This Week's Headlines (15 - 21 Oct 2022)

21 Oct 2022


  Indonesia to divert exports to new markets amid languid
 global demand


  The Trade Ministry has announced that it will refocus on the export of goods to nontraditional
  markets in a bid to offset the risk of reduced demand from major trade partners.  


  In a keynote speech to open the annual Indonesian Trade Expo, Trade Minister Zulkifli Hasan
  stated that the government would increase export volume to several regions, including Africa,
  South Asia, Central Asia and the Middle East.  


  Statistics Indonesia (BPS) data show that from the top 10 export destination countries in
  September, only India came from these regions, while the rest came from North America,
  East Asia, Europe, and Southeast Asia.  


  “We could even explore [export possibilities in] Eastern Europe, and if we want to take things
  further, to Latin America,” Zulkifli told expo participants on Wednesday.  


  The need to refocus on nontraditional export markets stems from the risk of a global economic
  slowdown, as diversifying means less exposure to economic turbulence in destination


  The African continent's and Indian subcontinent's huge populations are a must target for
  exports. In both markets he estimates total populations of around 1 billion and 1.5 billion
  people, respectively, meaning a big pool of consumers to purchase clothes and food.  


  The government will also find opportunities to deliver more goods to the Middle East, and in
  particular Saudi Arabia.  


  “This is a gift of our agreement with the United Arab Emirates [UAE],” Zulkifli continued, “As
  the nontariff stipulations mean that our goods could enter the UAE and continue to Africa,
  South Asia, Central Asia [and the] Middle East.”  


  Speaking at the same event, President Joko “Jokowi” Widodo said that Indonesia had
  received praise from the International Monetary Fund for being a “bright spot” amid the

  global economic gloom, which increased the nation’s global trust.  


  He stated that as Indonesia’s trade surplus continued into its 29-month consecutive run, the
  estimated US$10 billion deals from the expo would assist in maintaining this surplus in the
  coming months.  


  BPS data show that Indonesia’s trade surplus from January to September was $39.87 billion,
  almost 13 percent higher than the total surplus of last year.  


  “It is acceptable for other countries [to experience a dark year]. Our country must remain
  optimistic but still cautious, because the storm is unpredictable,”
  the commander-in-chief said.  


  In 2023, the IMF forecasts that the Sub-Saharan and Middle East-North Africa regions’ gross
  domestic product will grow by 3.7 and 3.6 percent, respectively, while India will grow by 6.1
  percent. Central Asia and the Caucasus are expected to rise by 4 percent.  


  In East Asia, China is positioned to have the largest economic growth next year with a 4.4
  percent increase, followed by South Korea and Japan with 2 and 1.6 percent, respectively.  


  Meanwhile, the institution projects next year’s GDP growth in the United States and the
  European continent to grow by 1 and 0.5 percent, respectively.  


  State-owned Bank Mandiri economist Faisal Rachman said that in the short term, these new
  markets would not be able to fully replace the potential demand loss from traditional markets.  


  “[But] with good diversification of export destinations, the impact of global pressure can be
  minimized,” Faisal told The Jakarta Post on Wednesday.  


  Furthermore, expanding exports to nontraditional markets should be kept as a medium-term
  strategy to enhance external resiliency against foreign risk exposure.  


  For this medium-term strategy to work, he said, Indonesia should enhance its downstream
  industry to fix the domestic supply chain, so that entry into new markets is more prospective. 


  Source: The Jakarta Post 




  BI again raises key rate by 50 bps to 4.75% 


  Bank Indonesia (BI) on Thursday raised its key rate by 50 basis points (bps) to 4.75 percent
  from 4.25 percent a month earlier. 


  In addition, the central bank raised the deposit facility rate and lending facility rate by 50 bps
  to 4.0 percent and 5.5 percent, respectively. 


  "This decision serves as a front-loaded, pre-emptive, and forward-looking step to reduce the
  expectation of overshooting inflation," BI Governor Perry Warjiyo said while announcing the
  results of the meeting of the central bank’s board of governors, which was accessed online
  from Jakarta on Thursday. 


  The decision is also aimed at ensuring that the future core inflation returns to a range of 2–4
  percent earlier or by the first half of 2023 as well as at strengthening the policy to stabilize the
  rupiah's exchange rate, he added. 


  That way the rupiah will hopefully trade in line with its fundamentals in view of the US dollar's
  strong appreciation and the high level of uncertainty in the global financial market,
  he explained. 


  BI is also continuing to strengthen the policy mix to maintain stability and the economic
  recovery momentum by taking several steps, including strengthening monetary operations
  and improving the interest rate structure in the money market, in keeping with the key
  rate hike. 


  Further, it is strengthening the stability of the rupiah's exchange rate, continuing to sell or
  purchase government bonds (SBN) in the secondary market to strengthen the transmission
  of the key rate hike, and implementing macro prudential and accommodative policies to
  push the distribution of bank credit/financing to the business world. 


  Source: Antara News Agency 



  Indonesia to offer tax holiday to companies investing in new capital


  Indonesia will offer generous incentives, including a 30-year tax break, for companies investing
  in a $32 billion project to build a new capital city in the country called Nusantara, an official
  said late on Tuesday. 


  Bambang Susantono, head of the Nusantara National Capital Authority, made the comments
  at a gathering with hundreds of local and foreign investors in the current capital Jakarta. 


  Construction of a dam and roads has started at the site of the new capital, he said, currently
  an underdeveloped area fringed by Borneo's vast rainforest. 


  As many as 100,000 construction workers will accelerate work next year in an effort to get
  the site ready by Aug. 17, 2024, when President Joko Widodo wanted to celebrate
  Indonesia's independence day at a new presidential palace, Susantono said. 


  Susantono asked the gathering to consider investing in areas such as healthcare,
  education and entertainment in the new capital, promising that regulations on fiscal
  incentives would be released soon. 


  The incentives include a tax holiday of up to 30 years and a 350% "super-tax deduction" for
  research and development, more generous tax concessions than for investments in other
  Indonesian cities, he said. 


  "This is a lifetime build this city," he said, adding the government will form a
  business entity to speed up deal making with the private sector. 


  At the gathering, which was also attended by the president, an executive with Indonesian
  hospital operator PT Medikaloka Hermina pledged to invest in Nusantara. 


  In his speech, the president, better known as Jokowi, sought to ease concerns about the
  future of Nusantara after his second term ends in 2024. 


  Jokowi is constitutionally barred from seeking a third term and there have been questions
  about whether his successor will back the project, which some have criticized as profligate
  spending during difficult economic times. 


  "Everything has been approved by 93% of parties in parliament. If any one of you is still
  unsure, what else is missing? There's no need to question anymore," Jokowi told investors. 


  A June survey of 170 experts by the Indonesian Centre for Strategic and International
  Studies found nearly 59% were unsure the Nusantara project would materialize, citing
  uncertainty over funding and management. 


  Source: Reuters