Economy and Business

BI Raises Rate to 5.25%

Indonesia’s central bank on Friday (29/06) raised its benchmark rate by twice as much as the market expected, as it ramps up efforts to defend the volatile rupiah and stem a sell-off washing across emerging markets. Bank Indonesia (BI) hiked the seven-day reverse repo rate by 50 basis points (bps) to 5.25 percent. A Reuters poll projected a 25 bps increase. Friday’s hike was Indonesia’s third in six weeks and comes as more vulnerable markets saw a sell-off intensify this week on a range of factors from rising oil prices to a trade war embroiling China, the United States and other leading economies. “The decision on interest rates is a continuation of BI’s pre-emptive and front-loading [strategy] in keeping the competitiveness of the domestic financial market,” governor Perry Warjiyo told reporters.


Learn Bahasa Decree

JAKARTA — Jakarta is set to introduce a regulation that requires companies to offer training in Bahasa Indonesia, the local language, to foreign employees, as pressure mounts on President Joko Widodo to protect Indonesian jobs ahead of presidential elections next year. The president signed a decree in March — set to come into effect this Friday — which aims to simplify Indonesia’s procedures for issuing work permits to foreign workers. In the decree however, is a clause that instructs all companies, domestic and foreign, who employ foreign workers to “facilitate Indonesian language education and training.”
Details on the new rule are still being decided at ministerial levels, but some of the suggestions include making it mandatory for companies to offer Bahasa training and to do so for longer than six months, said an official from the Ministry of Manpower and Transmigration. This means companies could face penalties for not following the decree. However, expats would not be held accountable if they choose not to participate in the language classes. The rumors, which died down last year, have returned in recent months ahead of the June 27 elections of governors, mayors and regents in nearly half of the country’s administrative regions. Chinese workers top the number of foreigners employed in the country, which totaled 126,000 last year, according to official data. Some observers and labor unions, however, say that those numbers do not account for illegal immigrants.  The president’s opponents have used the issue of Chinese workers to knock his credentials, accusing him of allowing foreign workers to dominate local jobs. As such, Jokowi, as the president is affectionately known, is keen to position the new regulation as the government’s efforts to tackle the problem. “We will decide on the details of the decree after gauging public mood,” said a senior official from the government who asked not to be named, pointing out that if the public does not see the measures as being tough enough, there is scope for tightening the rule. (various wire services, NY Times)

Trade Deficit Narrows Less than Expected

Indonesia’s trade deficit narrowed to $1.52 billion in May, but was worse than expected, due to higher oil prices, the country’s statistics agency said on Monday (25/06). That compared to a revised $1.63 billion deficit posted in April, which was the largest in four years. A poll by Reuters was for a deficit of $380 million in May. “This increase [in imports] was due to higher oil prices,” Suhariyanto, the statistics agency’s chief, told reporters. Global oil prices rose in recent months due to supply concerns for some major producers. Total imports in May were valued at $17.64 billion. Exports from Southeast Asia’s largest economy grew by 12.47 percent annually in May, a higher-than-expected rate, with shipments of metals boosting the total exports to $16.12 billion. (Reuters)

Domestic Coffee Consumption Could Effect Exports

For decades, Indonesia has supplied coffee roasters worldwide with prized beans that give a distinctive taste to brews favored by connoisseurs. Most locals, however, preferred tea. But now, as younger generations switch to coffee and hundreds of independent coffee shops and roasters pop up across the archipelago, Indonesia’s consumption of beans is rising. That’s left less coffee for export and forced up prices for foreign buyers. A small harvest in Sumatra has eaten further into tightening supplies of that region’s unique arabica beans, which are sought for the heavy, earthy notes they give to roasted blends.  Sumatran beans are a key component in Starbucks Corp’s Christmas Blend, which has been sold for more than 30 years.  “We’re seeing very strong coffee expansion in many markets but Indonesia is very much a market where demand is growing heavily,” said Michael Schaefer, global lead of Food and Beverage at Euromonitor International. Many new roasters are offering farmers significantly higher prices for their arabica beans, said Pranoto Soenarto, vice president of the Association of Indonesia Coffee Exporters and Industries. “Farmers are wooed,” Pranoto said. “They will keep their beans for these micro-roasters, who only buy in small amounts.”Wildan Mustofa, an arabica coffee farmer with a mill in Pangalengan, West Java, said his domestic sales are rising fast. “The local purchases grow by almost 100 percent every year,” said Wildan, while helping workers spread out coffee cherries to be dried under the sun. (Excerpted from a special Reuters Report)

Clarification of Language Requirement for Expats- Manpower Ministry

Indonesia is disputing a report by The New York Times that said it is imposing a language requirement for all expatriate workers in the country. Manpower Ministry spokesman Sahat Sinurat, in a clarification, told The Straits Times recently that there is no such requirement, although employers will need to facilitate Bahasa Indonesia language training for some foreign workers under a presidential regulation issued in March this year. The new rule, however, does not apply to foreign workers employed in emergency or urgent situations, those in temporary employment, members of a board of directors or board of commissioners, founding members, members of management and supervisory boards, he added. Mr Sahat, however, reassured the public that the new regulation includes other initiatives to simplify the licensing bureaucracy of foreign workers, and support investments. “We are improving the investment climate so that investments will continue to increase, so that more jobs will be created,” he added.
(Editor’s Note: Other questions regarding the new policy have yet to be answered including: what constitutes a valid period of study, can study occur online or outside Indonesia, is their any competency requirement or adjudication. AICC is seeking answers, meanwhile it has lobbied for a voluntary approach to language study).