The Indonesian government revised its 2015 economic growth target. Sofyan Djalil, Indonesian Coordinating Minister for Economic Affairs, stated on Friday (03/07) that the government’s previous target was unrealistically high at 5.8 percent (y/y) given the sluggish international and domestic economic context. The government revised down the GDP growth target of 2015 to 5.2 percent (y/y). Djalil said that the global economy is forecast to grow 2.9 percent (y/y) in 2015 from an earlier estimate of 3.5 percent (y/y).

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Indonesia’s rapidly growing population in combination with robust economic growth and underinvestment in infrastructure development has resulted in the country’s current lack of quality and quantity of infrastructure. This situation causes a steep increase in logistics costs and blocks efforts to develop and realize national and regional economic potentials (an efficient logistics system is crucial for socioeconomic development of Indonesia). However, government spending on infrastructure development is set to start soon.

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It is estimated that about 20 million Indonesians will travel back to their hometowns during the Idul Fitri (also known as Lebaran) celebrations that mark the end of the Ramadan (the Islamic holy fasting month) next month. This homeward bound traveling is locally known as mudik. The annual mudik tradition involves millions of Indonesians taking time off from work, leaving their urban residences and travel back to their places of birth in the rural areas for a few days. During these days cities become empty.

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Indonesian Transportation Minister Ignatius Jonan inaugurated the new coal terminal, owned by state-controlled coal miner Tambang Batubara Bukit Asam (Bukit Asam), in Tarahan (South Sumatra) on Wednesday (10/06). The Tarahan coal terminal, which required USD $152 million in investment, has now become Indonesia’s largest commercial terminal having the ability to accommodate ships with a maximum capacity of 210,000 dead-weight tonnage (DWT). This maximum capacity of the terminal is scheduled to be enlarged to 240,000 DWT.

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Several international institutions revised down their outlook for economic growth of Indonesia in 2015 as foreign investors have been somewhat disappointed with the performance of the new Indonesian government, while the global economic picture remains far from rosy. Goldman Sachs, JPMorgan Chase, Credit Suisse and Nomura Holdings have all slashed Indonesia’s economic growth forecast this year to below the five percent (year-on-year) mark. Last year Indonesia’s economic growth touched a five-year low of 5.02 percent (y/y).

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Indonesia is set to co-found a new cross-border Islamic (sharia-compliant) infrastructure bank together with Turkey and Saudi-based Islamic Development Bank (IDB), a multilateral lender. Indonesian Finance Minister Bambang Brodjonegoro said that Indonesia will contribute more than USD $300 million as start-up capital for the establishment of the new bank, named Islamic Investment Infrastructure Bank (IIIB), which aims to boost infrastructure development in various countries.

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The New Cities Summit 2015 will be held between 9 and 11 June at Ciputra Artpreneur in South Jakarta. The summit, themed “Seizing the Urban Moment: Cities at the Heart of Growth and Development,” will gather around 800 urban planners, urban leaders, artists, businessmen and innovators from around the world in Indonesia’s capital city. This year’s summit is the fourth edition. Previous editions were held in Paris, Sao Paulo and Dallas. The main theme of these summits is to discuss the future of cities.

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Today, Indonesian President Joko Widodo will lay the first stone for the groundbreaking ceremony of the 2,700 km Trans-Sumatra toll road project, linking Lampung to Aceh on the resource-rich island of Sumatra (Indonesia’s second-largest island in terms of geographic size). The toll road, which is one of the key priority infrastructure projects for the Indonesian government, is estimated to require a total of IDR 300 trillion (USD $23.1 billion) of investment. Ten years after parts of the toll road were first tendered, construction can finally commence.

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The benchmark stock index of Indonesia (Jakarta Composite Index, abbreviated IHSG) is again plagued by selling pressures on Wednesday’s trading day (29/04). After today’s first trading session the index was down 2.58 percent to 5,106.73 points. The decline is caused by the persistence of the negative sentiments that have been felt over the past couple of days (explained below) coupled with a discrepancy in economic growth forecasts between the Indonesian government and the country’s central bank (Bank Indonesia).

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Most Southeast Asian stock markets declined ahead of the two-day policy meeting of the US Federal Reserve which started today (28/04). Indonesia’s benchmark Jakarta Composite Index (IHSG) managed to limit losses. After the 3.49 percent fall yesterday, the IHSG was down 1 percent after the first trading session today. However, near the closure of the market the index improved markedly resulting in a small loss of 0.06 percent only. Due to severe losses over the past couple of trading sessions, some oversold blue chip shares became attractive.

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The heavily subsidized fuel price of Indonesia is likely to be raised next month according to Indonesian media sources. Various high officials, including Economic minister Hatta Rajasa, discussed the possibility to raise the fuel price from IDR 4,500 (USD $0.46) to IDR 6,500 (USD $0.67) per liter starting from May. This increase will only apply to private passenger cars, and not to motorcycles and public transportation. However, president Susilo Bambang Yudhoyono has not made up his mind yet.

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Last week, I discussed the composition of the ten largest Indonesian companies by market capitalization. For this week's column I have decided to zoom in on the performance of Indonesia's main stock index (IHSG), which has been highly volatile in the last week. It seems like its trend for the upcoming short-term has changed from an upward into a sideward trend. While the Dow Jones Index has been setting new records, the IHSG is showing some signs of fatigue.

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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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Despite the fact that Indonesia reported the world's third-highest GDP growth in 2012 (behind China's 7.4 percent and Saudi Arabia's 7.1 percent), supported by rising consumption by a burgeoning middle class and significant increased foreign direct investment, the country's performance in terms of competitiveness is disappointing. It is cheaper to import products from countries that contain competitive businesses than to produce them in Indonesia.

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The number of air passengers in Indonesia has increased significantly during the last decade, and turned the country in one of the fastest-growing air travel industries worldwide. Blessed with robust macro economic growth and a subsequent burgeoning middle class, Indonesians are increasingly using airplanes as means of transportation. It is estimated that in 2012 about 72.5 million people used air transport in Indonesia, a ten percent year-on-year increase.

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Indonesia's central government hopes that local governments team up with the private sector to develop the country's infrastructure. President Susilo Bambang Yudhoyono said that there are two ways through which local governments can stimulate its infrastructure development: cut expenses on other fields and use it on infrastructure development instead, or, invite the private sector to participate in public-private partnerships (PPPs).

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One of the industries that has been showing remarkable growth in recent years in Indonesia is the aviation industry. Blessed with robust macro economic growth and a burgeoning middle class, the country's population is increasingly using airplanes as means of transportation. Considering the magnitude of Indonesia, its island rich composition and underdeveloped road and rail network, air travel is an efficient option.

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Both Indonesia's cement production and cement consumption have risen rapidly in recent years. As the country has been showing solid economic growth for a decade - and is forecast to continue this growth -, property and infrastructure projects have grown in number accordingly, thus increasing demand for building materials such as cement. Moreover, the government is committed to enhance the country's much-needed infrastructure development.

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