Economy and Business

Nickel Ban Abruptly Starts

Indonesian nickel producers agreed on October 29 to immediately cease ore exports, causing a market shock, which pushed up global prices of the metal and boosted share prices of local producers. The abrupt halt in exports came two months earlier than the scheduled date of Jan. 1, 2020 the government’s announced last month – a deadline already brought forward by two years. This plan sparked a surge in ore exports to beat the new deadline, undermining the country’s goal of adding value to the metal used in the production of rechargeable batteries, mainly for electric vehicles. “This decision is not based on any government ruling or technical letter from the ministry. This is a mutual agreement [between producers] and wise thinking to add value to commodity exports,” Investment Coordinating Board (BKPM) head Bahlil Lahadalia said after a meeting with producers on Monday. The government would mediate between the parties if any issues arise, he said. (Jakarta Post)

Bank Indonesia Lowers Rates Again

Amid recent reports from the World Bank and IMF of slower growth, Bank Indonesia (BI) has cut the nation’s benchmark interest rate for the fourth month in a row to the lowest level in 17 months, citing the need to stoke economic growth amid rising global risks. The central bank cut the 7 Day Reverse Repo Rate ( 7DRRR ) by 25 basis points (bps) to 5 percent on Thursday, the lowest level since May 2018. BI Governor Perry Warjiyo said: “The policy is consistent with manageable inflation estimates and attractive domestic financial market yields as well as part of continued preemptive steps to support the domestic economic growth momentum amid global economic slowdown,” Perry announced. (Jakarta Post)

IMF Report Echoes Slow Growth Predictions

The International Monetary Fund has become the latest global institution to slash Indonesia’s economic growth projection amid thickening gloom surrounding world trade that is expected to spill over into the domestic economy. In its October 2019 World Economic Outlook published on Tuesday, the Washington, DC-based institution expects the country’s gross domestic product (GDP) to expand just 5 percent this year – down 0.2 percentage points from its April projection – and 5.1 percent in 2020, down 0.1 percentage points from the earlier forecast.

Shell/Inpex Get Contract Extension

The government has given Japanese oil company Inpex Corp and Dutch energy giant Shell a 27-year extension to develop the Abadi gas field in the southeastern part of the Arafura Sea. Dwi Soetjipto, head of the Upstream Oil and Gas Regulatory Special Task Force (SKKMigas), confirmed with The Jakarta Post on Wednesday that he had signed a contract on the matter with company representatives in Jakarta last week. The Abadi gas field is located in the Masela Block, 65 percent of which is controlled by Inpex, with the remaining 35 percent controlled by Shell. With the extension, thecompanies will operate the field until 2055.

Indonesia Drops 5 Points in Competitiveness Index

Indonesia’s ranking in the World Economic Forum’s global competitiveness index dropped five places in 2019 to 50th out of 141 economies, while Singapore takes over the United States as the world’s most competitive country. Indonesia, the largest economy in Southeast Asia, scored 65 out of 100 in the competitiveness performance, a 0.3 point drop from the previous year, primarily as a result of a stagnating performance in variables that include “enabling environment”, “human capital”, “markets” and “innovation ecosystem”. “It ranks fourth within ASEAN, behind Singapore [first], Malaysia [27th] and Thailand [40th],” reads The Global Competitiveness Report 2019, released on Wednesday. (Jakarta Post)

Indonesia Will Buy New F 16’s

Indonesian Air Force Chief Air Marshal Yuyu Sutisna has announced a plan to acquire two squadrons of the latest American-made F-16 jet fighters starting next year. “We will buy two squadrons of jet fighters as part of our strategic plan for 2020-2024. We’re aiming for the latest type, the Block 72 Viper,” Yuyu told Antara news agency during a visit to Riau on Monday.
The Air Force chief said Indonesia still relies on F-16 fighters for its air defense, with 33 of them still in operation at the Roesmin Nurjadin Air Base in Pekanbaru, Riau, and the Iswahjudi Air Base in Madiun, East Java.

Going Electric

Indonesia is buoyant about emerging as a major producer of electric vehicles (EV) owing to quite abundant raw materials to produce lithium batteries, the main component of EV manufacturing. Besides this, the country believes that electric-based vehicles can lower air pollution, especially in Jakarta, categorized as one of the polluted cities in the world and infamous for its massive traffic jams due to carbon emissions from motor vehicles, among other things. To expedite the materialization of the EV industry and attract investors, President Joko Widodo (Jokowi) had signed Presidential Regulation No. 55 of 2019 on the acceleration of battery-operated vehicles for road transportation in early August 2019.