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Tag: Indonesia

  • Retail Sales During Ramadan Signal a Rebound

    Retail Sales During Ramadan Signal a Rebound

    Retail sales in Indonesia increased ahead of the Idul Fitri holiday, hinting of a much-anticipated rebound in private consumption.

    Shopping malls saw crowds of people hunting for discounts on new clothes, jewelry or the latest trends in shoes and handbags ahead of the annual festivity. Housewives have meanwhile been filling their grocery baskets with staples such as beef, chicken and chili, the prices of which have been uncharacteristically low for this time of the year.

    “We expect retail sales to increase by between 20 percent and 25 percent, compared with the Idul Fitri holiday last year,” said Roy Mandey, chairman of the Indonesian Retailers Association (Aprindo).

    Sales growth has been accelerating since January, reversing last year’s downward trend, and reached 3.4 percent in April – the highest in 10 months, according to World Bank data.

    A Bank Indonesia survey also showed the Consumer Confidence Index increasing 2.9 points in May to 125.1 – near its three-year peak. A reading above 100 reflects optimism.

    Consumers started spending more of their incomes, according to the survey. The average income-for-consumption ratio slightly increased to 66.1 percent from 66 percent the previous month, while the income-for-saving ratio declined to 19.6 percent from 20 percent.

    According to Roy, retail sales during Ramadan and the Idul Fitri holiday will contribute around 40 percent to the full-year target. Last year, retail sales only contributed 6 percent to the total in the same period. The average contribution is 15 percent.

    Indofood Sukses Makmur, one of Indonesia’s largest producers of packaged goods and flour, predicts a 10 percent to 12 percent increase in sales during this period.

    “We increased stocks to meet rising demand during the fasting month and holidays that follow it,” Indofood director Taufik Wiraatmadja said on Thursday (07/06). He added that this was done to boost the company’s sales during Ramadan.

    Indofood CBP Sukses Makmur, its subsidiary that produces various branded consumer products such as instant noodles, snacks and dairy products, predicts an 8 percent to 12 percent rise, while Bogasari, its flour producer arm, predicts a 10 percent increase in sales.

    The growth in retail sales is also reflected in advertising spending during Ramadan, which increased 7 percent overall during Ramadan this year, compared with the same period last year.

    Research by Nielsen shows that there was an average of 7 million TV viewers in Indonesia per day during this year’s Ramadan, which is 18.6 percent more compared with other months. People watched TV about five hours 19 minutes on average during Ramadan, compared with four hours and 53 minutes during the non-Ramadan period. The research compared the Ramadan period on May 16-21, with the non-Ramadan period of April 1-7.

    “For online shopping during Ramadan, there is growth in clothing products, food and beverages products, household products and travel-related products,” said Hellen Katherina, executive director of media business at Nielsen Indonesia.

    Signs of a Turnaround

    Ramadan sales usually contribute 15 percent of Indonesian retailers’ annual sales, according to Roy of Aprindo. But last year’s sales were weak and only made up 6 percent of the full-year sales. As a result, retailers saw only 3.65 percent growth in 2017, representing the sector’s worst performance in the past 10 years.

    The positive trend comes as a relief to retailers, who are now confident of reaching between 8 percent and 9 percent growth by the end of this year, Roy said.

    He attributed the spike in retail sales to holiday bonuses and 13th checks received by some 4.3 million civil servants across the country.

    This year, the government allocated Rp 35.76 trillion ($2.56 billion) towards 13th checks and holiday bonuses for civil servants who have not seen pay raises since 2016. Last year’s figure was Rp 23 trillion. The government has also raised its expenditure on social assistance, which includes village funds, cash transfers under the Family Hope Program (PKH) and rice social assistance (Rastra). It has spent Rp 17.9 trillion between January and March, almost a double last year’s figure.

    “While a quarter that includes Ramadan usually fares better than other quarters, Jokowi’s move to increase the allowance for civil servants and expenditure on social programs proves to be a good decision to boost retail sales,” Alfred Nainggolan, a research analyst at brokerage firm Koneksi Kapital said on Sunday, referring to President Joko Widodo by his popular nickname.

    “There will be more momentum to increase it, such as regional elections and the Asian Games, which in turn will further support Indonesia’s economic growth,” Alfred said. The regional elections will be held at the end of June, while the Asian Games will take place in August and September.

    Stable food prices also contributed to consumer confidence, according to Juan Permata Adoe, deputy chairman of strategic foods affairs at the Indonesian Chamber of Commerce and Industry (Kadin).

    The government opened the import market for staple goods and imposed price controls on rice, sugar, meat, packaged cooking oil, and fuel and power to stabilize prices.

    A kilogram of beef sold for Rp 149,300 per kilogram during the last week of Ramadan, virtually unchanged from a month ago, according to National Strategic Food Price Information Center. In the past, it has not been unusual to see a 30 percent jump in commodity food prices during Ramadan and Idul Fitri.

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  • Angkasa Pura Retail opens units at Semarang terminal

    Angkasa Pura Retail opens units at Semarang terminal

    Angkasa Pura Retail has opened two shops at the new Semarang Ahmad Yani International Airport (SRG) in Central Java. The retail subsidiary of state-owned PT Angkasa Pura I has this month extended its retail footprint with two convenience shops spanning a total of 212sq m, one located landside in the public area and another airside post-security. A 135sq m airside gift shop is also set to open in due course.

    In addition, Angkasa Pura Retail will open a 105sq m gifting, souvenir and packaged food outlet at Lombok International Airport (LOP) in the coming months.

    Meanwhile, a 235sq m gift and souvenirs concept at Bali Ngurah Rai International Airport is also timed to open in August at the domestic departure area (gate six).

    ‘FLOATING TERMINAL’

    Last week, Indonesia’s President Joko Widodo inaugurated the ‘floating’ passenger terminal at Semarang, which replaces the previous 6,702sq m structure.

    Spanning 56,652sq m, the IDR 2.075tn ($149m) project has the capacity to handle 6.9m passengers annually, up from the previous 800,000 ceiling.

    According to a PWC Indonesia report earlier this year, Angkasa Pura I President Director Faik Fahmi was quoted as saying the ‘floating’ airport term relates to the fact the terminal is built on soft land, parts of which are submersed by water, using poles and pre-fabricated drainage.

    In a wide-ranging conversation during last month’s TFWA Asia Pacific Exhibition & Conference in Singapore, Angkasa Pura Retail revealed plans to re-map its existing 200sq m Surabaya Duty Free concession at Juanda International Airport, where it also operates a speciality beauty outlet at T2 (Baci) and other retail and F&B units.

    The re-mapping exercise is expected to take place towards the end of the year and is designed to open up space linked to the passenger gates.

    The firm’s merchandise presence at Surabaya includes wines & spirits, tobacco and fashion and accessories. The company is also taking a fresh look at its retail product mix in line with the the spatial re-configuration, with one focus being the development of Indonesian brand Bhumi Tea.

    For last two years, it has also boasted a presence in downtown Jakarta at the Kuningan City shopping mall, trading under the name ‘Ourflock’, but that has now come to an end.

    “The business was not doing very well and closed in August 2017,” confirmed Widya Wiedagdo, Marketing & Business Development Director, Angkasa Pura Retail.

    When asked if there are future plans to re-open in downtown Jakarta, he said: “Not yet, we must take many considerations as there is a lot of competition and the situation is not good for downtown, but the airport business is ok.”

    When asked for his plans this year, Wiedagdo says the objective is to open chocolate confectionery and fashion accessories stores in travel retail, in addition to dedicating more space towards liquor and spirits at Surabaya Airport.

     

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  • Analysing the Increased Online Shopping Consumption During Ramadan 2018

    Analysing the Increased Online Shopping Consumption During Ramadan 2018

    The month of Ramadan is considered as the most sacred period for millions of Muslims in Malaysia & Indonesia. As such, a huge number of people observing the religious period would shift their daily routine to focus on spirituality & contribute to charitable initiatives. This also shifts the way consumers shop in a very significant manner as well.

    Just a few weeks into Ramadan, online shopping consumption increased greatly during the fasting month. This was evident as iPrice Group, a price aggregator platform for hundreds of online merchants in Indonesia & Malaysia experienced double-digits growth in online sessions. Undertaking this study, there are unique consumer insights that only occurs during the month of Ramadan.

    Online Shopping at the Wee Hours of the Morning

    While many Malaysians & Indonesians are awake in the wee hours of the morning for Sahur (pre-dawn meal), they are more likely to shop online as well. Analysis suggests that online traffic at 5:00am increased by 105% in Malaysia & 345% in Indonesia when compared to the same time prior Ramadan. The increase was much higher in Indonesia as the country has the largest Muslim population in the world. This is a continuous trend as seen in our study last year in both Malaysia & Indonesia.

    In Malaysia, the increase in online traffic was much higher when compared to our research last year, where we only saw a 90% increase in online traffic at 5:00am. Indicating an increased interest in online products this year as compared to 2017.

    Evident in both countries was that online traffic during Ramadan was significantly higher when compared to the previous period. Overall online traffic was 11% higher in Malaysia & 30 percent higher in Indonesia. In addition to this, online traffic in both countries experienced a dip in online traffic at 7:00pm in Malaysia & 6:00pm in Indonesia as many prepare to break-fast (Iftar). Online traffic decreased 9% in Malaysia & 4% decrease in Indonesia at these periods. After Terawih prayers online traffic in both countries would resume, reaching its peak at 10:00pm.

    Search Trends for Fashion Products During Ramadan

    Fashion products are among the most sought-after items during Ramadan as millions of Malaysians & Indonesians prepare for the Hari Raya Aidilfitri celebrations. Using Google Trends, we saw that keywords such as “Baju Raya” & “Baju Raya 2018” was among the most popular keywords associated with “Raya” (which is closely associated with the Aidilfitri celebrations) in Malaysia.

    In the country, local brands have been actively showcasing their 2018 Raya collection & deals through various advertising, social media, & marketing campaigns across the country. The three most searched local fashion eCommerce brands in Malaysia during Ramadan were Naelofar Hijab, Fashion Valet & Muslimah Clothing. Towards the end of May 2018, Naelofar Hijab launched the “Shine On” collection which is their #naelofaraya2018 campaign. At this same period, Naelofar Hijab garnered a high volume of search interest between 23 – 30 May2018 indicating a successful campaign that caught the attention of many Malaysians.

    Close in fourth place was Siti Khadijah which garnered a high volume of search interest from Malaysians as well. Siti Khadijah specialises in prayer outfits specifically for women known as telekung. As such, the high level of interest for the eCommerce was no coincidence because many women are dedicating their time to pray during Ramadan.

    In Indonesia, there was high search volume for “gamis” which is a long dress worn by Muslim women along with keywords such as “hijab” & “baju muslim”. These keywords indicate that many Indonesians were looking for inspiration or sources for clothing suitable for their religion activities during the month of Ramadan. In addition to this, there was a high level of interest for “Baju Koko”, which is a fashionable traditional top for men most popularly worn during the Aidilfitri celebrations.

    Other Unique Search Trends Prior Aidilfitri

    Utilising Google Trends, there is also a high search interest for airline ticket promotions in Malaysia & Indonesia before Ramadan. This is in line with local trends since many will be travelling back to their hometown prior Aidilfitri celebrations. Search interest for airline tickets began during the second half of May 2018 which takes place a month before the Aidilfitri celebrations on 15th of June.

    In Malaysia, the most popular keywords & brands associated with “promotion” were “Airasia”, ”Malindo Air” &”Malaysia Airlines”. In Indonesia, inhabitants located in Sumatera, Kalimantan & Sulawesi were most interested in airline ticket promotions as compared to other states. This indicates that inhabitants in these regions were more likely to travel to the Java Islands or to other parts of the country for Aidilfitri.

    Other than airline tickets, the second most popular keyword used in Malaysia were related to groceries & merchandise deals. During Ramadan, there is a high demand for Raya goods such as biscuits, traditional delicacies, & other food stuff. Since these items are usually available at major supermarkets & stores many Malaysians are on the lookout for promotions by major retailers in order to maximise their spending. The top brands associated with the keyword “promotion” were:

    • Aeon
    • Giant
    • Tesco
    • Aeon Big
    • Econsave
    • Mydin
  • Indonesia Tries to Get Companies to Hold More Rupiah to Stem Weakness

    Indonesia Tries to Get Companies to Hold More Rupiah to Stem Weakness

    Over the past couple of decades, Indonesian companies have developed a tried and tested strategy to cope with the periodic plunges in the rupiah: retain dollars to protect their profits.

    But their behavior can add to downward pressure on the currency, exacerbating problems for policymakers in southeast Asia’s biggest economy, especially given its relatively open nature compared to neighbors with more restrictive currency regimes.

    The rupiah has been one of Asia’s worst performing currencies this year and hit its lowest level since late 2015 at one point last week after being caught up in an emerging market selloff.

    Bank Indonesia (BI), the nation’s central bank, has taken various measures to try to boost rupiah use and it is once again prodding firms to sell dollars, but companies surveyed are maintaining US currency holdings and only meeting minimum hedging requirements.

    Many companies say that with a lot of their costs in dollars and their revenue largely in rupiah they can’t risk getting caught by a slide in the local currency. They also point out that hedging can be very expensive.

    Vidjongtius, the president director of Indonesia’s biggest pharmaceutical company, Kalbe Farma, said that every percentage of rupiah depreciation raised its production costs by 0.35 percent.

    Having “cash on hand” dollars has been a strategy for Kalbe for a long time because “hedging with a banking product is relatively more complex and sometimes hard to monitor, plus there is a cost for that,” he said.

    The pharmaceutical industry is particularly exposed to exchange rate risks as its raw materials are mostly imported and it only exports a small part of its production.

    Capital Outflows 

    New BI governor Perry Warjiyo told a media gathering last Wednesday that forcing exporters to keep earnings onshore for longer or making companies convert dollar holdings was not currently an option under Indonesia’s laws.

    That is in contrast to tougher foreign exchange systems in existence in places like Malaysia, which since 2016 has made exporters convert 75 percent of their earnings into ringgit.

    Indonesia is also vulnerable because unlike some countries in the region, it runs a current account deficit. In addition, foreigners own nearly 40 percent of the government’s bonds, so its currency can be hit by outflows from the bond market.

    Warjiyo said there was a misperception among some companies about the cost of hedging and some alarmism over how low the rupiah might go.

    He has pledged to communicate more on hedging and to provide “a rational expectation” of where the rupiah is heading after he cited market talk suggesting it could pass 16,000 per dollar. It currently trades around 13,900.

    Some market participants have began to urge policymakers to reconsider Indonesia’s liberal rules on capital movement.

    In a parliamentary hearing this week, Kartika Wirjoatmodjo, chief executive of Bank Mandiri, one of the largest banks in the country, suggested that after the period of volatility passes, the rules be changed to accommodate some sort of capital management.

    “A softer approach would be to give exporters an incentive. So if they convert [earnings in dollars] to rupiah, maybe the tax on their deposit can be reduced,” he said.

    If BI goes down that kind of road it would be the latest in a series of incremental steps it has taken in recent years to try to pressure companies into embracing the rupiah.

    In 2012, it ordered exporters to receive their payments through local banks, in the hope that some of the money would stay in the country and be converted into rupiah.

    Two years later, the central bank made it mandatory for companies with liabilities in foreign currencies to hedge a quarter of their short-term foreign currency exposure.

    And in 2015, BI moved to enforce rules that mean all domestic transactions should be in rupiah, outlawing, for example, landlords charging rents in dollars.

    But this all clearly isn’t enough to make a big difference.

    And company executives say that hedging doesn’t always make sense.

    Dendy Kurniawan, chief executive of Indonesia AirAsia, which gets about half its revenue in rupiah and half in dollars, said if, for example, the rupiah fell 5 percent and it cost 6 percent to hedge it was pointless to hedge. “It does make more sense if the rupiah falls really deeply,” he said.

    Jahja Setiaatmadja, president director of Indonesia’s Bank Central Asia, said banks typically only took 20 to 25 basis points of profit margin for a simple foreign exchange hedging product, but because it was priced off the rupiah interbank market it could carry a 5.95 percent rate for a one-year contract.

    It’s not only exporters, but also companies with little or no dollar earnings that hold onto the American currency.

    Animal feed company Charoen Pokphand Indonesia, which mainly sells domestically but imports some raw materials, has sought to limit its dollar exposure by buying local corn and limiting its foreign debt, director Ong Mei Sian said.

    The company holds dollar cash in addition to hedging short-term interest payments, though does not fully hedge principal debt and long-term dollar needs, he said.

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  • Net1 Indonesia Available in 10 Exotic Destinations

    Net1 Indonesia Available in 10 Exotic Destinations

    Net1 Indonesia, a 4G LTE mobile data broadband provider, has announced its availability in 10 exotic tourism destinations in Indonesia. This aims to provide sufficient internet access for those who are traveling back to hometown and spending long holiday. By providing 4G LTE service in tourism destinations, especially those in remote area, Net1 Indonesia hopes to help people to share their holiday story and photos through social media.

    The ten destinations covered by Net1 Indonesia are Samosir Island in North Sumatera, Takengon Fresh Sea Lake in Aceh, Tiu Kelep Waterfall in Lombok – West Nusa Tenggara, Tanjung Kelayang Beach in Belitung, Situ Cileunca in Pangalengan – West Java, Tanjung Bira in Bulukumba – South Sulawesi, Bukittinggi in West Sumatra, Gili Trawangan in Lombok, Karimun Jawa Island in Central Java, and Mandalika in West Nusa Tenggara. Some of these destinations have been included in “10 new Bali,” a program released by the government through the Ministry of Tourism.

    “The existence of Net1 Indonesia in those 10 tourism spots with adequate 4G LTE based internet access is to facilitate the travelers and tourists to stay in touch with family and friends, yet still exist in social media. The connection provision in those spots is also reflecting our commitment to support the government programs to boosting the tourism industry through the brand of Wonderful Indonesia,” said Larry Ridwan, Chief Executive Officer of Net1 Indonesia.

    Further, Larry highlights that the availability of internet connection will leverage the tourism spots in order to be noticed and widely known by international publics. Thus, with adequate internet connection, visitors can help to expose and popularize those new destinations.

    “Travelers, especially millennials, cannot be separated from their smartphone and 4G data connections, they will stay exist during their trip to hometown and the whole long holiday. They usually share photos of food or unique tourist spots through social media. In line with this trend, Net1 Indonesia is triggered to expand its coverage in tourism destinations especially in rural areas,” Larry added.

    Net1 Indonesia’s effort to expand the coverage area in tourism destinations is also reflected by conducting digital activity #MauAda4Gdimana from 7 May to 7 July 2018. This digital activity is pursuing the society to be actively involved in voting a certain locations to get covered by Net1 4G LTE services. Participants who are interested in joining this activity can open microsite, then choose the location in the provided column then simply click VOTE.

    The development of destinations in Indonesia has driven investment growth in the tourism sector. According to data from the Investment Coordinating Board (BKPM) of the Republic of Indonesia, the investment in this sector in 2017 has increased by 31 percent, or valued at US$1.7 billion and is targeted to reach US$2 billion by end of this year. Indonesia’s tourism sector is projected to contribute 15 percent of gross domestic product (GDP), valued at IDR280 trillion for foreign exchange with 20 million of foreign tourist arrivals, 275 million of domestic tourists travel and able to absorb 13 million work force by 2019.

    Tourism is mentioned to be one of sectors with potential investment growth this year beside e-commerce. Indonesia’s tourism is considered to be the most sustainable commodity yet reaching to the lowest level of society. This sectors is rapidly growing compared to other leading commodities, among others are oil & gas, coal, and palm oil. Furthermore, the tourism sector will grow more economic centers throughout the country.

    Based on data from The World Economic Forum, Indonesia’s tourism competitiveness is continuously making positive leap from the ranks 70th in 2013 to 50th in 2015. In 2017, Indonesia’s tourism competitiveness index has climbed 8 places to 42th and is targeted to reach the 30th position by 2018.

    Collaborate with Local Governments

    Blessed with natural resources and regional cultures is a motivation for Indonesia to grow the tourism sector by increasing tourists visits, both from domestic and foreign. The local governments, starting from province to the lower level, districts and cities, are having the same spirit to develop tourism destinations in their regions. They aim to reach the target of 17 million foreign tourists visit this year and will increase to 20 million tourists by 2019.

    The commitment of Net1 Indonesia to support the tourism program, especially in the provision of 4G LTE broadband data access is reflected by the cooperation with a number of local governments ranging from City, District, to Province in Indonesia. So far, Musi Banyuasin Regency (MuBa), West Halmahera Regency, Talaud Islands Regency, Tual City, Siau Tagulandang Islands District Biaro (Sitaro), Sangihe Islands Regency, Bintuni Bay District and Kaimana Regency have signed Memorandum of Understanding with Net1 Indonesia to build 4G LTE-based communications infrastructure, including in tourism destinations.

    The characteristics of 450 MHz low frequency, which able to reach wide coverage than the higher bands, is providing benefits for Net1 Indonesia and the local government when they have to build telecommunication infrastructure such as Base Transceiver Station (BTS) as Net1 Indonesia only need one BTS to cover radius 100 kilometers area. Another advantage of the 4G LTE 450 MHz technology is its ability to support the launch of machine-to-machine (M2M) communication services in rural settings, such as video surveillance, telemetry, and tracking.

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  • Indonesia’s Annual Inflation Rate Slows in May

    Indonesia’s Annual Inflation Rate Slows in May

    Indonesia’s annual inflation rate slowed in May as the increase in food prices remained modest despite rising demand during the Muslim fasting month of Ramadan, data from the Central Statistics Agency showed on Monday (04/06).

    The headline consumer price index (CPI) in May rose 3.23 percent from a year ago, slightly below the median forecast in a Reuters poll, which had expected a rate of 3.28 percent. April’s annual rate was 3.41 percent.

    On a monthly basis, consumer price rose 0.21 percent.

    The annual and monthly rates were unusually low for inflation during Ramadan, which was a “delightful news” for authorities seeking to keep inflation under control, said Suhariyanto, the head of the statistics agency.

    However, the annual core inflation rate, which excludes government-controlled and volatile food prices and was more affected by the rupiah currency’s weakness, rose to 2.75 percent in May, from April’s 2.69 percent. The poll had expected a rate of 2.73 percent.

    Bank Indonesia targets inflation at 2.5-4.5 percent this year.

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  • World Bank Cuts 2018 Growth Forecast for Indonesia

    World Bank Cuts 2018 Growth Forecast for Indonesia

    The World Bank has cut its growth forecast for the Indonesian economy for this year to 5.2 percent from the 5.3 percent projected in March, amid volatile global financial conditions that have forced the central bank to tighten monetary policy.

    The Central Statistics Agency (BPS) said the Indonesian economy grew 5.06 percent year-on-year in the first quarter, far lower than the 5.4 percent target in the 2018 state budget, mainly due to household consumption, which remained stagnant.

    The projection by the Washington-based lender is in line with that by the Asian Development Bank and International Monetary Fund, which predict that the country’s economy will likely expand by 5.2 percent.

    “There is elevation of volatility in the global market starting in February, which put a lot of pressure on emerging markets, including Indonesia. So the first quarter was not as strong as we had expected,” Frederico Gil Sander, World Bank lead country economist for Indonesia, said.

    The rupiah dropped to a low of 14,202 against the US dollar last month – the weakest level since 2015 – amid a massive selloff on the Indonesian Stock Exchange (IDX) as global investors moved their capital into higher-yielding assets in the United States. The 2018 state budget assumes a rupiah exchange rate of 13.400 to the dollar.

    Foreign investors, who largely hold the most liquid assets on the IDX, have sold Rp 38.5 trillion ($2.9 billion) worth of stocks between January and May, which is only Rp 2 trillion short of the total for all of last year.

    In its first since November 2014, Bank Indonesia hiked its benchmark interest rate twice in two weeks last month to support the currency and stem capital outflows.

    However, there are fears that an early rate hike may lower spending by consumers and businesses as it makes lending more expensive. Growth in private consumption, which accounts for half of Indonesia’s economy, remained stuck at 5 percent in the first quarter.

    “We think consumption has stabilized at around 5 percent, and while it is not slow, some efforts are needed by the government to accelerate consumption,” said Sander, who was previously based in India.

    However, Indonesia is benefiting from rising commodity prices, including coal, one of the country’s key exports, which rose 25.6 percent on average in the first quarter. Indonesia’s coal benchmark, or HBA, was set at a six-year high of $101.86 in March.

    Last month, oil prices also hit their highest levels since November 2014, reaching almost $78 a barrel for global benchmark Brent crude.

    The higher commodity prices saw more investment, especially in machinery, equipment and vehicles. According to the Investment Coordinating Board (BKPM), Indonesia attracted Rp 185.3 trillion in investment between January and March, which was 11.8 percent higher than the same period last year. Of this, Rp 108.9 trillion was foreign direct investment, excluding banking and the oil and gas sector.

    The BKPM has set a total investment target of Rp 765 trillion for this year, which represents a 10.4 percent increase from last year. Rp 477.4 of this is foreign direct investment.

    The rise in investment increased import growth to 19.5 percent in the first quarter, compared with exports, which increased by 10.2 percent.

    Total imports reached $44 billion between January and March, with raw materials amounting to $32 billion, followed by capital goods and consumer goods, BPS data shows.

    Indonesia recorded a trade deficit for three months in a row between December and February, which swung to a surplus in March before returning to a deficit in April.

    Government consumption rose 12.9 percent in the first quarter – the fastest pace since 2016 – due to increased spending on social assistance, such as the Family Hope Program (PKH), which is aimed at reducing poverty and inequality. The cash transfer program is targeting 10 million of the country’s poorest families this year.

    According to Sander, the government’s infrastructure push, aimed at closing the gap between urban and rural areas, must continue while it should also work to improve the quality of human capital, including raising skill levels in the labor force to increase productivity.

    President Joko “Jokowi” Widodo’s administration has spent around Rp 905 trillion on infrastructure projects across the archipelago between 2015 and 2017, while the government has allocated a fifth of its budget, or Rp 1,167 trillion, to education in the same period.

    Finance Minister Sri Mulyani Indrawati last month predicted that the Indonesian economy would grow between 5.17 percent and 5.4 percent this year, while, Bank Indonesia predicted a growth rate of between 5.1 percent and 5.5 percent.

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  • H&M and Gap to Probe Violence, Sex Abuse in Asian Factories

    H&M and Gap to Probe Violence, Sex Abuse in Asian Factories

    Fashion giants H&M and Gap vowed on Tuesday (05/06) to investigate reports that Asian garment workers who supply their high-street stores routinely face sex abuse, harassment and violence.

    Based on interviews with some 550 workers in 53 H&M and Gap supplier factories in Bangladesh, Cambodia, India, Indonesia and Sri Lanka, rights groups said women were at “daily risk” of violence and faced retaliation if they reported the attacks.

    The coalition has investigated the factories for several years as efforts mount to push Western brands into improving safety along their supply chains and render them slave-free.

    Clothes stitched by low-paid Asian workers – part of a complex global supply chain – end up on high-priced Western high streets, with some 4,750 H&M stores located in 69 countries and about 3,700 Gap shops operating in about 90 nations.

    Sweden’s H&M — the world’s No. 2 clothes group after Zara owner Inditex — said it would review the findings of the recent report by the civil society groups and unions.

    “We will go through every section of the report and follow up on [a] factory level with our local teams based in each production country,” a company spokesman said in a statement.

    “All forms of abuse or harassment are against everything that H&M group stands for.”

    US retailer Gap said it was “deeply concerned about the troubling allegations raised by this report.”

    “Our global team is currently conducting our due diligence to investigate and address these issues,” a spokeswoman said.

    The charities said they had found widespread sex harassment, verbal and physical abuse – such as slapping – and threats of retaliation when women refused sexual advances from bosses.

    Forced Labor

    A separate report published last month by the coalition of rights groups found similar abuse of women at supplier factories in Asia for US-based Walmart, the world’s largest retailer.

    Walmart said last month that it was reviewing the “concerning” accounts cited in the report.

    The Ethical Trading Initiative (ETI), a group of trade unions, firms and charities of which both Gap and H&M are members, said it expected the retailers to work with the suppliers to ensure that women have swift access to remedy.

    “These allegations are deeply concerning,” said Debbie Coulter of the ETI. “Gender-based violence is unacceptable under any circumstances, and brands need to make sure that women working in their supply chain are protected.”

    Campaigners told the Thomson Reuters Foundation last month that the level of pressure and harassment faced by the workers in the three separate reports was approaching forced labour.

    “Any time you have retaliation against workers, and coercion and control … you are coming close to the line of forced labour,” Jennifer Rosenbaum of Global Labor Justice, a network of worker and migrant organizations, said last month.

    The reports have been published amid meetings hosted by the United Nations’ International Labor Organization to work on the first global convention against workplace harassment after the #MeToo campaign thrust the issue into the spotlight.

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  • Indonesia Gov’t to Foot Rising Fuel and Electricity Subsidy Bills

    Indonesia Gov’t to Foot Rising Fuel and Electricity Subsidy Bills

    The government has reiterated its commitment to keep fuel and electricity prices steady this year, amid rising global oil prices and the recent strengthening of the US dollar.

    State Enterprises Minister Rini Soemarno said the government will continue to subsidize diesel fuel at the current rate, which is four times higher than planned in the state budget. The government will also increase its subsidies for electricity.

    “Diesel was subsidized Rp 500 [a liter] by the government. Now it is Rp 1,500 and it will be Rp 2,000. It is covered from the current state budget,” the minister said over the weekend.

    According to her deputy, Harry Fajar Sampurno, the government’s diesel fuel quota is 16.23 million kiloliters for this year, which means the subsidies will cost Rp 32 trillion ($2.3 billion).

    The government will discuss the increase with House of Representatives Commission VII, which oversees the energy sector.

    It was previously planned to keep fuel and electricity prices stable until the end of 2019, but pressure is mounting to increase them, as crude oil prices are now nearly 50 percent higher than the government’s initial forecast of $48 a barrel.

    President Joko “Jokowi” Widodo, who is preparing to run for a second term next year, went as far as to support consumer purchasing power by raising energy subsidies to $588 million to keep fuel and electricity cheap until the end of 2019.

    Household consumption, which accounts for half of Indonesia’s economy, has been subdued over the past few years as Jokowi opted to divert money previously used for energy subsidies toward infrastructure development.

    The government spent Rp 98 trillion on energy subsidies last year, compared with Rp 342 trillion in 2014. State spending on infrastructure has meanwhile increased by more than 80 percent to Rp 376 trillion in the same period.

    Last month, oil prices spiked after the United States announced plans to impose new sanctions on Iran, a major exporter. The announcement resulted in oil prices hitting their highest levels since November 2014, with Brent crude futures at $77.90 and US West Texas Intermediate at $71.80 a barrel.

    Meanwhile, the rupiah traded at an average rate of 13,713 versus the dollar, compared with the initial forecast of 13,400, according to central bank data. Bank Indonesia governor Perry Warjiyo said the central bank expects a rupiah exchange rate of between 13,800 and 14,100 to the dollar for the remainder of this year and next year.

    Although higher oil prices and the weaker exchange rate will likely boost state revenue from oil and gas, they will also increase energy subsidies, especially for electricity and liquefied petroleum gas.

    The decision to maintain fuel and electricity prices is also intended to avoid undue pressure on the 2018 state budget, while at the same time limiting the budget deficit to 2.19 percent of gross domestic product.

    The government aims to keep the budget deficit at Rp 325.9 trillion, or 2.19 percent of GDP for the full year, compared with last year’s Rp 336.4 trillion, which amounted to 2.48 percent of GDP.

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  • Most SE Asian stocks gain; Singapore, Indonesia up nearly 1 percent

    Most SE Asian stocks gain; Singapore, Indonesia up nearly 1 percent

    Most Southeast Asian stock markets rose on Monday, with Singapore gaining nearly 1 percent as upbeat sentiment following positive U.S. jobs data pushed global equities higher.

    Asia ex-Japan shares rose 1 percent to their highest level since May 17.

    Data on Friday showed that U.S. job growth accelerated in May and unemployment rate dropped to an 18-year low.

    “We are following the bullish sentiment on Friday on U.S. after job data,” said Linus Loo, Head of research at Lim & Tan Securities.

    “Because we (South-east Asia) are export-driven, especially Singapore, we tend to track the U.S.,” he added.

    Singapore shares rose 0.9 percent in early trade. Financials drove gains, as heavyweights DBS Group Holdings and Oversea-Chinese Banking Corp gained 1.2 percent each.

    Indonesian shares rose 0.8 percent led by financials and telecommunication stocks.

    Indonesia’s annual inflation rate in May was 3.41 percent, slightly below the median forecast of 3.28 percent in a Reuters poll, data from the statistics bureau showed on Monday.

    An index of the country’s 45 most liquid stocks rose about 1.3 percent.

    Vietnam stocks rose as much as 0.9 percent, as materials and industrials extended gains from last week. Vietjet Aviation climbed nearly 7 percent while Vietcombank rose as much as 2.5 percent.

    Meanwhile, Philippine shares fell 0.9 percent, dragged lower by industrial on caution ahead of inflation data due on Tuesday.

    Philippine inflation likely accelerated for the fifth straight month in May, a Reuterspoll showed, but analysts were divided over when the central bank will again raise interest rates.

    Aboitiz Equity Ventures slumped 3.8 percent while SM Investments Corp fell 2.7 percent.

    Malaysian and Thai shares were largely unchanged in early trade.

  • Lippo Group Indonesia Opens Matahari Department Store’s 155th Outlet

    Lippo Group Indonesia Opens Matahari Department Store’s 155th Outlet

    Residents of Cilegon in Banten Province, Indonesia, responded enthusiastically to the opening of Matahari Department Store’s 155th outlet on Friday (01/06).

    In addition to being strategically located in the central business district, the 5,700-square-meter store inside the 67,000 square-meter Cilegon Center shopping mall also boasts a modern design.

    The first day of trading saw extraordinary sales, as more than 30,000 customers flooded the new outlet, said Irwin Abuthan, director at Matahari Department Store.

    “It was an extraordinary day. The turnout was fantastic. The store and mall will bring great added value and benefit to the city of Cilegon and surrounding areas,” Irwin said.

    Matahari Department Store, Hypermart, Matahari Supermarket, Foodmart, Primo, Boston Health & Beauty and Books & Beyond are all controlled by the Lippo Group, Indonesia’s largest multi-format retail group with more than 600 outlets spread out across Indonesia, from Aceh to Papua.

    This vast retail network is supported by a robust system comprised of formidable logistical networks and distribution channels.

    The Lippo Group owns and operates 70 shopping malls in Indonesia, making it the country’s largest.

    The image of the opening can be viewed below (3 images) :

  • Indonesia’s Coffee Retail Market Shows Lots of Promise

    Indonesia’s Coffee Retail Market Shows Lots of Promise

    Indonesia is one of the world’s biggest coffee retail markets by volume, driven by increasing domestic demand, according to the result of a recent study by global market intelligence agency Mintel, released on Thursday (31/05).

    The United of States, with 607,000 metric tons, is the world’s biggest, followed by Brazil (425,000 tons), Germany (424,000 tons), Japan (304,000 tons) and Indonesia (268,000 tons).

    The research also estimates that the compound annual growth rate in the coffee retail market in Indonesia will likely rise by 11.4 percent between 2017 and 2021, making it the world’s fastest-growing coffee retail market among a list of countries that includes Vietnam, ranked second at 9.2 percent, followed by Turkey (6.8 percent), the Philippines (6.7 percent) and Mexico (6.1 percent).

    “Coffee culture has surged in Asia with more and more specialty coffee houses setting up shop in countries like Japan, Singapore and Indonesia. Big-brand coffee chains are also increasing their expansion efforts in the region,” Jonny Forsyth, associate director at Mintel Food & Drink, said in a statement.

    The number of specialty coffee outlets and chain-store coffee shops in Indonesia has doubled to 1,025 and 1,083 respectively, between 2012 and 2016, with most of the new outlets in Jakarta, according to data compiled by research group Euromonitor.

    Since United States-based coffee giant Starbucks entered Indonesia in 2002, it has expanded to 22 cities with around 240 stores across the archipelago.

    According to data compiled by the International Coffee Organization, coffee consumption in Indonesia, the world’s fourth-largest coffee producer, surged to 276,000 tons in 2016 from only 108,000 tons in 2000.

    The Mintel study also showed strong growth in single-serve coffee in emerging Asian markets, thanks to rapid economic growth and urbanization, unlike more developed countries.

    In an annual report by Mintel released last year, Indonesia was ranked as the world’s fastest-growing consumer of packaged coffee, including instant coffee, ready-to-drink coffee and coffee in pods or capsules, between 2011 and 2016.

    “Asia’s emerging markets have led global coffee growth in years past and will continue with Indonesia leading this charge,” Forsyth said.

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  • Courts Malaysia hurts Asia performance

    Courts Malaysia hurts Asia performance

    Regulation changes in Malaysia dragged down both revenue and profits for Southeast Asian electrical, IT and furniture retailer Courts Asia.

    For the year to March 31, Courts Asia had a 3.7 per cent dip in revenue to SG$713.1 million (US$532.5 million). Profits slipped to $8.1 million from $23.7 million.

    Meanwhile, distribution and marketing expenses “remained relatively stable” at $56.5 million, or 7.9 per cent of revenue, the group says.

    Revenue from Malaysia, which contributed to 26.2 per cent of total turnover, slid 15.4 per cent on a year-on-year basis. This was mainly because of lower sales of goods and earned service charge income, says the group.

    Courts Asia executive director/group CEO Terence Donald O’Connor says the company faced headwinds in Malaysia following the introduction of the Consumer Protection (Credit Sale) Regulations 2017. This saw interest rates being capped at 15 per cent a year along with new compliance processes that led to a revenue drop.

    “The fall in revenue, coupled with an increased credit cost and a more prudent credit-sanctioning approach in Malaysia, affected our profitability,” says O’Connor.

    Taskforce

    As a result, Courts Asia has formed a transformation taskforce to look into business processes with the objective of driving productivity in Malaysia.

    Meanwhile, seven underperforming stores have been closed, ending with a footprint of 63 outlets. Other key actions taken in Malaysia include deploying a regional credit taskforce comprising executives with “specialised credit collections and marketing skill sets”.

    “While we agree that consumer sentiment has lifted with the changes sweeping through Malaysia, it will take time for it to filter through to discretionary spending,” says O’Connor. Initiatives such as zero rating GST from 6 per cent from today have been welcomed.

    In Singapore, Courts Asia’s performance remained strong at $25.2 million, the company says. Revenue from Singapore accounted for 69.9 per cent of the group’s top line, and increased 1.5 per cent. This was underscored by improved sales and follows an increased focus on driving an omni-channel approach with the relaunch of its online platform and the re-opening of Courts Megastore at Tampines in November.

    As part of its move toward offering furniture for the modern home, Courts Asia has refreshed its furniture range leading up to the Hari Raya festive season.

    For Indonesia, the group achieved 13.7 per cent growth in revenue in rupiah, thanks mainly to new stores. After “prudently widening its footprint”, Courts Asia now has 32 locations across the Jakarta region, including nine stores and 23 pop-ups.

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  • Indonesia Central Bank Raises Key Rate to Aid Rupiah, Flags Chance of More Hikes

    Indonesia Central Bank Raises Key Rate to Aid Rupiah, Flags Chance of More Hikes

    Indonesia’s central bank raised its benchmark interest rate for the second time in two weeks on Wednesday (30/05) and flagged more possible hikes as it escalated a battle to boost the fragile rupiah and contain capital outflows.

    Newly appointed Bank Indonesia Governor Perry Warjiyo pledged more action to promote financial and economic stability to bolster Indonesian assets amid an emerging market sell-off.

    The central bank “will continue to calibrate global and domestic market developments to utilize room for further rate hikes in a measured way,” Perry said after a meeting.

    On May 25, one day after being sworn in for a five-year term, Perry called Wednesday’s off-cycle meeting. On May 17, Bank Indonesia raised its key rate by 25 basis points to shore up the rupiah, then trading at its weakest since October 2015. Perry said the additional meeting was needed as a “pre-emptive, front-loading and ahead of the curve step” in response to expectations of higher US interest rates, which could push US Treasury yields higher.

    Rahul Bajoria, an economist for Barclays in Singapore, said the two hikes in two weeks “very forcefully signals to the market that the new governor is very serious about maintaining financial stability, and the institution is willing to be pre-emptive in managing risks that are emanating largely from external drivers.”

    Currency First

    Stephen Innes, head of Asia-Pacific currency trading at Oanda, said Wednesday’s decision showed “currency first and nothing else really matters.”

    The governor said Bank Indonesia will discuss loosening its “macroprudential” rules at its meeting in late June, and new ones should be released “soon.” He earlier said the central bank is looking at housing mortgages, but he did not give any details.

    In 2016 and 2017, Bank Indonesia cut its benchmark rate by a total of 200 bps in a bid to boost sluggish lending and economic growth.

    Perry said he expects loan growth to reach 12 percent at the end of 2018 compared with a year earlier. During much of 2017 and until April this year, annual loan growth was in single digits. April’s growth rate was 8.9 percent.

    With loan growth low and consumption weak, Indonesia’s annual economic growth has been stuck at about 5 percent.

    On Monday, Finance Minister Sri Mulyani Indrawati said: “We are ready to take any kind of policy to support Indonesia’s economy,” adding that if short-term measures mean slightly lower growth, “then that consequence has to be accepted.”

    The government has a 2018 growth target of 5.4 percent. Bank Indonesia said on Wednesday that it still expects expansion of 5.2 percent, better than last year’s 5.07 percent.

    Sound Key Indicators

    The rupiah, one of the worst performers among Asian currencies this year, barely moved following the rate announcement. It was trading at about 13,985 per dollar at the time it was made.

    Sri Mulyani and other senior officials on Monday sought to shore up confidence in Southeast Asia’s biggest economy at a time Indonesia, like other emerging markets, has seen an outflow of funds as US assets become more attractive due to rising interest rates.

    Key economic indicators are sound, Perry said, noting that the annual inflation rate is seen at 3.6 percent at the end of 2018, while the current-account deficit is expected to below 2.5 percent of gross domestic product, which Bank Indonesia considered “healthy.”

    Harry Su, managing director at financial research firm Samuel International, said the central bank “is now doing more proactive and forward-looking policy, particularly with regard to a possible higher current-account deficit, as well as inflationary pressure stemming from the current higher oil price environment.”

    All but one of 18 analysts in a Reuters poll expected Bank Indonesia to raise the key rate on Wednesday.

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  • Most SE Asian markets fall; Malaysia down for 5th session in six

    Most SE Asian markets fall; Malaysia down for 5th session in six

    Most Southeast Asian stock markets fell on Monday, with Malaysia declining for a fifth session in six, while Indonesia extended gains on the back of financial and infrastructure stocks.

    “There are lots of pitfalls that could sideswipe the markets,” said Stephen Innes, head of trading APAC at Oanda, referring to the U.S.-China trade issues, N.Korea-U.S. summit and strong U.S. dollar.

    U.S. oil futures hit six-week lows on expectations major producers may ease output curbs, while Asian stocks and U.S. share futures gained on signs the United States and North Korea were still working towards holding a summit.

    In Malaysia, trading services firms including IHH Healthcare and Sime Darby were among the top losers. IHH Healthcare fell as much as 4.8 percent and Sime Darby plunged 9 percent on disappointing quarterly results.

    Vietnam shares fell as much as 2.9 percent to a more than five-month low. Vinhomes JSC declined 5.5 percent and Vietnam Prosperity Joint Stock Commercial Bank fell 5 percent.

    Indonesian shares climbed as much as 1.4 percent and were headed for a fifth straight session of gains. Bank Mandiri (Persero) Tbk PT rose 5 percent and Bank Central Asia Tbk PT climbed 1.1 percent.

    The central bank said on Friday that it would hold an additional meeting of its board of governors on Wednesday to discuss economic and monetary conditions.

    “We suspect that the persistent selloff in the rupiah and upward pressures on local government bond yields (despite the recent 25bps rate hike) may prompt further action,” DBS said in a note.

    “Further BI rate hikes may be needed, with the next one possibly as early as this week.”