This Week's Headlines (19 - 25 Nov 2022)

25 Nov 2022


  Indonesia admits defeat in WTO nickel-export dispute 


  The government has admitted that the World Trade Organization ruling on its nickel-export ban
  was in favor of the European Union. 


  In a meeting with House of Representatives Commission VII, which oversees energy and
  technology policies, the Energy and Mineral Resources Ministry announced that the WTO panel
  had rejected Indonesia's justification for the policy. 


  In 2019, the EU launched consultations with Indonesia under the WTO framework about the
  latter's `restrictions on the export of several raw materials, including nickel, that are necessary for
  the production of stainless steel. 


  Registered as dispute DS592, Brussels believed Indonesia had violated Article XI:1 of the 1994
  General Agreement on Tariffs and Trade (GATT), which states that WTO members must grant as
  much access as possible to international trade. 


  Indonesia sought to justify its policy on the basis of exemptions from that principle stipulated in
  articles XI:2 (a) and XX (d) of the GATT. 


  “The government maintains that the panel’s decision does not yet possess permanent legal
  standing, so there is still a chance to appeal,” Energy and Mineral Resources Minister Arifin Tasrif
  said on Monday.  


  The minister continued by explaining that Indonesia was not obliged to change or retract its
  regulation as long as an appeal process was still ongoing through the WTO's dispute settlement
  body (DSB). 


  According to the ministry's information, the WTO decided that multiple Indonesian regulations
  violated the GATT, namely Law No. 4/2009 on Mineral and Coal Mining, Ministerial Regulation
  No. 11/2019 on Mineral and Coal Mining, Ministerial Regulation No. 96/2019 on the Export of
  Processed and Refined Mining Products and Ministerial Regulation No. 7/2020 on Mineral and
  Coal Administration. 


  The full WTO panel report was decided on Oct. 17, will be made publicly available on Nov. 30
  and become part of the DSB agenda on Dec. 20, according to a document shared by the ministry. 


  "It is necessary to defend our nickel downstream [development] policy by accelerating the
  construction of smelters," Arifin continued. 


  The minister said this would "make clear" that Indonesian nickel was indeed processed into
  higher-value goods, creating employment and spurring growth in nickel end-user industries. 


  Arifin said the appeal process would be "a long one". 


  When contacted by The Jakarta Post on Tuesday, Deputy Investment Minister Riyatno declined
  to comment, explaining that the ministry's position "would first be discussed internally". 


  The Trade Ministry’s policy agency head, Kasan Muhri, said it could not comment on the impact
  of this decision yet due to the government's decision to appeal. 


  "An [appeal] will take a long time, so the impact cannot be calculated," Kasan told the Post on


  Trade Ministry International Trade Cooperation Director General Djatmiko Bris Witjaksono told
  the Post on Tuesday that the government had "not yet" decided any other measures apart from


  "[This is] still in process within the WTO, [it is] still a long [process]," Djatmiko said. 


  The Office of the Coordinating Economic Minister and the Office of the Coordinating Maritime
  Affairs and Investment Minister did not respond to requests for comment. 


  University of Indonesia international trade law expert Wenny Setiawati said on Monday that
  downstream industrialization could continue for the time being. 


  However, she said, the government should prepare "alternative solutions" in case the decision
  made by the WTO's appellate body would be similar to the panel ruling in case DS952, which
  would compel Indonesia to revise or retract regulations. 


  "We must prepare for retaliation," Wenny told the Post. 


  State-owned Bank Mandiri nickel analyst Ahmad Zuhdi Dwi Kusuma said on Monday that the was
  prepared for case DS952, in stark contrast to a similar case in 2017, where the government
  relented and let nickel ore exports resume. 


  Currently, he said, domestic downstream industries were much stronger than before, so mining
  companies would be incentivized to process ores in their smelters rather than export it to
  international markets, especially if the domestic and international prices were alike. 


  Supporting strategies, such as the domestic market obligation that mimics the policy on coal,
  could also be implemented, he noted. 


  In an exclusive interview with the Post, President Joko "Jokowi" Widodo had already hinted at a
  possible defeat in the WTO case. 


  His strategy was to prolong the legal battle at the WTO through the appeal mechanism, which he
  estimated would take five to 10 years to process, and to develop as much of the domestic industry
  as possible during that period. 


  He expressed confidence that that method had already worked in the case of nickel, as Indonesia
  had shifted to nickel exports from ore exports and was earning much more revenue as a result. 


  “[Can you] imagine that, for decades, we were only exporting raw materials? Do we want this to
  continue? We do not,” President Jokowi said on Nov. 2. 


  Source: The Jakarta Post




  Indonesia Caps Minimum Wage Increase at 10% for 2023 


  Indonesia announced a minimum wage increase for 2023 that was smaller than labor unions had
  demanded, risking protests by workers. 


  Minimum wages across Indonesia will rise by a maximum of 10% next year, the Ministry of
  Manpower said, as it set a new formula for computing the increase. Provinces will have until
  Nov. 28 and cities until Dec. 7 to decide minimum wage levels that will come into force on Jan. 1. 


  “With the adjustment of the 2023 minimum wage formula, I hope that people’s purchasing power
  and consumption will be maintained and can increase economic growth and will eventually create
  jobs,” Minister Ida Fauziyah said in a Saturday briefing. 


  The increase falls short of the labor unions’ demand for as high as 25% increase in minimum
  wages. Unions had urged the government to use a previous rule that would pave way for at least
  13% increase, and also made a case for a 25% jump citing double-digit food, fuel and housing


  Consumer prices Indonesia are hovering below 6%, considered relatively low in Asia where
  neighbors Singapore and the Philippines are grappling with more than 7.5% price growth. 


  The Confederation of Indonesian Trade Unions had threatened a protest march by five million
  workers if its demand wasn’t met. 


  Source: Bloomberg 




  BI targeting to reduce inflation to 3.61% in 2023 


  Bank Indonesia (BI), in its Annual Budget Plan, has set the target of bringing down the Consumer
  Price Index (CPI) inflation to a level of 3.61 percent year on year (yoy) in 2023. 


  According to the central bank’s estimates, Indonesia’s CPI inflation reached 6.11 percent yoy as
  of November 3, 2022. 


  "Our target is to control inflation immediately next year, so we really need an increase in the
  benchmark interest rate," BI Governor Perry Warjiyo said during a meeting with Commission XI of
  the House of Representatives, which was accessed from here on Monday. 


  Next year, the central bank will also continue to control the rupiah exchange rate to make it more
  stable and even strengthen it to a level of Rp15,070 per US dollar, he informed. 


  These targets indicate that economic growth is likely to be slower next year and will be capped at
  4.37 percent yoy compared to the forecast of 5.12 percent for this year. 


   The forecast is in view of the global economic turmoil, which is expected to last until next year,
  however, the Indonesian economy is projected to fare better in 2024. 


  Speaking about the macro assumptions in Bank Indonesia's 2023 Annual Budget Plan, Warjiyo
  said the central bank has set 40 key performance indicators (IKUs), which would be issued to the
  House of Representatives. 


  "Key Performance Indicators is the implementation of our 12 strategic programs," he added. 


  According to the central bank governor, the indicators include the implementation of the main
  mandate and strategic initiatives as indicators of the success of the 2023 strategy, which is pro-
  stability and pro-growth, supported by institutional management based on 2EG, digital and green. 


  The indicators for next year include a core inflation target of 2–4 percent, adjustment of rupiah
  exchange rate volatility to economic developments and needs, as well as a foreign exchange
  reserve target equivalent to approximately 6 months of imports. 


  The indicators also include a bank credit growth target of 9.5–11.5 percent, the development of
  more than 3 thousand micro, small, and medium enterprises (MSMEs), 45 million Quick
  Response Code Indonesian Standard (QRIS) transactions, and approximately the same as 70
  thousand QR transactions between countries. 


  Source: Antara News