Indonesia launches Southeast Asia's first high-speed rail

Indonesia launched Southeast Asia’s first high-speed railway on Monday (Oct 2), a delayed, multibillion-dollar project backed by China that President Joko Widodo hailed as "a symbol of our modernisation". 

With a top speed of 350 kmh, the bullet train "Whoosh" can get between the capital Jakarta and Bandung in 45 minutes. 

The 140km journey would previously have taken about three hours by train. 

"The Jakarta-Bandung high-speed train marks our efficient, friendly, and integrated mass transportation system," Widodo said during a ceremony at the capital's central station. 

"It is a symbol of our modernisation in the public transport, seamlessly connecting with other modes of transportation." 

Widodo said the 600-capacity train was the first high-speed rail transportation in Southeast Asia. 

It is part of Beijing's Belt and Road initiative - a decade-old programme of China-backed infrastructure projects. 

The president said the name was actually an acronym, standing for a tagline of "Waktu Hemat, Operasi Optimal, Sistem Handal" - which in Bahasa Indonesia means "Saving time, optimal operation, reliable system". 

It was built by PT KCIC, which is made up of four Indonesian state companies and Beijing's China Railway International Co. 

The project was initially set to cost less than US$5 billion and be completed by 2019. 

However, delays caused by construction challenges and the COVID-19 pandemic led to a surge in costs. 

In preparation for its opening, officials have conducted public trials for the new high-speed route. 

Last week, Transportation Minister Budi Karya Sumadi confirmed that the government would extend the high-speed train route from Bandung to the country's second-biggest city Surabaya. 

Last month, Chinese Premier Li Qiang joined Senior Minister Luhut Pandjaitan on a ride aboard the train during his Jakarta visit for summits with Southeast Asian leaders. 

Pandjaitan told reporters on Thursday that Widodo plans to welcome Chinese President Xi Jinping in the future to ride the train, but did not give more specifics. 

Source: CNA 

Rupiah hits lowest point this year

A rising United States dollar is putting pressure on other currencies and has sent the Indonesian rupiah to its lowest level this year. 

One dollar bought just over Rp 15,622 on Thursday evening, meaning the Indonesian currency lost more than 2.3 percent over the past month. It touched a low of 15,647 on Wednesday, the lowest so far this year.  

The depreciation reflects current dollar strength rather than rupiah weakness, as more market actors see indications for a hawkish near-term stance of the US Federal Reserve (Fed).  

The Japanese yen dropped below the psychologically meaningful level of 150 to the greenback this week, and the US dollar index benchmark has been on a rising trend for months, gaining around 7 percent since mid-July.  

Economists asked by The Jakarta Post suggested that the dollar rally would not last much longer, irrespective of whether the Fed decided to hike the federal funds rate (FFR) in November or not.  

They expect the rupiah to bottom out this month, prior to the Federal Open Market Committee’s (FOMC) meeting on Nov. 1, in which the Fed makes its interest rate decisions.  

Late last month, Bank Indonesia (BI) Governor Perry Warjiyo said the central bank expected the Fed to hike its key interest rates by 25 basis points (bps) in November after keeping the FFR unchanged in the September meeting.  

Should that happen, the lower and upper rates for the dollar would sit at 5.5 and 5.75 percent, drawing up to BI’s rate for the rupiah at 5.75 percent, a novel situation that could increase pressure for capital outflow from Indonesia.  

However, the latest data from US derivatives marketplace CME Group show that a large majority of market actors still expects no FFR hike in November. 

Bank Permata chief economist Josua Pardede told The Jakarta Post on Wednesday that certainty about the FFR peak “will be a breath of fresh air” for the market, even if it meant another 25-bps increase. 

“Investors will buy more risky assets in emerging markets, including rupiah [assets],” said Josua on what may happen once the Fed lays down all its cards, including indications as to when the US central bank may begin to cut its benchmark rate, which is expected to happen in 2024.  

He went on to say that the US real sector indicators to be released later this month would contribute to calming the dollar down. 

BI has expressed no intention to hike its key rate further this year, nor is it under any pressure to do so from the inflation side, given that consumer price index growth has come down even faster than expected after touching a high of almost 6 percent in September last year.  

Nevertheless, the central bank has made stabilizing the rupiah exchange value its priority, through direct intervention in the foreign exchange market if necessary.  

BI said on Tuesday that it was also open to the possibility of buying bonds to manage yields.  

"We remain present in the market to ensure a balance in [foreign exchange] supply and demand so as to build market confidence," BI head of monetary management Edi Susianto was quoted as saying by Reuters on Tuesday.  

He went on to say that the rise in bond yields and capital outflows from the country remained manageable.  

Teuku Riefky, an economist from the Institute for Economic and Social Research at the University of Indonesia’s Faculty of Economics and Business, told the Post that rupiah depreciation would hurt sectors that rely heavily on imports.  

“Ninety percent of our imports are auxiliary and capital goods, meaning rupiah depreciation will directly raise production cost,” said Teuku on Wednesday.  

Bank Mandiri chief economist Andry “Asmo” Asmoro, meanwhile, said a weak rupiah would cause liquidity problems.  

“[Any further] weakening of the rupiah is dependent on the Fed’s policy, whether it will be relatively dovish or not in next month’s FOMC meeting,” Asmo told the Post on Wednesday. 

Bank BCA chief economist David Sumual said that, aside from the Fed’s monetary policy, oil prices would also affect the rupiah.  

However, in his assessment the rupiah’s weakness is temporary, and Indonesia’s economic fundamentals could cushion a rupiah weakening to Rp 15,700.  

“The positive side to this is that rupiah weakening is actually not entirely harmful […] and a weaker rupiah can help reduce the goods dumping from China,” David told the Post on Wednesday.  

Bank Permata’s Josua pointed out that Indonesian exporters could benefit from a strengthening dollar too, especially in the manufacturing sector.  

“However, amid the deteriorating global economy, exports will still face quite big challenges.” 

Source: The Jakarta Post 

Indonesian defence minister extends poll lead ahead of presidential election

Indonesia's defence minister, a former commander of its special forces, topped an opinion poll published on Wednesday, as candidates prepared to register for a presidential race next year that is expected to be close. 

Prabowo Subianto and Ganjar Pranowo, the former governor of Central Java, have dominated surveys prior to elections in the trillion-dollar G20 economy that is the world's third-largest democracy, trailed by former Jakarta governor Anies Baswedan. 

Pollster Lembaga Survei Indonesia (LSI) said 34% of respondents would vote for Prabowo in a nationwide telephone poll of 1,206 people in September that had a 2.9% margin of error. 

The shares of those choosing Ganjar and Anies, respectively, were 30.4% and 22%, while 13% did not answer or said they did not know. 

In a two-way runoff, Prabowo would win over Ganjar by about 11 points, the pollster's chief, Djayadi Hanan, told a press conference. 

"Prabowo Subianto had an 11.3% advantage," he said. "This is quite a significant advantage." 

Swing or undecided voters numbered about 40%, Burhanuddin Muhtadi, an analyst with pollster Indikator Politik Indonesia, told the conference. 

The number of those undecided may reflect the fact that none of the three men has formally registered to be a candidate yet, said Philips J. Vermonte, an analyst at the Centre for Strategic and International Studies. 

All three, and their running mates, are expected to formally register between Oct. 19 and 25. Anies is the only one to have declared a running mate. 

About 205 million voters are registered to vote in simultaneous presidential and legislative elections on Feb. 14, the election commission says. 

Prabowo, 71, comes from an elite Indonesian family and commands a huge following, despite unproven accusations of human rights violations over the kidnapping of democracy activists during economic and political turmoil in the late 1990s. 

He has denied wrongdoing. 

Prabowo, who lost in consecutive bids to become president in 2014 and 2019, has gained momentum after embarking on a rebranding campaign in which he reached out to young people with a sophisticated social media presence. 

Analysts are watching closely to see who wins the backing of the hugely popular incumbent Joko Widodo, who is not standing himself as he is limited to two five-year terms. 

Jokowi, as the president is popularly known, has voiced support for Ganjar, a fellow member of his ruling Democratic Party of Struggle (PDI-P). 

But tension between him and PDI-P chief Megawati Sukarnoputri, along with his more frequent public appearances with Prabowo, have led analysts to suggest he is still weighing his choice. 

Source: Reuters