Indonesia President Calls for More Prudent Government Spending Amid Global Tensions 

 

Indonesia's President Prabowo Subianto called on Tuesday for more efficient government spending amid expected economic challenges caused by rising geopolitical tensions. 

 

Prabowo, who took office in October, told his ministers and government officials that such tensions are expected to slow the growth of the world's major economies, without mentioning any country although citing a "military emergency" as an example.

 

"We cannot tolerate leaks, heavy spending, things that do not address the problems of our people, that aren't productive," he said, calling for fewer ceremonial events and seminars. 

 

"Tensions, wars, heavy competition between major powers ... this causes economic uncertainties." 

 

On Tuesday, Prabowo also presided over a launch of an application for state agencies to procure products which he said could make state spending more efficient. 

 

About 3,621 trillion rupiah (USD 228.31 billion) has been allotted in the state budget for government spending next year, which represents an increase of 6% over this year, with the budget deficit forecast at 2.53% of the country's gross domestic product, lower than this year's outlook of 2.7%. 

 

Prabowo has long touted his aim to accelerate Indonesia's economic growth to 8%%, from 5% now, by developing industries that process the country's rich natural resources and relying on the economic impact of his flagship programmes, such as giving students free school meals. 

 

During the speech, Prabowo also called for a more targeted subsidy scheme and to make sure all subsidies reach the poor. 

 

Source: Reuters 
 

Bullion Bank to Launch in First Half of Next Year, Airlangga Says 

 

The Financial Services Authority (OJK) and the government plan to gradually build a complete gold investment ecosystem, including a national gold council and hallmarking to ensure product authenticity. 

 

Indonesia is set to establish its first bullion bank early next year, Coordinating Economic Minister Airlangga Hartarto said on Tuesday.  

 

He added that the institution’s creation follows the enactment of Law No. 4/2023 on financial sector development and strengthening (P2SK).  

 

Airlangga previously suggested that state-owned lenders like Bank Syariah Indonesia (BSI) and Bank Rakyat Indonesia (BRI), through its pawnshop subsidiary Pegadaian, could form the country’s first bullion bank.  

 

“In the past, we only stored gold reserves in vaults and recorded their tonnage, not their value. Banks in countries like Singapore, however, include the value of gold in their financial statements,” Airlangga noted on Monday, as quoted by Bisnis.  

 

A bullion bank operates similarly to a conventional bank but focuses on gold rather than cash. It collects gold deposits from individuals and then lends or trades the metal with other parties.  

 

In October, the Financial Services Authority (OJK) issued Regulation No. 17/2024, outlining the requirements for establishing a bullion bank, including minimum core capital of IDR 14 trillion (USUSD 880 million). Regional banks and microfinance institutions are excluded from offering bullion services. 

 

Maman Firmansyah, director of multifinance and venture capital monitoring at the OJK, revealed that the government was drafting a presidential regulation to complement the OJK’s regulation on bullion banks.  

 

He added that the agency and the government would gradually build a complete gold investment ecosystem, that would include the establishment of a national gold council as an industry association and a hallmarking system to ensure product authenticity.

 

“We have identified some significant gaps in Indonesia’s bullion ecosystem. When [looking for reference] to practices in other countries, such as Singapore, the UK and Turkey, we found some components that have not been established here,” he said on Tuesday, as quoted by Bisnis. 

 

In October, gold prices hit an all-time high, surpassing USD 2,780 per ounce. Many analysts have forecast a continued rise in global gold prices driven by increasing demand from various countries amid geopolitical uncertainty. 

 

Domestic gold industry  

 

Airlangga also explained that bullion banks could add more value to gold products made in Indonesia as the government is keen to expand its downstream industry agenda to include the precious metal mined in several regions of the country.  

 

He stated that the Special Economic Zone in Gresik, East Java, was ready to produce 60 tonnes of gold per year following the launch of operations at PT Freeport Indonesia’s copper smelter in Gresik. Gold is extracted as a byproduct of copper refining.  

 

For the sake of comparison, state-owned pawnshop firm Pegadaian currently holds only 70 tonnes of gold in stock.  

 

Up until recently, state-owned gold producer and retailer PT Aneka Tambang (Antam) typically relied on imported gold to manufacture its retail products, but on Nov. 7, the firm signed a purchase agreement to source 30 tonnes of the precious metal annually from Freeport, ditching the need for imports. 

 

SOEs Minister Erick Thohir stated at the time that he would encourage SOEs in financial services to establish bullion banks and help distribute Antam’s gold to customers.  

 

“Those banks could support the domestic trade in precious metals and promote gold savings as an alternative investment option for Indonesians,” the minister said. 

 

Source: The Jakarta Post 

Investment Outlook: Indonesia Sets USD 120 Billion Target for 2025 

 

Indonesia is aiming for IDR 1,906 trillion (USD 119.72 billion) in investment for 2025, marking a 15.45 percent increase from the 2024 target. 

 

The target was revealed by Investment Minister and Head of the Investment Coordinating Board (BKPM) Rosan Roeslani during the 2024 National Investment Coordination Meeting held at the Ritz Carlton Mega Kuningan, Jakarta, on Wednesday. 

 

Roeslani outlined that the 2025 target is part of the government's broader investment strategy, with a projection for steady growth over the next five years. “The target for 2025 is IDR 1,906 trillion, and this will increase progressively through to 2029,” he said. 

 

The ministry is targeting an annual growth rate of 16.75 percent to achieve the projected 8 percent economic growth. 

 

According to Rosan, Indonesia will need a total investment of IDR 13,528 trillion over the next five years to achieve these ambitious economic targets. "This will require sustained investment growth of 16.75 percent per year,” he said. 

 

For the year 2024, Rosan reported that real investment realization from January to September reached IDR 1,261.43 trillion, a 19.78 percent increase year-on-year (YoY), reaching 76.45 percent of the total target for the year. Of this total, over 50 percent was contributed by investments on Java Island. The investments have also resulted in the creation of more than 1.8 million jobs. 

 

Rosan credited the government’s progress in investment growth to the implementation of the Job Creation Law, which has streamlined investment processes and expedited business licensing for investors. 

 

According to the latest IMD World Competitiveness Ranking for 2024, which placed Indonesia in the 27th position globally, an improvement from the 34th place in 2023. 

 

Source: Jakarta Globe