INTERNAL |
| Economy |
Bank
Indonesia (BI), the Central Bank of Indonesia indicated that the Indonesian
economic growth was forging ahead. The main reason quoted by the Bank
was the approximately 15% growth in investment. Investment has necessitated
increasing imports due to rising domestic demand. To maintain economic
stability, BI said that it would pursue various actions in anticipation
of internal and external factors that could disrupt macroeconomic stability,
and take definitive action to control the volatility of the Rupiah and
intervene on the currency markets. |
| Inflation
in June, 2005 |
| June
recorded inflation at 0.50% up 0.29% from May, 2005 with annual inflation
reaching 7.42%. Prices of processed foods, beverages, cigarettes and tobacco
were the highest. |
| Exchange
Rate |
On
4th July, the weakening Rupiah fell to Rp 9,855 for 1 US$. The Central
Bank said that the weakening of the Rupiah was due to the higher demand
of the currency vis-à-vis supply, the global strengthening of the
US dollar and the increasing world oil prices. (Rupiah reached an average
of Rp.14,900 to US$l in June 1998, but it has been relatively stable since
the middle of 2002. It was around Rp.9500 in the beginning of 2005). |
|
Forex |
The
foreign exchange reserves dropped by USD 346.4 million to USD 34.27 billion
on June 15 compared to the preceding week, Bank Indonesia said. |
| Exports |
Exports
in April dropped by 8.28% to USD 6.75 billion against USD 7.36 billion
in the preceding month according to the Central Statistics Agency. In
the first four months, exports increased by 31.12% as compared to the
same period last year .Oil and gas exports climbed 24.85% and non oil
increased to 33.01%. The three countries, Japan, USA and Singapore comprised
41.66% of total Indonesia's non oil export by destination |
| Imports |
Imports
rose slightly by 0.88% in April, 2005 compared to the preceding month.
In the first four months of 2005, imports increased by 33.85% as compared
to the same period last year. Import from ASEAN accounted 19.18% of Indonesia's
total non oil import in April. In the first four months, Japan was the
largest exporter with import from that country amounting to 2.41 billion
or 18.26% followed by China and USA. |
| Net
importer of oil |
Indonesia
has almost become a net oil importer. " For the government, this
is burdening its fiscal deficit. This is due to declining crude oil production
and rising fuel demand as well as hike in crude oil prices which has inflated
the cost of importing the fuels. Oil and gas export increased to US$ 15,105
million in 2004 from US$ 13,653 million in 2003. The role of oil in exports
was only 9.2 percent in 2004 compared to 24.2 percent in 1994. This is
more or less compensated by increase in natural gas export. Since 2003
natural gas export surpassed oil export. The overall oil import in 2004
increased by,36.4 %. Total export of crude oil and oil product dropped
from 395 million barrel in 1994 to 245 million barrel in 2004. Export
of petroleum products dropped from US$ 63.2 million barrel in 1994 to
US$54.4.Million barrel in 2004. In 2004 oil and gas current account showed
a deficit of US$ 1.6 billion compared to a surplus of US$ 2.0 billon in
2003. The oil and gas industry contribution to the GDP was 6.7% in 1994
and 6.0% in 2004. But for investors this net oil importer status offers
business opportunities in upstream well as downstream oil sector. The
government encourages upstream operation by offering import duty exemption
for goods and equipment for the oil industry and in downstream operation,
opportunities are available in the importation of fuel and crude oil which
are increasing rapidly. |
| Coal |
The
government owned coal mining company Pt. Tambang Batubara Bukit Asam plans
to produce 10.2 million tonnes coal this year. Last year it produced 9.9
million tonnes of coal. The company has large coal mines in Sumatra and
Kalimantan. Indonesia's coal production was US$ 132.35 million in 2004. |
| Diamond |
Under
a new regulation, rough diamond~ exports and Imports may be made only
by registered exporters and Importers with licence from the Ministry of
Trade, aimed at supporting development and expansion of diamond industry
and trade. |
| Krakatau
Steel |
The
Government owned steel manufacturer will be building an integrated sheet
steel factory for making slab to hot rolled coil production. The Company
will build a plant with slab and HRC production facilities with an annual
production capacity of one million tonnes. The factory will be built in
2008. |
It
may be mentioned that there was no investment in the steel industry after
the financial crisis of 1977. Indonesia still depends heavily on imports
of steel. Steel prices in the country are high. Karakatau Steel is the
only steel manufacture in Indonesia producing cold rolled coil/ sheet
from iron ore. |
| New
Power Plants |
In
order to anticipate looming electricity power crisis, State Utility Firm
Pf PLN plans to build new power plants. Some power plants currently in
construction, among others in Cilegon, Cilacap and Tanjung Jati B, are
expected to start operation in 2006. |
| Car
exports |
Indonesia
is expanding car exports, especially in ASEAN market, despite growing
competition form other car making countries. Car exports in the first
four months of this year surged 133.2 % compared to the same period last
year .PT Toyota Motor Manufacturing Indonesia is the leading exporter
of cars from Indonesia. |
| Palm
oil |
It
is reported that major buyers of Indonesian crude palm oil have delayed
shipment until the next few weeks on reports that CPO terminals in India,
China and European countries have been overloaded. |
| Rice |
Minister
of Agriculture Anton Apriyanto expressed optimism yesterday that the country
would achieve self-sufficiency for rice products this year although the
production might be less compared to last year's harvest. The National
Bureau of Statistics (BPS) estimated that the rice production this year
will reach 53.11 million tons, a fall of 1.8 percent against last year's
production of 54.06 million tons. |
| Salt |
The
government has banned imports of iodized salt from July to December. But
it will allow import of industrial salt. This was aimed at preventing
price decrease during harvest time in August and September. Indonesia
relies on imports of salt to meet its requirement as the domestic production
is only 1.3 million tonnes a year. It imports about 1.5 million tonnes
from India, Australia, Thailand and other countries. |
| Foreign
fishing Boats |
The
licences of about eight hundred foreign fishing ships operating in Indonesia's
Exclusive Economic Zone (EEZ) will be terminated in 2006 and 2007. The
licence of Philippine ships will expire in 2006 followed by Thai and Chinese
in 2007. They are likely to sell their fishing ships to local fishermen. |
| Fertilizer |
The
government owned PT Pupuk Kalimantan Timur will export 15,000 tonnes of
urea, the first export after the government lifted the ban on fertilizer
exports. |
| Airlines |
The
domestic airline Adam Air plans to buy 10 Airbus A 320 aircraft beginning
early 2008. Adam Air operates 15 Boeing aircraft serving 18 domestic destinations.
Mandala Airlines plans to increase its fleet with nine additional Boeing
aircrafts before the end of this year. |
| Cost
of air tickets: |
Minister
of Transportation Hatta Radjasa announced that his ministry would raise
the minimum ticket fares for domestic destinations. He hinted that the
fare increase was to be in the range of around 10 percent. The government
plans to increase the reference tariff on all flight routes to around
30 percent, compared to the bottom limit of flight tariff from the previous
year |
EXTERNAL |
| Japan |
President
Susilo Bambang Yudhoyono visited Japan Jon 31 May- 3 June 2005. He was
accompanied by a 102-member entourage which included inter alia Coordinating
Minister for Economy, Minister of Trade, State Minister for National Development
Planning, Energy and Mineral Resource Minster and Minister of Industry.
During the visit the President met with Emperor Akihito, Prime Minister
Junichiro Koizumi and Trade and Industry Minister Nakagawa among others.
President Susilo and PM Koizumi signed a Joint Statement "Partners
for New Challenges" wherein they identified four areas of immediate
cooperation reflected in the following |
| Joint
Announcement on he Cooperation on Disaster Reduction |
Joint
Announcement on commencement of negotiations on the Japanese Indonesia
Economic Partnership Agreement |
| Joint
Announcement of the Japan Indonesia Strategic Investment Plan and |
| Joint
Announcement on Maritime Affairs |
| R,I,
Japan agree to start EPA talks: |
Indonesia
and Japan agreed o start negotiations on an Economic Partnership Agreement
(EPA), a comprehensive economic cooperation and liberalization drive that
would boost trade between the two nations and increase Japan's investment
in Indonesia. |
A
number of Japanese corporate players pledged fresh investments in Indonesia,
an indication of the increased confidence of Japanese investors, who had
made no new significant investments in the country for several years.
During a one-on-one meeting with Susilo, top Japanese economic institutions
such as the Japan External Trade Organization (JETRO), the Japan Bank
for International cooperation (JBIC)-and the Japan International Cooperation
Agency (JICA) pledged to provide new assistance to help rejuvenate the
Indonesian economy. Japan is eager to see a stronger Indonesian economy
under the reform- minded Susilo, seen as a key ingredient for the political
and economic stability of Southeast Asia, a large market and investment
destination for Japan --which has been trying to counter the growing influence
of China in the region. Japan is Indonesia's largest donor and main source
of foreign investment, as well as one of its main export markets. Indonesia
enjoyed a trade surplus of $9.59 billion in 2004. |
MULTILATERAL |
|
G 33 |
The
first ministerial meeting of the Group of 33 countries was held on June
11-12 in Jakarta to discuss Special Products and Safe Guard Mechanism
in multilateral trade within the WTO so that the sensitivities of G 33
could be factored in the first approximation in July. Out of 42 countries
in the Group, 18 countries attended the meeting with six of them represented
by their ministers, viz. India, Indonesia, Sri Lanka, the Philippines,
Kenya, Tanzania and Indonesia. The Group proposed that the Special products
should be subject to tariff reduction and Tariff Rate Quota Special Products
should also have access to Special Safeguard Mechanism. This would come
to effect once imports go up. The meeting was chaired by Ms. Mari Elka
Pangestu, Indonesia's Minister of Trade. The Indian delegation was led
by Shri Kamal Nath, Minister of Commerce and Industry and was accompanies
by Mr. G.K. Pillai, Additional Secretary, and other senior officials. |
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