This Week's Headlines (Feb 3 - 9, 2024)

09 Feb 2024

Electric Vehicles

Indonesia Aims for 5.2% Growth Despite Global Economic Fears

Despite a more cautious perspective from the International Monetary Fund (IMF) and the World Bank, the government remains hopeful about achieving its 2024 economic growth target of 5.2 percent.

Chief Economic Minister Airlangga Hartarto expressed confidence in achieving the target despite global economic challenges. "This year, we remain optimistic about 5.2 percent, even though it may be 'rainy and somewhat gloomy', but Indonesia shines on its own. Our exports this year have relatively stabilized as we progress towards normalcy," he said at a press conference on Monday.

In comparison, The IMF forecasts Indonesia to achieve a growth rate of 5 percent for the current year and the following year. Meanwhile, the World Bank predicts a decrease in growth for both 2024 and 2025, with the growth rate projected to be 4.9 percent in each of those years.

Airlangga highlighted sustainable policies as key to future economic growth. However, he acknowledged the risks posed by global economic turmoil, such as the Ukraine-Russia conflict, Hamas-Israel tensions, and China's economic slowdown, leading to commodity price fluctuations.

"Advanced countries are still tightening monetary policies with high-interest rates for a longer period," he said.

The government, according to Airlangga, continues to maintain macroeconomic stability through a balance of fiscal and monetary policies to stimulate the economy. This includes controlling prices during national holidays.

Airlangga emphasized the government's efforts to promote new economic growth engines through digitization and sustainable energy transition. These initiatives include the ASEAN Zero Emission Community, green energy, and energy infrastructure.

"When we look at our economic growth in 2023, it's 5.05 percent, and quarterly it's 5.04 percent. With these figures, it is higher than the consensus forecast, which estimated 5.03 percent economic growth in 2023," said Minister Airlangga.

The Central Statistics Agency (BPS) on Monday reported that Indonesia's economy expanded by 5.05 percent in 2023, slower than the 5.3 percent growth in 2022. The main contributors to the Gross Domestic Product (GDP) were domestic consumption and infrastructure development.

Domestic consumption continued to grow due to controlled inflation and increased purchasing power, particularly in high-growth consumption groups. Notable growth was observed in the restaurant and hotel sectors, driven by increased tourism during school holidays, Christmas, and New Year.

The positive growth was attributed to ongoing infrastructure development and increased investment activities. Housing projects, including the Halim Perdana Kusuma Airport apartment complex, civil servant apartments in the new capital Nusantara, the million houses program, and toll road constructions such as Kisaran-Lebing Tinggi, Serpong-Cinere, Cinere-Jagorawi, and Cimanggis-Cibitung toll roads, supported this economic expansion.

Source: Jakarta Globe


China's Chery Pledges to Make Indonesia its SE Asia Production Hub

This year, Chery plans to commence exporting ICE cars and EVs from its Indonesian factory to other Southeast Asia countries, including Vietnam, Thailand and the Philippines.

Chinese automaker Chery says the company is committed to making Indonesia its production base for the local and Southeast Asian markets and it will realize this goal gradually by increasing its investment in the country.

This year, the firm plans to export both internal combustion engine (ICE) automobiles and electric vehicles (EVs) from its Indonesian factory to other Southeast Asia countries, including Vietnam, Thailand and the Philippines.

“Indonesia will be the first country in Asia from which Chery exports cars,” stated Qu Ji Zong, executive vice president of PT Chery Sales Indonesia (CSI), during a press conference on Monday, as quoted by Bisnis.

Chery has been assembling cars under a completely knocked-down (CKD) scheme in Indonesia since 2022 by working together with local factory PT Handal Indonesia Motor, which involved an initial Rp 250 billion (US$15.88 million) investment.

CKD refers to the delivery of disassembled parts either fully or partially manufactured overseas.

The firm has pledged to gradually increase its investment over the next five years, but declined to reveal specific financial details.

Last year, Chery launched ICE models, the Omoda 5 and Tiggo 7 Pro, to be sold in the country.

On Monday, the firm launched its first EV product named the Omoda E5, which is also assembled in its Indonesia’s factory. Indonesia is the first country outside China where Chery has launched its EV products.

The EV product sells for Rp 500 million after value-added tax (VAT) incentives. The government has granted Chery the EV incentives as its Omoda E5 meets the 40 percent local content requirement (TKDN).

In January, another major Chinese EV manufacturer BYD also launched three products to mark its entrance into Indonesia. However, its units are still completely built-up (CBU) or imported as finished products directly from China.

BYD entered Indonesia after the issuance of Presidential Regulation No. 79/2023, which allows companies to import EVs until the end of 2025 on the understanding that they will eventually build a factory in the country.

Analysts suggest that the carmaker may also pursue a CKD scheme to increase the local content level, which would grant it more incentives to sell in Indonesia.

Chery claims that the total orders for the Omoda E5 amount to 500 units, comparable with the almost 1,000 orders BYD claims to have received for its three product lines.

CSI’s Zong stated that BYD’s entrance into Indonesia could support EV penetration in the country. However, he expressed optimism that Chery still has the upper hand as the first mover in the competition among Chinese carmakers.

“For example, in sales and service, we have been more mature and closer to the consumer, as we arrived here earlier,” he stated.

Nickel Prospect

Coordinating Economic Minister Airlangga Hartarto has targeted the sale of 200,000 EV and hybrid cars this year, more than double the 80,000 units sold last year. He has also encouraged Chery to increase the TKDN level, as the government has set a minimum limit of 60 percent for EV products by 2027.

The Office of the Coordinating Maritime Affairs And Investment Minister previously stated that EV manufacturers are unlikely to meet the requirement if they do not use domestically made batteries. Chery currently still uses lithium ferro phosphate (LFP) batteries for its Omoda E5 units, similar to BYD. Thus, the firm is considering using nickel-based batteries, which have been the focus of the local battery ecosystem, in its future product lines.

Source: The Jakarta Post


Bali to Implement Foreign Tourist Tax Strting February 14

Bali Provincial Government will officially impose a tourism tax for foreign tourists starting February 14, 2024. Each foreign visitor will have to pay US$10 or Rp150,000.

The payment will be implemented through an app dubbed Love Bali introduced by the Bali Regional Government. This policy aims at overcoming the waste problem in Bali better, preserving Balinese culture, and purifying Balinese customs.

The policy also becomes one of the solutions for the over-tourism issue on the Island of the Gods. However, this regulation will certainly not reduce the interest of foreign tourists who want to travel drastically. The policy is considered to be supported by tourists as preserving culture and the environment in Bali must also be a top priority.

Tourism and Creative Economy Minister Sandiaga Uno in July 2023 is optimistic that the policy will increase Bali’s tourism quality as the conservation budget would be guaranteed from the contribution of the visitors.

Sandiaga said the implementation of this program would require a huge cost, therefore, collaborative cooperation from all parties is needed. The government would immediately monitor the levy payment policy from the ratification process to its implementation.

Bali Tourism Association asked for a transparent management of the foreign visitor tax collection funds. Considering the purpose of the regulation is for cultural and environmental preservation, it must be right on target and not for the interests of a few parties.

The Love Bali app for foreign tourist tax payments is expected to enable users to easily make payments and understand the importance of nature and cultural conservation which is the main focus of this policy.

Source: Tempo