Indonesia seen as ‘bright spot’ amid global economic gloom
 

  While the global inflation crisis darkens the economic prospects of many countries, with some
  expected to face recession this year, the International Monetary Fund has painted an optimistic
  outlook for Indonesia, which has fared better than other countries in withstanding the shocks of
  the pandemic and Russia’s war in Ukraine.    

  IMF managing director Kristalina Georgieva praised the country’s economic performance,
  pointing to several projections that the country will grow 5 percent in the full year, and to how it
  has maintained its inflation rate of slightly over 4 percent, which is lower than the rest of the world.  

  She said the financial body expected Indonesia to finish this year with “very healthy” growth, and
  dismissed predictions that the country was on the verge of recession.  

  “On a darkening horizon, Indonesia is a bright spot. […] Bravo to [Indonesia],” said Georgieva,
  commending how the country handled the current global economic turmoil during her visit to
  Sarinah department store in Jakarta on Sunday.  

  The head of the IMF visited Sarinah after she met President Joko “Jokowi” Widodo at the Bogor
  Palace in Bogor, West Java. Georgieva arrived in Jakarta after attending the third Group of 20
  Finance Ministers and Central Bank Governors (FMCBG) Meeting in Bali. 

  The Bali meeting commenced amid a gloomy economic outlook across the globe with the United
  States and China predicted to enter recession.  

  Sri Lanka has entered an economic crisis that has seen the country to run out of money to buy
  food and fuel for its people. A series of protests has forced president Gotabaya Rajapaksa to
  flee the country and resign.   

  Since the start of 2022, the IMF has downgraded its projections for global growth twice, and
  according to Georgieva, it would do so again in two weeks. It initially projected growth at 4.4
  percent in January, but revised it down to 3.6 percent in April.  

  The IMF also projected in April that Indonesia’s GDP would grow by 5.4 percent this year, with
  consumer prices to rise by 3.3 percent.  

  “Over the last few years, there has been tremendous progress in reforms that have made
  Indonesia much more resilient to [economic] shocks. […] The country succeeded to prevent a
  significant drop in economic output,” she said.  

  Indonesia has thrived throughout the pandemic, growing at 3.69 percent in 2021, according to
  Statistics Indonesia (BPS). In the first quarter of this year, it recorded 5.01 percent in GDP
  growth, despite food and energy crises and global inflation caused by the war in Ukraine. 
 

  BPS also announced that the headline inflation rate in June was 0.61 percent on a month-on-
  month (mom) basis and 4.35 percent on a year-on-year (yoy) basis.  

  Economists have praised the strong fundamentals of the country’s economy.

  Bank Indonesia has decided to hold its policy rate at 3.5 percent in June even after the US
  Federal Reserve hiked its rate by 75 basis points, which has been criticized as too dovish by
  analysts.  

  The Finance Ministry has also chosen to gradually increase fuel and electricity prices for the
  middle- and upper-classes as it maintains subsidies on electricity and fuel prices used by those
  in the lower-and middle-income brackets.  

  Despite all the praises, Georgieva warned Indonesia of a potential “third shock” – after the
  pandemic and the war – which was a debt crisis. “If we don’t get inflation under control, that could
  be a third shock of a debt crisis,” said Georgieva.  

  Abdul Manap Pulungan, an economist at the Institute for Development of Economics and Finance
  (Indef), remains skeptical about the optimistic economic outlook for the country.  

  “Healthy growth means economic growth surpasses inflation, so the limit of the inflation rate
  should be at 5.2 percent. […] But I’m skeptical about that, I think the inflation rate will surpass the
  growth by the end of the year,” he told The Jakarta Post. 

  He also reminded that apart from pushing down inflation, the government also needed to create
  jobs, as well as focusing on tradable goods, as the foundation of the economy.    

  Faisal Rachman, economist at state-owned Bank Mandiri, said the government’s decision to
  subsidize energy and fuel was the key that kept the country’s inflation in check. He also
  dismissed concerns about a debt crisis.  

  “Our debt is also mainly in rupiah. Our fiscal deficit is still in line with the agenda of fiscal
  consolidation. So, Indonesia is not prone to a debt crisis because we have prudent fiscal
  management,” he said. 
 
  Source: The Jakarta Post 

  Q2 FDI highest in last decade 

  Indonesia recorded the highest second quarter increase in foreign direct investment in
  over a decade, according to the Ministry of Investment, a continuation of the trend in
  foreign investment from the previous quarter.  

  Foreign Direct Investment (FDI) rose 39.7% year-on-year to Rp 163.2 trillion (roughly US$10.8
  billion under current exchange rate) in the April to June period of 2022 from Rp 116.8 trillion in
  the same period of 2021, the Minister of Investment told a press conference on Wednesday,
  July 20, 2022.  

  Minister of Investment Bahlil Lahadalia said the increase was a further acceleration from the
  previous quarter of 2022, which saw FDI increase by 31.8% compared to the first quarter of
  2021. It is worth noting that the report from the Ministry of Investment (also known as BKPM),
  excludes investment in banking and the oil and gas sectors.   

  Singapore remains Indonesia’s main source of FDI with $3.2 billion. The nation has long been a
  financial hub for global investors channeling their investment into the archipelago. China was the
  second largest investor with $2.3 billion, followed by Hong Kong ($1.4 billion), Japan ($0.9 billion),
  and the United States ($0.8 billion). It may be interesting to note that England further broke the
  top 10 investment sources to Indonesia as part of its commitment to invest in Indonesia’s
  development of renewable energy.  

  FDI contributed 54% to the total investments in the second quarter of 2022 as reported by BKPM.
  When taking into account domestic investments, Indonesia recorded Rp 302.2 trillion in the April
  to June period of 2022, a 7% increase compared to the previous quarter of 2021. Subsequently,
  total investment for the first half of 2022 was Rp 584.6 trillion, or a 32% increase compared to
  the Rp 442.8 trillion recorded in the first half of 2021.  

  Central Sulawesi rise in prominence  

  The growth in FDI was mainly driven by investments into the downstream industry development in
  the mining and petrochemical sectors. The province of Central Sulawesi as well as North Maluku,
  which had been growing rapidly as productive sources for nickel, had further risen in prominence
  with around $3.6 billion in investments having being poured into the region since the start of
  2022, leapfrogging other provinces in the nation as a favored investment destination.  

  Mr. Lahadalia attributed the spike in investment to the planned development of several major
  multinational companies, such as South Korea-based LG and China-based Foxconn, that
  have begun their factory construction phases in Batang, Central Java.  

  “There they’ll start producing maybe in 2024 or 2025 because that's part of the downstreaming   
  that’s being developed with Central Sulawesi and North Maluku,” Mr. Lahadalia said.  

 Downstream industry, renewable energy remain as priorities  

  Mr. Lahadalia said the government would continue to focus on downstreaming the metal
  processing sectors, as well as industries that uses energy. The comment came in regards to the
  current global energy challenge caused by the war between Russia and Ukraine, which has
  pushed oil prices pass the $100 dollar per barrel mark.  

  He reiterated the government’s plans to ban the export of bauxite and tin to further promote
  investment into the downstreaming of the metal industries, citing the strategy’s success in
  attracting major investments, mostly from China, in the production of components used in
  electric car batteries extracted from nickel.  

  “We understand that the global economic situation is still unclear due to the war between Russia
  and Ukraine, while the tightening of interest rate from the Fed will continue to be a challenge for
  the investment climate in Indonesia. However, looking at Indonesia’s economic growth as well as
  the growth in investment, BKPM is optimistic that the target of 1,200 trillion rupiah by the end of
  2022 can be achieved with the cooperation between the central and regional governments as well
  as investors,” Mr. Lahadalia said. 

  Source: Business Indonesia 

  Indonesia urges tech platforms to sign up to new licensing rules
 or risk being blocked 

  Indonesia urged tech companies on Monday to register under new licensing rules, or run the risk
  of having their platforms blocked, with data showing many big tech firms such as Google and
  Meta had yet to comply days out from July 20 deadline. 

  The requirement to register is part of a set of rules, first released in November 2020, that will
  allow authorities to order platforms to take down content deemed unlawful, or that "disturbs
  public order" within four hours if considered urgent, and 24 hours if not. 

  In a text message to Reuters, Communications Minister Johnny G. Plate urged companies to
  register before sanctions were applied. His ministry said last month that platforms could be
  blocked if they did not comply. 

  As of Monday, more than 5,900 domestic companies and 108 foreign companies had registered,
  including short-video app TikTok and music streaming firm Spotify, according to communications
  ministry data. 

  Other platforms such as Alphabet Inc's Google, Twitter and Meta Platforms Inc, which owns
  Facebook, Instagram and WhatsApp, have not yet registered. 

  Spokespeople for Facebook, Twitter, WhatsApp and Google, did not respond to requests for
  comment. 

  The new licensing system applies to all domestic and foreign Electronic Service Operators. 

  The government can also compel companies to reveal communications and personal data of
  specific users if requested by law enforcement or government agencies. 

  The government says the new rules have been formulated to ensure internet service providers
  protect consumer data, and that online content is used in a "positive and productive" way. 

  Despite the threat, some analysts doubt whether Indonesian authorities would immediately
  block platforms operated by non-compliant companies, especially given how widely used some
  of the platforms are in Indonesia, including by state officials. 

  With a youthful, digitally savvy population of 270 million, Indonesia is a top-10 market globally by
  number of users for a host of social media companies, including TikTok, Twitter and Facebook. 

  Some activists say the new articles related to content posed a threat to privacy and freedom of
  expression. 

  "Our analysis shows that this will be the most repressive regulation of its kind in the region," said
  Nenden Arum, from digital rights group, the Southeast Asia Freedom of Expression Network
  (SAFEnet). 

  Minister Plate said the registration requirement was administrative and not about content. 

  There were an estimated 191 million social media users in Indonesia as of February 2022,
  according to Statista. Only China and India have more social media users in the Asia Pacific
  region. 

  Source: Reuters