Economy and Business

EU Duties on Biodiesel

The European Commission on Tuesday imposed countervailing duties of 8 percent to 18 percent on imports of subsidized biodiesel from Indonesia, saying the move aimed to restore a level playing field for European Union producers. “The new import duties are imposed on a provisional basis and the investigation will continue with a possibility to impose definitive measures by mid-December 2019,” the EU executive said in a statement.
Last week Indonesia’s trade minister said he would recommend to an inter-ministerial team a 20 percent-25 percent tariff on EU dairy products in response to the EU targeting the country’s biodiesel, adding that he had asked dairy product importers to find sources of supply outside the 28-nation bloc. The EU duties are another blow to Indonesian biodiesel producers after the bloc said in March that palm oil should be phased out of renewable transportation fuels due to palm plantations’ contribution to deforestation. (Jakarta Post)

Jokowi Moves against Super Holding Company Plan

Once touted as a way for Indonesian state firms to go global, President Joko “Jokowi” Widodo has signaled he’s backpedaling on a plan to set up a superholding company of state firms, the local version of Singapore’s Temasek or Malaysia’s Khazanah. Jokowi told a group of chief editors that the government was currently assessing the best business model for state firms to become more efficient and profitable, as some have struggled to keep afloat as they need to remain commercially viable and profitable while providing a public service at the same time. “A superholding may not be the best option. Look at the performance of Temasek and Khazanah. They’re also having problems in the latest economic conditions. We will try to look out for a new mechanism and study the developments,” Jokowi said on Wednesday. The President taking a backseat on superholding plans is expected to be a major blow for State-Owned Enterprises (SOEs) Minister Rini Soemarno, the main campaigner for and the brain behind the superholding idea, and who many have speculated will not be reappointed to Jokowi’s new Cabinet. Ruling party and the President’s main supporter the Indonesian Democratic Party of Struggle (PDI-P) also seemed to be skeptical about the superholding idea. “Those who are thinking of forming a superholding must learn from the economic crises in the United States and Western Europe,” party secretary-general Hasto Kristiyanto wrote in a recent statement. (Jakarta Post)

Pain of Low Rubber Prices

A plant disease has spread to a majority of Palembang’s rubber plantations in South Sumatra, amid a plunge in the commodity’s prices and the government’s joint efforts with major rubber producing countries to limit supply. Riza, a farmer from Banyuasin regency in Palembang, did not understand why the leaves of his rubber trees kept wilting and why his plants’ latex production continued to decline. This is the second time he has faced the problem this year. “I was certain that the leaves were falling because of the dry season, but then I realized that many leaves also had measles-like spots,” Riza told The Jakarta Post recently. “I didn’t know the spots were a symptom of a disease.” On top of the epidemic, Riza has been struggling with the high cost of maintaining his family’s 120-hectare rubber plantations, which requires an expensive urea compound fertilizer, while also receiving low buying prices from middlemen who offer between Rp 8,800 (61 US cents) and Rp 9,000 per kilogram of rubber. The range is far below the ideal price of $1.40 per kg or more. “There is no balance between the selling price and production cost; we can’t break even,” he said, adding that he had to start another small business completely unrelated to rubber farming to make ends meet.

2nd Quarter Growth Down

Indonesia recorded lower economic growth in the second quarter of this year as it lost the momentum that had come from an increase in consumer spending, payroll bonuses and migrant worker remittances during Idul Fitri, according to the Institute for Development of Economics and Finance (Indef). “Indonesia missed the momentum to boost its economy when there were payroll bonuses and remittances from overseas workers during Idul Fitri and spending for general elections in April, an increase in consumer spending in the second quarter,” Indef executive director Tauhid Ahmad said in Jakarta on Aug. 7. The growth of Indonesia’s gross domestic product (GDP) slowed to 5.05 percent in the second quarter of this year, down from 5.07 percent in the previous year, despite high spending during the Idul Fitri holidays and on the general elections, Statistics Indonesia (BPS) reported on Aug. 5.

July Trade Deficit

Indonesia has recorded a trade deficit of US$63 million in July on the back of weak commodity prices that has affected its export value, according to Statistic Indonesia (BPS) data released on Thursday. The figure is a reversal from a June trade surplus of around $300 million. The country’s balance of trade has maintained a negative trend overall from January to July with a deficit of $1.9 billion, which is still an improvement from the minus $3.21 billion it recorded during the same period in 2018. Exports in July declined 5.12 percent year-on-year (yoy) to $15.45 billion, while imports fell 15.21 percent yoy to $15.51 billion. (Jakarta Post)

Payments Monopoly Investigated

The Business Competition Supervisory Commission (KPPU) is investigating e-payment service OVO over a possible breach of anti-monopoly rules in relation to parking facilities at a number of shopping malls and hospitals. KPPU investigator Devi Matondang said in Jakarta on Monday that the commission suspected OVO of monopolizing parking fee payment systems at public facilities belonging to the Lippo Group, such as Siloam Hospitals.
“There have been public complaints over parking payments at Lippo’s public facilities, such as Lippo Malls and Siloam Hospitals, where visitors [are permitted] to use only the OVO app to pay parking fees,” said Devi. She said that Lippo Malls had allowed visitors to pay parking fees using cash or the Flazz e-payment card issued by Bank Central Asia (BCA) prior to OVO’s establishment in 2017. (Jakarta Post)

Death of Globalization: BI Governor

BI Governor Perry Warjiyo stated that there are a number of changes in the global spectrum in the past few years such as the shifting trend of globalization to digitalization which forces policymakers to constantly respond to the rapid changes. “We are facing the death of globalization and the rise in digitalization,” said Perry in his acceptance speech at the 13th Bulletin of Monetary Economics and Banking (BMEB) International Conference in Bali today. The BI Governor then compared the current situation to past events where global trade took the role as a way for a country to improve their economic growth. This he says is a stark contrast to what can be observed today where a number of countries rely heavily on their internal strength in facing the global trade. Perry then asked the conference’s audience; “Is there still room available for global trade to return to the state of equilibrium?” As for digitalization, Perry mentioned its growing trend, especially in the financial sector where the services of banks and financial institutions are slowly being outperformed by financial technologies or fintech. “This is the rise of digitalization,” the Bank Indonesia Governor said. (Tempo)