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Insight: Indonesia Concern to Develop Electric Car

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Bakrie & Brothers Electric Car - Photo by the Company

JAKARTA (TheInsiderStories) – The Indonesian government is taking the necessary steps toward developing and producing electric vehicles in the future. The policy laws should be completed by early next year. The government is encouraging the electric car industry’s development, with plans to start construction next year. Firstly, for electric motorbikes and the battery industry.

The electric car industry is now increasingly visible, with the government’s encouragement to formalize presidential regulations regarding electric cars. At present, the presidential regulation draft is entering the stage of alignment in their respective ministries after being discussed with the Parliament.

This alignment includes the approach to the availability of electricity through the Ministry of Energy and Mineral Resources, tax incentives within the Ministry of Finance and the Ministry of Industry, with staged plans towards the realization of the industry. The government set a completion target of early 2019. Afterwards, this regulation can become a guideline for all industries, including private.

On the other hand, the Ministry of Industry suggested that the rules of electric cars involved various related parties. These includes involving independent institutions in the discussion process, such as researchers from educational institutions, like Indonesian university and Bandung technology institute, Usrabaya technology institute, as well as local electric vehicle industry producers, such as GESITS, Molina, Aplikabernas, MAB, and BNBR. Production of domestic electric cars will have the benefit of increasing automotive components imports, such as lithium ion based batteries.

The Bakrie & Brithers Tbk (IDX: BNBR), for example, plans to become a driver of the domestic electric cars industry. The company wants to fill electric cars with a certain level of domestic content (LDC), targets amount to 55 percent in 2022. The Bakrie Group, through PT Bakrie Autparts, it subsidiaries, claimed that, by joint venture with BYD Auto Co.Ltd, a leading automotive industry corporation from China, they can develop a new-line business in the automotive industry. The deals, worth US $300 million were signed in April of 2018. This is a great opportunity for the government to have a joint venture with the group.

Recently, the government launched the electric vehicle charging station (EVCS). This example of the latest technological engineering is intended to encourage the realization of electric cars government expansion. As we know, the government has a target of 20 percent for the production of low carbon emission vehicle (LCEV) in 2025.

So far, the agency has only prepared two stations, the first is the fast charging 50 kw station in Jakarta and the second is the 20 kw smart charging station at the central of knowledge and technology office, South Tangerang. In the future, similar stations can be spread, not only in Jakarta, but also in the big cities nationwide. The total investment spent for the project is up to Rp 500 million each unit.

Just now, the state oil and gas mining company and the Eleven March state-university are developing batteries for electric cars. However, the government claimed that Indonesia would build the largest lithium battery factory in Indonesia at Morowali Industrial Park (IMIP), Central Sulawesi, starting on January 11, 2019. The construction is planned to take two years, so that by 2021 it can be in production. IMIP already has investors from China, Japan and Korea. For the initial step, the investors will pour funds of around US$ 700 million.

The government is also committed to encouraging the development of electric cars which are environmentally friendly. At present the government is preparing fiscal incentives that will be given to electric cars, ensuring the price can be affordable. Incentives will be in the form of tax holidays, government borne import duty, and export financing and working capital credit assistance to procure battery swaps to promotion assistance. Including the sales tax on luxury goods, road maps rather than cars, including sedans and electric cars.

The study and research show that electric cars are considered capable of saving up to 80% more energy when compared with conventional cars that use fuel. Electric cars can use half the fuel compared with B20 fuel (6 million kl fuel). Innovations in electric cars can also encourage increased government budgets for research. Industry target 4.0, in 2030 the budget is 2% and now only reaches 0.08%.

The automotive industry is also preparing to incorporate plug-in hybrid electric vehicle as a solution to infrastructure constraints. The industry installed a power plant in a car using fuel like biodiesel-20. Currently there are no 380 watt electric car charging stations, the voltage is 220 watts different. However, the preparation of infrastructure such as an electric charging stations must be accelerated because electric cars require a power booster time of two hours. Fuel vehicles only take two minutes to charge.

Written by Daniel Deha, Email: theinsiderstories@gmail.com

Indonesia’s Pertamina to Develop Its Biggest Refinery with Oman Company

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Bontang Refinery in Balikpapan, East Kalimantan - Photo by Pertamina

JAKARTA (TheInsiderStories) — Indonesia’s state-owned energy producer, PT Pertamina will co-operate with an Oman company, Overseas Oil & Gas (OOG), to develop a new oil refinery. The refinery is projected to become the biggest refinery, as it will be integrated with the petrochemical plant.

Both companies have inked a framework agreement today (12/10) to develop 300,000 barrels per day capacity from the grass root refinery, along with a petrochemical plant, in Bontang, East Kalimantan.

CEO Pertamina Nicke Widyawati explained that the company will have a fuel off-taker agreement, so the Bontang refinery can supply domestic needs, especially for gasoline, aviation turbine fuel, and liquified petroleum gas (LPG).

“By the framework agreement signing with OOG today, we can move on to the next step, conducting bankable feasibility study,” she said in a written statement.

OOG will hold the majority shares, while Pertamina received 10 percent golden shares on the refinery development. According to Pertamina’s Megaproject and Petrochemical Project Director Ignatius Talulembang, in stages Pertamina consider to increase its shares to 30 percent in stages.

Moreover, the government-to-government cooperation will also open Pertamina’s opportunity to invest in Oman. Other than that, Pertamina has also signed an engineering, procurement, and construction contract with Hyundai Engineering Co. Ltd, SK Engineering & Construction Co. Ltd., PT Rekayasa Industri, and PT PP Tbk (IDX: PTPP) for refinery development master plan valued US$4 billion, in Balikpapan, East Kalimantan Province.

The project construction will start in January 2019 and planned to be finished in August 2023, delayed from the initial plan in 2021.

While, the Balikpapan refinery will have 360 thousand barrels per day (bpd) capacity, increased from the previous capacity at 100 thousand bpd. Quality of the refinery outcome will also be enhanced, from EURO 2 to EURO 5 fuel standard. By this, Indonesia’s diesel import is expected to declined by 17 percent.

“In addition to suppressing imports, the refinery will focus on producing higher standard fuel, so it will be more environmentally friendly,” said Widyawati.

Bontang and Balikpapan refineries are some of six refinery projects that will be developing by Pertamina until 2026.

Written by Staff Editor, Email: theinsiderstories@gmail.com

Japan’s Downside Revision to Q3 Real GDP May Indicate Slower Growth in 2018

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Jakarta (TheInsiderStories) – Japan’s real GDP growth in the third quarter (Q3) was revised down to a contraction of 0.6 percent quarter to quarter (q/q, or 2.5 percent q/q annualized) from the initial estimate of 0.3 percent q/q (or 1.2 percent q/q annualized) contraction.

The growth in Q2 was also revised down from a 0.8 percent q/q (or 3.0 percent q/q annualized) rise to a 0.7 percent q/q (or 2.8 percent q/q annualized) increase.

The downward revision was due largely to weak capital expenditure, which declined 2.8 percent q/q, reflecting a sharp contraction in fixed investment in financial statements statistics of corporations.

While major components of gross fixed capital foundation declined, except for residential investment, major factors that contributed to the q/q contraction in real GDP were a 3.1 percent q/q drop in investment in machinery and equipment (excluding transportation equipment) and a 2.5 percent fall in other building structures.

Reflecting weaker-than-expected Q3 results, IHS Markit revised down its 2018 real GDP growth outlook for Japan to 0.8 percent but kept its 2019 outlook at 0.9 percent.

 

Harumi Taguchi, Principal Economist, IHS Markit’s view remains that the contraction in Q3 is temporary and that growth will remain moderate until the consumption tax increase in October leads to a surge-and-drop in real GDP growth.

A solid rebound in manufactures’ shipments in October, up 5.3 percent month on month (m/m), suggests the rebound in investment in Q4 could be stronger than previously anticipated, even though the Nikkei Japan purchasing managers’ index, calculated by IHS Markit, signaled slower improvement in output in November.

Private machinery orders, excluding volatiles – a leading indicator of capex – does not indicate an immediate decline in capex, given that industry anticipated a continued increase in Q4. Construction orders for nonresidential buildings also maintained a modest uptrend in Q3.

While higher energy and fresh food prices led to a decline in monthly earnings for the third consecutive month and resulted in softer job openings in October, recent softening of energy and fresh food prices will underpin private consumption in short term, although weak consumer sentiment could keep consumers cautious about spending.

The drop in consumer demand following front-loaded demand ahead of the tax increase should not be severer than what Japan experienced after the April 2014 consumption tax increase, thanks to wage increases, smaller tax increase and various measures that the government is currently planning to implement to offset the impact.

In addition to a JPY1 trillion stimulus package passed by the Diet, the government plans to introduce additional JPY 3 trillion stimulus to boost recovery from natural disasters and to mitigate downside risks from the introduction of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, slated to go into effect in late December 2018, and the free trade agreement with the EU, expected to be effective in February 2019. This will probably support public spending in early 2019.

That said, risks are skewed to the downside. Major threats are the repercussions from global trade tensions, particularly between the US and China. Although trade talks between the US and Japan are not expected to turn hostile, pressure to narrow the trade surplus with the US could affect some industries, particularly for autos and agriculture, and persistent concerns could weigh on business sentiment.

Written by Staff Editor, Email: theinsiderstories@gmail.com

China’s CPI Falls on Lower Vegetable and Oil Prices in November

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JAKARTA (TheInsiderStories) – According to the National Bureau of Statistics, China‘s consumer price index (CPI) increased by 2.2 percent year on year (y/y) in November, 0.3 percentage point lower than the previous month.

Food prices contributed 0.49 percentage point to the CPI inflation in November. Pork prices, which are weighted heavily in the CPI basket, declined at a slower pace for the sixth consecutive month in November.

Due to improved weather conditions, fresh vegetable prices edged up only 1.5 percent y/y in October, down 8.6 percentage points from the growth rate recorded in October.

Non-food prices contributed 1.68 percentage points to the inflation. Owing to falling oil prices, the growth rates of vehicle fuel prices and residential water, electricity and fuel prices were down 9.4 and 0.6 percentage points, respectively, in November compared with October.

China’s producer price index (PPi) dipped to an eight-month low of 2.7 percent y/y in November, down 0.6 percentage point from October. The headline deceleration was driven by weaker upstream price inflation.

In particular, the manufacture of chemical raw materials and chemical products, the manufacture and processing of ferrous metals, the extraction of petroleum and natural gas, and the processing of petroleum, coking and nucleus fuel sectors together contributed 0.74 percentage point to the fall of y/y PPI in November compared with October.

Yanjun Lin, senior economist at IHS Markit rated China’s CPI is expected to face mild upward pressure in the coming months. The central bank’s monetary easing measures will pose an upside risk to inflation.

Low pork profitability and the spread of African swine fever will reduce pork supply and push up pork prices. However, as China is expected to ramp up agricultural imports from the US after the two sides agreed to a temporary trade ceasefire, this will further ease food price inflation. In addition, oil prices may remain weak and therefore lower transportation price inflation.

The PPI is expected to continue to fall in the months ahead. In the face of headwinds from the US-China trade conflicts, the government has temporarily eased off on overcapacity cuts and pollution curbs to stimulate domestic demand. This will increase the supply of industrial goods and drag on the PPI. Moreover, weaker oil prices will pose a downside risk to the PPI.

Written by Staff Editor, Email: theinsiderstories@gmail.com

Indonesia’s Galang Batang SEZ in Riau Officially Operating

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Coordinating Minister for Economic Affairs Darmin Nasution inaugurated the operation of the Galang Batang SEZ in Bintan, Riau Islands, Saturday (12/08) - Photo by CMEA

JAKARTA (TheInsiderStories) – Coordinating Minister for Economic Darmin Nasution, last Saturday, inaugurated Galang Batang Special Economic Zone (SEZ) in Bintan, Riau Islands Province. The Development and investment for the special economic zone valued Rp5.6 trillion (US$386.20 million) so far.

The SEZ, consisting of a port, 2 million tons of production capacity alumina refinery, a steam power plant, coal gas plant, brick factory, and water reservoir.

Nasution specified that Galang Batang is projected to be an area focused mainly on alumunium and its preservatives, with total investment of Rp36.25 trillion. The special economic zone is also expected to boost the regional economy and involve 23,200 workers.

There will be another three SEZs to follow, operating by early 2019. Those will be Arun Lhokseumawe in North Aceh regency and Lhokseumawe, Aceh Province, also Bitung in North Sulawesi Province, and Morotai in North Maluku Province.

Meanwhile, a petrochemical complex in Cilegon, Banten Province, owned by PT Lotte Chemical Indonesia, has just broken ground. The South Korean Lotte Group invested $3.5 billion in the petrochemical complex.

The factory, with a total area of 100 hectares, will have 2 million tons of naphta crackers total production capacity a year. The raw materials are then processed to produce 1 million tons of ethylene, 520 thousand tons of propylene, 400 thousand tons of polypropylene, and other derivative products.

The Government of Indonesia expects 10 more industrial zones to offer a ‘direct construction incentive’ to investors who agree to build their facilities in these specified zones.

Since 2015, the government has called on all industry players to concentrate their operations in industrial zones, with incentives provided to make it attractive for them to construct their facilities in such zones.

The government is hoping to see more investors become involved in developing industrial zones outside Java, which has historically dominated economic activity in the nation.

The development of such special economic zones outside Java is part of the ‘equitable development’ and at the same time a segment of the Master Plan of Acceleration and Expansion of Economic Development of Indonesia.

The Government has targeted Rp250.7 trillion in investment, for a total of 13 Industrial Zones namely Sei Manke, Banten, Morowali, JIIPE Gresik, Kendal, Wilmar Serang, Dumai, Konawe, Palu, Bitung, Ketapang, Lhokseumawe (Aceh) and Tanjung Buton will all welcome projects.

Somehow, the development of zones continues to face obstacles, such as the availability of sufficient electrical power, lack of investor interest, spatial conditions, high labor costs and discrepancies between upstream and downstream industry.

In 2015, government unveiled its sixth economic package, aimed at revitalizing an under-performing economy. The stimulus package aims to attract foreign direct investment to the special economic zones sited around the country.

‘Special economic zones’ are defined as areas where natural resources, mined in or around the zone, are processed; special economic incentives are offered by the Indonesian government to develop specific industries.

Under the new economic stimulus package, investors can qualify for generous income tax discounts ranging from 20 to 100 per cent for up to 25 years. In order to qualify for a 15-year tax holiday, investors would need to guarantee an investment of Rp 500 billion, while an investment of at least Rp1 trillion would be required to qualify for a 25-year tax holiday.

The regulation divides industrial zones into four categories, namely, developed industrial development estates (WPI)  in Java, southern Sulawesi, eastern Kalimantan, northern Sumatra (except for Batam, Bintan and Karimun) and southern Sumatra, northern Sulawesi, western Kalimantan, Bali and Nusa Tenggara, also in Papua and West Papua.

What’s more, the government also granted a Value Added Tax exemption facility on imports and / or delivery of machinery and factory equipment to be used by Companies in Industrial Area and Industrial Zone Companies.

The exemption from import duty on such machines and goods may be provided on imports originating from the Free Port and Free Trade Zone, Special Economic Zones, or Bonded Warehouses.

The exemption from import duty is conditional: machines as well as the goods and materials have not been produced domestically, already produced domestically but not yet meeting required specifications, or already produced domestically but in a quantity insufficient for industry.

The facilities are grouped into four regions based on the progress of industrial areas in each; for the easternmost region, the incentive is considerably bigger.

Minister of Industry Airlangga Hartarto said that he has facilitated the development of an integrated industrial area with supporting facilities to facilitate investment in the country.

With the incentives, the government is optimistic another 10 industrial zones will be done by 2019. Three will be operated this year, namely Lhokseumawe industrial area in Aceh, the industrial area of Wilmar Group in Serang, and Tanjung Buton industrial area in Riau.

SEZ is the areas targeted for Regional Development through Nawacita, the President Joko Widodo’s nine priority programs, which aim to increase productivity and competitiveness. SEZ is targeted to absorb 632,583 workers.

SEZ is regulated under Law No. 39/2009 on Capital Investment which goals are to boost capital investments, to optimize industrial activities/export/import/ other high value economic activities, to accelerate regional development by developing new centers of growth and balancing inter-regional development and finally to create jobs in industry, tourism and trade sectors.

US$1: Rp14,500

Email: linda.silaen@theinsiderstories.com

OPEC Cuts Oil Productions 1.2 Million Barrels per Day

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Mohammad Sanusi Barkindo, OPEC Secretary General, speaks to the media, at the Joint Press Conference; following the 5th OPEC and non-OPEC Ministerial Meeting in Vienna on Friday (12/07) - Photo by OPEC

JAKARTA (TheInsiderStories) – Organization of the Petroleum Exporting Countries (OPEC) and Non-OPEC has agreed to cut oil production amid United States (US) President Donald Trump to critics. The cut is by 1.2 million barrels per day (bpd), even bigger than the market predicted.

In the 5th OPEC+ Ministerial Meeting was held in Vienna, Austria, on Friday (12/07), the members agreed OPEC to cut 800 thousand bpd while non-OPEC will contribute 400 thousand bpd cut. The oil production cut will start in January 2019, and will be evaluated again in April.

“Following deliberations on the immediate oil market prospects and in view of a growing imbalance between global oil supply and demand in 2019, we decided to adjust the overall production by 1.2 million bpd, effective as of January 2019 for an initial period of six months,” said the Co-Chairmanship of OPEC’s President, Suhail Mohamed Al Mazrouei said in official statement on Friday (12/07).

OPEC’s decision made oil prices jump to US$63 per barrel on Friday.

The organization also recalling the ‘Declaration of Cooperation’ (DOC) reached on Dec. 10, 2016, between OPEC and non-OPEC producing countries.

Reaffirming the continued commitment of the participating producing countries in the DOC to a stable market, the mutual interest of producing nations, the efficient, economic, and secure supply to consumers, and a fair return on invested capital, and noting the overall improvement in market conditions and sentiment, and the return of confidence and investment to the oil industry.

The Joint Ministerial Monitoring Committee (JMMC) was requested to monitor the fair implementation of the above mentioned resolution and report back to the Meeting. Next OPEC and non-OPEC Ministerial Meeting will convene in Vienna, Austria, in April 2019.

Previously, The OPEC and Non-OPEC JMMC convened in Abu Dhabi, United Arab Emirates, for its eleventh meeting on Nov. 11, 2018 considers to cut the productions in 2019.

OPEC and a group of oil producers including Russia began cutting their output in January 2017 in order to drain a global crude glut that sent oil prices from over US$100 a barrel to under $30. In June, the group agreed to restore some of that output after its members cut more deeply than they intended and as oil prices hit 3 and half-year highs.

The Committee reviewed current oil supply and demand fundamentals and noted that 2019 prospects point to higher supply growth than global requirements, taking into account current uncertainties.

The group producers also noted that the dampening of global economic growth prospects, in addition to associated uncertainties, could have repercussions for global oil demand in 2019 – and could lead to widening the gap between supply and demand.

Last September, OPEC predicts the demand for world oil until 2023 will decline even though energy demand is getting higher amid the global economic expansion.

The fall in demand for OPEC crude is caused by strong oil supplies from non-OPEC countries, especially oil supplies from the United States (US). The organization added, the US is still the largest source of supply in the medium to long term. The US contributes to two-thirds of additional supplies driven by soaring oil production levels.

As is well known, the US has pushed its oil production to a record level of 11 million bpd in recent years as new technology revolutionizes shale oil production and opens up reserves that were previously considered uneconomical.

In addition, the US also imposed sanctions on OPEC members, Venezuela and Iran, which pushed Brent oil prices closer to the highest level since 2014 at around $80 per barrel, and spurred US producers to increase production.

OPEC has revised the prospect of growth in crude oil and non-OPEC production in 2023 to 4 million bpd higher than last year’s report. It said non-OPEC would produce 66.1 million bpf of crude oil and liquid fuel by 2023, up from 57.5 million bpd in 2017.

Meanwhile, the US is projected to increase oil production to 13.4 million bpd by 2023, from 7.4 mb/d in 2017 so that total US output reaches 20 mb/d, OPEC added. This will make the US, after becoming the largest crude oil importer, will also be able to meet its own oil needs.

As a result of these changes, OPEC crude demand is predicted to decline to 31.6 mb/d by 2023, from 32.6 mb/d in 2017. In its 2017 report, OPEC expects crude oil demand to be around 33 mb/d in the mid-2020s.

Nevertheless, OPEC still believes global oil demand will begin to recover and continue to rise to reach 40 mb/d in the next 2040. Moreover, OPEC sees global oil consumption until 2020 will reach 101.9 mb/d, up 1.2 mb/d from estimates in last year’s report.

Meanwhile, global oil demand in the longer term is expected to increase by 14.5 mb/d to reach 111.7 mb/d in 2040, slightly higher than last year’s forecast. In the long run, OPEC still hopes to maintain a balance between global market share and oil supply, especially in conditions of abundant and cheap reserves to be extracted.

Some specific highlights from this year’s World Oil Outlook like oil is expected to remain the fuel with the largest share in the energy mix throughout the forecast period to 2040. Total primary energy is set to expand by a robust 33 percent between 2015 and 2040, driven predominantly by developing countries, which see almost 95 percent of the overall energy demand growth.

Meanwhile, demand growth is driven by non-OECD regions, which see a huge increase of around 23 mb/d to 2040. Its added, there is no expectation for peak oil demand over the forecast period to 2040.

Furthermore, OPEC said, long-term demand growth comes mainly from the petrochemicals (4.5 mb/d), road transportation (4.1 mb/d) and aviation (2.7 mb/d) sectors. The total vehicle fleet – including passenger and commercial vehicles – is projected to increase to around 2.4 billion in 2040.

It said, the majority of the growth continues to be for conventional vehicles, but the long-term share of electric vehicles in the total fleet is projected to expand and reach a level of around 13 percent in 2040, supported by falling battery costs and policy support.

Non-OPEC liquids supply is forecast to increase by more than 9 mb/d between 2017 and 2027, with the major driver being US tight oil, but beyond this period non-OPEC supply is set to decline by around 4 mb/d.

The demand for OPEC crude is projected to increase to around 40 mb/d in 2040, up from 32 mb/d in 2018. While, the share of OPEC crude in the global oil supply is estimated to increase from 34 percent in 2017 to 36 percent in 2040.

OPEC said, global refinery additions are projected mainly in developing regions, led by the Asia-Pacific and the Middle East, but also Africa and Latin America. Fast evolving trade patterns for crude oil and refined products will continue to evolve, driven initially by additional flows from the US & Canada, and in the long-term by the Middle East, mostly attributed to increasing imports to the Asia-Pacific.

Talking about investment, OPEC sees, in the period to 2040, the required global oil sector investment is estimated at $11 trillion.

Email: linda.silaen@theinsiderstories.com

Weekly Briefing: More Tense on US-China Trade War amid Huawei Top Official Arrest

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JAKARTA (TheInsiderStories) — Good morning! The ongoing tariff trade war between the United States (US) and China may be in a ceasefire now but the tension continues. Canadian Huawei Technologies Co. Ltd. CFO, Meng Wanzhou, was arrested last Dec. 1st.

She was apprehended in Vancouver, and is now facing extradition to the US. China is warning Canada that there will be serious consequences if Meng is not released.

China considers it to be foul play, as Meng was apprehended by US request. Meng allegedly connected Huawei to a company that’s trying to sell equipment to Iran, while Iran is under US sanction.

If extradited to the America, Meng will face accusations over an alleged conspiracy of illegal activities with financial institutions. She is facing a 30 year sentence for each case involved.

The ongoing tension between the US and China made the Rupiah continue lower, weakened by 0.22 percent to 14,539, on Friday (12/07). Foreign net sell in the stock market was recorded at Rp538.63 billion (US$37.14 million), accumulated to Rp46.35 trillion from the beginning of 2018. Even so, the Jakarta Composite Index has still enjoyed a 0.17 percent gain, to 6,126.35.

Then, Bank Indonesia Senior Deputy Governor Mirza Adityaswara realises that the volatility of the Rupiah exchange rate is caused by global sentiment and the US and China trade war that has not yet subsided. The trade war is feared to slow down world economic growth.

Moreover, Chinese central bank responded by depreciating the Yuan and creating a bigger loss in emerging markets. Besides Indonesia, he highlighted that the Indian Rupee has had a worse slump compared to other developing countries.

Adityaswara then stressed that Indonesia must focus on solving the current account deficit by increasing exports, tourism, and managing unnecessary imports.

Furthermore, Finance Ministry’s gathered Rp4.9 trillion from State Saving Sharia Bond or so called ST-002, exceeded the Rp1 trillion target. Government will use the sharia bond investment for infrastructure funding.

While, Organization of the Petroleum Exporting Countries (OPEC) and its alliances including Russia has agreed to cut oil production amid US President Donald Trump to critics. The cut is by 1.2 million barrels per day (bpd), even bigger than the market predicted. OPEC will cut 800 thousand bpd while non-OPEC will contribute 400 thousand bpd cut.

The oil production cut will start in January 2019, and will be evaluated again in April. OPEC’s decision made oil prices jump to US$63 per barrel on Friday.

Ahead this week, Indonesia will announce November’s consumer expectation survey on Thursday. The United Kingdom, amid Brexit uncertainty, will also announce several economic data figures, such as GDP and trade balance today, and the unemployment rate the following day.

Meanwhile, South Korea will announce November’s unemployment rate, on Tuesday. Singapore’s unemployment rate and retail sales will be disclosed on Wednesday. China also has its unemployment rate being published this week, on Thursday. India will release their country’s trade balance data on Friday.

May you have a profitable week!

US$1: Rp14,500
Written by Linda Silaen and TIS Intelligence Team, Please visit our new website to get more insight on Indonesia’s economy: www.tisintel.com

Taiwanese Pegatron Moves Factory to Indonesia as Trade War Bites

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China's Apple supplier Pegatron Planned to Move is Factory to Indonesia - Photo by Pegatron

JAKARTA (TheInsiderStories) — The ongoing trade war between the United States (US) and China has impacted Taiwanese Pegatron Corp., who have decided to move one of it’s unit factories to Indonesia.

Ist subsidiary, Chinese’ iPhone and smart-phones assembler plans to open a factory in Batam, Riau Province, starting next year, as quoted by Nikkei. The company will only move its non-iPhone products assembling division to the Indonesian factory.

Pegatron’ investment in the factory is expected to start this month, with it looking to start operations in mid 2019. Pegatron plans to rent a factory and employ around 10,000 workers.

Pegatron highlighted the decision was taken under pressured from trade tensions, labour wage increases, and labour shortages. Even though US and China is now under a trade ceasefire agreement, the company will not change its decision to move the assembling plant.

Pegatron had previously considered other countries, including Vietnam for the plant’s location, due to the existing electronic supply chain development by the Samsung Electronic smartphone assembler there. However, investment in Batam, Indonesia, can be quicker than Vietnam.

Commenting on the planned, Coordinating Minister for Maritime Luhut Binsar Pandjaitan stated, Pegatron’s investment plan is still being discussed.According to him, Pegatron has some concerns over licenses.

“I have answered. We will take care of all the licenses. So it will not be intricate, or bribed and arrested by anti-graft agency later. Pegatron can invest here as long as following the existing regulation,” Pandjaitan told reporters today (12/07) by adding that the investment will be done in stages.

Pegatron is the second-largest electronics manufacturer in Taiwan. Its total assets exceed US$14 billion. The companies businesses are in motherboards, desktop PCs, notebooks, wireless systems, game consoles, TVs, and others. While most sales revenue comes from smart-phones and other communications devices.

In December 2017, Pegatron held $39.34 billion revenue with $ 482.63 million net income. Meanwhile, its unit China’s Pegatron Corp. has around $1 billion revenue each year.

Besides Pegatron, other Chinese companies such as Wistron, Quanta Computer, and Compal that assemble Apple products, also plan to leave China, following the trade tensions.

Written by Staff Editor, Email: theinsiderstories@gmail.com

Income of Indonesian Life Insurance Slowing Down in 3Q 2018

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JAKARTA (TheInsiderStories) – The Indonesian Life Insurance Association noted that total revenue from life insurance in the third quarter (3Q) of 2018 slowed 15.5 percent to Rp149.87 trillion (US$10.33 billion) compared to the same period in 2017.

Based on the official statement released today (12/07), the slowdown in revenue growth caused the claim expenses rose faster than the premium income. Until September 2018, life insurance premium income recorded Rp140.94 trillion, or up by 1.2 percent from 3Q of 2017 of Rp139.27 trillion.

The premium growth was driven by a rise in new business premiums which grew 6.4 percent and continued business premiums which declined 6.8 percent. The premium income mostly came from agencies which contributed 39.7 percent.

Next came from alternative distribution channels, which contributed 18.3 percent. The remainder came from other channels. In terms of products, unit link still dominates the total premium income with a contribution of 58.4 percent and traditional products 41.6 percent.

The total life insurance investment in the 3Q of 2018 worth of Rp 457.55 trillion, almost grew flat from 3Q 2017, amird the volatile market conditions. Investment in the form of mutual funds remained the highest contributor at 33.3 percent.

Investment from stocks followed closely with a contribution of 32.4 percent and an increase of 11.5 percent compared to the same period last year.

In terms of claims, in the 3Q of 2018, life insurance paid and benefits valued Rp 88.2 trillion, rose 6.7 percent in annually basis. The highest increase in claims occurred in contract final claims which contributed 15.5 percent and increased 58.2 percent compared to the 3Q of 2017.

The second largest increase in claims occurred in medical claims which increased by 3.2 percent to Rp7.05 trillion. Furthermore, the total life insurance insured in the 3Q of 2018 slowed 10.5 percent to 54.36 million people.

The slowdown occurred because of a decrease in the number of insured people by 14.7 percent and a decrease in the number of insured individuals by 0.5 percent.

US$1: Rp14,500

Written by Staff Editor, Email: theinsiderstories@gmail.com

Indonesian Forex Reserves Slightly Up to US$117.2B in November

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Bank Indonesia Headquarters at Central Jakarta - Photo: Privacy

JAKARTA (TheInsiderStories) – Bank Indonesia (BI) has noted that Indonesia’s foreign exchange (forex) reserves stood at US$117.2 billion in November, slightly up compared to October at $115.2 billion.

The reserves position was equivalent to 6.5 months of imports or 6.3 months of imports and payment of government foreign debt, and is above the international adequacy standard of around 3 months of imports.

Based on written statement on Friday (12/07), BI assessed that the forex reserves were able to support the resilience of the external sector and maintain macroeconomic and financial system stability.

The increase in reserves, mainly came from oil and gas revenues, the withdrawal of government foreign debt, and other foreign exchange receipts which were greater than the foreign exchange requirements for government external debt payments.

The central bank considers forex reserves to be adequate going forward, supported by confidence in the stability and prospects of a good domestic economy and export performance that remains positive.

Written by Staff Editor, Email: theinsiderstories@gmail.com

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