Construction firm Indonesia Pondasi Raya plans to conduct an initial public offering (IPO) on the Indonesia Stock Exchange in December 2015. The company, better known as Indopora, aims to raise around IDR 530 billion (approx. USD $39 million) by offering 303 million shares, or 15.1 percent of its paid-up capital, at a price ranging between IDR 1,280 and IDR 1,920 per share. This range is based on a price-to-earnings ratio of 8 to 12 times. Kurnia Salim, Head of Institutional Business at Yuanta Securities Indonesia, said Indopora is projected to collect IDR 333 billion (approx. USD $25 million) in net profit in 2016.

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In line with rising tourism in Indonesia, the value of hotel construction in Southeast Asia's largest economy is expected to grow 16 percent to IDR 21 trillion (approx. USD $1.6 billion) in 2016. Most of the new projects - roughly 21 percent - are located in the Greater Jakarta area. Besides tapping the tourism potential, hotel developers also want to tap the business potential, meaning that due to expected accelerated economic growth in 2016, there will arrive more foreign businessmen in Indonesia to attend meetings and other activities, particularly as the ASEAN Economic Community comes online.

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Sales of Semen Indonesia, Indonesia's leading cement producer, are expected to remain stagnant in 2015 despite recently rising cement demand due to the kick off of various government-led infrastructure projects. In the January-October 2015 period, the company's cement sales fell 2 percent compared to sales in the same period last year. On a positive note, Semen Indonesia's cement sales in October surged 10 percent to 2.7 million tons compared to the same month one year earlier. But with two months remaining it is not expected that the company's sales will significantly rise from last year's sales (26.6 million tons).

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The government of Indonesia is currently preparing the seventh economic policy package. Through this new package it aims to boost people's purchasing power by focusing on the village economy (ekonomi desa). The package will have two main centers of focus: (1) making the use of village funds - disbursed by the central government - more effective, and (2) improving logistics at the village level. Edy Putra Irawadi, Indonesian Deputy Minister for Industry and Trade, said these new policies will boost people's purchasing power, especially at the village level.

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According to the latest data from the Indonesian Cement Association (ASI), Indonesia's cement sales climbed 10.7 percent year-on-year (y/y) to 6.4 million tons in October 2015 as government-related infrastructure development has picked up in the second half of the year (cement sales only contracted on the island of Kalimantan in October). Cement sales are an interesting indicator as they provide valuable information about the country's household consumption and investment in property and infrastructure sectors.

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The second installment of Indonesia's September economic policy package, unveiled on Tuesday (29/09), received a warmer response from market participants compared to the first one (released on 9 September), evidenced by rebounding stocks and a stronger rupiah rate yesterday. Indonesia's latest policy package involves interest rate tax cuts for exporters, the speeding up of investment licensing for investment in industrial estates, and a relaxation of taxes on imports of capital goods in industrial estates and in the aviation industry.

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On Thursday (03/09), officials from the Netherlands, South Korea and Indonesia signed a letter of intent for a joint study of the second and third phase of the giant sea wall project (National Capital Integrated Coastal Development, abbreviated NCICD) off the coast of Indonesia’s capital city of Jakarta.

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Indonesia has cancelled further development of the multi-billion high-speed railway between the capital city of Jakarta and Bandung (West Java) as President Joko Widodo decided that Indonesia does not need a train that can reach speeds of over 300 km per hour on the relatively short route (150 km) between both cities. Besides the short distance, there will also be around 14 stations constructed between both terminal stations, implying that the train needs to hit the brakes before it can reach its maximum speed.

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In 2016 investors will be able to purchase about IDR 13.7 trillion (approx. USD $1.4 billion) worth of Islamic bonds (known as sukuk) to be issued by the Indonesian government. This amount is nearly double the amount of planned sharia-compliant sovereign debt paper this year (IDR 7.14 trillion). Indonesia will use proceeds from next year's bond sales to boost the nation’s infrastructure development (such as roads, ports, power plants, rail lines, bridges and Islamic universities).

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According to the latest rumours, the government of Indonesia tends to favour China to build the nation's first high-speed railway that will connect the capital city of Jakarta and Bandung in West Java. Over the past weeks, the ‘battle’ between China and Japan over who will be awarded the contract to construct the high-speed and high-profile railway between both cities (worth approx. USD $5 billion) heightened.

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After having grown rapidly in the years 2010-2013, infrastructure development in Indonesia lost its momentum in 2014. This was due to limited available government funds, uncertainty caused by the legislative and presidential elections, and the nation's slowing economic growth. After Joko Widodo became Indonesia's seventh president in October 2014, it was expected that infrastructure development would revive. However, it didn't. But Widodo made one important move by seriously reducing energy subsidies, hence making more funds available for infrastructure development.

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Last week it was officially announced that China Railway International Co. Ltd, subsidiary of China Railway Group Ltd, together with a consortium consisting of Indonesian state-owned enterprises (which include Pilar Sinergi BUMN Indonesia, Wijaya Karya, Kereta Api, and Jasa Marga) will build Indonesia's first ever high-speed railway, valued at over USD $5 billion, between the capital city of Jakarta and Bandung (in West Java), a route that stretches for approximately 150 km.

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China has won a contract to build a high-speed railway between Indonesia's capital city of Jakarta and Bandung (West Java), beating Japan along the way. Earlier this month, the Indonesian government unexpectedly decided to decline proposals from Japan and China for the construction of a multi-billion high-speed railway between both cities as these proposals included financial assistance or a guarantee from the Indonesian government. Moreover, Indonesia considered a super-fast train unnecessary on the relatively short route (150 km).

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In response to the ailing global economy, Indonesian President Joko Widodo has unveiled a new economic policy package that aims to boost economic growth of Indonesia amid a highly uncertain global context. On Wednesday (09/09), Joko Widodo (often called Jokowi) provided some details about the first phase of this new stimulus package during a speech at the State Palace in Jakarta.

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Government-led infrastructure development is regarded by most analysts and policymakers as the key to overcome Indonesia’s slowing economic growth as infrastructure development will cause a multiplier effect in the economy (triggering growth in other industries such as cement and property while job availability grows accordingly). In the second quarter of 2015, Indonesia’s gross domestic product (GDP) growth slowed to 4.67 percent (y/y), a six-year low.

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Indonesia is the eight-largest shareholder within the newly established Asian Infrastructure Investment Bank (AIIB). The Indonesian Finance Ministry announced earlier this week that the country will invest USD $672.1 million in the AIIB over the next five years. The AIIB is a new multilateral financial institution (initiated by China) that is to provide funds for infrastructure development projects in the Asia Pacific region. Initially, the AIIB has an authorized capital of USD $50 billion. This is expected to grow to USD $100 billion.

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A total of 1,555,609 foreign tourists have visited the island of Bali, the most popular tourist destination in Indonesia, in the first five months of 2015, an 11.3 percentage point growth from the same period last year. Given that the number of foreign tourists usually peaks in the period June-September it is most likely that the government’s target of welcoming 4 million foreign tourists on Bali in 2015 will be achieved, or exceeded. Most tourists that visit Bali originate from Australia, China and Japan.

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The latest data from the Indonesian Cement Association (ASI) show that cement consumption in Indonesia declined 3.8 percent (year-on-year) to 22.9 million tons in the first five months of 2015 (from 23.8 million tons of cement in the same period last year). This fall is the steepest decline in Indonesian cement consumption since 2009 when demand plunged nearly seven percent (y/y) amid the impact of the global financial crisis. The current decline is caused by the country’s economic slowdown and falling commodity prices outside Java.

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Although most emerging market stocks fell, Indonesian stocks and the rupiah showed a solid performance on Thursday (21/05). The rupiah appreciated 0.40 percent to IDR 13,122 per US dollar according to the Bloomberg Dollar Index, while the benchmark stock index of Indonesia (Jakarta Composite Index) rose 0.39 percent to 5,313.21 points. Most emerging stocks fell due to weak data from China (despite a series of stimulus). However, Indonesian stocks were supported by news about its credit rating and dividend announcements.

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Indonesia is not the easiest place to invest for foreign investors. This is reflected by the World Bank's Doing Business 2014 index in which Indonesia ranks 120th. In a business forum, held last week in Beijing, Chinese businessmen expressed a number of matters that blocked or seriously delayed their investments in Indonesia. For Indonesia (both domestic and foreign) investment realization, particularly in infrastructure, is important as investments is considered the main driver for the country’s economic growth in 2016.

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