PRESIDENTIAL REGULATION NOT EFFECTIVE ENOUGH TO DOWNPRESS PRICES

Member of Commission IV of House Fori Munawar rated that the Presidential Regulation Perpres 71/2015 issued by President Joko Widodo had not been effective in downsizing prices of essential goods in the market. Meaning Government resolution was needed in executing intergrated management and control from upstream to downstream including repressive action.

The Presidential Regulation had not been effective in reducing prices due to poor stock management and trading in echelon 2, 3 of the Government. Evidently no downturn of prices was seen in the market.

Recently President Joko Widodo released Presidential Regulation (Perpres) Number 71 year 2015 on the Stipulation of Process and storage of Essential Good signed on July 15 2015 which was intended to secure availability of goods and to stabilize prices.

Rofi questioned the mechanism of control and monitoring run by the Government in controling prices in the market considering that in reality the Government had no command of stock as regulated in the Perpres which made it difficult for the Government to make market intervention.

Almost certainly the Perpres would not be effective to day since the stock of rice was at minimum. The most thinkable solution would be to import rice which was no pro-farmers.

If the Government was not serious about controling, it was almost certain that the Perpres was nothing but paperwork. Based on monitoring at Kelapa Dua Market in Tangerang in the post Perpres era, it was unveiled that price of beef rose to Rp120,000/kg against the previous Rp98,000/kg. Other commodity prices increased around 10% - 15% above normal which was due to under supply and people’s consumption pattern during Ramadhan. (SS)

Business News - July 1, 2015

INDONESIAN PRODUCTS TO ENTER GLOBAL SUPPLY CHAIN VALUE IN THE UNITED STATES

Some Indonesian entrepreneurs have proven to have sufficient competitiveness, able to support quality products in the US market, and in the end, make Indonesia a product supply chain in the United States. In the end, they can also improve bilateral appreciation of Indonesia and the US, produce better economic growth, both in Indonesia and in the US. This statement was made by Indonesian Ambassador to the United States, Budi Bowoleksono, in “2015 Indonesian Ambassador’s Trade Appreciation Night” at the Indonesian Embassy in Washington, United States.

Five US companies, which received Indonesian Ambassador award in the field of trade, are Ethan Allen Design, Inc., American Furniture Manufacture, Inc., Design Selamat, Under Armour, Inc., and McCormick and Company, Inc. US employers have praised Indonesian embassy appreciates all the five companies, as they have been utilizing healthy investment credentials, business, and labor from Indonesia, which have been started in the past as well as the new ones.

“Basically, these companies recognize the competitiveness of Indonesia and choose products from Indonesia to become an integral part companies represent furniture sector, accessories, furnishings, clothing and footwear, and spices and seasoning. Indonesian Trade Attache in Washington DC, Made Marthini, revealed that the five companies that have constantly praised Indonesian workers who are skilled and reliable, for example, Indonesia’s ingenuity in design and production. Te five winners were proposed to receive Primaduta award in the Trade Expo Indonesia (TEI) 2015, “said Made.

“This award is to emphasize that a successful bilateral trade will generate economic growth and employment, both in Indonesia and in the United States,” Budi said during the award giving ceremony. He said that in 2014, Indonesia’s exports to the United State reached nearly USD 28 billion, with a surplus enjoyed by Indonesia. “Therefore, it is expected to maintain bilateral trade with the United States so that it can continue to increase surplus for Indonesia,” he said.

Director of American Manufacture Company, Inc. and President of Indonesia-US Business Council, appreciates Harry Chou, Indonesian businessman, for his commitment and the high quality of its products. He said that the company might not be able to meet the demand which is quite difficult from the thousand of hotels requesting product furnishings and room design quickly, but it can be satisfied by Indonesian manufacturers.

Deputy Director of Apparel Sourcing Under Armour, Peter Gilmore, said that Indonesian entrepreneurs are relatively newcomers in the US market, but showing a quite good growth. “The purchase of Under Armour from Indonesian entrepreneurs, especially footwear, increased 75% in 2014 and 2015. Foot worker is a product of Footwear Under Armour with the fastest growth,” said Peter. Deputy Director of Government Affairs and Taxes of McCormick and Company, Inc., Paul Nolan, stated that Indonesia has become an important component in the supply chain of spices trade by the company.

“Cinnamon, black pepper, white pepper, nutmeg, vanilla and cloves are the most iconic, important and poplar products in the US and in the world that will encourage even greater demand for Indonesian herbs and species, “said Paul. Meanwhile, in the field of furniture, Indonesia is a major destination of US companies that want to get high quality furniture in a sustainable manner.

President of Selamat Desain, Thatcher Davis, appreciates Indonesian craftsmen skilled in making environmentally friendly, but trendy furniture. President CEO, and Chairman of the Board of Ethan Allen Design, Inc., Farooq Kathwary, said that many advantage of working with Indonesia is its history of expertise, workers with the spirit of learning. Investment made in technology, and a high work ethic held by the workers and the management, “said Kathwary.

Currently, five major Indonesian export products to the US include clothing, footwear, rubber, seafood, and furniture. While, Indonesian five major exports to the US include aircraft, soybeans, fruits, machine tools, and cotton. (E)

Business News - July 1, 2015

MINISTRY OF INDUSTRY: THE METAL INDUSTRY SHOULD BE PROTECTED

The government continues to suppress the volume of imported products and encourage the growth of domestic industries, especially base metal material industries. Data from the Ministry of Industry mentioned that currently the metal industry supplied at lest 85% for machinery equipment. Considering that it plays a role in the development of national industry, the Ministry of Industry is committed to protecting the national industry.

Minister of Industry, Saleh Husin, in Jakarta, Friday (June 26), said that the metal industry is one of the basic industries that support production of capital goods supporting other industries. With metal as the main raw material, the industry is recognized as having a role in the development of national industry. the position of this industry as supporter of other industry is also strengthened by base materials industry growth, where in 2014 grew by 5.89%.

Meanwhile, to ensure the availability of raw material supply, the Ministry of Industry has supported local resource-based metal industry development program. He explained that the potentials of abundant domestic raw materials which have not been used optimally is also a great opportunity for improvement of product competitiveness.

Saleh Husin also stressed that the government continued to suppress the volume of use of imported products and encourage the growth of domestic industry, especially base metal industry. The strategy is the increased Use of Domestic product (P3DN) program. Through P3DN program, Industry Minister said that the government provides support to become a trigger to increase the use of metal products in the country, especially in projects financed by the state budget (APBN). One of them is by requiring government agencies to maximize the use of domestic products in the procurement of goods/service funded by state budget (APBN)/regional budget (APBD).

The Ministry of Industry, said Husin, has repeatedly encouraged the use of local products in every government project. Unfortunately, supervision and enforcement are not yet evident, so the urge t improve the domestic industry is still considered lacking. He said that the sluggishness of the world steel industry led to the migration of production to countries that have high demand. According to the Minister of Industry, Indonesia with a variety of infrastructure megaproject plans, has become the target of world’s steel producers.

Meanwhile, Indonesian Iron & Steel Industry Association (IISIA) is pessimistic that the implementation of the regulation on steel import duties from most favorite nation (MFN) is able to stem the flow of imported products into the country this year. Data from the Central Statistics Agency (BPS) shows that the volume of imports of iron and steel in January-May 2015 is 4.970 million tons, or equivalent to USD 3,538 billion. Of the 15 major iron and steel exporting countries, eight have had a free trade agreement (FTA) with Indonesia.

Executive Director of IISIA, Triseputro Hidayat, said that sources of iron and steel imports mostly come from countries that have had FTA with Indonesia. Hidayat believed that tariff harmonization seemed not to have a maximum impact, so it must also be supported by specific non-tariff barrier.

Hidayat explained that the Minister of Finance has issue Minister of Finance Regulation No. 15/2015 on Second Amendment to Regulation of the minister of Finance No.15/2015 on Second Amendment to Regulation of the Minister of Finance No.213/2011 on the stipulation of System of Classification and Exemption of Import duty Tariff on Imported Goods. The minimum limit of import duty is 15% for iron and steel products with tariff heading (HS) 72 is expected to boost local steel consumption which is currently unable to compete with imported steel.

He also revealed that the steel industry would petition to the World Trade Organization (WTO) against China’s unfair trading. He revealed that members of South East Asia Iron & Steel Institute (SEAISI) have agreed to protest against the Chinese government’s policies, which imposed a tax rebate for downstream products, and exports of upstream products were imposed with high rate. He said that with the policy imposed by the government, there is no country in the world that can resist. (E)  

Business News - July 1, 2015  

CRITICAL SOIL IN INDONESIA POSTED AT 23 MILLION HECTEARES

Today the total area of critical soil in Indonesia was posted at 23.4 million ha. Indonesia was among the heighted countries in the world and was urged to minimize foret destruction. The Minister of Environment and forestry Affairs Siti Nurbaya was quoted as saying.

In fact compared to previous years the total expanse of critical land and been reduced notably. Somehow the Government was striving to accelerate land restoration process.

Hilman Nugroho, Director General of Riverbank Control stated that each year there was degradation of primary land to become critical land totaling 100,000 ha in Indonesia, which was evenly spread out nationwide.

It would be possible to rehabilitate land by only relying APBN budget. The budget available was only for 500,00 ha per year so it would take 48 years to rehabilitate.

Therefore the mass tree planting movement by school children and newly wed couples to restore critical land could be continued and the outcome would be constantly monitored.

If school children alone did the planting there would be 40 million trees and LAPAN to monitor the trees already planted. Hilman assured the mass planting campaign was more than just ceremonial. The planted trees would be nursed for 3 years before left alone to grow naturally. (SS)

Business News - July 1, 2015

GREECE DEFAULT ISSUE OVERSHADOWING ASIA’S CURRENCIES AND STOCKMARKETS

This week the default issue was more fearful than the domestic macro economy situation. At home, there were perceptions economic growth target could be attained if the Government was able to maintain people’s consumption and it could be positive sentiment to Rupiah. Understandable because Rupiah had been hovering around Rp.13,000 per USD.

According to BI Governor Agus Martowardojo. Might USD made countries whose transactions posted deficit, high inflation, and weak fundamental economy to have their currencies under pressure.

If the countries were making sound reformation and could minimize deficit like India, the country could build trust and Rupiah depreciation could be minimized.

Structural reformation was exercised by the Government by managing subsidy and food the better was, plus enhancing infrastructure development; but if there were policies rated by marketplayers as still conflicting and inconsistent, it could lessen credibility.

Per Q 1/2015, DBT ratio was posted at USD 3.8 billion or around 1.8% against GDP. Inflation per May 2015 came to 7.15% Y o y, high above the APBN assumption-P 2015 which was 5%.

It was right indeed for the Government to keep controlling inflation by some instruments like the Perpres Presidential Regulation Number 71 2015 on the Stipulation of price of essential needs. From the external factor, international creditors were said to be rejecting program of the Greece Government to end financial crisis, but they were forwarding a counter-proposal. News of the rejection was announced by Greece Prime Minister Alexis Trispas, faded all the hope of agreement signing between Athens and the creditors.

Greece need extra financial aid to save the nation from default to pay debt worth €uro 1.6 billion to IMF which was due by end of June. Too bad, the creditors refused to pay bailout if Greece was not willing to exercise further reformation.

IMF seemed to be the most skeptical in the Troika body which determined the amount of Greece bailout fund.

According to Tsipras, certain institutions peristed not to accept equal action taken by the Government of Greece. Rejections never happened before, neither in India nor in Portugal.

Tsipiras remarked further “This strange attitude could mean they hide one out of two points. They did not wish any agreement or they were serving some interest in Greece. The condition put Greece on a critical point because if they failed to pay, they could be kicked out of Grexit, or even worse kicked out of Uni Europe.

Last Wednesday (14/6) Finance Minister of Euro zone (Euro group) ran a meeting to discuss reformation in June. This seemed to rely on Greece to score surplus, which was believed to be very optimistic: axing of pension fund, increased income from the tax sector and privatization of companies.

If the proposal was approved, which was most unlikely, Greece would receive European fund worth euro 35 billion for financing economic development till 2020. Unfortunately Dimitris Koutsoumbas, Secretary General of the Greece Communist Party stated that Greece could not accept an “anti democratic agreement” with Uni Europe.

According to Dimitris, the people of Greece needed a comprehensive to Dimitris, the people of Greece needed a comprehensive plan to exit from the Eurozone and than common currency was not going to solve anything. The Uni Europe and German attitude could not be accepted. Greece’s past Government must also be accountable for it. Because of the this content, chances of Greece running another election this year is great.”

The coalition Government led by the Syzira Party only had 12 majority votes and most probably hard to offer a new proposal to their own Parliament.

The Moneymarket

Rupiah value at inter-bank transaction Jakarta last Thursday (25/6) inched down by 5 points to the level of Rp.13,306 per USD against the previous Rp.13,301 per USD. Rupiah value was moving flat with tendency to weaken against USD amidst marketplayers watching the case of bail out for Greece.

Officials of the eurozone last Thursday again negotiated to arrive at an agreement to save Greece from default after previously on Wednesday (24/6) failed to arrive at an agreement. The Uni Europe Summit would discuss various global development including the Greece case. The agenda would be the market’s focus this week.

Analysts said that if Greece at the meeting again failed to have bailout, the investment instrument tend to be under pressure including that in Indonesia. Evidently Rupiah weakened together with most of Asian currencies in respond to the situation in Greece.

However the market was sure that Rupiah weakening tend to be limited as BI released macro prudential regulation in the form of LTV or FTV ratio for property credit including KPR and reduction of down payment for automotive credit.

The policy was expected to keep the momentum of economic growth because the property and automotive sectors were related and had significant effect on other economic sectors. Meanwhile in BI mid rate last Thursday (25/6) Rupiah was seen to weaken to Rp.13,323 against the previous Rp.13,280 per USD.

Rupiah was the most depreciated currency in Asia last week which moved the varied way. Malaysia’s Ringgit was the second most depreciated currency next to Rupiah, down by 0.17% during closing session among others suppressed by Fitch who planned to lower investment in that country.

This week pressures on Asian currencies was still due to the Greek factor and the Fed planning to increase benchmark rate.

In the event that Greece failed to pay their debt, the effect could befall on middle income states like Indonesia, Brazil, turkey, India, south Africa etc. their currencies would weaken, but it would only be temporary.

By prediction USD would settle at above Rp.13,000 – Rp13,400 (26/6). This week Rupiah value would be in the range of Rp.13,250 – Rp.13,350 per USD. Most likely BI would be in the market to make intervention to keep Rupiah from falling into Rp.13,500 per USD as a new psychological level.

As known, the Greece debt crisis which had not seen any ray of hope made euro even sink deeper. Last week (25/6) the EUR/GBP was corrected by 0.21% to become 0.71197. Weakening of EUR/GBP and IMF was because the market was still waiting for meeting outcome between Greece Prime Minister Alexis Tsipras with leaders of Uni Europe (ECB) and IMF known as Troika which still continued on Thursday (25/6).

One day before Greece’ new proposal to increase tax and to axe pensioners fringe benefit was rejected by creditors. All in all the risk of Greece default to pay EURO 1,5 billion which was due on June 30,2015 would swell. Since last week no positive news was able to uplift euro.

Even if Greece finally get a new loan package, the sentiment would only support strengthening of Euro moderately.

Besides, Euro was still adopting eased money policy. On the contrary England tighten their monetary policy with speculations of increased benchmark rate policy with speculations of increased benchmark rate being supported by their impressive economic dat.

Data week marketplayers were still focusing attention on the Fed’s monetary policy as data of new homes buying in the USA turned better; Besides the prospect of increased interest when the Fed stated that America’s economy was ready to have 2 interest increase this year, i.e. in September and December.

The sentiment being awaited by the market was US GDP of the first quarter. The data showed state health of US economy.

The Capital Market

Index of IHSG was closed red during transaction last Thursday (25.6). Data of RTI showed that index inched down by 0.68% or 33.474 points to the level of 4.920.042. Apparently 166 shares went down, 96 went up and 89 stagnated.

Transaction on that day 4.5 billion lots of shares at the value of Rp.5.3 trillion. By sector, 9 out of 10 indices turned red. Index of consumer’s goods went down by 1.63%, basic industry down by, 1.51%. Only index of agriculture turned green or 0.22%.

Weakening of IHSG was in parallel with weakening of the global stockmarket. Hong Kong shares were falling, to stop continual strengthening over the past 4 days. Index of Hang Seng was down by 1% to the level of 27,145 Index of China Enterprises was down by 1.6% to the level of 13,467.90.

At BEI IHSG was striving to break through the psychological level of 5,000. To open transaction, IHSG inched down by 9.384 points (0.19%) to the level of 4,944.132 due to negative sentiment from the global market.

Index continued to nose dive since opening session. Premium shares were beginning to be released by investors. During closing session in Session 1, IHSG was axed by 19.243 points (0.39%) to the level of 4,934.273 due to pressures to sell by investors. Index was trapped in the red zone since opening session.

Only one sector remained strong, i.e. agriculture, and the rest fell into the red zone. Index failed to touch the green zone today. To close session on Thursday (25/6) IHSG was axed by 33.474 points (0.68%) to the level of 4,920.042 meanwhile Index of LQ 45 was corrected by 8.581 points (1.01%) to the level of 840.897. foreign investors were seen to make foreign net buy of Rp.150,306 billion in the entire market.

Trading was running moderately with frequency of 215,258 transactions and volume 4.523 billion lots worth Rp.5.321 trillion. 96 shares rose, 166 shares went down and 89 shares stagnated.

Meanwhile Asian stockmarket were closed to weaken with China’s stockmarket sinking deepest. Singapore stockmarket made it to elevate to the green zone. Index of Nikkei 225 weakened by 96.63 points (0.46%) to the level of 2059.22 points (0.95%) to the level of 27,145.75. Index of Composite Shanghai dropped by 162.37 points (3.46%) to the level of 4.527.78. Index of Straits Times rose by 4.71 points (0.41%) to the level of 3,356.04.

Not only Asian stockmarkets weakened, the never ending Greece drama made index of European stockmarket slump on the second day last Thursday (25/6). Index of STOXX Europe 600 inched down by 0.41% during opening session to 396.05. Furthermore index then went down by 0.76% to the level of 396.20 or down by 0.2%.

Negotiations between the Greece Government and Europe representatives ended without significant result Greece Prime Minister met with TROIKA this end of month to discuss phase 3 bail out extension this end of month and Greece had to pay first installment of USD 7 billion to IMF.

Under the circumstances IHSG would move in the range of 4,925 – 5,000 with positive sentiment from property and automotive sectors.

According to GAIKINDO sales dropped due to falling purchasing power and low commodity prices. GAIKINDO expected that infra structure could jack up sales.

This year the Government threw fund of Rp.290 trillion for infra-structure development. The figure was significant increase compared to 2014 which was Rp.240 trillion. Admittedly sales target for automotive sales would be hard to meet, therefore GAIKINDO set sales target of around 1 million to 1.1 million units of cars. The revision referred to sales of last May which dropped again.

With reference to GAIKINDO data sales of May was only 79.236 units or down against April at 81,600. Sales of last May was the lowest monthly sales of the year. Total whole sale of cars through January-May was posted at 443,000 units. The figure was a downturn of 16.6% against same period last year at 531,000.

Meanwhile sales of retail in January-May came to 432,000 units or down by 13.7% against same period the previous month at 51.000 units. With that downturn, GAIKINDO said that there was still positive development in the automotive credit. Last year car sales by credit was in the range of 70%-75%. This year in line with bank expansion or financing agencies, the position of credit cars constituted 80% to 90%. (SS)

Business News - July 1, 2015