Economy and Business

BI/MOF Watching China’s Evergrande

Indonesia’s economic chiefs are nervously watching for fallout from the $340 billion default of China’s Evergrande Real Estate Group. Bank Indonesia Governor Perry Warjiyo said on Tuesday that the Evergrande crisis could affect Indonesia’s capital market, but he added that it had gradually subsided. He said Indonesia’s economy remained the dominant factor in the market. “We assume that the Indonesian market reflects Indonesia’s fundamental conditions more than the technical conditions or global financial conditions,” Perry told reporters during an on-line press conference. Finance Minister Sri Mulyani Indrawati said Evergrande had become a source of risk to China’s financial sector stability. A default, she added, would impact more than just China’s domestic economy, but also the world. “So, we have to be wary of Evergrande’s default phenomenon,” Sri Mulyani said during an on-line press conference on Thursday.

Further Curbs to Nickel Exports

The Investment Ministry is mulling over plans to ban or restrict the export of processed nickel products with less than 70 percent nickel content. Speaking at a virtual conference on Sept. 17, Investment Minister Bahlil Lahadalia said the government was planning to ban exports of processed products containing 30 to 40 percent nickel to preserve Indonesia’s nickel reserves and develop the downstream mining industry. Local players, such as the Indonesian Nickel Mining Association, responded that the ban is premature. The association’s Meidy Katrin Lengkey said: “The government must ensure the domestic market is ready to absorb the products.”

ADB Revises Growth Forecast

The Asian Development Bank (ADB) has slashed its economic growth outlook for Indonesia following the mid-year resurgence in COVID-19 cases and deaths. For this year, the ADB now expects Indonesia’s economy to grow by 3.5 percent, which is 1 percentage point less than forecast in April. For next year, the development bank has reduced its forecast by 0.2 percentage points to 4.8 percent, signifying a delay in getting back to the typical pre-pandemic growth rate of around 5%

Electricity Upgrade in Central Kalimantan

State-owned electricity monopoly PLN says it has built infrastructure to power the nationally strategic food estate program in Central Kalimantan PLN reported on Monday that it had built a 55.7-kilometer circuit of a mid-voltage network (JTM), a 59.7-kilometer circuit of a low-voltage network (JTR) and 29 substations in Pulang Pisau and in Kuala Kapuas. The newly built infrastructure is slated to power 20,000 hectares of food estate, out of a total 164,600 ha earmarked in Central Kalimantan for the program, which is included in the 2020–2024 National Strategic Projects list. The region is an important source of exports of the herbal product kratom, a leaf brewed as a tea for medicinal purposes

Key Association Objects to Mandatory Health Certifications for Hotels

The Indonesian Hotel and Restaurant Association (PHRI), a major tourism business lobby, has objected to plans to make Cleanliness, Health, Safety and Environment (CHSE) certifications mandatory for tourism players – a central part of the government’s strategy for reviving tourism in the country. Introduced in 2020, the Tourism and Creative Economy Ministry’s CHSE certifications seek to standardize and enforce best COVID-19-related practices for businesses in the restaurant, hospitality and tourism sector. The ministry hinted earlier this month that it planned to make the certification compulsory. PHRI chairman Hariyadi Sukamdani said businesses would be “burdened” if they had to pay for CHSE certifications, which would be made part of the country’s recently revamped online single submission (OSS) business permit system. (Jakarta Post)

Equation for Coal Altered

China’s recent, seemingly sudden, decision to end its support for coal-fired power, communicated in Xi Jinping’s recent address at the UN, will challenge many in Indonesia’s business community. Feeding China’s voracious appetite made Indonesia a world leader in exports of thermal coal. For decades Indonesia’s mining laws and policy catered to the needs of conglomerate owners, many of whom served in the government as well.
China’s recent pledge throws a spanner in Indonesia’s coal energy development. Local stakeholders said the Chinese decision would disrupt plans to build new coal power plants in Indonesia. Meanwhile, projects included in the electricity procurement plan (RUPTL) and those that had reached power purchase agreements (PPAs) or financial closure would continue.

According to the Institute for Energy Economics and Financial Analysis (IEEFA), power plants accounting for 54 percent of a total 18 GW of new coal capacity in Indonesia have Chinese backing. “Xi Jinping’s statement will reduce Chinese investors’ interest in coal plant projects in Indonesia,” Adhityani Putri, executive director of renewables pressure group Yayasan Indonesia Cerah, told the Jakarta Post this week.

Indonesia’s ministry of Mines and Energy had recently made statements that longterm coal would be eliminated as a primary fuel source for power plants. Now, that future may be a lot closer. (Jakarta Post)

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