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Insight: The Indo-Pacific Cooperation’s Significance for Indonesia

Insight: The Indo-Pacific Cooperation's Significance for Indonesia
Indonesia's Vice President, Jusuf Kalla, when opening the Dialogue on Indo-Pacific Cooperation High-Level (IPC) in Jakarta on March 20, 2019. Photo by TheInsiderStories.  

JAKARTA (TheInsiderStories) – Indonesia held a High-Level Dialogue on Indo-Pacific Cooperation (IPC) in Jakarta on March 20, 2019, with the theme “Towards a Peaceful, Prosperous, and Inclusive Region.” This dialogue was held to enhance cooperation and trust building among 18 countries in the Pacific and the Indian Ocean regions.

For over five decades, countries in Southeast Asia and its surroundings in Asia, the Pacific Ocean and Pacific Rim have enjoyed peace and stability, upon which economic growth and welfare have accumulated. Moreover, through intensive interactions and dialogue, many important regional institutions and mechanisms have been formed, in which ASEAN has played a pivotal role.

In implementing its vision, Indonesia promoted several inherent key principles for Indo-Pacific cooperation. They include an emphasis on ASEAN centrality, openness, transparency, inclusivity and respect for international law, to enhance mutual trust, respect and benefit.

Indonesian Foreign Minister Retno Marsudi noted, the realization of such a vision is undertaken through a two-pronged approach. First, strengthening ASEAN-led mechanisms — particularly the East Asia Summit (EAS). Second, continue to bridge and connect these mechanisms with other non-ASEAN regional mechanisms in the Indo-Pacific region.

Highlighting that the Indian Ocean Rim Association was the only “vehicle of cooperation” among coastal states bordering the Indian Ocean, Marsudi added that the Indo-Pacific concept also aims to link new Indian Ocean investments with mature investments in the Asia-Pacific. This concept – stressing ASEAN unity and centrality – has received positive responses from ASEAN member states and the bloc’s dialogue partners, with Indonesia using the moment as the main agenda item at the IPC dialogue.

But, the core question is, what’s the significance of Indonesia’s proposal of an ASEAN Indo-Pacific concept. There are three things that can be noted. First, Jakarta’s role in conceptualizing the concept, and seeking agreement from ASEAN and its dialogue partners, cements its status as the unofficial leader of ASEAN and as a global middle power.

While ASEAN traditionally eschews the delineation of a leader among its 10 states, Indonesia – being the largest member both in geographical size and population, as well as being one of ASEAN’s founding states – has long been viewed as having both the clout and capacity to spearhead critical regional initiatives.

The articulation of an Indo-Pacific strategy also speaks to Indonesia’s branding of itself internationally as a global maritime axis. This perpetuates Jakarta’s vision of being the “Global Maritime Fulcrum” – with key policy thrusts of ramping up naval capabilities, enhancing maritime trade and connectivity, and safeguarding marine resources in its territorial waters.

Second, at the regional level, the Indo-Pacific cooperation concept is significant because it entrenches ASEAN centrality – placing ASEAN in the driver’s seat in managing regional geopolitics and addressing the multifaceted security and economic challenges.

Instead of allowing external powers to dictate terms of Indo-Pacific cooperation – such as Beijing with its Belt and Road Initiative, or Washington and Tokyo with their yet-to-be-defined free and open Indo-Pacific strategy – ASEAN is seizing the initiative to propose the “rules of engagement.” This could persuade regional powers to abide by ASEAN’s envisaged concept, as all powers present at the EAS adhere to and are comfortable with the ASEAN Way of maintaining ASEAN centrality, nonintervention in internal affairs, and consensual decision-making.

Being the only inclusive regional security platform where all East Asian powers are represented, discussion of ASEAN’s Indo-Pacific concept at the EAS – and obtaining agreement from EAS members on what it stands for and the way forward – ensures that states are on the same page. With ASEAN taking the lead, individual powers are discouraged from announcing unilateral declaratory statements on their own Indo-Pacific concept, should it differ from ASEAN’s definition.

Third, at the international level, Indonesia’s – and subsequently ASEAN’s – proposal of a cogent Indo-Pacific partnership strategy serves to offset great power politics by providing a view independent from the United States, China, and other interested powers like India, Japan, or Australia.

ASEAN’s centrality, which defines the regional security architecture, makes it more likely that its proposal will be accepted by all powers. Any vision proposed by other powers could be accused of attempting to assert hegemony in the region, and ASEAN – being a neutral block of states trusted by EAS members – is best placed to reassure all parties of its benign and collaborative intentions.

The articulation of ASEAN’s own Indo-Pacific concept also preempts any competitive narratives emanating from Washington or Beijing. The ASEAN narrative is one of collaboration for the benefit of all Indo-Pacific states, with the thrust toward developing “economic growth centers” particularly appealing for the region’s developing nations.

Powers that may wish to assert a new era of great power competition would gain no traction among Indo-Pacific states after ASEAN’s pronouncement of its strategy emphasizing mutual security and economic gains. Nonetheless, major questions still remain on the applicability and feasibility of Jakarta’s Indo-Pacific concept proposed by Marsudi.

For example, beyond the principles and conceptual underpinnings, what should states concretely do to implement the strategy? With China already possessing de facto control of the South China Sea, how may ASEAN and Indo-Pacific states enforce the respect of international law with peaceful dispute resolution? How can the scourges of piracy and terrorism be better mitigated while ASEAN member states continue to resist intervention in domestic affairs?

There remains substantial dissonance between Indonesia’s suggested Indo-Pacific partnership concept and the reality on the ground. This requires further strategic thinking to achieve reconciliation between desired and likely outcomes.

In today’s geopolitical narrative where the much-vaunted confluence of the Pacific and Indian Oceans has taken center stage, ASEAN’s ability to maintain its prized centrality will depend on Indonesia – and its fellow ASEAN member states – closing the cognitive gaps in its Indo-Pacific strategy. And it must do so in a manner that regional powers find convincing and nonadversarial to their interests.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com

Indonesia Initiates Indo-Pacific Partnership to Maintain Economic Stability

Indonesia Initiates Indo-Pacific Cooperation to Maintain Economic Stability
Indonesian Vice Presidnet Jusuf Kalla.

JAKARTA (TheInsiderstories) – In the midst of various global economic uncertainties, Indonesian government sees the importance of the Indonesia-Pacific region partnership that is home to 3/5 of the world’ population with almost US$52 trillion in GDP. The program is expect to maintain stability and inclusive cooperation is crucial for economic growth and prosperity in the region.

Vice President Jusuf Kalla said Indonesian government was ready to realize synergies that are expected to be the seeds of concrete cooperation in interactions between countries in the Indo-Pacific region. The fields which are the main dimensions of cooperation include cooperation in the fields of maritime, infrastructure, and sustainable development to realize the Sustainable Development Goals.

“Conducive regional architecture is very important, to accommodate the growth of mutual trust and encourage the spirit of cooperation for the common good,” he said at a meeting of the High Level Dialogue on Indo-Pacific Cooperation in Jakarta On Wednesday (03/20).

Kalla stressed that the concept of Indo-Pacific cooperation promoted by Indonesia is a synergy based on inclusiveness, openness, concrete cooperation, and respect for international law, with ASEAN’ centrality as one of the main nodes of development and cooperation in the region.

“Because the sea is a source of prosperity. Because the sea unites us,” he stressed.

Some concrete cooperation that can be carried out include the establishment of new economic growth centers, cooperation in piracy prevention, and handling marine waste and mitigating natural disasters.

On the same time, Minister of Foreign Affairs Retno Marsudi said the government had made a breakthrough effort through a “ball picking approach”, to initiate meetings between members of the East Asia Summit, themed Indo-Pacific in the first quarter of March 2019.

She also said that Indo-Pacific cooperation that is inclusive and transparent is very much in line with Indonesia’s vision as a world maritime axis.

“Indonesia’s initiative to mobilize dialogue on cooperation in the Indo-Pacific region actually departs from the view of Indonesia which sees Southeast Asia as a zone of peace, freedom and neutrality,” said Marsudi.

According to her, this wealth is the basic capital in maintaining the stability of the region amid the geopolitical and geo-economic dynamics in the Indian Ocean and Pacific region. Indonesia’ role in realizing this is an embodiment of the vision of the 2019 World Maritime Axis.

This plan of cooperation will be followed up concretely by the Japanese delegation which will be present to Indonesia this week to discuss the draft Memorandum of Cooperation in the field of employment.

“This forum is the first forum for all 18 countries to discuss Indo-Pacific concepts. But all countries present also said that this forum is very useful in finding common ground for the Indo-Pacific which is peaceful, safe and prosperous for the people,” she stated.

Marsudi emphasized that Indonesia does not want the Indo-Pacific region to become a big theater, a new cold war, the argument of United States political and economic competition with China. The US along with the Quad (Australia, Japan, India) ranks slowly reduced the quality of ASEAN’s role by raising new actors, India, to confront China.

“And we do not want this area to be the arena of Graham Allison’s Thucydides Trap competition, which at the end of our life is a satellite that has to choose who is entrenched. Indonesia is the backbone of non-aligned forces,” she firmed.

Furthermore, she said, Indonesia’s big concept in the Indo-Pacific is the centrality of ASEAN. Laying down the central role of ASEAN as a leader and dealer managing regional stability maps as well as initiating the expansion and deepening of cooperation across maritime cooperation projects, maritime infrastructure, energy, technology transfer, logistics development, and so on.

“The mechanism of expansion and deepening of triangle cooperation, for example, from IORA, APEC, and ASEAN in fact if it can run well and complement each other is certainly very meaningful. The Indo-Pacific is a cross-growth region with orbit and its satellites are increasingly reaching out to the rest of the world, spreading prosperity,” she concluded.

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

Japan February Inflation Rate Weaker than Estimated

Bank of Japan Maintains Negative Interest Rate
Bank of Japan.

JAKARTA (TheInsiderStories) – Statistics Japan shows that the country’ annual inflation lowered to 0.7 percent in February from 0.8 percent in a month earlier. The figure below the Bank of Japan’ (BoJ) target of 2.0 per cent.

On a monthly basis, consumer prices were flat in February from previous month 0.3 percent, data showed on Friday (03/22). The data shows Japan’ inflation stood at 0.2 per cent year-on-year (YoY) in February 2019, unchanged from the previous month’ 15-month low figure but below market expectations of 0.3 per cent.

Both prices of food and transport fell for the third month in a row, while the cost of housing was flat after declining for 34 consecutive months. On a monthly basis, consumer prices were flat in February, after a 0.3 percent rise in January.

In average, inflation rate in Japan stood at 2.98 percent from 1958 until 2019, reaching an all-time high of 24.90 percent in February of 1974 and a record low of -2.50 percent in October of 2009.

Prices of food dropped by 1.4 percent year-on-year in February, after a 1.5 per cent fall in January and marking the third straight month of declines. Among food, cost continued to fall for vegetables and seaweeds (-15 percent vs -14.4 percent), of which fresh vegetables (-22.2 percent vs -21.2 percent); fruits (-1 percent vs -2.7 percent), of which fresh fruits (-1.4 percent vs -3.3 percent); and oils, fats & seasonings (-0.4 percent vs -0.6 percent).

In addition, inflation slowed for dairy products and eggs (2.4 percent vs 2.8 percent), meals outside the home (1 percent vs 1.1 percent), while was steady for cereals (at 0.7 percent). Meantime, cost rose faster for fish & seafood (1.6 percent vs 1.5 percent), of which fresh fish & seafood (0.6 percent vs 0.5 percent), cooked food (0.4 percent vs 0.1 percent), and meat (0.4 percent vs 0.3 percent).

At the same time, the cost of transportation and communication declined for the third consecutive month (-0.6 percent vs -0.2 percent). In contrast, inflation was steady for miscellaneous goods and services (at 0.9 percent), while prices slowed for culture and recreation (1.4 percent vs 1.5 percent), medical care (1.2 percent vs 1.3 percent); and education (0.4 percent vs 0.5 percent).

Meantime, cost went up slightly faster for fuel, light and water charges (5.3 percent vs 5.2 percent), of which electricity (7.7 percent vs 7.2 percent) and gas (6.2 percent vs 5.6 percent), while prices were unchanged for housing (vs -0.1 per cent in January); clothes & footwear (vs 0.2 percent); and furniture and household utensils (vs-0.1 percent in January).

The price data underscores the fragile nature of Japan’s economic recovery, as escalating China-United States (US) trade frictions and slowing Chinese growth weighs on exports and business sentiment.

The BoJ faces a dilemma. Years of heavy money printing have dried up market liquidity and hurt commercial banks’ profits, stoking concerns over the rising risks of prolonged easing.

And yet, subdued inflation has left the BoJ well behind its US and European counterparts in dialing back crisis-mode policies, and with a dearth of ammunition to battle an abrupt yen spike that could derail an export-driven economic recovery.

Some analysts say core consumer inflation may grind to a halt in coming months as recent oil price falls push down gas and electricity bills, which could put the BOJ under pressure to ramp up an already massive stimulus programme.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com

May, EU Parliament Sets New Deadlines for Brexit

PM May and EU Parliament Gets “Two New Deadlines” after Crisis Talks
UK's Prime Minister Theresa May in a meeting with President of Europen Council Donald Tusk - Photo by European Council

JAKARTA (TheInsiderStories)European Union (EU) Parliament finally gave a two-tier extension for United Kingdom (UK) Prime Minister Theresa May’ Brexit planned by softening the threat of an unconditional divorce after initial talks at the summit in Brussels which lasted from 21-22 March.

During the meeting, member of parliament accepted May requested after lawmakers issued a series of votes rejecting the divorce agreement, then refused no agreement, then accepted the her advice on delays.

EU offers a delay until May 22, if lawmakers pass the prime minister’ Brexit deal at the end of next week. But if the parliament continues to reject it in three “meaningful polls”, Britain faces tough deadlines on April 12.

If May can get a Brexit approval through parliament next week, then the new Brexit date is May 22. With this, it will take less than two months for the UK and the EU to sign a divorce agreement and get all the technical arrangements for the separation officially begun.

Conversely, if the May agreement doesn’t qualify before the end of next week, then the new Brexit date is April 12. This is a new deadline for the UK to decide how it wants to continue.

Otherwise, UK can leave the EU without agreement. Or it can “show the way forward” in the block, which is likely to require a delay longer than the EU.

Brussels has chosen a date because that is the last point when Britain can decide whether to take part in the European Parliament elections which take place on May 23-26.

However, passing an agreement on May 22 will prove to be problematic for two reasons. First, because May suffered the first and fourth largest Commons defeats and only a handful of Tory Brexiteers publicly stated that they had changed their minds.

Secondly, because Speaker John Bercow has warned he can ban voting, by applying a rule of more than 400 years that prohibits lawmakers being forced to vote on the same problem repeatedly in a short period of time.

Therefore, the EU calls on Britain to “show the way forward” – including asking for a delay in the duration of Brexit in order to take part in the EU Parliamentary elections. If not, the UK will exit the block without agreement.

In her speech Thursday (03/21), British’ premier said that he would ask people in Britain to participate in the election, three years after the vote left the EU. However, May said the move “underlined” the “importance” of MPs to support the agreement and ultimately be able to take control.

May then promised for the first time, if she failed to get a ratified agreement next week, the Commons could more easily declare the type of Brexit he could choose.

May also vowed to “support commitments” made last week by de-facto representative David Lidington for an “indicative vote” in another divorce scenario.

But May refused to admit the mistake of the situation which was labeled a “national emergency” in a joint statement that rarely happened on Thursday by the Congress of Trade Unions and Confederations for the British Industry.

Therefore, May hopes the pressure from Brexit without an agreement now takes two weeks later than expected to reflect MPs to support her agreement.

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

Two Indonesia’s Airlines Cancels Boeing Purchase Plans

Boeing Suspends the Operations of 371 MAX 737 Aircraft

JAKARTA (TheInsiderStories) – Two flight carrier PT Garuda Indonesia Tbk (IDX: GIAA) and PT Lion Mentari Airlines had canceled Boeing 737 Max 8 booking. The state-owned aviation company confirmed that it had canceled 49 units booking of Boeing 737 MAX 8 aircraft.

Cancellation was made due to loss of trust from consumers of Garuda Indonesia. While, the airliners own by Rusdi Kirana also aimed to drop the buying planned.

Lion Air has ordered 222 Boeing 737 Max 8 with Boeing until 2035. Lion Air Group Managing Director Daniel Putut said, now the company renegotiate the possibility of exchanging Boeing 737 Max units with other units, but has not found a meeting point.

Currently, Lion Air operates 10 units of Boeing 737 MAX 8. In connection with a circular from the Director General of Civil Aviation of the Ministry of Transportation regarding temporary grounded Boeing 737 MAX 8 aircraft, Lion Air states that it will temporarily suspend 10 Boeing 737 MAX 8 aircraft.

Indonesia and China’s aviation regulator has told domestic airlines to suspend operation of Boeing 737-8 MAX aircraft following the second deadly crash for the aircraft model in less than five months.

This policy was taken following the crash on Sunday of Ethiopian Airlines flight ET302 that killed all 157 people on board. This crash involved the same type of aircraft involved in the Lion Air crash in Indonesia in October that killed all 189 people on board.

Indonesian Directorate General of Air Transportation took steps to carry out inspections, prohibiting flying while airplanes of Boeing 737-8 MAX in Indonesia. This policy was taken to ensure that aircraft operating in Indonesia were in flight-worthy conditions.

“One of the steps that will be taken is to conduct a temporary grounded inspection, to ensure the condition of the aircraft is airworthy and the step has been approved by the Minister of Transportation,” said Director General of the agency Polana B. Pramesti on Monday (03/11).

Inspections will start as soon as tomorrow, March 12, 2019. If problems are found at the time of inspection, the aircraft will be prohibited from flying temporarily until it is declared complete by the flight inspector.

So far, supervision of the operation of Boeing 737-8 MAX aircraft has been carried out since 30 October 2018 and after the JT610 accident, if a problem occurs or the findings of the aircraft inspection result are immediately grounded on the spot.

The agency continues to communicate with the Federal Aviation Administration (FAA), to provide assurance that all Boeing 737 – 8 MAX aircraft operating in Indonesia are airworthy. The FAA has issued an Airworthiness Directive which has also been adopted in Indonesia and has been applied to all Indonesian aviation operators that operate the Boeing 737-8 MAX.

Currently, airlines operating such aircraft are one unit of PT Garuda Indonesia and 10 units of Lion Air. The FAA said that it would continue to communicate with the DGCA if further steps were needed to ensure airworthy conditions for the Boeing 737-8 MAX.

The agency has also received a direct statement from Boeing Co., where the manufacturing party said it would provide the latest information regarding the results of the Ethiopian Airlines accident investigation. Boeing Co. also ready to answer questions from Indonesia about the steps that need to be taken to ensure airworthy type of Boeing 737-8 MAX aircraft.

Previously, the Civil Aviation Administration of China told airlines to suspend operation of the aircraft model on Monday. The administration said it had issued the notice to suspend commercial 737-8 flights as the two crashes both occurred during the take-off phase and had certain similarities. It said it will contact the United States (US) FAA and Boeing and will update airlines on when flights can resume.

Aviation industry officials have said it is too soon to say if there is a connection between the two crashes.

Air China took delivery of the country’s first 737-8 MAX at the end of 2017, with the aircraft maker adding that this was the first of almost 100 737 MAX to be delivered to Chinese companies by the end of 2018.

As reported, the Ethiopian Airlines Boeing 737-8 MAX with the ET-AVJ registration number for Nairobi fell on Sunday (03/10) morning.

Among a total of 157 passengers, 32 of whom were Kenyans, 18 Canadians, nine Ethiopians, and eight US citizens. The United Nations, which will host an environmental conference in Nairobi this week, said it lost 19 of its officials in the accident, one of them an Indonesian citizen.

Through the written statement of the Indonesian Embassy in Rome, Italy, the Indonesian citizen is a woman who lives in Rome and works for the World Food Program.

According to the Cirium Flight Global database, this aircraft was delivered on November 15 and is supported by two Leap-1B engines made by CFM International, a joint venture company of General Electric Co and Safran SA.

Although Africa has a relatively poor record of flight safety compared to global standards, Ethiopian Airlines is known to operate a modern fleet featuring the latest Boeing 787 Dreamliners and Airbus SE A350s, and 737 MAX.

According to the airline, the Ethiopian Airlines Boeing 737-8 MAX pilot, Yared Getachew, already has more than 8,000 flight hours, while the co-pilot Ahmed Nur Mohammod has spent around 200 hours flying. The plane itself has flown about 1.200 hours, explained CEO of Ethiopian Airlines.

But this raises new concerns about the security of the 737 MAX, less than two years after the popular slim model entered commercial services.

Any disruption to the 737 program could threaten the financial and reputation of Boeing as an aircraft manufacturer. Bloomberg Intelligence estimates, this aircraft model contributes nearly one third of the company’s operating profit.

“This is the most important plane in the line. If there is something bad with the 737 program, it will be a very serious challenge for the company,” said George Ferguson, analyst at Bloomberg Intelligence.

Boeing said it was preparing to send a technical team to help investigate the Ethiopian Airlines plane accident.

The aviation and transportation authorities of the US FAA and the National Transportation Safety Board also plan to work with the Ethiopian authorities in investigating the cause of the accident.

In the midst of widespread questions about the occurrence of the two deadly accidents in a short span of time, a number of aviation industry players warned not to draw conclusions early.

Some of the major airlines that operate the model even provide guarantees. “We have full trust in the aircraft and our crew, they are the best and most experienced in the industry,” said American Airlines Group Inc. in a statement. The parent of this well-known airline operates 24 of the MAX 8 models.

by Linda Silaen, Email: linda.silaen@theinsiderstories.com

Moody’s Revises Indosat Ooredoo’s Outlook to Negative

(Photo: Indosat Ooredoo)

JAKARTA (TheInsiderStories) –  Moody’s Investors Service (“Moody’s”) has revised the outlook on P.T. Indosat Tbk‘ (lndosat Ooredoo) ratings to negative from stable. At the same time, Moody’s has affirmed the company’s Baa3 issuer rating.

“The negative outlook reflects a weakening in Indosat’s financial metrics driven by the company’s plans for accelerated 4G capex amid an intensely competitive operating environment for the Indonesian mobile sector,” says Nidhi Dhruv, a Moody’s Vice President and Senior Analyst.

Indosat Ooredoo‘ operating and financial profile has weakened
significantly over past quarters, mainly due to the introduction of
registration for pre-paid SIM cards in Indonesia and a more rapid decline in traditional voice and SMS revenue in 2018.

Specifically, the company’s revenue declined by 23 percent to Rp23.1 trillion (US$1.64 billion) in 2018 from a year earlier, primarily driven by a 26% decline in the cellular business. Indosat Ooredoo’ subscriber base also fell 47 percent to 58 million at the end of 2018 from 110 million at the end of 2017, while average revenue per user (ARPU) declined 8 percent to Rp18,700 over the same
period.

“Although the Indonesian mobile sector remains intensely competitive, there has been some uptick in quarter-on-quarter ARPUs and revenue growth. A more consistent growth in revenue, leading to the company steadily recouping its market share and profitability margins, would be supportive of stabilizing the rating outlook,” says Dhruv, who is also the Lead Analyst for Indosat Ooredoo.

Indosat Ooredoo has suffered steeper declines in its subscriber and
revenue share due to its weak 4G networks, in turn a result of
under-investment by the company over 2016-2018. In Q4 2018, the company also saw significant leadership changes resulting in a management overhaul and potentially delaying responses to the rapidly changing competitive environment.

Under the new management team, Indosat Ooredoo has significantly
increased its capex plans to Rp30 trillion over 2019-2021 primarily to strengthen the company’s 4G networks and expand coverage
ex-Java.

“The accelerated capex investment is key to Indosat Ooredoo’s strategy to remain competitive, especially ex-Java against its closest competitor, XL Axiata Tbk (P.T.) (Baa3 stable). However, if Indosat Ooredoo heavily debt funds its aggressive capex plan, its leverage and cash flow metrics will remain above our tolerance for the rating,” adds Dhruv.

Absent any capital restructuring initiatives, Moody’s expects Indosat
Ooredoo’s adjusted gross leverage will remain at 3.5x-3.7x over the next 2 years. Its retained cash flow (RCF)/debt is expected to also weaken in the range of 25 percent to 30 percent.

“Indosat Ooredoo is exploring alternative funding options — including
the sale of its towers and monetization of its stakes in some
subsidiaries. However, although such tower sales would benefit the
company’s liquidity position, given the capitalization of leases, it
would be leverage neutral. Furthermore, these initiatives would be time consuming — driven by market dynamics, and subject to regulatory and shareholder approvals,” adds Dhruv.

The company has stated that at this time it does not foresee an imminent need to raise equity.

Indosat Ooredoo‘ liquidity position is strained. Its cash and cash
equivalents of Rp1.0 trillion as of Dec. 31, 2018 and available
revolver facilities of Rp3.7 billion, combined with its projected
operating cash flow of around Rp5.0 trillion over the next 12 months, will be insufficient to cover its debt maturities of IDR6.4 trillion and projected capital spending of IDR10.0 trillion.

Moody’s expects the company will refinance its maturing debt with
longer-dated rupiah bonds and bank loans. Given Indosat Ooredoo’
demonstrated strong access to the domestic bank and bond markets, we consider the refinancing risk to be manageable. Earlier this month, Indosat Ooredoo successfully completed the first tranche of a bond issuance in the amount of Rp2 trillion.

Moody’s remains cautious about Indosat Ooredoo‘ credit profile over the near-term. Nonetheless, the company’s Baa3 rating continues to combine its standalone credit strength of ba1, reflecting Indosat Ooredoo’s established market position, moderate financial profile and Moody’s expectation for moderate growth in the Indonesian cellular market following price increases by incumbents since Q3 2018.

Furthermore, the credit support Moody’s believes Ooredoo Q.P.S.C. (Ooredoo, A2 stable) is likely to provide to Indosat Ooredoo in a distress scenario, resulting in a one-notch uplift.

The negative outlook reflects Indosat Ooredoo‘ weak operating and
financial metrics for its Baa3 rating, with limited potential for
near-term improvement in the company’s underlying profitability. The negative outlook also reflects the uncertainties with regard to the timing and execution of its potential capital restructuring plan.

Moody’s will closely review the company’s progress over the next 12
months. The rating could be downgraded if there is a material deterioration in its underlying credit strength, arising from a reducing market share, diminishing profit margin, weaker operating cash flow or increased shareholder returns.

Metrics indicative of downward pressure include adjusted debt/EBITDA rising above 3.0x or retained cash flow/adjusted debt remaining below 25 percent to 30 percent on a sustained basis. In
addition, the one-notch uplift (based on expected support from the parent company, Ooredoo) could be removed if the parent company’s stake falls below 50 percent or if it indicates that Indosat Ooredoo is no longer a core asset.

Given the negative outlook, upward pressure on the rating is unlikely. However, Moody’s could change the outlook to stable if there is a  consistent improvement in Indosat Ooredoo’s credit profile and overall profitability through organic or inorganic measures.

Parameters that  Moody’s would consider for a change in outlook to stable include consistent revenue and earnings growth, a consistent improvement in its debt leverage and a clear plan and capacity for adjusted debt/EBITDA to remain below 3.0x, and retained cash flow/adjusted debt remaining above 25 percent to 30 percent on a sustained basis.

Indosat Tbk. (P.T.) is an integrated telecommunications network and
services provider in Indonesia. The company is the second-largest
cellular operator in the country in terms of revenue and active
subscribers. It also provides multi-media, data communications, and
internet services. The company is 65 percent owned by Ooredoo Q.P.S.C.

US$1: Rp14,100

by Linda Silaen, Email: linda.silaen@theinsiderstories.com

Indonesian Stock to Watch on Friday, March 22

Photo by IDX

JAKARTA (TheInsiderStories) – The Jakarta Composite Index closed up 0.29 percent or 19.07 points at 6,51.78 in trading on Thursday (03/21). In the midst of this strengthening there were fluctuations in issuers stock movement and also there were several corporate actions.

Top Gainers

Shares of PT Cahayaputra Asa Keramik Tbk (IDX: CAKK) and PT Wahana Interfood Nusantara Tbk (IDX: COCO) recorded the biggest gain after closing up 25 percent each at the same time touching the limit of automatic trading termination.

Following the strengthening of CAKK and COCO, the shares of PT Star Petrochem Tbk (IDX: STAR) closed up 20.45 percent or 18 points to Rp106 per share.

Top Losers

PT Electronic City Indonesia Tbk (IDX: ECII) shares posted the deepest price decline after closing down 25 percent, while touching the automatic rejection limit to the level of Rp825 per share. The next weakest position was the shares of PT Siwani Makmur Tbk (IDX: SIMA) which closed down 24.83 percent at Rp224 per share.

PT Wijaya Karya Bangunan Gedung Tbk (IDX: WEGE)

The state-owned developer aims at two airport development projects for this year, namely Hang Nadim Airport (Riau Islands) and Komodo Airport (East Nusa Tenggara). The value of each of these projects is Rp1.5 trillion for Komodo Airport and around Rp5 trillion for Hang Nadim Airport.

PT HM Sampoerna Tbk (IDX: HMSP)

The cigarette maker issuer recorded a net profit last year of Rp13.63 trillion, up 9.21 percent from the previous year’s net profit of Rp12.48 trillion. Based on the financial report published on Thursday, the company’ sales rose 7.7 percent to Rp106.74 trillion from Rp99.09 trillion a year earlier. Despite rising, the cost of goods sold also rose to Rp81.25 trillion, from the previous year Rp74.88 trillion.

PT Garuda Indonesia Tbk (IDX: GIAA)

The flight carrier confirmed that it had canceled 49 units booking of Boeing 737 MAX 8 aircraft. Cancellation was made due to loss of trust from consumers of Garuda Indonesia.

PT Krakatau Steel Tbk (IDX: KRAS)

The state-owned steel company targeting its steel production to reach 2.8 million tons in 2019, an increase compared to last year’ 2.2 million tons of steel production. The target is in line with the increased production capacity to 4 million tons per year.

PT Lion Mentari Airlines

The airliners own by Rusdi Kirana is rumored to have started preparations for the process of an initial public offering with a target of reaching $1 billion.

Furthermore, Reliance Sekuritas Indonesia views the composite index will move lower at 6,450-6,520. The shares that can still be monitored are PT Waskita Beton Precast Tbk (IDX: WBSP), PT Japfa Comfeed Indonesia Tbk (IDX: JPFA), PT Bank Permata Tbk (IDX: BNLI), PT Timah Tbk (IDX: TINS), PT Medco Energi Internasional Tbk (IDX: MEDC), and PT Matahari Putra Prima Tbk (IDX: LPPF).

Written by Linda Silaen and TIS Intelligence Team, Please Read Our Insight to Get More information about Indonesia

Morning Briefing: CPO Banned by EU, Indonesia Threatens Retaliation

Photo by MPOC
JAKARTA (TheInsiderStories) — Good morning! Disagree with European Union restriction on palm oil, Indonesia threatened to ban imports of some goods from the EU as a retaliation. Coordinating Minister for Maritime Affairs Luhut Pandjaitan hinted that jets manufactured by European companies could be among the targets.
He added, Indonesia may need about 2,500 aircraft in the next two decades. The EU’ palm oil restriction is feared to harm Indonesian economy. Especially, almost 20 million people in Indonesia are dependent on the commodity. This situation also created a tension in Malaysia, as both countries hold 85 percent of palm oil global supply.
Indonesia is also planning to submit a formal protest with World Trade Organization, if the EU ratifies proposal to ban vegetable oil fuels to achieve renewable-energy goals. Meanwhile, the EU argues that it compatible with WTO rules.
The new measure is now in a two-month scrutiny period when the bloc’s member states and the European Parliament can express objections. If none is received, the measure will be published in the EU official journal and become a law.
Furthermore, United States President Donald Trump affirmed that he will keep the import tariffs on Chinese goods, as long as there is no trade agreement reached with China. Previously, the trade deal seemed shaking as China has pushed the Trump administration to remove tariffs, but US didn’t give any certainty.
US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer are scheduled to visit China on March 28 and 29. Then, Vice Premier Liu He will visit the US in early April.
Following the Ethiopian Airlines crash, a state-owned enterprise PT Garuda Indonesia Tbk (IDX: GIAA) cancels its order on 49 units of Boeing 737 MAX 8 aircrafts. Garuda Indonesia official said that Boeing has lost consumers’ trust, even though it has tried fixing the aircraft system.
The flight carrier had ordered 50 units of Boeing 737 MAX 8 aircrafts, with one has been arriving in 2017. But the Transportation Ministry ban forbids the aircraft to fly. Garuda Indonesia is now negotiating the cancellation plan. If there is no agreement reached with Boeing, Garuda Indonesia is potentially losing US$26 million from its down payment.
Lion Air, Indonesian airlines which suffered by Boeing 737 MAX 8 crash several months ago, started to prepare for an Initial Public Offering. Lion Air eyes for US$1 billion funding from the corporate action targeted to settle this year, and company is now working with advisers. The value target would be Indonesia’ third-largest IPO on the record.
Then, Bank of Indonesia’ act on keeping 7-Day Reverse Repo rate at 6 percent has given a good sentiment to the market. Rupiah gained power by 0.9 percent and reached its best point this month. Jakarta Composite Index also increased by 0.29 percent to 6,501.77.
The Bank also strengthened accommodative macro-prudential policies by increasing the range of the Macro-prudential Intermediation Ratio (RIM) from 80-92 percent to 84-94 percent. With the relaxation of the RIM, it is expected that bank lending can reach the upper limit of the target of 10-12 percent this year.
US$1: Rp14,000
May you have a profitable day!
Written by Linda Silaen and TIS Intelligence Team, Please Read Our Insight to Get More information about Indonesia

Ten Parties is Estimating Unqualify in Indonesia’s 2019 Election

Indonesia’s ten-Parties Predicts Unqualify in 2019 General Election
The 16-parties that participating in 2019 General Election.

JAKARTA (TheInsiderStories) – An Indonesian credible media, Kompas through its Research and Development Agency survey on Feb. 22 to March 5, 2019 showed that there were ten political parties participating in the 2019 General Election threatened not to pass the Parliament’s threshold of 4 percent. The five parties among the ten parties are old parties, while the other five parties are newcomers, according to the Kompas report today (03/21).

The survey explained, even though the five old parties had seats in the current Parliament and supported candidates for President and Vice President Joko Widodo-Ma’ruf Amin, it was considered to have failed to maintain the loyalty of its constituents.

The Hati Nurani Rakyat Party (Hanura) even won 5.3 percent of votes in the 2014 election, but the party which had once been led by Wiranto was threatened with no more striding to Senayan because only 0.9 percent was chosen by respondents. Meanwhile, the Keadilan dan Persatuan Indoensia Party (PKPI) only gained 0.2 percent.

The other three parties are the Amanat Nasional Party (PAN) of 2.9 percent, the Persatuan Pembangunan Party (PPP) 2.7 percent, and the Nasional Demokrat Party (Nasdem) 2.6 percent.

However, these three parties are estimated to be able to meet the threshold if added to the level of margin of error +/-2.2 percent.

Furthermore, the survey found that there were five newcomer parties that had not been able to delegitimize the dominance of old parties. They are the Bulan Bintang Party (PBB) 0.4 percent, the Persatuan Indonesia Party (Perindo) 1.5 percent, the Solidaritas Indonesia Party (PSI) 0.9 percent, the Berkarya Party 0.5 percent, and the Garuda Party 0.2 percent.

With the calculation of the sampling error rate of +/-2.2 percent, these parties will still find it difficult to meet the minimum parliamentary threshold.

From the results of the survey, it was found that seven political parties that did not qualify for Senayan were parties supporting the Widodo-Amin pair. The seven parties are PPP, Nasdem, Hanura, Perindo, PSI, PKPI, and the PBB.

On the other side, the six old parties are still too powerful on the national political stage as indicated by the survey. The two old parties, namely the Demokrasi Indonesia Perjuangan Party (PDI-P) to gain respondents’ trust by 26.9 percent, while the Golongan Karya Party (Golkar) was 9.4 percent.

Meanwhile, the Gerakan Indonesia Raya Party (Gerindra) owned by President Candidate Prabowo Subianto to gain a vote of 17.0 percent, the Kebangkitan Bangsa Party (PKB) 6.8 percent, and the Demokrat Party (Demokrat) by 4.6 percent, and the Keadilan Sejahtera Party (PKS) 4.5 percent.

Looking at the trustworthiness of these parties, it has the potential to create new regulations to simplify the party system in Indonesia. In addition to increasing the parliamentary threshold from 3.5 percent in the 2014 election, this simplification can also be caused by a tail coat effect that is only felt by some political parties.

In the 2014 election, there were 10 political parties that passed the parliamentary threshold or won seats in the Parliament, from legitimate national votes. This election was attended by 16 national political parties, while the 2014 election was followed by 12 national political parties.

In addition, there is a tendency for small and medium-sized political parties not to have a tail-suit effect or a positive relationship between the electoral power of candidates promoted in the presidential election and their supporting parties, for example the seven parties supporting Widodo-Amin and Democratic Party that supporting Prabowo-Sandiaga.

Therefore, with the current electoral system, parties will experience natural selection to seriously manage cadres and work programs to be offered to the public.

However, the simplification of party quantities due to simultaneous new elections can be assessed when the electoral system is simultaneously applied several times. Even simultaneous elections can be a natural selection process to reduce the number of parties in each election, even though election laws in Indonesia always change every five years.

Previously, the Central Java Election Supervisory Agency decided the declaration of the victory of presidential candidate and vice-presidential candidate Widodo-Amin by Central Java Governor Ganjar Pranowo and 31 regional leaders violated the rules in the declaration of Widodo-Amin’s win in Solo, Central Java, on January 26, 2019.

According to the Agency, violations of 32 regional heads were not based on campaign rules, but related to neutrality as regional heads as stipulated in Law Number 9 of 2015 concerning the Second Amendment to Law Number 23 Year 2014 concerning Regional Government.

In the regulation, the government should show a neutral attitude that should be used for the sake of administering regional government only and not for the political interests of one group or group.

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

Bank Indonesia Maintained Benchmark Rate at 6%

Indonesian Bank to Maintain Benchmark Rate at 6% and Implements Mix-Policy
Governor of Bank Indonesia Perry Warjiyo - Photo: Privacy

JAKARTA (TheInsiderStories)Bank Indonesia (BI) decided to keep the benchmark 7-Day Reverse Repo Rate (DRR) at 6 percent, based on the latest economic conditions, said senior officer today.

Governor of BI Perry Warjiyo said that the decisions taken were consistent with efforts to strengthen external stability, especially controlling the current account deficit to safe limits and maintaining the attractiveness of the domestic financial market.

It also pays attention to global and domestic economic conditions. Globally, there is reduced uncertainty in the financial markets due to the policies of a number of central banks that are not as stringent as previous estimates which have a positive impact on foreign capital inflows to developing countries including Indonesia.

On the other hand, BI also monitors the symptoms of economic slowdown in various countries such as the United States, Europe, and China. “This gives a challenge to push exports forward,” he said in Jakarta today (3/21).

Interest rate policy is still focused on maintaining stability. However, it does not mean that BI is ignorant of the role to encourage economic growth through macroprudential policies and the payment system.

“The policy mix is ​​strengthened to support domestic demand and encourage economic growth,” he said.

BI mentioned, about some of those economic mix-policy which are to increase liquidity availability through regular and scheduled term-repo transactions, strengthening accommodative macroprudential policies by increasing the range of Macroprudential Intermediation Ratios from 80-92 percent to 84-94 percent to support bank financing for the business world, accelerating financial market deepening policies.

Furthermore, BI also strengthens payment system policies to support inclusive economic and financial activities, the economic ecosystem of digital finance.

In coordination with the Government and related authorities, BI also continues to be strengthened to maintain economic stability, particularly in controlling inflation and the current account deficit, and maintaining the momentum of future economic growth, particularly in boosting domestic demand and maintaining external stability by encouraging exports, tourism and foreign capital flows.

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

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