Economy and Business

Indonesia Oil Reserves Depleting

Indonesia’s proven oil reserves to last just 12 years: Arcandra – Deputy Energy and Mineral Resources Minister Arcandra Tahar has said that Indonesia needs to intensify exploration for new oil fields, because the country’s proven oil reserves will only support about 12 years of exploitation.  He explained that Indonesia had 3.3 billion barrels of proven oil reserves, while estimated production was 800,000 barrels per day.  “It could be a bit longer, because our production will decline. Next year, our oil production will decline to 700,000 bpd,” Arcandra said in Jakarta on March 20.  He stressed that the development of new technology to pump more oil from existing fields and to discover new oil reserves were the only ways for Indonesia to prolong its oil production.  Editor’s Note: Exploration is subject to numerous variables including, world market prices, incentives, and the investment climate.  (Jakarta Post)

S&P Cautions on Worsening Balance Sheets at Indonesian State Firms

Standard & Poor’s Global Ratings has highlighted a deterioration in the balance sheets at Indonesian state-owned enterprises involved in a government-led infrastructure push in Southeast Asia’s biggest economy.  SOEs, especially those working in power and construction, have extensively borrowed to match the government development plans, causing their balance sheets to become “substantially weakened,” Xavier Jean, an analyst with S&P, told reporters on March 13.  The leveraging level of 20 listed and rated SOEs has increased to around an average of 5 times debt-to-EBITDA, jumping from 1 times in 2011.  “This is a trend that we are keeping a close eye on because we think it’s going to persist and going to accentuate in 2018 and to the run up to the 2019 election,” Jean said. Editor’s Note: On Tuesday March 27 the Ministry for State Owned Enterprises announced that two SOE’s, Jasa Marga (toll roads) and Waskita Karya (construction)  were in the market to raise $583.6 million) to strengthen their finances.

212Mart: From Street Protests to Local Convenience Store

In December 2, 2016 one of the largest rallies in Indonesia’s history defined –for many– how religion and politics became a combustible mix in Indonesia Some of those involved in the rally — who usually refer to themselves as  “212 alumni” — have moved to evolve into a more permanent political movement, while others took to shape the enthusiasm into business enterprises.  “Indonesia is a Muslim-majority country, so there is a need for halal products in convenience stores. And the demand is growing,” Irfan Syauqi Beik, the general secretary of Koperasi Syariah 212, a Bogor, West Java-based cooperative that holds the chain’s trademark, told the Jakarta Globe in a recent interview. “For example, if parents give money to their children to shop, they do not need to worry, as we do not sell alcoholic beverages, non-halal foods or cigarettes. So that can give them reassurance,” Irfan said.  As a Sharia-based convenience store, Irfan said all of the products sold in 212 need to secure halal certifications from the Indonesian Ulema Clerics (MUI).  212Mart does not sell cigarettes, condoms or alcohol beverages.  The store also pauses operations four times a day to adhere to the Islamic call to prayer, or adzan. Such practices are common in places like Saudi Arabia, but are rarely implemented by Indonesian shopkeepers, who typically take turns with employees to answer the call to prayer. (Editor’s Note: Indonesia has passed but not yet implemented a controversial law on halal certification.)  (Jakarta Globe)

Energy Subsidies Return

After his election in 2014 President Jokowi eliminated most subsidies on gasoline and electricity, but they have now crept back. The government indicates that the subsidies are necessary for economic reasons but they are bound to have a political benefit next year when national elections occur. 

Indonesia’s plans to keep electricity tariffs and some fuel prices unchanged for the next two years will cost around Rp 8.1 trillion ($588 million) in additional subsidies this year alone, Ministry of Finance officials announced in early March.  The plans, which are slated to be discussed at the House of Representatives, were announced last week as a measure to increase middle class purchasing power.  Southeast Asia’s largest economy grew 5.07 percent in 2017, Indonesia’s best pace in four years, but consumption – the biggest contributor to the economy – remained sluggish at around 5 percent versus a pre-financial crisis era rise of 6 percent.  Finance Minister Sri Mulyani Indrawati said the measure is needed to maintain a low inflation rate, since average oil prices are expected to be higher than initially anticipated this year, while the rupiah exchange rate will likely be weaker.  “We are mitigating the risks to inflation and to the balance sheets of companies through a number of regulations,” Sri Mulyani told reporters.

The rupiah is forecast to be traded at 13,500 to the dollar on average in 2018, compared to the government’s initial forecast of 13,400, the minister said, adding that crude oil price is expected to be priced at $55-$60 a barrel, compared to initial projections of $48 a barrel.   Indonesia’s annual inflation rate in February was 3.18 percent, the lowest since December 2016. The central bank is targeting inflation of 2.5-4.5 percent for 2018.

One Day For Import Permits

The processing time for permits used to import materials for exported goods had been cut to just one hour from the previous 30 days, Finance Minister Sri Mulyani Indrawati said on Tuesday. The licensing process for stocking goods in bonded zones is also cut to one hour from the previous 10 days. “As for the issuance of identification numbers for importers, we can now do it in three days instead of the previous 10 days,” she said during a meeting with President Joko “Jokowi” Widodo and custom facilities users in Cileungsi, Bogor, West Java.  She guaranteed that tax refunds could now be processed within one month instead of one year. President Jokowi had himself lamented the long wait for tax refunds, based on his own experience when he was a businessman.”Pak President used to say that the refund could take more than a year, he had been through this himself. Now it is one month,” Sri Mulyani said.  She added that licenses for operations in bonded zones now required the submission of just three documents instead of the previous 45. The process now could be done on-line. (The Jakarta Post)

Fisheries Minister Bans Plastic Water Bottles

Fisheries and Maritime Affairs Minister Susi Pudjiastuti said she had her own way of campaigning for the issue of environmental awareness. Susi has banned her employees from consuming mineral water in plastic bottles in the office, especially during the ministry’s events. “I banned them completely, I fine anyone who brings any bottled mineral water,” she said in symposium at the ministry today.