December 1, 2015 edition
Pressure on Bank Indonesia (BI) to cut the rupiah interest rate and breathe some life into the lackluster economy is mounting. This is not just coming from businesses and consumers but also from the government, most notably from Economic Coordinating Minister Darmin Nasution and, more recently, Vice President Jusuf Kalla. Their request has some merit, with annualized October inflation declining to 6.25 percent and moving closer to BI's 4-5 percent year-end target. A lower interest rate, it is argued, would boost consumption and serve as an effective growth driver along with state spending.
But the central bank also carries the responsibility of maintaining a stable rupiah. Understandably, it worries about the currency weakening further should it cut rupiah interest rates. Thus, it must take into consideration the US Federal Reserve (the Fed)'s plan to raise the US interest rate before year's end. Most expect Bank Indonesia to cautiously wait and assess market reaction before deciding what to do with rupiah interest rates. Should the market remain calm with minimal foreign funds exiting and limited rupiah exchange rate volatility, then it could start lowering the interest rate. If funds rush out and hurt the rupiah significantly, depending on the extent of the volatility, it could maintain or even raise interest rates to prevent more funds from moving out.
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November 24, 2015 edition
At the Raja Tempirai oil block in the Penukal Abab Lematang Ilir regency of South Sumatra, there is little to suggest anything is amiss. The names of the two block operators, Pertamina Hulu Energi Raja Tempirai (PHE Raja Tempirai) and Golden Spike Energy Indonesia, still hang at the entrance, and 100 or so employees mill about, going about the daily business of running the plant.
"In truth, these employees still haven't been paid," Lapangan Arifson, Pertamina's Raja Tempirai field manager told Tempo.
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November 17, 2015 edition
It is only a month before the closing of company books for 2015. In retrospect, it has been quite a dismal year. In January, there were high expectations, being the start of President Jokowi's first year in office. But by the year-end, the results were disappointingly far below expectations. This year's economic growth is expected to reach only 4.8-5.0 percent, in contrast to the 6.0 percent target set by the new administration. The Rupiah and the Jakarta Composite Index (JCI), which began the year, respectively at Rp12,500 per US$ and 5,200 points, dropped considerably, settling at Rp13,600 per US$ and 4,500 points by year-end. With sluggish economic growth, businesses have been forced to adjust downward this year's revenue targets. Along with the decline in sales, companies have been busy cutting costs, which at times hurt employment. Unfortunately, the cost cuts are rarely able to match the drop in revenue. As a result, profits have narrowed across the board.
The follow-up question is whether our economy has reached its lowest point and that by next year it should start to recover? In various economic seminars towards year-end, numerous experts are facing difficulty in assessing next year's outlook. Even the optimistic scenario predicts this year's sluggishness will extend till the first half of the year and the recovery to take place only after mid-year. The problem, they argue, is that the level of volatility or uncertainty remains high.
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November 10, 2015 edition
It is pivotal for a hotel chain to understand the market. This is why Garth Simmons, appointed as chief operating officer (COO) for Accor Hotels in Malaysia, Indonesia and Singapore five months ago, tries hard to understand the culture and the industry of the region he is currently in charge of. This is especially the case with Indonesia, where there is more room for the company to grow.
The French company continues to expand, despite the current global economic slowdown. Last month, Accor opened its 100th hotel, the Novotel in Makassar, South Sulawesi.
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November 3, 2015 edition
President Jokowi's announcement that Indonesia will join the US-led 12-nation Trans Pacific Partnership (TPP) free trade zone is causing quite a stir. The previous administration's efforts to join the ASEAN Economic Community (AEC), which opens up trade, investment and people flow among ASEAN member states, attracted considerable stiff resistance. This time the stakes are higher, as it puts the country even further on a market-opening path. The issue is that in joining the TPP, as with the AEC, requires significant support from key political, government and business stakeholders to be effective and show results.
This support is critical when changes need to be done by member countries to fulfill TPP's tough terms and when the results will only be felt over a period of time. Not properly addressing these fears and doubts could undermine the initiative and, in a worst case scenario, could even reverse the gradual opening of Indonesia's economic doors.
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October 27, 2015 edition
Last Monday, the market sighed with relief when the latest economic data on China came to light. For the third quarter this year, the Chinese Bureau of Statistics announced an economic growth rate of 6.9 percent, slightly above analysts' prediction of 6.7 percent. The Chinese government also claimed that the 2015 growth target of 7 percent was not beyond reach.
Regrettably, this optimism didn't last long. In fact, many analysts have come to doubt China's numbers. Since this August's 1.9 percent yuan devaluation, they believed that China's weakening economy was actually worse than the official data suggested. On top of this, market anxiety was growing, after renowned investment bank Goldman Sachs declared that shockwaves from the third global crisis were upon us.
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October 20, 2015 edition