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Today's Headlines Infrastructure
Basuki Hadimuljono, Indonesian Minister of Public Works and Public Housing, said the government continues to push for infrastructure development in the form of toll roads in various regions across Indonesia.
The central bank of Indonesia (Bank Indonesia) believes that the Indonesian government needs to make a more careful selection in terms of infrastructure development projects in order to curtail the big amount of imports that put pressure on the country's current account balance and rupiah exchange rate.
Indonesia managed to rise sharply in the ranks of the World Bank's latest Logistics Performance Index (LPI). In the 2018 edition, which was released on Tuesday (24/07), Indonesia ranked 46th, up from 63rd in the preceding edition (released in 2016).
Indonesia's Transportation Ministry is optimistic that the construction of the Patimban Seaport in Subang (West Java) can commence in June 2018 after the Idul Fitri celebrations have completed. Meanwhile, the port operator tender is scheduled to be opened in July 2018. The USD $3.1 billion Patimban seaport is envisaged to become a key international seaport in Indonesia with a 7.5 million twenty-foot equivalent units (TEU) capacity.
The Indonesian government targets to see 17 toll road projects, all part of the national strategic projects program, being completed before the end of 2019. Two of these projects - (1) the 7.2 km-long Bekasi-Cawang-Kampung Melayu toll road and (2) the 11 km-long Bogor Ring Road - are estimated to be ready for the public before the end of 2018. Combined, the 17 toll road projects cost IDR 105.35 trillion (approx. USD $7.6 billion) and will contribute to improved connectivity in Southeast Asia's largest economy.
The Committee for the Acceleration of Priority Infrastructure Delivery (in Indonesian: Komisi Penyediaan Percepatan Infrastruktur Prioritas, or KPPIP), said 14 projects have been removed from the national strategic projects list. KPPIP Program Director Rainier Haryanto said an evaluation showed that these 14 projects failed to meet specific criteria and can therefore not be started - or reach financial close - before the fourth quarter of 2019.
It has been a while since we last reported on developments surrounding the Palapa Ring project, one of Indonesia's priority infrastructure projects in the 2016-2019 period. The Palapa Ring, which involves an undersea fiber-optic cable network that stretches across 13,000 kilometers as well as an onshore network of nearly 22,000 kilometers, will provide fast broadband Internet to Indonesians in both the urban and rural areas across the country. Once completed, all Indonesian districts (kabupaten) are connected through fiber-optic communication.
Shares of listed construction company Waskita Karya are under pressure on Wednesday (21/02) after the Indonesian government decided to temporary halt all elevated construction projects that involve girder installations (which include projects such as flyover toll roads, bridge construction, and the light rail transit, or LRT).
The International Monetary Fund (IMF) sees room for Indonesia's tax ratio to rise up to 15 percent of gross domestic product (GDP). Luis Breuer, IMF Mission Chief for Indonesia, expects to see an improvement in Indonesia's tax ratio - from the weak level of 10 percent of GDP in 2017 - on the back of Indonesia's improving economic growth. Accelerating economic growth should boost tax revenue realization.
After a good year in 2017, sales of commercial vehicles in Indonesia are expected to accelerate further in 2018 on the back of accelerating economic growth, growing activity in the mining and agriculture sectors, and the Gaikindo Indonesia International Commercial Vehicle Expo (to be held between 1-4 March 2018 in the Jakarta Convention Center).
Latest Columns Infrastructure
Indonesia posted a higher-than-expected USD $454.4 million trade surplus in April 2015. Previously, analysts predicted to see an April trade surplus of around USD $120 million. However, the USD $454.4 million trade surplus was smaller than the (revised) USD $1 billion trade surplus recorded in March. Moreover, the April surplus (the country’s fifth consecutive trade surplus) is primarily caused by a large drop in imports, signalling that Indonesia’s economic performance remains sluggish at the start of Q2-2015.
Ahead of the release of Indonesia’s official first quarter GDP growth figure (scheduled to be released in the first week of May), Indonesian stocks fell and the rupiah depreciated (slightly) against the US dollar on the back of weak market sentiments that have plagued Indonesian markets over the past week. Most importantly, weaker-than-expected Q1-2015 corporate earnings reports of listed Indonesian blue chips have made market participants concerned that Indonesia’s economic slowdown has continued into the first quarter of 2015.
Within a couple of days Statistics Indonesia (BPS) is scheduled to release Indonesia’s GDP growth figure for the first quarter of 2015. Despite economic growth forecasts for full-year 2015 - both of the Indonesian government and international institutions such as the World Bank, International Monetary Fund (IMF) and Asian Development Bank (ADB) - signalling a rebound from the five-year low of 5.02 percent (y/y) in 2014, various analysts expect to see further slowing economic growth in Q1-2015.
The year 2015 may be a good one for Indonesian cement makers. The Indonesian government under the leadership of Joko Widodo is eager to invest heavily in the country’s infrastructure as this is one of the main bottlenecks that blocks higher economic growth. In the Revised 2015 State Budget the central government set aside IDR 290.3 trillion (USD $22.3 billion) for infrastructure development. Surely, the country's large cement producers - Semen Indonesia, Indocement Tunggal Prakarsa, Holcim Indonesia and Semen Baturaja - will benefit from this.
Indonesia’s central bank (Bank Indonesia) decided to maintain its benchmark interest rate (BI rate) at 7.50 percent, the deposit facility rate at 5.50 percent and lending facility rate at 8.00 percent. This interest rate environment is considered to be in line with the central bank’s ongoing efforts to push the country’s inflation figure within its target of 4±1 percent for 2015 and 2016, as well as to control the country’s current account deficit towards a healthier level at 2.5-3 percent of gross domestic product (GDP) in the medium term.
The government of Indonesia decided to relocate the planned Cilamaya deep seaport project in West Java to a different location (possibly Subang or Indramayu) as the initially proposed location is too closely located to an oil and gas block operated by Pertamina Hulu Energi Offshore North West Java, a subsidiary of state-owned energy company Pertamina. Indonesian Vice President Jusuf Kalla said that it would be dangerous to construct the seaport close to this block as there is a high likelihood that ships will hit oil and gas rigs.
The Asian Development Bank (ADB) released a report today (24/03) in which it discusses recent economic developments in Indonesia. According to the report, Indonesia’s economic growth is projected to accelerate over the two years ahead provided that the Indonesian government continues to implement structural policy reforms. Such reforms - which include the acceleration of infrastructure development, reduction of logistical costs, and enhancing budget implementation - should lead to an improvement of the investment climate.
One of the key strategies to improve the economic fundamentals of Indonesia is to restructure and strengthen the country’s exports. This restructuring involves the transformation of Indonesian exports from being dominated by (raw) commodities to manufactured exports by developing downstream industries in Southeast Asia’s largest economy, including import substitution industrialization in order to curb the country’s demand for imported products amid Indonesians’ rising purchasing power.
Although Indonesia’s economic growth slowed further in 2014, there is optimism that growth will accelerate in 2015 despite sluggish global economic conditions (curbing Indonesia’s export performance) and Bank Indonesia’s relatively high interest rate environment. Indonesia’s central bank has raised its BI rate several times over the past one and a half years in an effort to combat high inflation (caused by fuel price hikes), curb capital outflows ahead of US monetary tightening, limit the current account deficit and support the rupiah.
The total number of foreign tourist arrivals to Indonesia in 2014 was 9.44 million, up 7.19 percent from the preceding year, meaning that the government target of welcoming 9.3 million foreign tourists last year was achieved. As usual, most foreign tourists entered Indonesia through the Ngurah Rai International Airport in Bali, the most famous tourist destination in the world’s largest archipelago. During the whole year of 2014 a total of 3.71 million foreigners spent some time on Bali.
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