JAKARTA (TheInsiderStories) — Good morning! Last week, Indonesian government issued 16th Economic Policy Package, include expansion of tax holiday, relaxation of negative investment lists, and foreign exchange exports for natural resources rules. The goal is to reduce the current account deficit (CAD) at the safe level.
Through the policy package, Government extended tax holiday to 18 sectors. Indonesia also obliged Exports Foreign Exchange to be placed in Indonesia Finance System.
The regulation will be implemented to natural resources such as mining, agriculture, forestry, and fisheries, with bigger export value than import. Outcome of these exports must be put in bank’s special account, in Rupiah or US Dollar. And those who do not follow, will get administrative sanction.
Moreover, Bank of Indonesia (BI) rose its 7-Day Reverse Repurchase Rate (7-DRR) by 25 bps to 6 percent. Deposit Facility interest rate was also increased by 25 bps to 5.25 percent, and Lending Facility interest rate increased by 25 bps to 6.75 percent. The increase in policy rates is also to strengthen the attractiveness of domestic financial assets anticipating a rise in global interest rates in the next few months.
These policies gave positive sentiment to currency and stocks market. At the end of the week, Rupiah gained strength by 1.15 percent to 14,594 versus the greenback. The Jakarta Composite Index also spiked by 0.95 percent to 6,012.35, with Rp1.65 trillion (US$112.24 million) foreign net buy.
Meanwhile, Transportation Minister Budi Karya Sumadi mentioned that sanction to Lion Air over its crash will be released by the end of the month, waiting for Transportation Safety National Committee investigation result. Lion Air JT-610 PK-LQP fell of Karawang Waters, West Java, on Oct. 29, 13 minutes after take off, and killed 189 people on-board.
Asia Pacific Economic Cooperation (APEC) Summit held last week in Papua New Guinea, country leaders didn’t release communique, amid United States (US) – China spat over trade and investment. Moreover, US stated that it will not back off from the trade war with China.
US Vice President Mike Pence in his blunt speech, even said that the country will take firm action to solve the imbalance trade with China, or impose another US$250 billion tariff for Chinese goods. US President Donald Trump is scheduled to meet China President Xi Jinping in G20 meeting in Argentina.
May you have a profitable week!
Written by Linda Silaen and TIS Intelligence Team, Please visit our new website to get more insight on Indonesia’s economy: www.tisintel.com