This Week’s Headlines (3 - 9 June 2023)

09 Jun 2023


  Indonesia inflation eases to central bank target sooner than expected


  Indonesia's annual inflation rate eased to 4% in May, matching the upper end of the central bank's
  target range earlier than expected, data from the statistics bureau showed on Monday.

  Inflation in Southeast Asia's largest economy had been above Bank Indonesia's (BI) 2% to 4%
  target range since June
2022 due to pressures from rising global food and energy prices.


  Peaking near 6% in September, inflation has since eased gradually after the central bank hiked
  interest rates by a total of 225 basis points.

  A Reuters poll of analysts had expected May inflation at 4.22%. In April, the rate was 4.33%.

  The core inflation rate, which strips out government-controlled and volatile food prices, eased to
  2.66% in May from 2.83% a month before. The poll had expected 2.80%.


  At BI's last policy meeting, it had expected headline inflation to ease to within its target in the third
  quarter, with core inflation seen staying within the same target band throughout the year.


  Pudji Ismartini, deputy head of the statistics bureau, attributed slowing inflation to declining
  airfares after the Eid al-Fitr festivities.


  "Indonesia's inflation continues to surprise on the downside as seasonal festive effects fade and
  administrative measures help to calm food cost," Radhika Rao, DBS Bank economist said.

  Rao expected BI to maintain a neutral policy stance, but to pivot towards easing in the third
  quarter, citing the trajectory of inflation and BI's "constructive view on the currency".


  Even as inflation returned to target "much earlier than expected", Bank Danamon economist
  Wisnu Wardana predicted BI would keep rates unchanged throughout the year, as downside risks
  from declining global food prices were balanced by rising oil prices due to production cuts by


  Speaking separately at a parliamentary hearing, BI Governor Perry Warjiyo said the bank's
  interest rate policy would be guided by inflation developments.


  He also reiterated that he believed the rupiah would strengthen further against the U.S. dollar
  through to 2024 due to improving fundamentals.


  BI will lower its inflation target next year to a 1.5% to 3.5% range.


  Source: Reuters




  Isuzu to move truck factory from Thailand to Indonesia, ministry says


  Japanese automobile manufacturer Isuzu Motors is set to move its truck factory from Thailand to
  Indonesia by 2024, Industry Minister Agus Gumiwang Kartasasmita said on Thursday.


  The relocated factory will produce UD Trucks, previously owned by Volvo and acquired by Isuzu in
  2019, the ministry said.


  "We would like to express our appreciation for Isuzu's decision and hope that the relocation of the
  production base will go well. We will prepare various facilities, including incentives, to support the
  factory relocation process," said Agus in a statement.


  Isuzu already has a factory in Karawang, West Java. Last year, it produced 44,694 units,
  equivalent to 15 percent of the company’s total production worldwide, the ministry said.


  In Indonesia, Isuzu was the seventh largest four-wheeler wholesaler with more than 36,646 units
  sold in 2022, just 940 units below Mitsubishi Fuso, another Japanese truck-producing competitor,
  according to the Association of Indonesian Automotive Manufacturers (Gaikindo) data.


  Isuzu exported 8,254 completely built-up (CBU) units last year, contributing to the seventh-largest
  shipment from Indonesia’s automobile industry, the same data show.


  Indonesia has become an appealing automobile market for global automakers, with Japanese
  manufacturers such as Toyota, Mitsubishi and Daihatsu dominating the country’s domestic four-
  wheeler market.


  The automotive industry in Indonesia generates roughly 4 percent of total GDP, the ministry said,
  making it one of the primary sources of growth in the national economy.


  “Isuzu hopes for support from the Indonesian government to help ease the export process,”
  Yasuyuki Niijimam, senior executive officer at Isuzu Motors said in a statement.


  Currently, the Isuzu factory in Indonesia produces Isuzu Tragafor commercial purposes, which the
  company exports to various countries, with the Middle East and the Philippines being the main
  target markets.


  Minister Agus also hopes the Isuzu truck factory in Indonesia will be able to expand its exports to

  “We would target the volume of production in Indonesia as well as increase market exploration in
  Africa,” Agus said.

  The ministry also hoped Isuzu could increase its local content uses, especially on vehicles that are
  still completely or partially imported to be assembled in Indonesia.


  Indonesian automobiles have faced headwinds during the pandemic when the production of
  automobiles fell to a total of 690,176 units in 2020, marking a significant drop from previous


  Automobile production recovered steadily the following year, with output reaching 1.12 million


  In 2022, Gaikindo data reported that production jumped 31 percent to over 1.4 million units of
  four-wheelers from the previous year, marking further expansion after it quickly recovered from
  the pandemic.


  The country also has been pushing for greater adoption of electric vehicles (EVs) in both two-
  and four-wheelers.

  The government has set a target of increasing the share of EVs to 5 percent of all vehicles sold
  this year, and to 10
 percent in 2024, so as to reach the critical mass needed for growth of the


  This year, the government has introduced a variety of incentives, including a luxury tax cut for
  four-wheelers and subsidies for two-wheelers purchases.


  Source: The Jakarta Post




  Indonesia plans to ban single-use plastic by end of 2029


  Indonesia will start imposing a ban on single-use plastic products by the end of 2029, the
  country’s Environment and Forestry Minister Siti Nurbaya Bakar said on Monday (Jun 5). 

  By that time, manufacturers are also mandated to reduce their use of plastic packaging by 30


  Mdm Siti Nurbaya said the ban will include single-use plastic shopping bags, plastic straws and
  plastic cutlery while the use of styrofoams for food packaging will also be prohibited.

  “This is a way to deal with packaging wastes that are difficult to collect, have no economical value,
  hard to recycle and have the potential to pollute (the environment),” the minister was quoted as
  saying by Indonesian news agency Antara.

  Various studies and reports have named Indonesia as one of the top plastic waste producing
  countries in the world.

  Last year, the country of 270 million people produced 12.6 million tonnes of plastic waste,
  according to data from Indonesia’s environment ministry. 


  Meanwhile, a study from environmental group Zero Waste Indonesia Alliance suggests that only
nine percent of plastic waste in Indonesia are recycled while the rest end up in landfills or polluting
  the rivers and oceans.

  Mdm Siti Nurbaya said provinces in Indonesia will be instructed to produce a plastic waste
  reduction road map in support of the ban taking place in 2029.

  In July 2019, the popular resort island of Bali became the first Indonesian province to impose a
  ban on the use of single-use plastic bags, straws and styrofoams. 


  Meanwhile, the country’s capital Jakarta issued a ban on the use of single-use plastic bags in July
  2020 but still allows the use of plastic straws, cutlery and styrofoams.


  Mdm Siti Nurbaya, the environment and forestry minister, said the private sector should also play
  its part to reduce plastic waste. She mandated all manufacturers to reduce their packaging waste
by 30 percent by the year 2029 in a bid to tackle the upstream life cycle of single-use plastic


  Indonesia is not the only country hoping to end its reliance on single-use plastic products.


  In 2018, Malaysia set an ambitious road map to eliminate single-use plastics by 2030.


  To support this goal, Malaysian minister for natural resources, environment and climate change
  Nik Nazmi Nik Ahmad said last month that the country aims to ban the use of plastic bags for
  retail purposes across all business sectors nationwide by 2025.


  Source: CNA