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Tag: Indonesia

  • How ASEAN could benefit from the US-China trade war?

    How ASEAN could benefit from the US-China trade war?

    ASEAN has been urged to find ways for its member states to join hands together to cushion any possible fallout from the trade war between the United States and China.

    Against the backdrop of an escalating trade war between the US and China, Deputy Minister of International Trade and Industry Dr Ong Kian Ming is advocating greater cooperation between ASEAN countries to package the region to foreign investors instead of focusing on country specific promotion.

    He said Malaysia and it’s Asean counterparts should look at ways as a comprehensive unit to take advantage of this situation as investors might be interested in relocating and investing more in Malaysia as a result of this trade war.

    Drawing reference to the strong two way cross border trade linkage in terms of investment and expertise exchange between Johor and Singapore, Ong said Malaysia should replicate this with other countries.

    He also noted that interest from Chinese companies to invest in Malaysia, coming through the Malaysian Investment Development Authority, has risen since last year.

    Instead of setting hub in Malaysia, Ong added that Chinese companies could use Malaysia as a connecting point to tap into the Asean market.

    He opined that the trade war between US and China is less than likely to find a resolution in the short term and Malaysia, being an open economy will be affected by the trade duel.

    In that light, Malaysia should be open to investments and ratify trade agreements such as RCEP and CPTPP, which are yet to be signed in order to strengthen its stance on remaining open to trade.

    “As tariffs have gone down, the non-tariff measures has also gone down. That is why we need to have a greater push among the governments in Asean with the help of the business sector to come in and advice the government on the challenges they face so that we can remove or reduce some of the regulatory red tape with regards to the non-tariff measures,” he said referring to non-tariff barriers.

    Ong said in that regard, ASEAN is working together to compile a database of non-tariff measures so that the trade bloc could gather some of the regulatory and bureaucratic issues faced by companies when setting shop in another ASEAN state.

    International Trade and Industry Minister Darell Leiking urged all the relevant agencies in Malaysia to strive to reduce bureaucracy so as to facilitate more investments into the country.

    He also asked for all chambers of commerce within ASEAN to stand together and start trading with each other during a meeting with members of the Malaysia-Thailand Chamber of Commerce (MTCC) earlier last week.

    Retailers across the region do not see any immediate impact on their business; however, it is worth monitoring exchange rates, as RMB value might represent a variable to consider while working on price architecture.

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  • First Hanamaru udon noodle store opens in Indonesia

    First Hanamaru udon noodle store opens in Indonesia

    Japanese restaurant chain Yoshinoya has opened its first Hanamaru udon noodle venue in Indonesia.

    The first branch opened last week in Lippo Mall Puri, western Jakarta, under local operator Happy Restaurants Indonesia, Yoshinoya’s wholly owned subsidiary.

    The brand intends to launch two further restaurants in Jakarta this year, with the aim of opening 50 within five years. The restaurant interiors are being designed to resemble a Japanese shrine.

    Vriska Virginia Lahama, the subsidiary’s GM, said: “By building an interesting restaurant concept like in its home country, Japan, I am sure this concept can attract consumers to come and eat and then they take pictures and post them on social media.”

    Yoshinoya already runs 83 beef bowl restaurants in the country.

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  • Hong Kong’s Kam’s Roast opens in Indonesia

    Hong Kong’s Kam’s Roast opens in Indonesia

    Hong Kong-based restaurant Kam’s Roast has now opened in Indonesia.

    The franchise, which also has branches in Singapore and the Philippines, has been recognised in the Michelin Guide Hong Kong and Macau for the past four years.

    Launching in Pantai Indah Kapuk – a neighbourhood in northern Jakarta – the eatery features local roasts garnished with sauces imported from Hong Kong.

    The website for the brand in its home territory – where it is known as Kam’s Roast Goose – describes the brand as a third-generation business originally launched in 1942 under the name Yung Kee Restaurant.

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  • Indonesia Raises Import Taxes on 1,000-Plus Goods to Support Rupiah

    Indonesia Raises Import Taxes on 1,000-Plus Goods to Support Rupiah

    Indonesia will raise import taxes on more than 1,000 goods, ranging from cosmetics to cars, as part of measures aimed at cutting imports and supporting a weak rupiah, Finance Minister Sri Mulyani Indrawati said on Wednesday (03/09).

    The import tax will be raised to up to 10 percent on 1,147 mostly consumer goods, from an existing 2.5 percent to 7.5 percent, effective next week, Sri Mulyani said in a news briefing.

    “We want to be alert, but we also want to be selective. These are unusual times, so we are carrying out measures that we wouldn’t do during normal times,” Sri Mulyani said.

    The rupiah dropped to its weakest level since the 1998 Asian financial crisis this week, closing at 14,930 per dollar on Wednesday. Stocks tumbled the most in nearly two years and bond prices also fell.

    The battered currency has been one of emerging Asia’s worst performers as investors dump assets as US rates rise and amid fear of contagion from crises in Argentina and Turkey.

    Tariffs will be kept at 2.5 percent for raw materials used by the manufacturing industry because of the important role in domestic production, Indrawati said.

    Consumer goods such as ceramics, audio speakers and swimwear will have a 7.5 percent import tax applied. Products that can be made domestically ranging from soap and shampoo to kitchen appliances will be taxed at 10 percent.

    Luxury cars will also be taxed at 10 percent, while Industry Minister Airlangga Hartarto said the import of cars with engine capacity of 3,000 cc and above will be stopped.

    “This is a good chance for local producers to penetrate our own domestic market that is usually filled with imported goods,” Sri Mulyani said.

    Trade Minister Enggartiasto Lukita said the higher taxes did not breach free trade rules set by the World Trade Organization because importers can offset the tariffs on their tax liabilities.

    Government data showed goods covered by the taxes were worth $5 billion in the first eight months of this year and $6.6 billion throughout 2017.

    The government will also relax rules on coal, palm oil and rattan exports, Enggartiasto said, without providing details.

    It is unclear whether importers would pass on the higher tariffs to consumers, though Enggartiasto predicted the impact on inflation would be minimal.

    Some manufacturers relying on imported raw materials are already feeling the impact from the rupiah’s slump.

    Unilever Indonesia director Sancoyo Antarikso said his company had adjusted some prices in August and was reviewing costs to preserve profitability, growth and support brands.

    Agus Nurudin, managing director of market researcher Nielsen Indonesia, expects the price of food containing dairy, soy, beef and wheat to rise if the rupiah falls further.

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  • Astra Sets Up Joint Venture With Hong Kong’s WeLab to Provide Loans to Indonesians

    Astra Sets Up Joint Venture With Hong Kong’s WeLab to Provide Loans to Indonesians

    Diversified Indonesian conglomerate Astra International has established a joint venture with Hong Kong-based technology company WeLab to provide financial products and loans to unbanked people, the company announced on Thursday (06/09).

    “We hope to expand our digital portfolio, while we also aim to further encourage financial inclusion in Indonesia. We continue to seek partners with the industry’s leading companies. We believe WeLab is at the forefront of fintech innovation.

    Through this partnership, we want to offer innovative solutions to provide benefits to consumers throughout Indonesia,” Astra International director Suparno Djasmin said in a statement.

    Astra subsidiary Sedaya Multi Investama and WeLab established a joint venture, Astra WeLab Digital Arta (AWDA), to give unbanked people access to loans.

    The joint venture, which uses big data analysis to better assess customers’ financial profiles, will offer loan products for retail consumers that can be accessed by smartphone, while also providing financial solutions to corporate customers.

    AWDA will launch its mobile application, Maucash, in the third quarter of this year to allow customers to apply for loans anytime and anywhere.

    The new entity sees massive potential in Indonesia’s fintech industry and seeks to capture the untapped potential.

    Supported by rapid growth in the adoption of smartphones, Indonesia recorded a 7.9 percent year-on-year increase in the number of internet users to 143.26 million last year, according to the Indonesian Internet Service Providers Association (APJII).

    An APJII survey showed that about 44.16 percent of respondents use smartphones to access the internet, while 30.28 percent do so with both computers and mobile phones and the remainder use computers only.

    “We believe our advanced technology, combined with Astra’s operational experience in the Indonesian market, can provide new experiences for consumers in Indonesia,” said Simon Loong, WeLab founder and chief executive.

    WeLab, founded in 2013, operates Woalaidai, one of the largest mobile credit delivery platforms in China. It also operates WeLend, an online loan platform in Hong Kong.

    The company also partners with traditional financial institutions that utilize WeLab technology to offer fintech-based solutions to their customers.

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  • Go-Jek Indonesia to Partner With Peer-to-Peer Lending Firms

    Go-Jek Indonesia to Partner With Peer-to-Peer Lending Firms

    Indonesian ride-hailing and online payment company Go-Jek said on Tuesday (04/09) that it will partner with three peer-to-peer lending firms as the startup looks to expand its financial technology services in Southeast Asia’s biggest economy.

    Go-Jek, whose backers include Google and China’s Tencent Holdings, has grown rapidly since launching eight years ago in Indonesia, a country with a population of more than 250 million people.

    The company already offers a wide range of app-based services outside of ride-hailing, such as food delivery or movie tickets, as it competes with the other main ride-hailing app operating in Indonesia, Singapore-based Grab, which bought the Southeast Asian business of Uber Technologies earlier this year.

    Go-Jek said it had formed a strategic partnership with Indonesian peer-to-peer lenders Findaya, Dana Cita and Aktivaku.

    “We believe that a strong collaboration between financial services providers and technology companies can reach a wider range of people who have difficulty accessing financial services, such as unbanked communities,” Go-Jek president Andre Soelistyo said in a statement.

    P2P lending is an internet-based business where small-business owners or individuals usually without access to bank credit can seek loans – helping alleviate a financing shortfall estimated at more than $73 billion in Indonesia.

    The emergence of P2P lending platforms has so far been welcomed by Indonesia’s financial regulators which see them as offering a much needed service to cash-strapped businesses and consumers at a time when Indonesia’s economy has been hobbled by sluggish bank lending.

    “This collaboration is very positive to increase financial inclusion in Indonesia,” said Hendrikus Passagi, who oversees fintech at the Financial Services Authority (OJK).

    Go-Jek founder Nadiem Makarim said in August that the platform has 20 million to 25 million monthly users, for whom it processes more than 100 million transactions.

    Go-Jek’s payment system, known as Go-Pay, has emerged as one of the most popular mobile payment platforms in Indonesia and last year Go-Jek acquired three smaller payment system fintech firms.

    Go-Jek said the partnership with P2P lenders would be separate from its Go-Pay payment vertical.

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  • Indonesia’s Forex Reserves Decline Around $400m in August

    Indonesia’s Forex Reserves Decline Around $400m in August

    Indonesia’s foreign exchange reserves slipped around $400 million in August to $117.9 billion, Bank Indonesia said last Friday, partly because of the central bank’s intervention to defend the rupiah.

    The rupiah has lost around 9 percent of its value so far this year. The currency was trading around its weakest levels in 20 years this week, closing at 14,815 per dollar on Friday.

    The end-August reserves level, sufficient to meet 6.8 months of imports, “remained adequate as they will be supported by our confidence in stability, better economic prospect and positive export performance,” the central bank said in a statement.

    From February until August, the reserves had declined $14.1 billion.

  • Property Sector Will Continue to Face Headwinds in 2019

    Property Sector Will Continue to Face Headwinds in 2019

    Indonesia’s property sector will continue to face headwinds next year amid the usual uncertainties associated with an election year, a declining rupiah and rising interest rates, global credit rating agency Moody’s Investors Service said.

    In a report titled “Indonesian Property Developer Chartbook,” Moody’s rated eight of the country’s property developers, Bumi Serpong Damai, Lippo Karawaci, Sentul City, Intiland Development, Alam Sutra Realty, Agung Podomoro Land and Modernland Realty.

    “The chartbook [report] provides updated snapshots of the developers’ business positions, marketing sales trends, revenue, profitability, cash flow, liquidity, leverage and interest coverage ratios, debt maturity profiles, foreign exchange exposure and covenant quality scores,” Jacintha Poh, vice president and senior analyst at Moody’s Investors Service, said in a statement on Tuesday (04/09).

    Moody’s said further rupiah depreciation, along with rising interest rates, will hamper growth in the property sector.

    Bank Indonesia has raised interest rates by 125 basis points since May this year and many observers expect further increases towards the end of the year.

    The rupiah has depreciated by 11 percent against United States dollar so far this year and traded at 14,927 against the greenback on Wednesday, near its lowest point in 20 years.

    Moody’s found that five of the eight property companies did not have sufficient cash as of June 30 this year to repay their short-term debt. These are Agung Podomoro, Modernland Realty, Intiland Development, Sentul City and Lippo Karawaci.

    For example, Agung Podomoro Land had Rp 1.3 trillion ($87 million) in internal cash, while its short-term debt stood at Rp 5.9 trillion as of June 30. Intiland Development had Rp 976 billion, while its short-term debt stood at Rp 4.61 trillion.

    But the global firm noted that some of these companies have replaced short-term debt with longer-term debt, which in the end could improve their cash coverage ratios.

    Higher debt-funded capital expenditure and a surge in the cost of funding will further weaken some developers’ leverage and interest coverage ratios over the next 12 to 18 months, Moody’s said.

    The ratings agency also highlighted that most of the developers will generate operating cash flow over the next 12-18 months, but only Pakuwon Jati, Bumi Serpong Damai and Intiland Development will be able to generate free cash flow – allowing them to expand, reduce debt or pay dividends to shareholders.

    However, Moody ‘s still expects demand for property to recover next year. The increase in new property projects, sales promotions and lower property prices will boost demand and support an improvement in marketing sales.

    Moody’s said in the report that the marketing sales of Bumi Serpong Damai, Alam Sutra Realty and Modernland Realty have exceeded 50 percent of their full-year target in the first half.

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  • Indonesia Pertamina Profits for First Half of 2018 Seen at Multi-Year Low

    Indonesia Pertamina Profits for First Half of 2018 Seen at Multi-Year Low

    Pertamina is expected to post its lowest first-half profit in four years for 2018, an official said, with the state energy company squeezed by government fuel polices, higher oil prices and a 9 percent slide in the rupiah.

    Net profit at Pertamina is expected to come in at less than Rp 5 trillion ($336 million) in the first six months of 2018, Deputy State-Owned Enterprises Minister Fajar Harry Sampurno said at the House of Representatives in Jakarta.

    The forecast was a result of oil prices climbing while Pertamina’s “downstream compensation was insufficient,” he said.

    The government, which sets the levels at which the company can sell oil products, has sought to shield the public from rising prices, promising not to raise some consumer fuel prices ahead of elections due in 2019.

    But the policy has dented Pertamina’s finances and cut its means of spending on much-needed infrastructure.

    The company’s latest forecast for its first-half profit is well below half of the company’s full-year 2018 targeted profit of Rp 33 trillion and its audited full-year 2017 profit of Rp 34 trillion, as reported in a legislative hearing on Thursday.

    Pertamina’s full-year profits have not been below $10 billion since at least 2005.

    The company’s previous chief executive was removed in April after repeated clashes with the government over fuel price controls that were estimated to have cost the company more than $1.4 billion last year.

    To ease pressure on the rupiah, which slipped to its lowest since 1998 this week, the government of President Joko “Jokowi” Widodo has also asked Pertamina to rein in capital goods imports for infrastructure projects.

    “All projects that have not reached financial close will be delayed,” Fajar said, referring to his office’s latest “guidance” on Pertamina’s spending plans.

    Pertamina finance director Arief Budiman said the company was revising its 2018 profit target, as well as its work plans and budget.

    “It will likely decline,” Arief said, referring to Pertamina’s 2018 profit target revision, but not giving a figure.

    The company’s work plans and budget usually include operating expenditure but can also include capital spending plans.

    While higher oil prices have yielded Pertamina better returns from its oil and gas output, they have also increased Indonesia’s fuel bill, as a net oil importer, especially with the rupiah slumping.

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  • Indonesia’s August Inflation Picks Up, but Stays Below Market Expectation

    Indonesia’s August Inflation Picks Up, but Stays Below Market Expectation

    Indonesia’s annual inflation rate picked up slightly in August but was below market expectation and remained within the central bank’s target range, statistics bureau data showed on Monday.

    Consumer prices rose 3.20 percent in August from a year earlier, compared with July’s annual inflation rate of 3.18 percent. Analysts surveyed by Reuters had expected a rate of 3.33 percent.

    Bank Indonesia targets inflation rate in the range of 2.5 percent to 4.5 percent this year.

    The consumer price index was down 0.05 percent on a monthly basis due to a drop in food prices, such as that of chicken and chilies, Central Statistics Agency (BPS) head Suhariyanto told a news briefing.

    The annual core inflation rate, which excludes prices of government-controlled goods and volatile food, also edged up to 2.90 percent in August, the second month of acceleration and higher than the poll’s estimate of 2.85 percent.

    Bank Indonesia Governor Perry Warjiyo has said the rupiah’s slump had not affected prices at least until July. The rupiah has lost nearly 8 percent of its value so far this year and on Monday it was trading at its weakest in 20 years.

  • A Call to Stop Use of Plastic in Bali

    A Call to Stop Use of Plastic in Bali

    Java Mountain Coffee, a Jakarta-based social enterprise advocating for sustainable coffee farming, has called on the hospitality industry in Bali to avoid using plastic and aluminum coffee capsules in a bid to reduce pollution.

    Coffee capsule usage has grown five times faster than growth in coffee consumption globally between 2011 and 2016, Java Mountain Coffee said, citing a 2017 study by Euromonitor International.

    The firm said this is not sustainable, because used capsules usually end up in landfills, rivers and the ocean. Java Mountain Coffee said the used coffee pods also contribute to climate change, especially the plastic ones, which release harmful substances into the environment when exposed to sunlight.

    “Java Mountain Coffee’s response to the recent commitment by the global travel industry to reduce its reliance on plastics and other harmful environmental products, is to stop the use of plastic and aluminum coffee capsules,” the firm’s spokeswoman, Nadine Alexandra, said in a statement.

    “We believe the Bali travel industry collectively can lead the world in environmental responsibility, reversing old uninformed historical human behavior, which has caused irreversible damage to our planet,” she said.

    Java Mountain Coffee participated in an environmental event titled “Act Local, Impact Global,” hosted by Alila Resorts Bali last week. The island hotel industry organized the event in response to a commitment by the global travel industry in June to reduce the use of plastic and other harmful waste products.

    At least 50 hotels, members of the Bali Hotel Association and other travel industry stakeholders attended the event to share their environmental initiatives.

    Among these initiatives is “Komitmen” by One Island One Voice, a Bali-based network of organizations active in the field of waste prevention and management. The initiative calls on individuals, organizations, companies and government offices on the island to separate organic and inorganic waste at the source and to stop using single-use plastic straws, plastic water bottles, plastic retail bags, plastic cups and plastic cup lids.

    “Java Mountain Coffee urges all stakeholders to join us and make a commitment to One Island One Voice’s ‘Komitmen’ initiative,” the firm said.

  • Indonesia Braces for Prolonged Pressure as Rupiah Slides

    Indonesia Braces for Prolonged Pressure as Rupiah Slides

    Indonesia is bracing for prolonged pressure on the rupiah amid souring emerging market sentiment exacerbated by Argentina’s economic woes, Finance Minister Sri Mulyani Indrawati said on Monday (03/09), as the local currency plumbed its weakest levels since 1998.

    The rupiah hit 14,825 per dollar on Monday, the weakest since the Asian financial crisis two decades ago, before closing at 14,810. It has lost nearly 9 percent this year.

    The central bank intervened again on Monday in the foreign exchange and bond markets as foreign investors continued to sell Indonesian assets spurred by rising US interest rates and fears of contagion from crises in Turkey and Argentina.

    “We are monitoring global dynamics and need to be vigilant because the dynamics caused by the sentiment on Argentina is very high. The situation there is not yet finished, so we’re anticipating these dynamics will continue,” Sri Mulyani told reporters after a meeting with President Joko “Jokowi” Widodo and the central bank governor.

    Jokowi had called a meeting with his economic ministers and the central bank governor to stress the importance of communicating to the people what was being done to stabilise the exchange rate, Coordinating Minister for Economic Affairs Darmin Nasution said.

    “The president said ‘don’t let it be that you’ve done something, but the people said you have not,’” Darmin said.

    The government has forced a wider use of biodiesel starting Sept. 1 to reduce oil import bill. Officials have also announced plans to raise import tariffs on some consumer goods, though the list of affected items has not been made public yet.

    Sri Mulyani said authorities will monitor “in detail the behavior of market players” and take steps to prevent speculation.

    Bank Indonesia has raised its benchmark interest rate four times since mid-May, by 125 basis points. It has also spent billions of foreign exchange reserves to intervene in the currency and bond markets.

    International credit rating agency Fitch Ratings has forecast Indonesia’s policy interest rate could rise by 100 basis points through 2020.

    Bank Central Asia chief executive Jahja Setiaatmadja said he saw no sign of the sort of panic-selling seen during the crisis two decades ago, but added that the central bank could have to raise interest rates by at least 200 basis points more by 2019.

    Indonesia’s 10-year bond yield rose to 8.266 percent on Monday, the highest since November 2016, while the main stock index slipped 0.9 percent.

    The cost of insuring exposure to Indonesia’s sovereign debt hit an eight-week high, with the country’s five-year credit default swaps jumping 5 basis points from Friday’s close to 131 bps, according to data from IHS Markit.

    “With an external situation like the one we face now, we must assume that we need to continue to strengthen our fundamentals,” Sri Mulyani said. “We are looking directly at our foundation and looking at where there are factors that are considered sources of weakness.”

  • Higher Risk Still Means Higher Interest in Fintech Lending

    Higher Risk Still Means Higher Interest in Fintech Lending

    For platforms that boast superior debtor risk assessments and aim to compete with conventional banks, online peer-to-peer lending services have so far fell short of their promises.

    These services currently offer annual interest rates of 19 percent on average to their clients, most of which are small and medium enterprises. However, the Indonesia’s Financial Services Authority (OJK) says this is still too high to attract more borrowers that generally do not qualify for bank loans.

    In comparison, conventional banks offer SMEs loans at interest rates of up 10 percent, or 7 percent with the state subsidy. Ajisatria Sulaeman, director of the Association of Financial Technology (Aftech), said borrowers using peer-to-peer services are often those who do not meet banks’ requirements.

    It means there are risks that those banks do not want to take, hence the higher interest to adjust to the higher risk, Ajisatria said. While it is easy for peer-to-peer services to obtain potential borrowers’ behavior data on social media and through the use of services such as technology startup Go-Jek, it is still costly to verify.

    “Without data from the civil registry, how can we make sure that they use their own identity numbers and not those of others?” Ajisatria said.

    “So data from the Directorate General of Population and Civil Registration and the Financial Information Service System are still very important. With that, we can ensure that borrowers are not fraudulent,” Ajisatria said on Thursday.

    Some peer-to-peer lenders even resort back to conventional credit scoring services, such as Pefindo, but this comes at additional costs, which are passed on to borrowers in the form of higher interest rates.

    “The focus is on how we can easily identify borrowers, especially those with good intentions,” Ajisatria said.

    He said peer-to-peer platforms will be in a better position to assess loan risks if they have easy access to the population registry data. The number of bad loans can be reduced, which in turn, will allow peer-to-peer lenders to charge lower interest rates.

    Sluggish lending by banks over the past few years has seen Indonesia’s financial regulator welcome peer-to-peer platforms, which usually disburse small loans to micro, small and medium businesses that banks often consider high risk.

    Loan growth has dropped to below 10 percent over the past two years from 20 percent previously, central bank data shows. Chatib Basri, a former finance minister, said in March that a climate of healthy competition and a growing number of online lending firms could help to reduce high interest rates.

    “This approach can be made by multiplying the firms in the market segment, which will certainly cause interest rates to decline,” said Chatib, who just became an advisor to peer-to-peer lender ModalKu.

    Indonesia currently has 66 registered peer-to-peer lending firms, which have paid out Rp 7.8 trillion ($525 million) in loans as of July this year, compared with just Rp 247 billion by December 2016, according to the OJK.

    These firms serve to connect more than 250,000 individual lenders to 1.85 million borrowers. OJK deputy commissioner Sukarela Batunanggar said the financial regulator until now still has no intention to cap interest rates and limit the size of loans these financial technology firms can offer. Aftech, which was established in 2015 and now consists of 152 fintech startups offering various services, ranging from lending, insurance and investment, plans to issue a standard on fintech interest rates soon, but it is currently still finalizing the amount.

    Economic Contribution

    According to a study conducted by Aftech and the Institute for Development of Economics and Finance (Indef), fintech lending firms have contributed Rp 26 trillion to Indonesia’s gross domestic product since the OJK issued a regulation on such services in 2016.

    Indonesia’s nominal gross domestic product was Rp 13,558 trillion at the 2017 exchange rate, according to the Central Statistics Agency (BPS).

    “While this is relatively small, there is still hidden potential on fintech platforms, as until now, it has not reached those in need of loans across the country,” Indef economist Bhima Adinegara said.

    The presence of peer-to-peer lending firms has resulted in the creation of 215,433 jobs since 2016, with total wages amounting to around Rp 4.6 trillion.

    “The government must use this potential to increase financial inclusion by issuing easier regulations to expand the sector further, so it can contribute more to the Indonesian economy,” Bhima said.

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  • Lippo Indonesia Delivers First Apartments in Meikarta Megaproject

    Lippo Indonesia Delivers First Apartments in Meikarta Megaproject

    The Lippo Group handed the first 863 apartments in its Meikarta megaproject in Cikarang, Bekasi, West Java, over to their new owners on Saturday, signifying the conglomerate’s success in meeting its commitments.

    Lippo Cikarang, the group’s property developer arm, said in a statement that the apartment units are in the towers known as Irvine Suites and Westwood Suites – both situated in the Meikarta CBD, which is the premium area inside the 500-hectare property development. The two towers have cost Rp 709 billion ($48 million).

    “This handover of apartment units in the Meikarta CBD is real proof of our achievement and success in honoring our commitments to our customers,” Meikarta president Ketut Budi Wijaya said in the statement.

    Saturday’s event marks the start of a series of handovers of apartments in the 84-tower first phase of the gigantic project. All units in the six 42-story apartment towers – Irvine, Westwood, Pasadena, Burbank, Glendale Park and Newport Park – have already been sold.

    The topping-off ceremonies of the first four towers, marking the placement of the last beam on top of the building, have already taken place, while those of Glendale and Newport are scheduled for December this year.

    Lippo plans to hand over the second batch of units in 28 more towers, which are between 32 and 42 stories in height, in February next year.

    The Rp 278 trillion project, which will ultimately consist of 200 skyscrapers hosting offices, apartments, shopping malls, educational institutions and health care facilities, is expected to redefine urban living in Indonesia.

    The developer plans to build 225,000 apartments in total and designate 1.5 million square meters as commercial space.

    Situated 34 kilometers east of the capital, the future city will eventually be home to around a million people who will benefit from several transportation infrastructure projects currently underway.

    In addition to an elevated section of the Jakarta-Cikampek Toll Road, scheduled for completion in 2019, there is also a light rail transit system connecting Cawang, East Jakarta, with East Bekasi. This project has already reached 47 percent completion. Another is the Jakarta-Bandung High-Speed Railway, which is expected to be operational by March 2021.

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  • Indonesia’s E-Commerce Market Will Grow to $65b by 2020

    Indonesia’s E-Commerce Market Will Grow to $65b by 2020

    Online sales of physical goods in Indonesia are projected to increase more than eightfold to $65 billion annually by 2020, a study by global business consultancy McKinsey & Company shows.

    The report titled, “The digital archipelago: How online commerce is driving Indonesia’s economic development,” concludes that government support, large numbers of young, digitally savvy consumers and increased participation by micro, small and medium enterprises in e-commerce will drive the digital economy and boost online sales over the next five years.

    “We think there will be leapfrog growth for Indonesia’s e-commerce sales in the coming years, which is boosted by the number of internet users,” McKinsey Indonesia president director Philia Wibowo said in Jakarta on Wednesday.

    According to the Indonesian Internet Service Providers Association (APJII), there were 143 million internet users in the country last year, with about 44 percent of them using mobile devices to go online.

    McKinsey noted that e-tailing, or business conducted online through e-commerce firms such as Blibli, Tokopedia, Bukalapak and Lazada, will likely amount to $40 billion by 2020, while transactions on social media platforms, including Facebook, Instagram, Line, WhatsApp and Blackberry Messenger, may reach anything between $15 billion and $25 billion.

    Total e-commerce sales in Indonesia amounted to around $8 billion last year, with $5 billion of that from e-tailing.

    McKinsey also noted that 83 percent of internet users are expected to make online purchases by 2020, compared with 74 percent currently.

    The business consultancy interviewed 60 experts, ranging from chief executives of publicly listed companies, small and medium business owners, startup owners, former ministers to heads of government agencies, across the archipelago.

    The company also surveyed nearly 3,500 people, including 700 online merchants, 500 offline merchants, 2,000 online buyers and 250 dropshippers.

    “We conducted this research because we saw that there are rarely surveys out there that offer comprehensive reports on e-commerce. This particular sector has a real impact on the country’s economy,” Philia said.

    This is McKinsey Indonesia’s first e-commerce survey.

    Social Impact

    McKinsey said e-commerce has had a positive impact on job creation and social equity in Indonesia.

    As the largest e-commerce market in the region, Indonesia could generate about $20 billion in online sales by 2020, compared with $2.5 billion today.

    This projection shows that online sales in the coming years will also come from regions in Indonesia that are currently untapped.

    The business consultancy projects that e-commerce will support 26 million jobs both directly and indirectly by 2020, compared with 4 million now.

    Meanwhile, buyers can also save money through e-commerce. People living outside Java can expect to pay between 11 percent and 25 percent less for goods online, compared with brick-and-mortar shops.

    Buyers living in Java can save between 4 percent and 14 percent, McKinsey said.

    The business consultancy said e-commerce can also improve gender parity and financial inclusion.

    Challenges

    McKinsey noted that there are five key challenges if Indonesia wants to boost its e-commerce sector.

    The government should ensure that logistics and infrastructure are reliable. Indonesia still trails behind many other countries in terms of infrastructure development and it ranked in 63rd place among 160 countries globally in 2016, according to the World Bank data.

    Online payment systems meanwhile also play an important role in the growth of e-commerce. However, only 49 percent of Indonesians currently have access to financial services, compared with 85 percent in Malaysia and 82 percent in Thailand.

    McKinsey said while the internet is key to building a strong digital ecosystem, only around 60 percent, or 36 million small and medium business in Indonesia currently have an online presence. Of those, only about 15 percent have online ordering and payment systems, which shows an urgent need for small business owners to implement reliable technology and payment systems.

    Aside from that, McKinsey said Indonesia also faces a technical skills shortage. The country only produces eight science, technology, engineering and mathematics graduates per 1,000 citizens, while China produces 34 and India 20.

    Supportive Policies

    McKinsey further noted that supportive government policies also play an important part in boosting the country’s digital economy.

    Indonesia revised its negative investment list in 2016 to allow 100 percent foreign direct investment in e-commerce, if the investment exceeds Rp 100 billion ($6.8 million).

    The government is also committed to improving the country’s infrastructure, prioritizing the building and upgrading of ports and roads to lower logistical costs.

    “The focus on infrastructure projects must be continued, especially to improve access to rural areas,” Philia said.

    The government further established several agencies to support the digital economy, including the Bank Indonesia Fintech Office last year and the National Creative Economy Agency (Bekraf) in 2015.

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