Indonesian Central Bank Holds Rates Steady, Rupiah Hits Fresh Four-Month Low 

 

Indonesia's central bank held its main interest rates steady on Wednesday, as expected by a narrow majority of analysts, to support the sliding rupiah, which hit a four-month low earlier in the day. 

 

Bank Indonesia (BI) held the benchmark rate at 6.00%, as by 17 of 31 economists polled by Reuters. The other 14 had expected a 25 basis-point rate cut. 

 

The central bank also left the overnight deposit facility and lending facility rates steady at 5.25% and 6.75%. 

 

"The focus of monetary policy is directed towards strengthening the rupiah's stability against the impact of an increasingly uncertain global economy," Governor Perry Warjiyo told a press conference. 

 

A strong dollar has put the rupiah under pressure since October. It fell to four-month low of 16,120 a dollar earlier on Wednesday. It pared some of its losses to trade at 16,085 after BI announced its decision. 

 

The central bank cut rates by 25 bps in September, just ahead of the start of the U.S. Federal Reserve's rate-cutting cycle, but has held them steady since on concerns about the rupiah and uncertainty around the policies of Donald Trump's incoming administration in the US. 

 

Trump's tariffs, combined with rising geopolitical tension, are expected to slow global growth next year and fuel inflation by disrupting supply chains, raising expectations that the Fed will delay rate cuts, Warjiyo said. 

 

"The timing is not right yet," the governor said when asked about BI's own room for easing. He added that the bank would continue to monitor the situation. "Inflation is low and we want to push for economic growth," he said. 

 

Annual inflation was 1.55% in November, near the bottom of BI's 1.5% to 3.5% target range, having eased significantly since early 2023. Annual economic growth was 4.95% in the third quarter, the slowest in a year. 

 

Meanwhile, to stabilize the rupiah, BI has conducted bigger market interventions, offered debt with attractive yields to encourage capital inflows, and bought more government bonds in the secondary market this quarter, Warjiyo said. 

 

"It seems that the US economy will remain strong in 2025, which may keep (the) USD strong in 2025. That's why IDR's stability will be in peril even in 1H 2025, giving fewer chances for Bank Indonesia to deliver cuts," said Ryota Abe, an economist at SMBC in Singapore. 

 

Source: Reuters 

RI to Build First Nuclear Power Plant in Bangka Belitung  

 

Indonesia’s first nuclear power plant is set to be built on Kelasa Island in the province of Bangka Belitung. 

  

“Right now, the regional regulation on spatial planning is [under review] at the ministry, and [we are] waiting for its approval,” PT Thorcon Indonesia director Bob S. Effendi said on Dec. 12, as quoted by kompas.com.  

 

The prototype reactor is to be delivered by South Korea in 2028 via sea route, and total investment for the project is set to amount to IDR 17 trillion (USD 1.06 billion), which would include a survey, research, technology transfer and infrastructure, among other things. 

 

Bob went on to say that Bangka Belitung would make history as the country’s first province with a nuclear power plant, which he claimed would boost its potential for renewable energy development thanks to increased investor confidence.  

 

“In Indonesia, there are two [potential locations], including West Kalimantan and Bangka Belitung. We see the prospects in Bangka Belitung, with Thorcon Indonesia as the investor,” Bob explained.  

 

Other potential locations to build the plant in Bangka Belitung included Tanjung Ular in the regency of West Bangka and some areas in South Bangka. 

 

The company plans to use thorium, a rare earth element, as the raw material and seeks to build the only available thorium-based nuclear power plant in the country, as well as the world’s pilot plant, with the abundant tin resources in Bangka Belitung.  

 

Thorium can be produced as a by-product in the production of tin.  

 

“For the electronics industry, rare earth elements are not new, but [their potential] has yet to be realized for the economy in this region,” Bob said.  

 

He further noted the crucial role of renewable energy in the government’s plan to phase out the use of coal-fired power plants.  

 

“Affordable, clean and reliable energy must be available to reach the 8% economic growth and 2060 NZE [net zero emissions] target,” he said.  

 

Bangka Belitung gubernatorial spokesman Eko Kurniawan said the local government was arranging a medium-term development plan.   

 

He suggested that, while the public was likely to understand the economic aspects of the plant, conducting a sustained information campaign was also necessary, considering “the very dynamic” social aspect.  

 

The government has set a target to add 100 Gigawatts (GW) of power supply in the next 15 years, with renewable energy set to contribute 75% and nuclear power 5% of the total target.  

 

Bob also mentioned the attempts to utilize other energy sources, but added that challenges persisted such as unreliable weather.  

 

The government has announced plans for more than 20 nuclear power plants to be built until 2050 by multiple companies. 

 

Previously, Coordinating Economic Minister Airlangga Hartarto said on Wednesday that state-owned electricity firm PT PLN was working with companies from Japan and the United States to build plants in the country.   

 

"PLN has signed agreements with the US and Japan for small modular reactors [SMRs]. This is something that needs to be considered to strengthen the support for our energy industry," Airlangga said at a national investment coordination meeting in Jakarta, as quoted by kompas.com.  

 

South Korea, Russia, France and China have also expressed interest in assisting in the development of nuclear power in the country. 

 
Source: The Jakarta Post 

 

Hybrid Cars in Indonesia to Get 3 % Luxury Tax Incentive 

 

Indonesia announced Monday that it would roll out a tax incentive for hybrid cars in an attempt to reduce the country’s carbon emissions. 

 

The government kicked off the week by announcing a series of upcoming economic policy packages, including incentives for electric vehicles (EVs). Tax incentives for electric-powered cars are already in effect. Senior minister Airlangga Hartarto revealed that the government would also help lower the tax bill for cars that run on both internal combustion engines and electric motors better known as hybrid vehicles.  

 

“The luxury tax on hybrids will be government-borne. The government will cover 3% of the [luxury] tax burden for hybrid vehicles,” Airlangga told the press in Jakarta. 

 

Hybrid cars are currently subject to a luxury tax rate of between 6% and 12%. In other words, the luxury tax for hybrid cars will be capped at 9% once the freshly announced discount is in force. Fully electric four-wheelers are already enjoying luxury tax incentives. 

 

At present, electric cars that have at least 40% of their components produced locally are eligible for a 10-percent value-added tax (VAT) discount. The cars sold in Indonesia that can apply for this tax cut include the Hyundai Ioniq 5 and Wuling Air EV.   

 

“We plan to continue the [tax incentive] facilities for electric four-wheelers based on the local content. We will keep the government-borne luxury tax for completely built-up, imported electric vehicles. The same goes for the completely knocked down cars,” Airlangga said.  

 

Completely built-up cars refer to imported units that arrive in Indonesia in one piece. On the other hand, complete knockdowns get delivered in parts and are assembled at a local factory.  

 

Import tariff exemption for electric cars would also remain in effect, Airlangga told reporters.  

 

According to the Indonesian Automotive Industry Association (Gaikindo), hybrid cars are more popular compared to their battery counterparts. The wholesale of hybrid cars reached 36,672 units in January-September 2024. This far surpassed the wholesales of battery electric vehicles, which only had 27,548 units sold over the same nine-month period. Plug-in hybrid EV wholesales reached 118 units, data shows. 

 

Hybrid cars emit less emission than their conventional counterparts, although not as clean as their fully electric counterparts. Indonesia has been aiming to reach net zero emissions by 2060 or sooner. President Prabowo Subianto, however, has revised Indonesia’s net-zero emission target to 2050. 

 

Airlangga also announced that the government would proceed with the plan to raise the VAT to 12% starting in January. Staple food such as rice and eggs, however, will be VAT-free. 

 

Source: Jakarta Globe