• Indonesia's Rupiah under Pressure Ahead of BI Rate Announcement

    Today, Bank Indonesia will start its February two-day policy meeting. Markets are eagerly awaiting whether the central bank of Indonesia will indeed cut its key interest rate (BI rate) again. Last month, it had cut the BI rate by 0.25 percent to 7.25 percent as inflation, the current account deficit and the rupiah rate were all under control. Although the rate cut was welcomed by the business community it was considered not enough to push borrowing costs lower in Southeast Asia's largest economy hence unable to boost economic activity significantly.

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  • Indonesian Demand for Imported CBU Cars still Strong

    Despite the country's high import tariffs and the high luxury goods tax, there remains strong demand for imports of completely built up (CBU) cars in Indonesia. As the Indonesian government is eager to limit imports of consumer goods, it set an average import tariff of 45 percent on CBU cars. Besides this import tariff the imported CBU car is also subject to Indonesia's luxury goods tax at 20 percent. However, these high taxes have done little to curtail imports of CBU cars. The real reason why some foreign-branded imported CBU cars see declining sales in Indonesia is due to weaker purchasing power.

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  • Indonesia's 2017 Mineral Ore Export Ban to Be Reviewed

    Again there has emerged speculation that Indonesia may not fully implement its ban on exports of concentrates (partially processed metals) in 2017. This controversial ban, part of the country's 2009 Mining Law, aims to boost domestic processing facilities and reduce the country's dependence on raw commodity exports. The ban was originally implemented in January 2014. However, as there was insufficient domestic smelting capacity full implementation would imply a huge revenue loss. Therefore, concentrate exports were allowed to resume (until 2017) provided exporters pay higher taxes, royalties and provide evidence that they are committed to develop smelters.

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  • Indonesia's Rubber Producers Unhappy with Foreign Investment

    Indonesian rubber producers do not welcome the government's decision to open the nation's crumb rubber sector to foreign ownership for the full 100 percent. This decision is part of the government's tenth economic stimulus package, announced last week. Stakeholders in Indonesia's rubber sector argue that current installed production capacity of existing rubber processing plants in Indonesia already exceeds domestic demand. Crumb rubber is recycled rubber produced from automotive as well as truck scrap tires.

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