Contrary to reports last week, the central bank of Indonesia (Bank Indonesia) expects that the country's January inflation rate may exceed 1 percent due to the disturbance of food products distribution amid severe floods in several cities in Indonesia, particularly Jakarta and Manado. Higher food prices are expected to add 0.3 percent to the monthly inflation rate. Apart from the flood issue, higher LPG as well as electricity tariffs (in the industry sector) will also contribute to January 2014 inflation.

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Indonesia's Ministry of Finance is optimistic that the country's inflation rate can be kept at 5.5 percent in 2014 as demand and supply of goods is expected to remain stable although the depreciating rupiah exchange rate and weak state of the country's infrastructure will continue to provide inflationary pressures. Deputy Finance Minister Bambang PS Brodjonegoro expects inflation in January 2014 to be lower than in the same month last year (1.03 percent) but it remains uncertain the extent to which the current floods will impact on the inflation rate.

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Traditionally in the first month of the year, heavy rainfalls plague certain areas of Indonesia, particularly parts of Java, Kalimantan and Sumatra as the rainy season hits its peak. These weather conditions cause social problems as tens of thousands of people need to relocate as well as economic turmoil due to disrupted harvests and logistic trouble amid bad connectivity. Governor of Indonesia's central bank (Bank Indonesia), Agus Martowardojo, stated that the current weather conditions may result in higher inflationary pressures in January.

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The company file of Mitrabahtera Segara Sejati has been added to the Indonesian Companies section. Mitrabahtera Segara Sejati, a subsidiary of Indika Energy, is a leading Indonesian integrated services provider of sea logistics and transshipment. The company focuses on the transport of natural resources, particularly coal, and bulk materials. In the first half of 2013, its net profit grew 7.1 percent (yoy) to USD $19.5 million and the company's revenues increased 10 percent to USD $74.9 million.

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According to the Deputy Minister of Transportation Bambang Susantono, the construction of the Trans-Java railroad is well on its way and might be fully operational from the first quarter of 2014. The Trans-Java railroad is a 727-kilometer double-track railroad that connects Jakarta and Surabaya, Indonesia's two largest cities. Most of the railroad, which costs the government IDR 9.8 trillion (USD $852.2 million), will be ready for use before New Year but there are still a few plots of land that the government needs to acquire.

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Kawasan Industri Jababeka is an Indonesian industrial estate developer that also has stakes in the country's power generation and infrastructure sectors. Between 70 and 80 percent of the company's total sales are derived from its real estate sales. Currently, the company owns strategic land banks on three locations in Indonesia (all on the island of Java): Kota Jababeka, Cilegon Industrial Park, and Tanjung Lesung. Kawasan Industri Jababeka was the first publicly listed industrial estate developer in Indonesia.

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Indonesia’s economy continues to adjust, as weaker commodity prices, tighter international financing, and slowing domestic demand moderate the growth rate to 5.6 percent for 2013. This downward revision is discussed in the latest edition of the World Bank’s Indonesia Economic Quarterly (IEQ). Further moderation of growth (at 5.3 percent) may be expected in 2014, with growth in high income economies firming but international market conditions likely remaining volatile.

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Indonesia Investments has added the company profile of Ancora Indonesia Resources to the Indonesian Companies section. Ancora Indonesia Resources is a diversified natural resources company focused on Indonesia. The company's business activities include mining, trade, transportation and services, which are conducted through the company’s subsidiaries Multi Nitrotama Kimia and Bormindo Nusantara. Indonesia's current Trade minister Gita Wirjawan owns a large stake in the company.

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Indonesia Investments updated the company profile of AKR Corporindo (AKRA), Indonesia’s leading integrated supply chain solutions provider and largest private sector distributor of petroleum and basic chemicals. Apart from trading and distribution, the company is also engaged in other business lines, i.e. logistic services, manufacturing, as well as coal mining and trading. In the first six months of 2013, AKRA recorded a 17.9 percent jump in profit to IDR 350.9 billion (USD $31.9 million) compared to the same period last year.

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The Indonesian government is studying the possibility of cutting toll road prices for specific trucks, hence companies engaged in transportation logistics would be the key beneficiaries. The study comes after stakeholders have complained about the expensive prices that are charged by toll road operators (most of which are state-controlled companies). Indonesian President Joko Widodo said a price cut of up to 30 percent is possible. A cheaper price would improve the competitiveness in the logistics sector.

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Mega Manunggal Property, an Indonesia-based logistics property company that is primarily focused on the development and provision of logistics facilities related to warehouses and office buildings, is expected to see rising net income and revenue in the years ahead supported by growing demand for modern warehouses, logistics services, enhanced operational efficiency, and an increase in rental prices. Mega Manunggal Property is part of the Argo Manunggal Group, a group that is active in various sectors including textile, steel, property, mining, and insurance.

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One of the major problems which is blocking Indonesia's economic growth is the country's infrastructure. The lack of quality and quantity of Indonesia's infrastructure causes logistics costs to rise steeply and thus makes investors (particularly the foreign ones) hesitant to invest as high logistics costs imply a weakening of the country's competitiveness. The problem of Indonesia's infrastructure is both 'hard' infrastructure (roads, airports and electricity supply) and 'soft' infrastructure (social welfare and health care).

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In order to improve Indonesia's intra-island connectivity on Java (and thus reduce logistics costs that are due to fragile infrastructure), the government is planning to build a toll road above the sea from the capital city of Jakarta in the western part of Java to Surabaya in East Java. Both these cities are Indonesia's centers of industrial productivity and economic growth. The 775 kilometer-long toll road, which is expected to cost about IDR 150 trillion (USD $13.3 billion), will be build by a consortium of 19 Indonesian state-owned enterprises.

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In its most recent report regarding Indonesia's economy, the World Bank states that high logistic costs form a serious impediment to the country's economic growth. The report, titled Annual Logistics Report, is compiled by Bandung Institute of Technology’s Research Center for Logistics and Supply Chains, the Indonesian Logistics Association (ALI), the STC Group, Panteia Research Institute, and the World Bank Indonesia Office. The report provides an analysis and overview of the progress made in tackling the problem of logistics in Indonesia.

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Due to uncertainty over the feasibility study, it seems highly unlikely that groundbreaking of the ambitious Sunda Strait Bridge project can be conducted in 2014. There has been a long delay with the feasibility study as differences of opinion emerged over who would undertake the study and how it will be financed. Economic Minister Hatta Rajasa said that if the government considers the project to have high priority, then it should make a decision now. If not, Indonesia's next government - after the 2014 elections - will be burdened with the issue.

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The Sunda Strait bridge, a planned road and railway connection between the two western Indonesian islands of Sumatra and Java, has been a dream of Indonesia's political elite since the 1960s. From both a political and an economic point of view, the connection between these two islands through physical infrastructure is a grand ideal. However, as with many other infrastructure projects in Indonesia, its realization tests people's patience.

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