JAKARTA (TheInsiderStories) – Good morning. The most important development from Thursday (20/09) was the revelation that President Joko Widodo has signed a Presidential Instruction that puts a three-year ban on palm oil plantations licenses, a move that is unlikely to be popular among the palm oil industry, one of the most influential industry in Indonesia.
Indonesia is the world’s largest palm oil producer and exporter. The freeze will be applicable for plantations seeking new licenses or have yet to obtain full licenses.
The move may boost Widodo’s popularity ahead of the 2019 Presidential Election as it shows that he is able to take strong stance against the country’s businesses community, which carry quite significant political influences, particularly outside Jakarta.
The Presidential Instructions also put in motion a thorough review on existing palm oil licensing data by both the central government and local governments. The policy’s implementation will be reviewed every six months by the office of the Coordinating Minister for Economic Affairs.
The freeze will provide supports to the price of palm oil as freeze on new plantations will limit supply of the commodity. According to the government’s data, the land area of palm oil plantations reached 14.03 million hectares by the end of 2017, rising from 11.90 million hectares by the end of 2016.
The freeze came on top the already implemented ban on forest clearing until 2019, which was first introduced by the previous President Susilo Bambang Yudhyono in 2011.
Yesterday, the World Bank released its Indonesia Economic Quarterly report and sent a mixed message. The Washington-based institution, on the one hand, praised the government’s ‘decisive and coordinated policy actions’ which helped to enhance Indonesia’s economic resilience amid heightened global uncertainty.
On the other side, the World Bank cast doubts on the government’s policy prescriptions like rising import tax on around 1,000 items, postponing infrastructure projects and expanding the use of biodiesel as ‘unlikely to have a large impact’ in meeting its objective of lowering the current account deficit in the short term.
Instead, the measures could have an adverse impact of weighing down economic growth, according to the World Bank.
While, Indonesia’s e-commerce sector is expected to be more competitive as Finance Minister Sri Mulyani Indrawati revealed that US giant Amazon is preparing to make an entry.
If the move is materialized then Amazon will face a stiff competition from China’s Alibaba, which has strong presence via Lazada and Tokopedia, as well as local players like Bukalapak, which is backed by media conglomerate PT Elang Mahkota Teknologi (IDX:EMTK).
In the mean time, the financial market enjoyed a rare gain today as fears over trade war eased. The Jakarta Composite Index gained 1 per cent at 5,931 supported by blue chip stocks. Foreign investors net bought stocks worth Rp221 billion, which helped the rupiah to strengthen to 14,839 per US$1 from 14,896 per US$1.
Furthermore, Indonesian politics will get more noisy as the campaigning for the 2019 General and Presidential Election will officially start on Sunday with both camps had announced the structure of their respective campaign team.
The opposition may again see a slight fracture in the coalition due to competing factions jockeying for the position of Jakarta’s deputy government, previously held by the Vice President Candidate Sandiaga Uno.
May you have a profitable day.
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