Updates News May 24, 2017

In the News

RI Expects US$5-10bn Investment following S&P Rating Upgrade
Tempo.co 24/05/2017

The Investment Coordinating Board (BKPM) chairman Thomas Lembong expects US$5-10 billion investment in Indonesia (RI) in the next 1-2 years after ratings agency Standard & Poor’s (S&P) upgraded Indonesia’s credit rating. “It’s equal to Rp70-130 trillion investment in Indonesia thanks to S&P upgrade,” he said yesterday.

According to Thomas, the rating upgrade will not have an immediate impact. Investors would need time to learn the best avenues to invest in Indonesia. “Be it bonds, shares, etc. Nevertheless, in the next 12-24 months, the impact will be significant.”

The most important thing is, Thomas said, the government must keep the momentum going. “We have to exploit such encouraging development to continue to boost reforms that could bring more upgrades,” he said.

Thomas said that the government will not be satisfied with the S&P investment grade (BBB-) with a stable outlook. “Eventually, we want to move to BBB, BBB+, A-, A and so on,” he noted.

S&P last week upgraded Indonesia’s credit rating to investment grade (BBB-) with a stable outlook. The agency upgraded the rating on the basis of lower fiscal risks as the government budgeting becomes more realistic.

S&P sees that the policy could contain larger deficit and reduce the risk of higher debt to GDP ratio. The agency also predicts improvement in state revenue as a result of the tax amnesty program and controlled fiscal expenditure.

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Minister Luhut: Reclamation Project will Not be Stopped
Tempo.co 24/05/2017

The Coordinating Minister of Maritime Affairs Luhut Binsar Pandjaitan said that the government will not stop the reclamation project in the Jakarta Bay.

He reasoned that the National Development Planning Agency’s (Bappenas) study show that the city is sinking faster than expected.

According to Luhut, the condition could get worse due to climate change. the waters in rivers can no longer flow downhill because of gravity.

As a result, waters will need to be pumped into the ocean.
Luhut added that the government has no other choice other than to go ahead with the reclamation project as tidal flooding has become uncontrollable.

The government is still studying the project and will announce the results after Eid al-Fitr.
He told observers not to merely talk to the media but also discuss the issue with him at the Maritime Ministry building. “We will roll the red carpet [for observers].”

He said that the government will admit wrongdoing if the observers were proven right. “For example, if Islet G technically needs to be cut to half, we will correct it,” he said.

Luhut said he is bemused by criticism pointed to the government. “If you do want to question it, wasn’t the port built on reclaimed [area], should we dismantle it also?”

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Bank Indonesia Predicts Decline in Commodity Prices in 2018
Tempo.co 24/05/2017

The Governor of Bank Indonesia Agus Martowardojo predicts a slight decline in commodity prices next year. It would have an impact on the government’s economic growth target of 5.4-6.1 percent set out in draft 2018 state budget.

“We expect consolidation of real sector, corporations and banks to be concluded so that 2018 could see positive economic growth. We could yet reveal the figure,” Agus said yesterday, May 22, in Jakarta.

He noted that the initial target for 2017 economic growth of 3.4 percent has been revised to 3.5 percent. Meanwhile, according to Agus, the global economic growth forecast for 2018 is 3.6 percent.

In the first quarter of 2017, Indonesia’s economic growth hit 5.01 percent underpinned by better export performance and government consumption. “Going forward, we expect consumption and private investment to contribute [more],” he said.

Agus said that more private investment will make the economy stronger. Bank Indonesia predicts 2017 economic growth at the range of 5-5.4 percent. “Restructuring of cooperatives and banks continues and is expected in the second half to become the foundation of better economic growth,” he said.

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Government to reactivate southern Java highway
Antara News 24/05/2017

Coordinating Minister for Maritime Affairs Luhut Binsar Panjaitan said the government planned to reactivate the southern Java highway ahead of the Islamic holy days Eid al Fitr June 25-26.

"There is a project proposed to us to revive the southern Java highway . Parts of the road are still functioning and parts have yet to be built," Luhut said here on Tuesday.

The route extends between the western part and the eastern end of Java, he said, adding the proposal deserves follow-up action as development in Java has been concentrated too much along the northern coast.

"There has been offer of scheme of assistance. We will meet again before we come to a decision next week," he said.

Meanwhile, he said, observation has been made over the northern highway of its readiness ahead of Eid al Fitr when millions of people mainly from Jakarta are expected to travel using the highway to celebrate the holy days with relatives .

"We have checked all preparations ahead of Eid al Fitr, coordination between related agencies the Transport Ministry, security, the health ministry and public works and housing ministry to guarantee better service in the northern coastal highway.

"We will finalize before the end of May to ensure that everything runs as expected. Until today preparations have been progressing . We learn from past experience . Everything look better," he said.

Every year days before Eid al Fitr , big unsolved problem is traffic jams along the northern highway and fatal accidents.

Luhut said the government also will reactivate roll on and roll off vessels between Semarang and Surabaya and between Jakarta and Lampung to reduce congestion in land transport."The cost is lower and level of safety would be higher," he said.

He said by reactivating a number of old routes would give more alternatives to reach destinations and would result in better distribution of goods.

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President calls on more ministries to earn WTP status
Antara News 24/05/2017

Indonesian President Joko Widodo is keen to witness more ministries or institutions earning the Unqualified Opinion (WTP) status from the Supreme Audit Agency (BPK).

Jokowi made the statement during the Investigation Report event for releasing the 2016 Central Government Monetary Report (LKPP) at the Bogor Palace in West Java on Tuesday.

To this end, the head of state has instructed every institution to form a special task force in a bid to receive the WTP rating from BPK.

"I want every ministry or institution to set up a task force, so that in future, this will be a necessity, which in fact is supposed to be a clear requirement to receive the WTP rating. This is our obligation to wisely utilize the money of the people and state," the president emphasized.

On the other hand, Jokowi also lauded the central government for its efforts in earning the WTP status from the BPK in the 2016 LKPP.

The WTP rating was earned by the central government for the first time in the last 12 years."Thankfully, after 12 years, for the first time, the central government has received the WTP rating from the Indonesian BPK for the 2016 LKPP. This is the result of our hard work and efforts made by the ministries and all institutions so far while using the peoples money," he remarked.

On the occasion, BPK Head Moermahadi Soerja Djanegara also revealed that 73 State Ministries/Institutions Monetary Report (LKKL) and one Public State Treasurer Report received the WTP rating.

These figures reach 84 percent, a rise from 65 percent recorded last year.Moreover, eight LKKL received the "Qualified Opinion" (WDP) status, and six others received the "Disclaimer," or TMP status.

The president has urged those ministries and institutions that received the WDP and TMP ratings to bring about changes immediately.

The Ministry of Defense, Ministry of Environment and Forestry, Ministry of Womens Empowerment and Child Protection, National Family Planning Coordinating Board, National Election Commission, and Geospatial Information Agency received the WDP status.

The Ministry of Marine Affairs and Fisheries, National Commission on Human Rights, State Ministry for Youth and Sports Affairs, Public Broadcasting Agency TVRI, Maritime Security Agency, and Creative Industry Agency earned the TMP status.

"Next years target is that every institution or ministry should receive the WTP status. No Disclamer and not even WDP; this is our obligation for managing the peoples money," Jokowi emphasized while urging the ministries to take the matter more seriously.

"The essence of the governments accountability is its moral responsibility towards the people. The money should be utilized fully for the people, and they must feel the benefits. No one may play around with the peoples money," he added.

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Indonesia, Canada launch local economy development program
Antara News 24/05/2017

Indonesian National Development Planning Minister Bambang Brodjonegoro and Ambassador of Canada to Indonesia Peter MacArthur here, Tuesday, launched a local economy development project worth C$18 million in the provinces of Gorontalo and Southeast Sulawesi.

As part of the countrys two national programs for increasing investments -- National Support for Local Investment Climates (NSLIC)/National Support for Enhancing Local and Regional Economic Development (NSELRED) -- in the provinces, the project will focus on broadening work areas by developing a micro-middle economy sector in the selected regions.

"We will improve the provinces productive sectors and bolster investment in order to create more job opportunities as well as increase the peoples income and welfare," the minister remarked.

The minister further expressed hope that the project would help to tackle the countrys several economic challenges, including unemployment, poverty, and inequality.

"The Indonesian government expects this partnership to soon be implemented in an effective, efficient, transparent, and accountable manner, so it would benefit the people as well as contribute to national and global economic developments," Brodjonegoro remarked.

On a similar occasion, MacArthur said this project is intended to create a conducive environment for upcoming investments in Indonesia.

"This program is an implementation of the Canadian governments commitment to supporting Indonesias economic development," the ambassador reiterated.

MacArthur added that the project, being implemented for the 2016-2020 period, will empower the micro-middle economy in Indonesia and help the country create a secure business environment in its provinces.

Hence, in implementing the project, Brodjonegoro will cooperate with the Human Development and Culture Coordinating Ministry, Ministry of Cooperatives and Small and Medium Enterprises, Home Affairs Ministry, Investment Coordinating Board, and the provincial governments.

The Canadian-funded NSLIC/NSELRED programs are committed to supporting some innovative provinces in Indonesia that have submitted a development proposal already approved by a reviewing team.

Last year, some regions in Southeast Sulawesi Province, including Kendari City, Baubau City, Wakatobi District, Bombana District, and South Konawe District, had collaborated for a similar project launched in North Sulawesi Province.

The Canadian government has supported economic development in Indonesia since 1954 by allocating a grant worth $20 trillion to fight poverty.

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Garuda Launches Direct Flights From Denpasar to Chengdu in China
Jakarta Globe 24/05/2017

National flag carrier Garuda Indonesia launched a nonstop service from Denpasar, Bali, to Chengdu in China's Sichuan province on Monday (22/05), as part of the airline's strategy to attract more Chinese tourists.

"The Chinese market has a lot of potential for us," Nina Sulistyowati, commercial and information technology director at Garuda Indonesia, said in a statement on Tuesday.

The airline currently operates an extensive domestic and regional network throughout Asia, Australia, the Middle East and Europe and flies to 73 international destinations; some locations are served under codeshare agreements with other airlines.

Garuda also serves direct flights to Beijing, Guangzhou and Shanghai in mainland China.
The Bali-Chengdu route will be operated on Airbus A330-300 aircraft with 24 executive and 263 economy class seats.

Garuda offers four outbound flights to Chengdu on Mondays, Wednesdays, Fridays and Saturdays. Outbound flights each Monday will depart from I Gusti Ngurah Rai International Airport at 7.55 p.m., local time, and arrive at Chengdu Shuangliu International Airport at 2.25 a.m., local time.

Outbound flights on Wednesdays, Fridays and Saturdays will depart from I Gusti Ngurah Rai International Airport at 8.00 p.m. and arrive at 2.25 a.m., local time.

Garuda also offers four return flights on Tuesdays, Thursdays, Saturdays and Sundays, which will depart from Chengdu at 4.10 a.m. and arrive in Denpasar at 9.55 a.m., local time.

China has the world's largest number of outbound tourists, according to China Tourism Academy. The country saw 122 million Chinese tourists travel overseas last year, up about 4 percent compared to 117 million travelers in 2015.

Indonesia is among the top destinations where Chinese tourists spent the most money last year.
Separate data from Indonesia's statistics bureau shows that the country has so far attracted three million foreign tourists in the first three months of 2017, up 15 percent compared to 2.6 million in the same period a year earlier. "Hopefully the Bali-Chengdu route can accommodate Indonesians wanting to travel to Chengdu," Nina said.

"Of course, we expect the route to serve the growing demand of Chinese travelers making their way to Bali."

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Industrial Estate Developer Puradelta Sets Aside Rp 900b in Capex for 2017
Jakarta Globe 24/05/2017

Industrial estate developer Puradelta Lestari has set aside Rp 900 billion ($67 million) in capital expenditure this year, the bulk of which will be used for land acquisition and developing infrastructure in its integrated township in Cikarang, West Java, the developer said in a filing to the Indonesia Stock Exchange on Monday (22/05).

"At least Rp 700 billion will be allocated towards building infrastructure in Kota Deltamas, while the remainder will go towards buying new land," Puradelta Lestari corporate secretary Tondy Suwanto said. He added that the company will use internal cash for capital expenditure.

Kota Deltamas is an integrated township in Cikarang, with a total development area of 3,053 hectares and a signature project named Puradelta.

As of Monday, the company had already sold 36 hectares of its industrial land to tenants, which include foreign and local manufacturers. This figure is equivalent to 60 percent of the company's target for this year.

Land sales are expected to increase further this year.
The developer has achieved Rp 559 billion of its Rp 1.5 trillion marketing sales target the first quarter.
Puradelta also suffered from a slowdown in property demand this year amid challenging economic conditions.

This saw the developer's net income decline 54.6 percent year-on-year to Rp 123 billion in the first quarter.

Revenue was also down 68.5 percent to Rp 222 billion.
Puradelta has been diversifying its business by developing its non-industrial business segment, such as commercial and residential developments, to expand revenue sources.

The company still relies on its industrial estate business, which involves the sale and management of land for tenants in its estate.

bulk of its revenue, or 80.5 percent of the total as of end of March this year, came from this segment.
This proportion has been reduced from 98.7 percent in the same period last year, amid a strong push by the company to diversify.

The commercial business segment contributed 12.1 percent, while the residential and hotel business segment contributed 3.8 percent and 3.6 percent, respectively.

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Increased Infrastructure Financing Expected After Indonesia Secures Investment-Grade Status
Jakarta Globe 24/05/2017

Securing investment-grade status from global credit rating agency Standard & Poor's gives Indonesia a stronger footing to pursue more infrastructure developments, a state minister said on Monday (22/05).
The credit rating agency raised the country's long-term sovereign credit rating to BBB-, the lowest investment grade tier, from BB+ last Friday. S&P was the last of three major global rating agencies to grant the investment grade status to Indonesia.

Coming on the heels of last week's rating upgrade, the government expects the economy to grow as much as six percent by next year as more foreign direct investments flow into the country.

The cost of government borrowing is also expected to drop, allowing President Joko "Jokowi" Widodo to invest more state funds into national infrastructure developments.

"S&P's upgrade frees up the government to seek more investments," National Development Planning Minister Bambang Brodjonegoro said.

The minister said the government will look to raise the country's GDP to somewhere between 5.4 and 6.1 percent next year, up from a 5.1 percent growth rate expected for 2017.

"Investment growth should also quicken, from just 4-5 percent in the past few years [...] we want to see 7-8 percent growth by next year."

Bambang added that the newly minted investment-grade status from S&P, Moody's and Fitch Ratings, will open up global financial institutions that were previously hesitant – or unable – to invest in national infrastructure projects to ramp up funding in coming years.

According to Finance Minister Sri Mulyani Indrawati, the government must set out to align investors' interests with the administration's plan to increase infrastructure spending across the archipelago, create new jobs and pursue more inclusive economic development projects.

"That can mean [investing] in large-scale infrastructure projects outside of Java, perhaps in Kalimantan, Sumatra, Sulawesi, Papua and other islands," Sri Mulyani said.
Steady Hand
The recent investment-grade upgrade reflects S&P's and other economists' belief that the government can balance development ambitions without blowing the state budget deficit out of proportion.

"It's obvious, the reason S&P improved Indonesia's rating was because our fiscal risk is lower under Sri Mulyani," Dzulfian Syafrian, an economist at the Jakarta-based Institute for Development of Economics and Finance (Indef), told the Jakarta Globe.

Since taking up her post as finance minister last year, Sri Mulyani has slashed state spending by $10.2 billion by cutting unnecessary budget allocations in a bid to keep the country's deficit below the 3 percent legal limit.

Dzulfian, who is also a doctoral researcher at the UK-based Durham University Business School, said the country's fiscal risk was high in previous years because of over-optimistic estimations by Jokowi.

"[The president] should realize by now that the economy can't be driven in a short-term manner. Tax generation was stagnant [...] and the fall of global oil prices made it impossible to expect such high growth rates," Dzulfian said

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Kertajati Tops Off Terminal Structure, Readies for 2018 Operations
Jakarta Globe 24/05/2017

Kertajati International Airport, the province's largest airport, had its main terminal structure topped off on Sunday (21/05).

The government aims for the Rp 25 trillion ($1.88 billion) airport to be operational in June next year and cater to 11 million passengers a year, easing traffic on Bandung and Jakarta airports — particularly during the hajj and minor hajj (umrah) period.

"Our hope is that umrah traffic from West Java will be channeled through this airport. We expect that 1.5 million pilgrims will travel from here each year," said Minister of Transportation Budi Karya Sumadi.
The minister and West Java Governor Ahmad Heryawan were both present at the topping off ceremony signifying completion of the terminal's metal shell.

The airport's development has seen many delays, but Budi said he is now confident it will be operational next year. Kertajati airport will have 3,000 meters runway, capable of handling large body jets such as Airbus A380 or Boeing 747.

The airport is located about 120 kilometers north of the province's capital, Bandung, and is likely to replace the city's overcrowded Husein Sastranegara International Airport.

The central government and the West Java administration bear most of the development costs.
The governor said the administration is now drafting a plan to connect the airport to toll roads by 2019, with a seven-kilometer uninterrupted link to Cikampek-Palimana Toll Road, and another one leading directly to Bandung.

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