right direction. That would be sufficient to convince investors that there is a long term story in Indonesia and that it's worth investing for the long run.

David: I am rather optimistic about the interest rate situation. Inflation rose quite sharply at the end of last year but by the second half of this year, inflation is expected to come down quite sharply. So assuming that real interest rates are kept constant until 2007, I expect SBI rates to be in single digits by the end of next year. This will be driven by improved foreign investments and continued gross domestic expansion.

Shoeb: Fauzi and Roosniati, do you share the same optimism?

Roosniati: The only downside we have to consider is security because portfolio money is very mobile and that needs to be taken into consideration. The only factor that can secure macroeconomic stability is FDI and longer term investments in infrastructure. I would worry if the money coming in is targeted only at equities or fixed income funds.

David: I think that FDIs for 2006 will definitely exceed last year's and the outlook for increased foreign direct investments is good. You look at just one deal - the sale of Bumi Resources was US$3.2 billion - and I understand there are other bigger investments in the oil and gas sector. But what I hope to see is more broad-based investment in other sectors.

Fauzi: We think that inflation will fall to 8 per cent this year and fall further to 5-6 per cent by the end of next year which would allow BI to cut one-month SBI rates to around 8 per cent by the end of next year.

David: We are not very far off from single digit one-month SBI rates so I think it is very achievable and it will be a significant decrease from current levels. That's why we are not being unrealistic to expect the equity market to continue to gain for the rest of this year.

Shoeb: Things look rosy on the macroeconomic front. What do you see as the major risks to Indonesia's continuing macroeconomic growth and stability? Another bomb perhaps?

Fauzi: I don't see terrorism as the biggest threat. I think the biggest threat will come from the government's inability to implement its policies and meet its promises to introduce structural reforms, the infrastructure package, the investment package. If it can't do that, investor optimism would slowly evaporate and as real investments might not rise fast enough to ensure that the 2.5 million new entrants to the labour force find full employment. If under-employment continues to rise to exceed 50 per cent of the labour force, that would create the potential for social and political instability.

Then the market optimism which we have seen building up to maximum level could certainly collapse. Of course, the possibility is small but we have to take it into consideration.

Roosniati: On top of that, the expectations on President Yudhoyono's government are quite high and if they are not met fast enough, confidence will fall. Furthermore, there is the competition from China, India and Vietnam which are all moving very fast and are FDI-friendly. We continue to promise that we are also pro-business and pro-foreign investors but we still have a lot of regulations and red tape.

David: If the government is not able to ensure labour reforms, I think that will be a major setback for investment potential in Indonesia and it will be less competitive than other countries in the region and Indonesia will continue to lose out. Furthermore, Indonesian companies will continue to lose their competitive advantage as well as worsen the unemployment problem.

Shoeb: Is 2006 a make or break year for Indonesia? How much of a window does the country have to put its house in order before investors lose patience?

David: Looking at it from the equities side, we always say that Indonesia has one chance to make it. This is that one chance. If we make it we will grow from here, if we don't we will have serious problems. Again using the stock market as an indicator, investors are willing to give Indonesia the benefit of the doubt and they are investing in the country. We should be able to see by the end of the year whether the government will keep its promise in the future years. So, yes, I think this is a crucial year and I think a lot of the investment positions will be decided this year.

Roosniati: Unlike western countries, we do not look at situations as make or break. Indonesians are a very patient people and not confrontational. I would prefer to call 2006 a transformation year for Indonesia as we have seen a lot of things happen which we have not seen before in our lifetime such as combating corruption. Changing the mindset of the people is not easy. I think we should give credit to the government and as Indonesians, we have to support this government and this president.

Fauzi: The government is certainly moving in the right direction and we have witnessed many things we have not witnessed ever before which is quite revolutionary. Also, the eagerness of the current economic team to introduce structural reforms on a timetable is unprecedented. The government knows where it has to go and it has given itself a strict timetable and it seems to be moving in the right direction.

It is willing to confront labour which many governments avoided doing in the past. It was willing to cut fuel subsidies sharply even though it is politically one of the most unpopular measures for any Indonesian government to implement and one which has brought down governments in the past. The markets and investors are now willing to give Indonesia the benefit of the doubt because the potential is there.
 

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Discussion Starter · #12 ·
Sri Mulyani fires chiefs of tax, customs offices


Rendi Akhmad Witular, The Jakarta Post, Jakarta

The government has fired the chiefs of the tax and customs offices, a move widely seen as a renewed bid to root out graft in the notoriously corrupt agencies.

Aside from raising the confidence of the business community, the decision also counters the assumption that Finance Minister Sri Mulyani Indrawati -- like her predecessors -- was powerless to deal with the two agencies.

The Finance Ministry announced in a press statement Friday that President Susilo Bambang Yudhoyono had appointed chairman of the Capital Market Supervisory Agency (Bapepam) Darmin Nasution as the new director general of taxation, replacing Hadi Purnomo.

It was an unhappy 59th birthday present for Hadi, who was celebrating the day with his subordinates at the Directorate General of Taxation. He was scheduled to retire next year.

Darmin's current position will be filled by former head of the state treasury management agency, Ahmad Fuad Rahmany, currently an executive with the Aceh and Nias Reconstruction and Rehabilitation Agency (BRR).

Yudhoyono also appointed "Mr. Clean" Anwar Suprijadi -- chairman of the state administrative agency -- to replace Eddy Abdurrahman as director general of customs and excise.

Eddy was replaced following his failure to curb smuggling and underinvoicing activities, which not only cause huge state losses but also undermine the competitiveness of the country's industries.

The new officials will be sworn in next week after Mulyani returns from Washington D.C., where she is attending the spring meeting of the World Bank and the International Monetary Fund.

"We expect the new people installed will erase protracted mutual distrust between the business community and the tax and customs offices," chairman of the National Economic Recovery Committee Sofjan Wanandi said.

He said the replacement of the tax chief would also help accelerate the deliberation of tax amendment bills, following allegations several tax officials were deliberately trying to stall the process to maintain the status quo.

The amendments, which are still being deliberated in the House of Representatives, concern Law No. 16/2000 on general taxation arrangements and procedures, Law No. 17/2000 on income tax and Law No. 18/2000 on VAT and luxury tax. They are now expected to be enacted in 2007 after a delay from the initial target of 2006.

Darmin's appointment was not a surprise to many, because he has been a close and trusted associate of the finance minister since they were both lecturers at the University of Indonesia.

They also were together in the university's agency for economic research (LPEM) in the early 1990s, when Darmin headed the institution and Mulyani was his deputy for research.

In a recent gathering attended by Finance Ministry senior officials, Mulyani reportedly declared that Darmin was the only official at the ministry that she currently trusted.

"Mulyani did not appoint officials from the internal ranks of the tax office because she could not trust anyone there. This is obvious because of the scale of corruption at the agency," said economist Faisal Basri, another confidant of Sri Mulyani.
 

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Discussion Starter · #13 ·
FDI realisation rises 30%, but approval drops 45%. The approval numbers better pick up in 3Q and 4Q. Investors are watiing for new tax & labor law reforms, and perhaps lower interest rates..

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UPDATE: Indonesia's 1Q 2006 Approved FDI Slows To $2.4B
615 words
26 April 2006
19:58
Dow Jones International News
English
(c) 2006 Dow Jones & Company, Inc.
(Updates with official and analyst comments)

By Farida Husna and Phelim Kyne

OF DOW JONES NEWSWIRES

JAKARTA (Dow Jones)--Indonesia recorded a slowing in approved foreign direct investment to $2.4 billion in the first three months of 2006 from $4.3 billion in the same period last year, official Investment Coordinating Board data issued Wednesday indicated.

Approved FDI in the first quarter consisted of 413 projects, compared with 322 projects in the same period in 2005, a board statement said without elaborating on the figures.

The statement said that realized FDI, which involved a total of 226 projects, rose slightly to $2.6 billion in the January-March period, compared with 211 projects valued at $2.0 billion in the first quarter of last year.

Rising crude oil prices on the global market dented investor enthusiasm during the first three months of 2006, the board's Deputy Chairman Darmawan Djajusman told reporters at a press briefing.

"High oil prices in the first quarter of this year triggered foreign investors to recalculate their investment planning in Indonesia," Djajusman said.

He warned that a continuing upward trend in would "endanger our investment targets" for 2006.

The Indonesian government has forecast total approved and realized FDI of $16.32 billion and $10.71 billion respectively in full-year 2006.

Wednesday's statement said that Indonesia recorded total approved domestic investment of IDR16.1 trillion in the first three months of 2006, compared with IDR9.1 trillion in the same period last year.

Realized domestic investment rose to IDR8.5 trillion in the first quarter of 2006, an increase from the IDR4.5 trillion recorded in first three months of 2005.

Investors Await Policy Implementation

The data is bad news for the government of President Susilo Bambang Yudhoyono, which needs to boost investment substantially to meet its 2005-2009 average annual economic growth target of 6.6%. Indonesia's government has forecast 6.2% on-year economic growth for 2006, outpacing the 5.6% on-year expansion last year.

In 2005, Indonesia recorded a 30% on-year rise in approved foreign direct investment to $13.6 billion, reversing a 26.0% decline the previous year.

But the slowing in investment approvals suggests foreign investors remain unconvinced by the government's efforts to win investor confidence and jump-start needed investment.

Indonesia's investment inflows have been hobbled in recent years by investors' perceptions of an unpredictable judiciary, rampant corruption and shabby infrastructure.

The resolution last month of the long-deadlocked Exxon Mobil Corp. (XOM) and Pertamina (PTM.YY) joint operations contract to tap the massive East Java Cepu oil field was an important symbolic victory in government efforts to lure back foreign investors, analysts say.

But the first quarter data suggests that investors are waiting for concrete policy changes indicated in an investment stimulus package unveiled last month.

The package consists of 85 measures designed to remove regulatory obstacles to investment in areas including taxation, customs and excise duties, labor and small- and medium-sized enterprise development.

But some analysts have criticized the package as a list of timetables for regulatory revisions rather than specific policy measures.

"What investors are waiting for is implementation," Standard Chartered economist Fauzi Ichsan told Dow Jones Newswires.

"The potential (for investment growth) is there because Indonesia is the biggest market in (the Association of Southeast Asian Nations) and has abundant natural resources. But whether the government can improve the investment climate remains the biggest issue."

-By Farida Husna and Phelim Kyne; Dow Jones Newswires; 62 21 3983 1277; [email protected]
 

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Discussion Starter · #14 ·
This is gonna be a tough year.
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POLL-Indonesian GDP growth seen slowing in 2006
By Muhamad Ari and Adriana Nina Kusuma
735 words
26 April 2006
16:48
Reuters News
English
(c) 2006 Reuters Limited
JAKARTA, April 26 (Reuters) - Indonesia's economy is forecast to grow at a slower pace this year, but a recent surge in capital inflows may lead to an earlier cut in interest rates which could boost growth next year, a Reuters quarterly poll shows.

The median forecast of 12 economists showed that Southeast Asia's largest economy will expand 5.4 percent this year, down from 5.6 percent last year. Growth, however, is forecast to accelerate to 6 percent next year.

Market estimates were lower than an official forecast of 6.2 percent and 6.4 percent for this and next year, respectively. They were also below forecasts of 5.6 percent for 2006 in a similar survey in January.

Analysts expect the resources and telecommunications sectors to boost economic growth, due partly to an anticipated increase in foreign investments amid firm global commodities prices and strong growth in the telecommunications industry.

Growth is forecast to slow this year as high interest rates hurt consumer spending, a key driver of the economy.

"Consumption has slowed as interest rates remain high. The fuel price hike and the tightening by Bank Indonesia have also hurt investments," said economist Anton Gunawan of Citigroup.

Reflecting the weak consumption, motorbike sales fell around 25 percent to 873,808 units for the first quarter of this year from the same period a year earlier.

The central bank has kept its benchmark one-month interest rate unchanged at 12.75 percent this year after it raised it six times since it was introduced last July to fight a sharp rise in inflation and boost the rupiah.

Economists say interest rates are likely to start moderating in the second half this year as a recent surge in the inflow of foreign funds has boosted the rupiah and eased inflationary pressure.

"Inflation pressure should taper off, paving the way for an easier monetary policy," said Singapore-based economist Christy Tan of Bank of America. "The risk is if oil prices continue to rise and/or yield erosion takes place faster than expected, leading to hot money outflows from Indonesian assets."

Annual inflation in March eased to 15.74 percent. It hit a 6-year high of 18.38 percent in November after the government raised domestic fuel prices by an average of 126 percent on Oct. 1.

Following are the results of the poll.

Historical data
 

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Discussion Starter · #15 ·
The Index closed at 1481 today...a new record high. What do you guys think of this?? Do you think the money currently invested in equities will flow to real investments this year??
 

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Discussion Starter · #16 ·
Cemex set to end presence in Indonesia CEMENT.
By SHAWN DONNAN and TAUFAN HIDAYAT

26 April 2006
Financial Times
London Ed1
Page 25
English
(c) 2006 The Financial Times Limited. All rights reserved
Cemex of Mexico is expected to announce the USDollars 350m sale of its 25 per cent stake in Semen Gresik, Indonesia's largest cement company, to a local group in a deal that will bring a dispiriting end to its efforts in south-east Asia's largest economy.

People close to the transaction said last night that the Mexican cement group, which has been battling for majority control of Gresik since 1998, had finalised details of a sale to Indonesia's Rajawali Group.

Both Rajawali and Gresik are understood to have approached officials in recent days to lay the groundwork for government approval.

"They are shooting for a signing in the next few days, no later than next week," one person close to the deal said. That timing, the person said, depended in part on whether the sales agreement is signed in Indonesia or in Mexico and on travel schedules.

The Indonesian group has been sitting on more than USDollars 800m in cash since selling a majority of its Excel-comindo mobile phone business to Telekom Malaysia last year, people close to the transaction said. It is expected to team up with international private equity groups or hedge funds to buy the Cemex stake, they said, although who those foreign investors would be remained unclear.

People close to the deal said the Rajawali Group was unlikely to try to secure majority control of Gresik, something Cemex had been trying to do ever since it bought an initial 14 per cent stake for Dollars 115m in September 1998. Indonesia's government, which sold the initial stake to Cemex as part of an IMF-mandated privatisation programme, continues to hold 51 per cent of Gresik's shares.

Cemex would not comment yesterday.

The deal is likely to be seen as a disappointing end to a high-profile example of the barriers facing foreign investors in Indonesia and the power that continues to be wielded by vested interests eight years after the fall of Suharto. The failure of President Susilo Bambang Yudhoyono and his government to bring an amicable end to the dispute is also likely to be a blow to his efforts to convince foreign companies to return to the country.

Cemex's exit would also come at a time when major international rivals are notching successes in Indonesia. Germany's Heidelberg Cement and Switzerland's Holcim have secured majority stakes in other major Indonesian cement producers with the latter announcing plans earlier this year to build a new Dollars 300m plant in east Java.


Lafarge, the French cement group, yesterday announced that it would be getting Dollars 30m in bridge financing from Citigroup to help rebuild its plant in Aceh province.
 

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Investment realization is going to slow over the next few months as approvals declined dramatically from Jan-March. They're not even going to get close to their full year investment targets. And now the government is trying to lure Middle Eastern investment, which will be about as fruitful as their efforts with China (lots of promises, no money). As is well know, the Middle East's combined GDP is less than the country of Spain.
 

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Discussion Starter · #19 ·
GLOBAL INVESTOR
Where Big Is Beautiful; Investors used to favor small, flexible Asian markets. But their tastes are shifting to the major blockbusters including, possibly, Indonesia
By Ruchir Sharma; Sharma is a co-head of global emerging markets at Morgan Stanley Investment Management
851 words
1 May 2006
Newsweek International
Newsweek International
0
English
Copyright (C) 2006 Newsweek Inc. All Rights Reserved.
It's a scene familiar to moviegoers: as fires burn, bombs explode and shrapnel flies, the ash-smeared hero marches on, undaunted and unafraid. Much like Indonesia's stock market. In the face of leadership upheavals, civil rebellions and financial turmoil that would rattle its neighbors, the Jakarta Stock Exchange has stood out as one of the hottest in all of Asia. Behind that surprising performance lies a major shift in the way foreign investors watch emerging markets.

For most of the past two decades, investors have favored plotlines involving small, flexible countries, often with a technological flair: Thailand, Malaysia, Taiwan. Now smaller countries have been left behind as tastes shift to the major blockbusters. In Asia, that means China, India and now, possibly, Indonesia. These are big, sprawling acts, with large workforces that multinationals can tap, and vast domestic consumer markets. Furthermore, a wealth of natural resources--once viewed as a kind of curse, a source of easy money that sapped a nation's will to produce and excel--is now seen as a competitive advantage, benefiting countries from Brazil to Russia. Indonesia is the only Asian economy that is blessed in both respects: the world's fourth most populous nation, with 240 million people, it also has vast untapped oil reserves, coal, palm oil and nickel.

And so our hero rises amid the chaos. Since the Bali bombings of October 2002, the Indonesia market has risen 400 percent, and it now trades at a premium to fellow members of the Association of Southeast Asian Nations like Malaysia or Thailand, despite the fact that its economy is growing no faster and more precariously. In recent years GNP growth has averaged 4.5 percent, following the new trend line for the region's once high-flying economies, brought to earth by the Asian financial crisis of 1997-98. Meanwhile, Indonesia's inflation and balance of payments have often looked shaky, triggering a mini-collapse of the rupiah a few months ago.

The market continues to climb in part because of the "base effect." It's always easy to grow from a small base, and Indonesia's market is still recovering from a more than 90 percent plunge in dollar terms during the crisis years. Now that it has surpassed its smaller neighbors, however, the conclusion seems clear: investors are just more bullish on big countries in Asia.

No matter that Indonesia has so far missed out on its own potential. A messy transition to democracy since the 1998 collapse of the Suharto regime has resulted in a general sense of policy drift. Little has been done to combat the "three L's"--local regulations, legal uncertainty and labor rigidity--that famously constrain the economy. During the transition, Indonesia has been rising in global surveys of the most corrupt and difficult countries in which to do business. With foreign companies reluctant to invest in a country where property rights are opaque and labor laws are burdensome, Indonesia's oil production has been in decline for a decade. Once a net exporter, it had to import oil last year, making it a major casualty rather than a big beneficiary of the surge in crude-oil prices.

However, there is now reason to believe that the faith shown by investors may not be misplaced. For one, Indonesia at last has a government that has some pretensions of an economic vision. President Susilo Bambang Yudhoyono took office in 2004 and has begun to act decisively in the last year, putting economic policy in the hands of technocrats, who in turn are working on policy packages designed to improve the investment climate.

They are trying to resolve old contractual disputes in critical economic sectors, including oil and gas, as a signal of welcome to foreign investors. And they are pushing labor-market reform, including plans to ease the requirement that employers pay severance to workers equal to two months' compensation for every year they spend on the job. This proposal has run into predictable resistance, but the widespread view in Jakarta is that Indonesia cannot follow the "French example" and that such reform will pass soon enough.

To be sure, the Indonesian president needs to expend a lot of political capital to gain any meaningful traction for reform. And there is still so much to be done: Indonesia has weak human capital due to a lousy education system--which is why it has no world-class companies. And it has a low value-added manufacturing sector that is being squeezed by both China and Vietnam. These factors limit Indonesia's long-term appeal. However, as Russia has shown, in a commodity-led bull market, all it takes is some basic economic reform and a modicum of stability to usher in boom times. It could be a thrilling emerging market story, while it lasts.

Document NEWI000020060426e2510000e
 

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Discussion Starter · #20 ·
Indicators
Now showing, magnificent 7
584 words
27 April 2006
The Economic Times
English
(c) 2006 The Times of India Group. All rights reserved.
You know about G-7 - US, Japan, Germany, UK, France, Italy and Canada. Now, get a lowdown on E-7 - the emerging market economies. These are China, India, Brazil, Russia, Indonesia, Mexico and Turkey.

It's a club of developing and emerging nations which believes it can outpace the lumbering G-7 on virtually every economic parameter by '50. Among E-7, India leads, and will do so, on all growth indicators from '05 to '50. That's no empty boast but a message from a PwC report.

"The World in '50 looks almost like a sequel to the now-popular Goldman Sach BRIC report. Attempting to make long-term economic forecasts for '50, our calculations suggest that E-7 will collectively be 25% bigger than the G-7 when measured in dollar terms at market exchange rates. Looked at differently, E-7 will be around 75% larger in purchasing-power parity (PPP) terms," the report states.

Though things look even now, deep purchasing power inequalities among various countries, especially between E-7 and G-7, persist. But it is also true that this disparity holds out tremendous potential for future growth in economies. This is a reason why MNCs and private equity players are making a beeline to these countries.

"This represents the flow of capital to under-capitalised economies," says Mahesh Vyas, MD and chief economist, Centre for Monitoring Indian Economy (CMIE). Mavens like Mr Vyas believe that in the next 10-15 years, there would be a dramatic and unpredictable shift that would narrow the gaps.

But do not make the mistake of bundling E-7 nations into one basket. There will be layers and hierarchies in the way they stack up against each other. And, Indians will have a lot to rejoice about, thanks to the country's demographics.

The country is forecast to have the fastest-growing population among E-7 and G-7, the increase expected to be around 0.8% annually in '50. Both China and Russia are expected to experience significant declines in their working-age people between '05 and '50. This will give India's economic growth story a very positive momentum.

Taking into account these demographic trends, PwC predicts India as the fastest-growing large economy in the world. At 7.6% GDP growth in dollar terms, the tally could make China's 6.3% look anaemic; the US, with 2.6%, would be struggling to catch up.

India's per capita GDP growth measured on PPP is expected to be the highest among E7 and G7, at 4.3% against China's 3.8%. In absolute terms though, China will continue to lead. Overall, India's GDP by '50 is forecast to be close to 60% of the US' - in dollar terms. But China will be far ahead as its GDP will be 95% of it. Even Brazil will be as big as an economy as Japan by '50.

But developed world citizens need not feel threatened due to rise of E7. While the relative GDP shares of OECD countries will understandably decline in relative terms, the rise of E-7 economies should boost average OECD income levels through creating new market opportunities.

There will be losers in this rise of E-7. ""These losers may not outnumber the winners but could be politically vocal in their globalisation," the report says. And this might be just one of the hurdles that E-7 will have to cope with.

Document ECTIM00020060426e24r0000x
 
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