Tag: Indonesia

  • Indonesia’s Bekraf opens pop up in Singapore with fashion start-ups

    Indonesia’s Bekraf opens pop up in Singapore with fashion start-ups

    Bekraf, the Indonesian Creative Economy Agency, has joined with the Indonesian embassy in Singapore to open a pop-up store showcasing Indonesian fashion startups.

    Joshua Puji Mulia Simanjuntak, Bekraf’s marketing division deputy head, described Singapore as an important market for Indonesian creative industries, particularly for fashion, as a prospective hub to reach Asean and global markets.

    The fashion industry in Indonesia contributes over half of all creative exports from the country, an economy that generated US$20 billion to 2016 figures.

    At least 14 brands will participate in the event running at Paragon Mall during August.

  • AirAsia bullish on Indonesian market

    AirAsia bullish on Indonesian market

    Malaysian low-cost carrier AirAsia, which will start flights to Silangit Airport, Indonesia, the main gateway to Lake Toba from Oct 28, is looking to increase its services in Indonesia, a market in which it sees huge potential.

    Speaking at a press conference in conjunction with the official launch of the new route today, AirAsia Group CEO Tan Sri Tony Fernandes said the airline is eyeing more routes from Malaysia to Indonesia such as Belitung, Banyuwangi as well as Raja Ampat.

    “We are very bullish about Indonesian tourism. Indonesia is a huge priority for us,” Fernandes said.

    “We have already started talking about Kuala Lumpur-Belitung (route), which we see as a huge potential. There are so many places within Indonesia, as I’ve always said Indonesia is much more than just Bali.”

    In addition, Fernandes said the airline is also looking at cruise business in Indonesia, noting that coupled with the low-cost airline, it would be a huge potential for the state’s tourism industry.

    According to Indonesia’s Tourism Ministry, AirAsia made the highest contribution of all airlines to the number of international tourists flown to the country, bringing in 25% of the total figure.

    The four times weekly direct flights from Kuala Lumpur to Silangit Airport is the 21st route launched by the airline into the state.

    Fernandes said the new route marks the carrier’s commitment to support the government of Indonesia in developing the 10 priority tourism destinations, including Lake Toba.

    “Prior to Silangit, travellers wishing to visit Lake Toba had to take a six-hour bus ride from Medan. Today, they can fly direct to Silangit and reach Lake Toba in just an hour.

    “In addition to building new airports, Indonesia is converting Terminal 2 at Soekarno-Hatta International Airport into a low-cost carrier terminal. We believe this is a step in the right direction and we will continue to fully support Indonesia to achieve 20 million tourist arrivals by 2019,” he added.

    AirAsia is offering promotional all-in fares from RM39.10 for one way till Aug 12 for travel between Oct 28 and March 29, 2019.

    Besides Silangit, AirAsia also flies to 15 other destinations in Indonesia namely Jakarta, Lombok, Pekanbaru, Surabaya, Bali, Medan, Padang, Semarang, Banda Aceh, Pontianak, Yogyakarta, Palembang, Bandung, Makassar and Solo.

  • Indonesia Needs ‘Dollars Now,’ President Says, Urging Greater Biodiesel Use

    Indonesia Needs ‘Dollars Now,’ President Says, Urging Greater Biodiesel Use

    Indonesia’s President Joko “Jokowi” Widodo on Tuesday (31/07) urged his ministers to make “serious” efforts to strengthen foreign exchange reserves by widening biodiesel use to combat pressures caused by a global trade war.

    Indonesia requires foreign inflows to finance its current account deficit and the central bank has spent about $12 billion of its forex reserves in recent months to defend the rupiah, which has lost about 6 percent this year.

    “The country needs dollars now,” Jokowi told a cabinet meeting. “I don’t want to keep doing meetings without good implementations.”

    The cabinet has met at least six times since the start of July to tackle concerns over trade and the rupiah currency, and Jokowi called for swifter action to prop up the currency.

    He sought immediate implementation of a government’s plan to widen the mandatory use of B20 biodiesel to all diesel vehicles, including locomotive engines and heavy equipment.

    Expansion of the B20 programme could be launched as soon as Thursday, Industry Minister Airlangga Hartarto said this week. He estimated the measure could save Indonesia $5 billion in diesel imports each year.

    Replacing imports could benefit Indonesia, one analyst said.

    “In the short term, this would be a faster solution, compared to trying to boost exports,” said Josua Pardede, an economist with Bank Permata in Jakarta.

    “Replacing imports would be one alternative to maintain the current account deficit at a healthy level,” he added. “The oil and gas deficit has been continuously expanding in the last year due to the rising oil price.”

    Biodiesel can cut fuel costs and reduce emissions, but some varieties need special handling and equipment as the fuel has a solvent effect, corroding engine seals and gasket materials, and it can solidify in the cold.

    Indonesia’s auto industries group, Gaikindo, has said stepping up biodiesel blends can increase fuel consumption and could cause engines to overheat.

  • AirAsia opens new gateway to Lake Toba via Silangit

    AirAsia opens new gateway to Lake Toba via Silangit

    AirAsia’s new route to Silangit in North Sumatra is more than just a direct flight to the gateway of Lake Toba. It also marks the airline’s commitment to sustainable tourism development there.

    Group CEO Tan Sri Tony Fernandes said AirAsia strives to connect travellers to the hidden treasures of Indonesia while ensuring the sustainability of these destinations.

    “Our team has already been to Silangit to work with the local authorities.

    “We are building a recycling plant there and we are hoping to work with the local government on sanitation.

    There will be four flights from the Kuala Lumpur International Airport 2 (klia2) to the Silangit Airport in Tapanuli every week beginning Oct 28.

    Prior to the new route, travellers wishing to visit Lake Toba had to take a six-hour bus ride from Medan.

    “We will put more flights on if the demand comes and with the infrastructure built along with it.

    “The ultimate aim is to build a hub. It won’t be a big hub, as Jakarta will still be our main hub,” said Fernandes.

    The new Kuala Lumpur-Silangit route was launched by Maritime Affairs Coordinating Minister Luhut Binsar Pandjaitan, Air Transportation acting director-general Pramintohadi Sukarno, Fernandes, AirAsia Group Bhd executive chairman and AirAsia X Co-Group CEO Datuk Kamarudin Meranun and AirAsia Indonesia CEO Dendy Kurniawan.

    Pandjaitan is confident that the new route will boost tourist arrivals in Lake Toba – one of Indonesia’s top 10 priority tourism destinations.

    “We are upgrading the facilities at Silangit Airport and extending the runway length from 2,650m to 3,000m.

    “We are also expanding the apron and terminal building to accommodate more aircraft and passengers and we hope this new route will benefit the local economy and community.”

    AirAsia is offering special introductory all-in-fares from Kuala Lumpur to Silangit from RM39.10.

    These fares are available for booking on airasia.com and the AirAsia mobile app from Aug 2 to Aug 12 for the travel period from Oct 28 this year to March 29, 2019.

  • Japan to Help Build Fish-Processing Centers in Indonesia

    Japan to Help Build Fish-Processing Centers in Indonesia

    The government will use a grant from the Japan International Cooperation Agency to build integrated marine and fishery centers on islands in Indonesia’s six outermost regions to boost exports.

    The agency, known as JICA, granted total funding of 2.5 billion yen ($22 million) for the construction of processing centers on Sabang in Aceh, Natuna in the Riau Islands, Biak in Papua and Morotai Moa and Saumlaki in Maluku.

    “Once the program is completed, small fishermen will be able to use the upgraded fishing ports … and have access to various facilities, such as fish storage,” Shinichi Yamanaka, JICA’s Indonesian representative, said in a statement on Wednesday (01/08).

    “Hopefully, this cooperation initiative will stimulate local fisheries and coastal citizens’ standard of living, especially those on Indonesia’s farthest islands,” Yamanaka said.

    Nilanto Perbowo, secretary general of the Ministry of Maritime Affairs and Fisheries, said the government expects the facilities to be operational by 2020.

    The facilities are part of President Joko “Jokowi” Widodo’s program to develop Indonesia’s remote areas, which includes the establishment of 20 integrated marine and fisheries centers.

    The Indonesian fishing industry has seen rising production over the past three years, since the government started to crack down on illegal fishing activities. But the industry lacks the capability to process bigger catches, limiting local fishermen from reaching a broader market.

    The country’s fishermen caught 7.7 million metric tons of fish last year, up 18 percent since 2014, when the crackdown began, according to Maritime Affairs and Fisheries Ministry data.

    Still, it missed the government’s target of 8.8 million tons. Destructive Fishing Watch, a fisheries watchdog, said slow progress in mechanizing the fishing industry is one of the factors behind the failure. The government has set a target of 9.5 million tons of fish for this year.

    Maritime Affairs and Fisheries Minister Susi Pudjiastuti met with Japanese Foreign Minister Taro Kono in Tokyo in May to request assistance with the construction of the facilities, arguing that the East Asian nation also stood to benefit from the increased availability of Indonesian products. The Banda Sea near Maluku for example, is a known source of yellowfin and bluefin tuna, which are in high demand in Japan.

    Susi also asked Japan to exempt Indonesia from its 7 percent import tariff on fishery products, noting the archipelago’s successful crackdown on illegal fishing in its waters. Thailand and Vietnam are also exempt from the import tariff.

    Indonesia has managed to reduce illegal fishing by foreign vessels by 90 percent and decreased illegal fishing by 25 percent overall, according to a study published on Nature Ecology & Evolution in March. The country took various steps to achieve this, including the sinking of hundreds of foreign vessels caught fishing illegally.

  • IFC Invests $150m in Indonesia’s OCBC NISP’s Green Bond

    IFC Invests $150m in Indonesia’s OCBC NISP’s Green Bond

    The International Finance Corporation has invested in $150 million in “green bonds” issued by Indonesian lender Bank OCBC NISP, the private sector arm of the World Bank Group said in a statement on Wednesday (01/08).

    The five-year green bond, of which the IFC will be the sole subscriber, is the first ever debt paper issued by a commercial lender in Indonesia to fund environmentally friendly projects and help the nation mitigate the effects of climate change. The IFC and OCBC NISP signed a partnership agreement in Jakarta on Tuesday.

    The green bond is also expected to support government programs aimed at achieving a 29 percent reduction in greenhouse gas emissions by 2030. Green projects, including the development of green buildings, renewable energy and infrastructure, are prioritized in terms of funding.

    “This is a major milestone for the Indonesian banking sector as it’s expected to catalyze the development of the green bond market in Indonesia,” IFC chief executive Philippe Le Houérou said in the statement.

    “In a country where green financing is relatively low, this first ever green bond by a commercial bank marks the first step in unlocking the potential of the green bond market in Indonesia to spur new financing for climate smart projects. The IFC is in discussions with other players and keen to provide investment and advisory support to help develop green financing products in the country.”

    Indonesia is considered one of the world’s top greenhouse gas emitters – mainly due to forest fires – and the government has been under constant pressure from environmental activists to end deforestation and environmental degradation, especially in forest areas.

    According to the National Development Planning Board (Bappenas), Indonesia reduced carbon emissions by 15.5 percent between 2010 and 2015.

    In addition to its investment in the green bond, the IFC said it will support Bank OCBC NISP with advisory services, such as identifying projects that comply with the green bond principles and reporting assets considered environmentally friendly.

    “We realize that sustainability is a long journey and the pioneering green bond is an early step for Bank OCBC NISP to help our clients to do business in more sustainable way and to contribute to positive developments and governments goals,” Bank OCBC NISP president director Parwati Surjaudaja said.

    “Together with the IFC, we are looking forward to further collaborate and find innovative solutions that widen opportunities for economically, socially, and environmentally sustainable private investment,” he added.

    OCBC NISP, the local arm of Singapore-headquartered OCBC Bank, is Indonesia’s 10th-largest lender, with Rp 170.3 trillion ($11.8 billion) in assets as of June 30 this year.

    More to Come

    The IFC said it has worked with the Indonesian government and the Financial Services Authority (OJK) to develop a sustainable financing roadmap for the country. Indonesia became the first Asian country to sell green bonds internationally when the government issued a $1.25 billion five-year green sukuk, or Islamic green bond, on Feb. 23 this year.

    Speaking at a press conference in Jakarta on Wednesday, Houérou said the IFC is currently also in discussions with other private-sector players in Indonesia interested in issuing green bonds. He said there are several plans in the pipeline but declined to elaborate.

    “The opportunity is huge. It’s big. It’s a new trend worldwide, but now it’s in the region and Indonesia. The private sector is seeing more and more opportunity, while the government is also supportive of the initiative,” Houérou said. He added that he chose OCBC NISP to invest in the green bond because the lender has been financing projects in renewable energy and infrastructure.

    The IFC said it estimates that Indonesia may offer $272 billion worth of potential opportunities for green financing schemes.

    Vivek Pathak, the IFC’s director for East Asia and the Pacific, said the green bond might not offer lower interest rates, but in the long run, it could attract a large pool of investors and also boost the company’s image and business prospects.

    “When we were approaching the banks, the first question the banks ask is: ‘Would I get a lower interests rate?’ And my answer is no. But the thing is, there are investors that focus on climate financing exclusively. So there is a pool of capital out there, which these companies are able to access,” Pathak said.

  • Indonesia Gov’t Undecided on New Coal Policy

    Indonesia Gov’t Undecided on New Coal Policy

    Indonesia President Joko “Jokowi” Widodo will decide on Tuesday (31/07) whether the government’s policy on coal for domestic use should be revised, considering both the need for price stability and for reducing the current external deficit.

    The government in March set a ceiling price for 25 percent of its coal production bound for state utility company Perusahaan Listrik Negara at $70 a metric ton, in order to keep electricity prices stable ahead of the 2019 elections.

    The quota and price cap mean miners miss out export revenues amid the commodity’s rising global price, to the tune of $5 billion a year, a substantial amount that could reduce Indonesia’s current account deficits, Coordinating Maritime Affairs Minister Luhut Pandjaitan said on Monday (30/07).

    The government may charge a coal sales tax to coal companies at between $2 and $3 per ton to subsidize PLN. A new agency could be established to manage the process.

    The government may also revise the 25 percent quota to allow coal with energy levels above 4,500 kilocalories per kilogram (kcal/kg) or below 4,000 kcal/kg to be exported, because PLN needs it between 4,000 and 4,500 only, said Rosan Roeslani, chairman of Indonesia’s Chambers of Commerce and Industry (Kadin), who was present in a discussion with top government officials on Monday.

    All revisions will still need to be discussed with the coal and power industry, and their impact on state revenue would need to be calculated, Luhut said.

    “Even if this happens it will probably be next year at the earliest,” he said.

    Indonesia is the world’s top exporter of thermal coal, and its economy has benefited from rising demand for the dirty fuel — which hit $104.65 a ton in July — the highest since May 2012.

    Expert and consumer groups are against the government’s proposal.

    “Abandoning the domestic coal price will be a blunder policy, which will not increase foreign exchange from coal exports to reduce the balance of payment deficit, but only increases the income of coal businesses as well as the cost of production for PLN,” Fahmy Radhi, an energy analyst at Gadjah Mada University, said in a statement on Sunday.

    PLN would bear $3.68 billion in additional costs to buy coal at the current market price, Fahmy said. Even with the sales tax on coal companies, which is estimated to bring $1.28 billion, PLN would still be left with an additional expense of $2.40 billion.

    PLN has been under financial pressure for the past few years, trying to meet the government’s plan for 35,000 megawatts of additional power capacity.

    In September, Finance Minister Sri Mulyani Indrawati sent an official letter to Energy and Mineral Resources Minister Ignasius Jonan and State Enterprises Minister Rini Soemarno, warning of PLN’s poor financial performance.

    The company suffered losses of Rp 6.49 trillion in the first half of this year. In the same period last year it recorded a net income of Rp 510 billion.

    “If the rule is really implemented, then it means the government favors more the interests of a handful of people [coal businessmen] rather than the interests of a larger community — electricity consumers,” Tulus Abadi, managing director at the Indonesian Consumer Protection Foundation (YLKI), said in a statement.

  • MUFG will have more stake in Bank Danamon Indonesia to 40%

    MUFG will have more stake in Bank Danamon Indonesia to 40%

    Indonesian regulators have cleared Japanese lender Mitsubishi UFJ Financial Group’s plan to increase its stake in Bank Danamon to 40 percent, bringing it closer to completing what could be the biggest takeover of an Indonesian firm.

    The Financial Services Authority (OJK) approved MUFG’s planned purchase of a 20.1 percent stake from shareholder Asia Financial, MUFG said in a statement on Tuesday (31/07). The Japanese lender said it would complete the purchase of those shares “as soon as possible.”

    MUFG said in December that it was seeking a 73.8 percent stake in Bank Danamon, to build a foothold in Southeast Asia’s biggest economy.

    Japan’s largest lender had laid out a plan to buy Danamon shares in three stages.

    In the first stage, completed in December, MUFG bought 19.9 percent from Singapore state investor Temasek Holdings for Rp 15.875 trillion ($1.17 billion). At that price, Danamon was valued at around $6 billion.

    The Japanese bank would then raise its stake to 40 percent and seek approval to hold at least 73.8 percent in Indonesia’s fifth-largest bank by offering to buy out other shareholders.

    However, MUFG needs special permission from the OJK to take its holding above 40 percent – where foreign ownership of commercial banks is normally capped though exceptions are sometimes made.

    MUFG did not immediately reply to requests for comment on Tuesday on whether the Japanese lender had been granted approval for a 73.8 percent stake. The OJK declined to comment.

    If approved, this would mark a rare major purchase by an overseas lender in Indonesia’s banking sector after caps on foreign ownership of banks were introduced in 2012.

    An MUFG official said in January that Bank Danamon would be merged with another Indonesian bank, Nusantara Parahyangan (BNP) after MUFG’s 40 percent stake was approved.

    Danamon is the latest in a string of deals by the acquisitive MUFG, which already holds stakes in Vietnam’s Vietinbank, Thailand’s Bank of Ayudhya and Security Bank Corp of the Philippines.

    Danamon’s shares rose 5 percent on Tuesday to Rp 6,575, giving it a market value of around $4.5 billion.

  • After Sprinting to Aid Rupiah, Bank Indonesia Could Struggle in a Marathon

    After Sprinting to Aid Rupiah, Bank Indonesia Could Struggle in a Marathon

    Bank Indonesia has done more than any Asian peer to defend its currency amid a global rout in emerging markets, but the fact that the rupiah has kept slipping suggests the central bank would struggle to maintain the pace in a prolonged battle.

    Like many developing markets with current account or trade deficits, Southeast Asia’s largest economy is hostage to forces outside its control, including rising US interest rates, higher oil prices and the Washington-Beijing trade conflict.

    And the difficult position Indonesia authorities face “may not end quickly,” Bank Central Asia chief executive Jahja Setiaatmadja told reporters on Thursday (26/07). “This is truly a marathon.”

    What differentiates Indonesia is how strongly the central bank has come out of the blocks.

    Bank Indonesia (BI) has lifted rates 100 basis points, twice what the Philippines has done, and has drawn more heavily on its foreign reserves than other Asian nations have.

    Still, the rupiah is down more than 6 percent in 2018, nearly as much as the peso and Indian rupee. Bond yields went down after Indonesia’s 50 bps June rate hike – which BI said reflected a “pre-emptive, front-loading and ahead-of-the-curve” policy – as investors gave their thumbs-up, but the reprieve proved temporary.

    An Open Economy

    For sure, economists do not perceive the lackluster results in stabilizing the market as a failure. Much is due to the fact Indonesia’s economy is more open than India’s or the Philippines’ and its financial markets have larger foreign investor participation.

    But limited results raise concerns about BI’s firepower in case the Sino-US trade conflict escalates and lasts for years, or US heads into recession.

    In such an environment, BI’s traditional tools won’t be enough. Further hiking rates at this pace will choke growth and add to pressure on the currency. And foreign exchange reserves are only $20 billion above the $100 billion mark at which some economists expect BI to turn less interventionist.

    Given policy constraints, the economy “may not be able to able to handle more rate hikes,” Paul Mackel, HSBC head of global emerging markets FX research in Hong Kong, said in a note.

    Mackel said Indonesia might consider temporarily requiring exporters to sell some FX proceeds and curb importers’ FX purchases, similar to what Malaysia did in 2016.

    President Joko “Jokowi” Widodo on Thursday pleaded with exporters to bring home earnings they currently keep offshore to help manage the rupiah from falling further, Finance Minister Sri Mulyani Indrawati said on Friday.

    Indonesian authorities, who know they need a multi-pronged approach, have revived an old tool and created a new one they hope will help the rupiah.

    To give foreign investors more instrument choices, they auctioned nine- and 12-month Bank Indonesia Certificates (SBI) for the first time since 2016, raising Rp 6 trillion ($412.51 million). The instruments, which foreigners can buy in secondary markets, help bring more capital in and let BI mop up the dollars investors sell to purchase the bonds and rebuild reserves.

    Next week, BI launches a new benchmark for overnight inter bank money markets, called Indonia, mirroring euro zone’s and Britain’s Eonia and Sonia. It aims to improve the transmission of BI rate moves to the financial sector.

    Beyond reserves, the central bank “has at its disposal a number of measures” to counter FX volatility, said Roland Mieth, emerging markets portfolio manager at PIMCO in Singapore.

    Finding Dollars 

    The finance ministry is also reducing rupiah bond issuance, hoping to meet some financing needs with additional foreign-currency loans from lenders such as the World Bank and the Asia Development Bank.

    “We are getting many offers, but we are only taking what is needed to cover the shortfall in our rupiah bond issuance,” Scenaider Siahaan, finance ministry director of borrowing strategy told Reuters.

    Foreigners, who hold more than one-third of Indonesia’s government bonds, sold nearly Rp 29 trillion ($2 billion) of local currency bonds in April to June. Following BI’s 50 bps benchmark hike, this month has seen 5 trillion rupiah returning.

    While the central bank has been “very much” proactive, that doesn’t mean Indonesia is out of trouble, said Rohit Garg, emerging market fixed-income and foreign exchange strategist at Bank of America Merrill Lynch in Singapore.

    “If trade tensions do increase … there is only so much that BI can do to make sure that rupiah weakness is limited,” he said.

  • Asia’s large format retailers prepare for steady growth

    Asia’s large format retailers prepare for steady growth

    Global research organisation IGD has reported that Asia’s large format retailers are set to grow 3.3 per cent a year to 2022, with Vietnam, India and the Philippines forecast to see double-digit growth from large format players over the next five years.

    Most of this growth is predicted to be driven by domestic retailers, except for Vietnam where foreign retailers have been investing to gain a foothold in this fast-growing market. Indonesia will see steady growth, also driven mainly by domestic players; with China coming through as another market with significant growth opportunities due to its vast geography.

    Many large format retailers in Asia are still enjoying steady growth through expansion although they are facing pressures from increased competition in more developed markets.

    Besides expansion to new regions, retailers are also digitising physical stores to create a seamless shopping experience in more matured markets.

  • New Bike-Sharing Service Set to Help Jakarta Combat Air Pollution, Bad Traffic

    New Bike-Sharing Service Set to Help Jakarta Combat Air Pollution, Bad Traffic

    Surya Teknologi Perkasa, a subsidiary of digital self-service kiosk operator M Cash Integrasi, has introduced an online-based bicycle-sharing service dubbed Gowes, aimed at providing an emission-free transportation alternative to help Jakarta combat air pollution and traffic congestion.

    Bicycle sharing is still relatively new business in the capital, where motorcycle ride-hailing services such as Go-Jek Indonesia and Grab have been dominating over the past few years.

    Jakarta Deputy Governor Sandiaga Uno, who attended the inauguration event at the National Monument (Monas) in Central Jakarta on Friday (27/07), said there will be a three-month trial of the bicycle-sharing service, during which time people will be allowed to ride for free in the Monas area. This will be done to test demand for the new service.

    The trial will take place in collaboration with the Jakarta provincial government and the Institute for Transportation and Development Policy.

    “We are pleased with the trial. We expect support from the government and all parties to make bicycles Jakarta residents’ preferred option for short-term transportation as it reduces air and noise pollution, while also being affordable and safe for all ages,” Surya Teknologi Perkasa president director Iwan Suryaputra said in a statement.

    He said the company will continue to support the government’s efforts to reduce carbon emissions and mitigate traffic congestion in the capital through the bike-sharing system.

    Jakarta is consistently among the top-10 most polluted cities in the world, according to data provided by air quality monitoring app AirVisual.

    A study by US-based research company Inrix has shown that Jakarta is the 17th most congested city in the world after Bangkok and Russia’s Kansk, noting that its residents spend on average 63 hours in congestion per year.

    Gowes, which means “to paddle,” in Indonesian, is already available in Bintaro, Banten and several locations in Bali. Equipped with tracking devices, users do not need to return the bicycles to their original location after use. Instead, they can park it anywhere with Gowes’s operational area.

    The Gowes smartphone application also offers other digital products and services, such as internet data packages, phone credit and more, similar to those offered by Go-Jek. The services are also in line with the parent company M Cash’s core business.

    M Cash was the second digital startup to list on the Indonesia Stock Exchange (IDX). It raised Rp 300 billion ($21 million) in October last year from the sale of 25 percent of its enlarged capital. Since then, the company has acquired mobile wallet service provider Matchmove Indonesia and cloud-based digital advertising firm Digital Marketing Indonesia.

    M Cash reported net income of Rp 45 billion in the first half of this year, compared with Rp 3.8 billion in the corresponding period last year.

  • Dairy Farm restructures after recent result

    Dairy Farm restructures after recent result

    “Underperforming” subsidiaries and rising rent and labour costs are disturbing the chairman of Hong Kong-listed multinational retailer Dairy Farm International – but those factors failed to prevent a solid second-half year performance.

    Dairy Farm’s total sales rose 17 per cent to US$12.215 billion in the six months to June 30 and profit attributable to shareholders was $215 million, up 6 per cent. The increased sales came largely from the Yonghui supermarket operation and Maxim’s which owns food retail channels and the Starbucks business in Hong Kong, Singapore, Vietnam and Cambodia.

    Chairman Ben Keswick said the health and beauty business in Hong Kong and Macau drove strong results in North Asia, but the Southeast Asian food businesses continued to face challenges producing a weaker overall performance.

    “While the outlook for the remainder of the year is expected to remain challenging for the Food businesses, particularly in Southeast Asia, the group’s other businesses should continue to make steady progress. Significant management and structural changes have been made to address the issues the group faces in a number of areas, but time will be needed to deliver sustainable improvement.”

    The company has consolidated its trading operations into a more centralised structure with two main trading divisions: North Asia and Southeast Asia, in addition to the standalone business of Home Furnishings (essentially Ikea) and Maxim’s.

    Keswick says five strategic priorities have been identified: building capability, growing presence in Mainland China, protecting the group’s Hong Kong business, revitalising the Southeast Asia operations and driving digital innovation. “A series of programs are underway to support these priorities across all of the group’s businesses,” he said in the earnings statement.

    In North Asia, overall sales within the food businesses were ahead of prior year, but profits declined, mainly due to higher rent and labour costs in Hong Kong. “The health and beauty business in Hong Kong and Macau delivered very strong sales and profit growth, driven by a significant increase in business from higher numbers of mainland Chinese tourists.”

    Southeast Asia challenges

    However, in Southeast Asia, challenging trading conditions continued for Dairy Farm’s food businesses.

    “The group saw lower sales and profits in Singapore, Malaysia and Indonesia, while in the Philippines, sales were higher but profits lower, due to increased operating costs resulting from more store openings. Generally, these businesses have suffered from a lack of investment in infrastructure, range and competitive pricing for some time, while competition in each market has been increasing.

    “Turning these food businesses around and becoming more relevant to the changing demands of customers will take significant effort. Appropriate plans are now being put in place following the strategic review, but will require time to take effect,” said Keswick.

    He said the improving performance of the majority of the group’s health and beauty businesses in Southeast Asia is encouraging, with Malaysia, Indonesia and Vietnam reporting better underlying results.

    Dairy Farm’s convenience store operations (7-Eleven) performed well, with Hong Kong and Macau trading in line with last year.

    “In Singapore, overall convenience store sales were slightly lower than last year due to the termination of a multi-site agreement, but profitability improved following the closure of some underperforming stores. Like-for-like sales increases and store expansion in Mainland China continued to underpin growth in this sector.

    “In Home Furnishings, Ikea performed ahead of last year in Taiwan and Indonesia, with sales and profits growth. Hong Kong reported higher sales, helped by a contribution from the new store which opened in October last year, but associated higher operating costs resulted in reduced reduction in profits. Progress continues to be made on new store development in both Taiwan and Indonesia, with several sites under development. Meanwhile, e-commerce activities are showing increased results in all markets but from a small base.

    Keswick said Maxim’s delivered another good performance and is continuing to expand its presence across Mainland China and Southeast Asia. In Hong Kong, Maxim’s opened its first Shake Shack in May with “encouraging initial results”.

    Supermarket chain Yonghui reported strong sales growth and underlying profits from the core food business remained strong, but total profits were behind prior year due to the investment in new technology formats and the introduction of an employee incentive scheme announced earlier this year.

    Philippines restructure

    Meanwhile, back in March, the group announced it had agreed to partner with Robinsons Retail Holdings Inc. (‘RRHI’), the third largest retailer in the Philippines, to build a leading food retail business in that market. Dairy Farm will combine its Rustan Supercenters operations with RRHI to build on the combined strengths of both businesses, creating a new platform for growth. Following completion of the transaction, Dairy Farm would own 18.25 per cent of RRHI. The transaction, which is subject to certain regulatory approvals, is expected to be completed in the fourth quarter.

    As at June 30, Dairy Farm, including associates and joint ventures, operated more than 7400 outlets across all formats, compared with 7181 at the end of last year.

  • Maybank Indonesia posts lower earnings in first half of 2018

    Maybank Indonesia posts lower earnings in first half of 2018

    Malayan Banking Bhd’s (Maybank) Indonesian unit PT Bank Maybank Indonesia Tbk’s net profit fell 6.6% to Rp932.7 billion (RM264 million) for the first six months ended June 30, 2018 compared with Rp998.5 billion in the previous corresponding period, due primarily to lower fee-based income and a slight compression in net interest margin (NIM).

    The bank recorded a loans growth of 6% to Rp127.1 trillion as at June 30, 2018 from Rp119.9 trillion in the previous year. Its sharia business saw solid growth of 42.2% to Rp23 trillion, making up 18.1% of its total loans.

    Asset quality improved significantly as reflected by lower gross and net non-performing loans (NPL) of 2.8% and 1.6%, respectively, as at June 30, 2018, compared with 3.6% and 2.4% in the previous year.

    Net interest income registered a 2.5% growth to Rp3.9 trillion in June 2018 compared with Rp3.8 trillion in the previous corresponding period, but NIM was marginally lower at 5.1% in June 2018 from 5.3% a year ago. On a quarterly basis, NIM improved 28 basis points from 4.8% in the first quarter of 2018.

    The capital adequacy ratio improved to 18.8% as of June 30, 2018 from 16.9% in the previous corresponding period with total capital reaching Rp24.7 trillion.

    Maybank Indonesia president director Taswin Zakaria said the bank continue to focus on growing its assets selectively while maintaining the discipline in loan pricing to ensure sound asset quality going forward.

    “Global banking continues to be the leading contributor to our asset growth; while our community financial services has now resumed an upward growth momentum as the bank sees opportunities in the retail and small medium enterprise segments. We expect to see further growth in this segment as we have recently embarked on our recalibrated retail business model.”

  • Indonesia Commits to Developing Low-Cost Airport Terminals

    Indonesia Commits to Developing Low-Cost Airport Terminals

    The Ministry of Transportation has given its support for the development of airport terminals specifically catering to low-cost carriers, as part of Indonesia’s efforts to lower travel costs and boost tourism.

    “Be it specialized terminals or airports for low-cost carriers, we will certainly explore the matter further,” the ministry’s civil aviation director general, Agus Santoso, said on Tuesday (24/07), as quoted by Antara.

    Agus said President Joko “Jokowi” Widodo issued a directive for the establishment of more welcoming transportation infrastructure to attract more foreign tourists to Indonesia.

    Indonesia took a cue from Malaysia and Singapore, which have been operating low-cost terminals over the past several years. The two neighboring countries last year attracted 26 million and 17 million foreign tourist arrivals, respectively. Indonesia only managed to attract 14 million.

    Low-cost terminals, which provide only basic amnesties, could allow airlines make significant cost savings. This may allow them to offer cheaper tickets and in turn, attract more travelers, Agus said.

    “The low costs are derived from minimal services, but we will nonetheless always uphold safety, whether it be for low-cost airlines, terminals, or even airports,” he said.

    The country’s largest airport operator, Angkasa Pura II, earlier announced a plan to transform Terminal 1 and Terminal 2 at Soekarno-Hatta International Airport outside Jakarta into Indonesia’s first low-cost terminals.

    The terminals are undergoing a massive revamp to update and expand facilities dating back to their opening in 1985 and 1992, respectively. Angkasa Pura II president director Muhammad Awaluddin said the company will use the opportunity to transform them into low-cost terminals.

    “We saw that it is possible to synchronize this program with the revitalization effort,” he said.

    Awalludin said he will reduce human involvement in low-cost terminal services, which would further trim costs. Terminal 4 of Singapore’s Changi Airport has managed to achieve that by implementing automated machines from the check-in counters, through baggage storage to immigration counters.

    “Is Changi low in quality? No. Did Changi abolish many of its functions? No. So we will match that standard,” he said.

    Awaluddin said Soekarno-Hatta Airport’s low-cost terminals would further benefit budget airlines currently operating from there, including the country’s largest, Lion Air and Citilink.

  • Indonesia to Postpone Coal, Palm Oil Insurance Rules by Six Months

    Indonesia to Postpone Coal, Palm Oil Insurance Rules by Six Months

    The Ministry of Trade has decided to postpone for six months the application of rules saying coal and crude palm oil export shipments should use Indonesian insurers, the country’s leading coal industry association said.

    The decision would be the second time that application of the rules, issued in October and due to come into effect on Aug. 1, have been postponed.

    The rules were part of trade regulations intended to boost the role of the archipelago’s shipping industry and save foreign currency. Elements of the regulations were postponed in April to 2020 with little clarification from the trade ministry.

    The decision to postpone the insurance rules was announced by the ministry at a brief meeting with industry representatives on Thursday (26/07), Indonesian Coal Mining Association (ICMA) executive director Hendra Sinadia said.

    “Everybody is very anxious,” Hendra said, referring to coal buyers and exporters confused about how they could put the rules into practice for shipments sold on a free-on-board (FOB) basis, on which the vast majority of Indonesia’s coal exports are sent.

    Under FOB terms insurance is the responsibility of the buyer, Hendra noted.

    Trade Minister Enggartiasto Lukita is expected to formally announce the decision on his return from a visit to the United States, Hendra added. Enggartiasto is due to return to Jakarta on July 28, according to the trade ministry, though its representatives did not immediately respond to questions on the matter.

    Ido Hotna Hutabarat, chief executive of coal miner Bumi Resources unit Arutmin Indonesia, said the rules were unworkable.

    “This cannot be carried out for FOB sales because we don’t have rights to control the buyer,” he said, adding that FOB shipping terms were preferable as they were lower risk.

    Indonesian Palm Oil Association (Gapki) executive director Mukti Sardjono said on Wednesday Gapki would discuss how to implement the rules with the Trade Ministry. “We hope the implementation of this regulation won’t be a disincentive for exports,” he said.

    Dody Dalimunthe, executive director of the Association of General Insurance Companies of Indonesia (AAUI), said there were 73 Indonesian insurance companies that can cover coal and CPO shipping. “And many companies already use this insurance,” he said.

    Earlier, ICMA chairman Pandu Sjahrir said diplomats from several countries including Japan had asked the trade ministry for a transition period for the insurance rules to come into effect. The Japanese embassy did not respond to a written request for comment.