Local e-commerce company Bukalapak is not worried about Chinese giant Alibaba’s plan to expand into Indonesia as local players can still compete with foreign ones, the company’s co-founder said.
Bukalapak co-founder and chief financial officer Muhammad Fajrin Rasyid said that unlike social media, which adopted a general model for their users worldwide, e-commerce business models needed a so-called “local touch”. This was because customers’ preferences for goods, methods of payment and logistic systems were different in each country, he went on.
“Our customers mainly buy ‘local goods’ such as sambal [traditional hot relish] and they prefer to use cash on delivery as a method of payment. We must understand things like this,” Fajrin said at a Centre for Strategic and International Studies (CSIS) seminar on the digital economy in Jakarta on Monday.
He further said that some foreign e-commerce companies had fallen victim to their own poor understanding of local customs. Japanese online market Rakuten Belanja Online closed in March while German-backed online delivery service Foodpanda Indonesia was shuttered on Oct. 3.
“We are sure our customer to customer [C2C] model is still suitable for Indonesia. We have 1 million sellers and our mobile apps have the highest rate by users compared to other e-commerce companies,” Fajrin said.
During the event, Investment Coordinating Board (BKPM) deputy of investment planning Tamba Parulian Hutapea confirmed that Chinese tech giant Alibaba would enter the Indonesian market soon. The company has bought German e-commerce company Lazada and plans to use the latter’s resources in Indonesia to make entry into its market.
Twenty of Indonesias food and beverage companies from around the country have displayed their products at Salon International de Lalimentation (SIAL) in Paris, France.
The Industry Ministry of Indonesia has assisted these companies in displaying the diversity of Indonesia’s leading products, ranging from coffee, soft drinks, processed oil, health drinks, snacks, biscuits, instant noodles, processed fruit and processed fish, as well as organic foods, said Secretary of the Directorate General of Agro Industry of Industry Ministry, Enny Ratnaningtyas, in a press release received here on Tuesday.
The Indonesian companies reflect the competitiveness of Agro products from Indonesia in international markets, as well as opening opportunities for broadening export markets.
According to Enny, the SIAL Paris 2016 event will bring Indonesian food and beverage products to the European community, as well as the world, due to the attendance by businessmen and visitors from many foreign countries.
“Moreover, the SIAL Paris 2016 exhibitors can interact with all potential buyers from Europe and Asia, as well as visitors from around the world who will be present at this exhibition,” said Enny.
Enny also said the twenty companies will be located in the Indonesian pavilion, in Hall 4 booth 4M138 at the Paris-Nord Villepinte.
The booth is located close to the Indonesian Trade Promotion Center of Lyon.
Separately, Director General of the Ministry of Industry Panggah Ago Susanto noted that the nation’s food and beverage industry has been able to excel in both the domestic and global markets.
This is reflected in its positive performance, such as in 2015, which accounted for 30.84 percent of the GDP of the non-oil processing industry and 5.61 percent of the national GDP.
Meanwhile, the export value of Indonesian food and beverage products in 2015 amounted to 26.539 billion US dollars.
“Special food and drink exports to France in 2015 reached 34.5 million US dollars, or 0.13 percent of the total exports of food and beverage products to the world,” said Panggah.
The Communication and Informatics Minister Rudiantara said that his office and the finance ministry are working to collect tax search engine, Google. “I support the effort. We will not give up,” he told Tempo in Pontianak, West Kalimantan on Tuesday, October 18, 2016.
Rudiantara said he has no idea why Google tends to avoid paying taxes. “I do not know why. They choose not to pay their duties,” he said
The minister added that Indonesia has sent a letter to Google, stating that all businesses in Indonesia are subject to taxes.
“I told Google, if they plan to reach a settlement, we can talk this out,” said Rudiantara.
Google has not registered as a corporate in Indonesia, although it reaps profit in Indonesia. It has also refused to pay taxes in the past five years worth Rp5.5 trillion.
Shopper-engagement platform Sprooki will launch in Indonesia next month at the 125,000 sqm Supermal Karawaci retail precinct in western Jakarta.
It will be integrated with the precinct’s touchpoints and mobile apps, allowing retailers to offer customers individualised content such as vouchers, special offers, event alerts and store information.
Sprooki Michael Gethen and Claire Mula
Customers will be able to share content on social media including Facebook, which has more than 60 million users in Indonesia. Sprooki is available in both English and Bahasa languages.
Based in Singapore, Sprooki uses customer location, profile and behaviour data to help retail outlets, shopping malls and department stores engage with their customers via smartphones and other devices.
Supermal Karawaci is the largest shopping centre in Banten province, west of Jakarta, with more than 1000 stores, three cinemas and the largest Timezone arcade in Southeast Asia – complete with an indoor rollercoaster.
Sprooki CEO/co-founder Michael Gethen says the deployment will help Supermal Karawaci’s retail tenants improve sales and give the mall unprecedented insight into shopper habits and behaviour.
“By implementing the Sprooki platform, our mall will be one of the first shopping precincts in Indonesia to incorporate a data-driven mobile platform to improve shopper experience,” says Supermal Karawaci marketing and leasing GM Pipih Tjandra.
Sprooki’s mobile platform is already being used by Southeast Asian shopping malls such as a Lend Lease’s 313@Somserset in Singapore and Crescent Mall in Ho Chi Minh City, Vietnam, as well as thousands of retailers and major brands such as Coffee Bean and Tea Leaf, Forever 21, Gap, GNC, Marks & Spencer and Pie Face.
State-owned railway company PT Kereta Api Indonesia (KAI) has offered at least 600 old train cars to Myanmar.
“We have about 600 20-year-old cars. They can run up to 60 kilometers per hour. But they need to be reconditioned,” KAI director of logistics and development Budi Noviantoro said in Yogyakarta.
Budi explained that his company has sent a technical team to Myanmar to conduct a survey. As the company purchased new cars from General Electric, PT KAI had no longer used the old cars for its operations.
The Myanmar Ambassador to Indonesia has offered PT KAI to operate the country’s railway, reflecting a cooperation commitment to realize the mass transportation project.
“Myanmar has had trains. But the speed is limited only to 30 kilometers per hour,” Budi said.
Budi pointed out Myanmar has a huge potential in the railway sector, but the government could not yet optimize the potential, as the situation in the country has just been stabilized.
In addition, KAI has also discussed a cross-border railway project, connecting Kunming, Vietnam, Thailand, Malaysia and Indonesia. Delegations of six ASEAN countries, including Myanmar are currently meeting in Yogyakarta to discuss the cross-border railway project.
KAI president director Edi Sukmoro said that the cross-border railway network can be realized since railway transportation is the most important part in the ASEAN Economic Community era.
“In Europe, a car can be transported by a Ferry. In the future, Indonesia can have this,” he said.
The government will build and revitalize 1,000 traditional market centers in 2017 at a total cost of Rp3.7 trillion Fund.
The Trade Ministry would build and revitalize 272 of the markets with the Aid Task Fund and 52 carry over project from 2016, Trade Minister Enggartiasto Lukita said.
The remaining 728 units would be built and revitalized with the Special Allocation Fund (DAK) and fund from the Ministry of Cooperatives and Small and Medium Enterprises..
Enggartiasto said the trade ministry had carry over projects to be implemented in 2017 was as a result of the cut in the budget for all ministries and government agencies including the trade ministry.
“We will give priority to development of small traditional markets . The development and revitalization program would follow standardization of market and system of management,” he said.
With the system the markets would be well maintained, he added.
“Currently the traders pay fee but there is no accountability of the fee from the market management. The market management charges fee but the fund is not used to improve the service and for the maintenance of the market,” the minister said.
In 2015, the government plans to build and revitalize 1,017 traditional market centers, including 182 units to be financed with TP fund, 770 units with DAK and 65 units with fund from the the Ministry of Cooperatives and Small and Medium Enterprises.
Implementation of the plan in 2016 reached 99 percent with 1,002 units of market built and revitalized.
In 2016, development of traditional markets with TP fund, 168 units with a budget of Rp1.46 trillion and 710 units within DAK of Rp1.006 trillion.
Garuda Indonesia has issued a ban on the Samsung Galaxy Note 7 for all its flights starting from Monday due to safety issues.
This move ensues the recent ban by US Department of Transportation on the device, including its recalled and replaced units, after reports of the smartphone catching fire.
Garuda Indonesia VP corporate communications Benny S. Butarbutar said in a press release Monday that passengers in possession of a Samsung Galaxy Note 7 would not be permitted to board the aircraft. Bringing the device through carry on baggage, checked-in luggage, or cargo was also strictly prohibited.
This is the second ban issued by the airline regarding Samsung Galaxy Note 7. In early September, it banned the use of the device during flights as well as warned passengers not to charge the battery or store the smartphone in checked baggage.
Samsung has already been forced to recall more than 2.5 million devices due to faulty batteries. The company has instructed users to “power down and stop using the device”, and announced the permanent end of its production last week.
BlackBerry’s decision to license software and outsource handset production globally represents a win for the Canadian company’s biggest market, Indonesia, which is seeking a larger share of the smartphone value chain.
BlackBerry’s new venture signed last month with an affiliate of PT Telekomunikasi Indonesia, the country’s largest wireless carrier, will see its Indonesian partner produce, promote and distribute all BlackBerry-brand devices in Indonesia.
The venture comes as international phone vendors gear up to comply with the latest “made in Indonesia” regulations to tap growth in what is poised to become the world’s fourth-largest smartphone market by 2020, with total annual sales of nearly $US1 billion ($1.31bn) by then, according to research firm Euromonitor International.
Adopted in July, the latest rules give producers more options when it comes to meeting next year’s 30 per cent quota for “local content” — which previously focused on local manufacturing but can now include software or investment — in their 4G-enabled tablets and smartphones sold in Indonesia, up from 20 per cent this year. The requirement will rise to 40 per cent in 2018.
BlackBerry’s joint venture was “created in support of the Indonesian government’s effort to promote manufacturing of locally sourced products”, said Ralph Pini, general manager of devices at the Waterloo, Ontario-based firm, which said last month it would stop making phones and focus on software.
Indonesia is a crucial market for BlackBerry. Its BBM messaging service is the top messaging platform in the country of 250 million people with nearly 60 million monthly active users as of June, BlackBerry said. WhatsApp and Facebook Messenger trail with about 50 million active users for each app, according to estimates from Britain-based social media consultancy We Are Social.
In 2012, Indonesia introduced regulations requiring importers of mobile phones to set up assembly plants in the country by the end of 2015. In September 2014, the government issued regulations requiring all 4G devices sold in Indonesia to include at least 30 per cent locally-sourced components by 2017.
Analysts say the more-flexible regulations passed in July make it easier for handset makers to meet requirements, given that they allow the quota to be reached via other options in addition to manufacturing.
The value of imports in September, which amounted to US$11.30 billion, has dropped by 8.78 percent compared with the previous month, which was US$12.38 billion, the Central Bureau of Statistics (BPS) has said.
“Indonesias imports in September 2016 amount to US$11.30 billion, down 8.78 percent from August, or down 2.26 percent if compared to September 2015,” BPS chief Suhariyanto said at a press conference in Jakarta on Monday.
Suhariyanto said non-oil-gas imports in September were valued at US$9.55 billion, down 9.77 percent compared to the previous month. Compared to September 2015, these imports dropped by 0.95 percent.
Oil and gas imports in September stood at US$ US$1.74 billion, down 2.97 percent compared to the previous month, and down 8.88 percent compared to last September.
In September, cereal commodities such as wheat touched the highest value in import items at US$39.0 million, or 19.17 percent, while the steepest drop was in the machinery and mechanical equipment category, whose value was US$98.9 million or 5.17 percent.
The cumulative value of imports from January to September crossed US$98.69 billion, down 8.61 percent compared to the same period last year. The cumulative value of oil and gas imports was US$13.74 billion, down 29.19 percent; non-oil imports were valued at US$84.95 billion, down 4.10 percent.
The top three countries for non-oil imports in the January-September period were China with a value of US$21.99 billion, or 25.88 percent; Japan with US$9.48 billion, or 11.16 percent; and Thailand with US$6.64 billion or 7.81 percent. “Non-oil imports from ASEAN countries touched 21.82 percent, while from the European Union it was 9.17 percent,” Suhariyanto said.
The import values of auxiliary raw materials from January to September decreased by 9.8 percent and capital goods by 12.66 percent. However, imported consumer goods shot up by 12.80 percent.
Asia is home to more than half the world’s most dynamic retail hubs, according to new research that reinforces images of the region’s mall-strewn megacities.
The research, by professional services and investment management company JLL, says 12 of the fastest-growing retail cities are in Asia, with eight in China alone — another indication that global economic growth is increasingly driven by the Asia-Pacific region.
JLL lists Dubai as the world’s fastest-growing retail destination, with Shanghai second and Beijing third. Places 9 to 13 are occupied by Bangkok, Chengdu, Kuala Lumpur, Jakarta and Manila, respectively. Only two European cities make the top 20 — Moscow and Istanbul — with none from Africa. Mexico City is the sole city from the western hemisphere, sitting at number 19.
Overall, JLL lists London as the “most attractive” city for retailers, with Hong Kong second and Paris third. Dubai, Singapore, Shanghai, Tokyo and Beijing all make the top 10, with Bangkok, Taipei, Seoul and Osaka in the top 20.
Shanghai at night. The Chinese megacity is projected to be one of the world’s retail hubs in the coming years (Photo: Simon Roughneen)
The study looks at the presence of 240 international retail brands in 140 cities — which altogether make up 36% of the world’s gross domestic product, 13% of the global population and a third of total worldwide consumer spending.
“The search for growth is escalating the penetration of international brands across the world’s most attractive retail cities, especially in Asia,” said David Zoba, chairman of JLL’s Global Retail Leasing Board.
Asia catching up
Many Western economies continue to suffer from slow growth — in stark contrast with Asia, where the International Monetary Fund predicts overall growth of more than 5% in 2016-17 and describes the region as “the engine of the global economy.”
Asia is urbanizing rapidly as economies develop and incomes rise, meaning that big global brands will increasingly look to Asia as a source of consumers. World Bank research shows that nearly 200 million people in the East Asia and Pacific region –excluding India and its heavily populated neighbors such as Pakistan — moved from the countryside to cities during the decade after 2000.
In 1800, only 3% of the world’s population lived in cities, a figure that rose to 13% by 1900. Now more than half the world’s population is urbanized, with projections that 70% or more of the world will live in urban areas by 2050. And while in the 19th and 20th centuries urbanization was mainly a Western and Japanese phenomenon, developing countries are catching up fast, particularly in Asia.
Despite the steady rural-urban shift, only 36% of East Asia’s population had moved to urban areas by 2010, with only Japan, Malaysia, South Korea and Taiwan having larger urban than rural populations.
While China had by far the largest absolute numbers of people moving to cities, smaller countries such as Cambodia, Laos and Vietnam showed higher rates of urbanization. Laos more than doubled its small urban population, while high-growth economies such Cambodia and Vietnam both had between 4% and 4.5% annual urban population growth rates. Retail investors are noticing opportunities even in smaller cities such as Phnom Penh, where Japanese mall operator Aeon opened the city’s first large shopping mall in 2014.
Asia’s cities will continue to grow over the coming decades as the region becomes wealthier. McKinsey Global Institute expects that in the next 15 years, “the center of gravity of the urban world will move south and, even more decisively, east.” According to MGI, half of global GDP in 2007 came from 380 developed world cities, with the 22 biggest cities in developing countries contributing a mere 10%.
However, MGI predicted that by 2025 half of the cities in its 2007 rankings will not make the list, with 136 developing world cities entering its ranking of the 600 biggest urban economies — including 100 from China alone.
“By 2025, developing-region cities of the City 600 will be home to an estimated 235 million middle-class households earning more than $20,000 a year at purchasing power parity (PPP),” MGI reported. The figure is larger than the 210 million such households expected in the cities of developed regions.
Thinktank Oxford Economics said that cities such as Chengdu, Hangzhou and Wuhan “will become as prominent in 2030, in economic terms, as cities like Dallas and Seoul are today.”
Shift east
The thinktank predicted that by 2030 eight European cities will drop out of the global top 50 cities ranking, measured by GDP, while nine Chinese cities will join that group, taking the Chinese total to 17, which will be more than North America and four times more than Europe.
In turn, the thinktank said, this will mean more Asian consumers with money to spend. “Starting from a comparatively low base today, China will boast some 45 million high-income urban households (exceeding $70,000 per annum at 2012 prices and exchange rates) by 2030, putting it well ahead of Europe and hot on the heels of North America. Shanghai will jump from a rank of 69th today to 8th for its number of high-income households in 2030,” Oxford Economics said.
Otherwise, however, the seven megacities with the most high income residents will remain the same as today, with Tokyo leading New York, London, Osaka, Los Angeles, Paris and Chicago.
But Asian cities are set to add tens of millions of middle-income households (incomes between $10,000 and $70,000) to their ranks by 2030. Jakarta will be home to 9.4 million, with 7 million to 9 million more in each of Chongqing, Shanghai, Tokyo and Beijing, the projected top five cities ranked by population of middle-income households, according to the thinktank.
JLL said that for retailers, vying for market share in emerging economies is sometimes risky, but the potential prize — market access to vast populations and rapidly expanding middle classes — outweighs any perils.
For example, China’s anti-corruption crackdown has had “a knock-on effect” on the luxury goods market in the world’s second-biggest economy, said James Hawkey, JLL’s head of retail for China. But retailers are nonetheless “increasingly comfortable dealing with these risks, and generally have their eyes on the long-term prize of establishing a strong position in major world markets.”
Although incomes and spending power remain lower in many Asian countries and cities than in the West, part of the attraction of smaller, less-developed markets is relatively low rental costs.
“Places like Ho Chi Minh City, Jakarta and Bangalore present an opportunity for retailers to establish their brands at rents of less than $2,000 per square meter per year with projected in-store sales increasing by 8% to 10% until 2019,” JLL reported.
Wealthy mid-sized cities or trade-oriented city-states such as Singapore and Hong Kong also benefit from high numbers of visitors such as tourists or business travelers.
But Asia’s urbanization will not mean that rural dwellers will be ignored by retailers, particularly in China.
“Retail potential in Asian hubs is strongly influenced by what is happening in their hinterlands — what is happening in nearby provinces and/or countries,” Steven McCord, JLL’s head of research for northern China, told the Nikkei Asian Review.
“Shanghai exerts a ‘gravity effect’ over its surrounding cities and provinces due to its size and the wealth of its retail offer. Therefore, close to 80 million people within day-trip distance to Shanghai will regularly travel to that city for large shopping sprees,” McCord added.
While some global e-commerce giants, including Amazon Inc, are planning to build brick-and-mortar convenience stores, Lazada Malaysia will focus on things it does best — selling inventory to customers from its warehouses through its online platform.
Its chief executive officer (CEO) Hans-Peter Ressel said Lazada Malaysia will concentrate on strengthening its online shopping business, rather than building physical stores to complement its online services.
“We can’t comment on their (Amazon’s) strategy because we focus only on our products,” Ressel said in an interview last week. “We have decided to go this way, and if other players are doing other things, I’m happy to learn and observe how this works for them, but it doesn’t change our strategy.”
Citing unnamed sources, The Wall Street Journal last week reported that Amazon stores will sell perishable goods, including milk and meats. The Seattle-based retail giant will also build drive-in locations for consumers in a rush where online grocery orders will be brought to the car, the newspaper said.
Lazada Malaysia, which has achieved more than five million app downloads, is part of the Lazada Group which operates online shopping platforms in Indonesia, the Philippines, Singapore, Thailand and Vietnam. Its product offering covers diverse categories, including electronics, fashion, health & beauty, sports & travel, and groceries.
Vienna-born Ressel, who is of Austrian and Filipino descent, had served as Lazada Malaysia chief commercial officer and chief operations officer since August 2012, before he became its CEO in March 2015.
Lazada Malaysia, he said, would continue to collaborate with brand retailers, hypermarkets and offline flagship stores to sell their products.
“If you want [to operate your own] store, how many stores do you need? What do you want to put on these stores? We don’t believe in doing everything by ourselves. We have partners; we have brands, and it is crucial to have their collaboration, that’s our focus,” he said.
Notably, Lazada Malaysia this year brought in top brands such as L’oreal, Levi’s and Samsung. It also formed partnerships with giant retailers such as Tesco, Watsons and Senheng.
Ressel believes e-commerce is the way forward, considering that two-thirds of Malaysians have Internet access, with most of them spending more than four hours a day online.
“If we didn’t believe in the future growth of e-commerce, we won’t be here. Today, 20 million out of 30 million Malaysians are online. The [Malaysian] e-commerce market will definitely grow towards a size that is similar to Western countries, China and Korea. It’s just a matter of time,” he said.
According to an estimate by statistics portal Statista, total revenue for the Malaysian e-commerce market this year will hit US$894 million (RM3.75 billion) and revenue is expected to see an annual growth rate of 23.7% in the next five years, to reach US$2.58 billion by 2021.
Currently, the market’s largest segment is electronics and media, with a market volume of US$380 million. User penetration is at 61.7% this year and is expected to hit 76.8% in 2021.
Recent research has highlighted the potential increase in digital ad spend in Indonesia over the next five years. Brands yet to venture into Indonesia’s booming digital ecosystem must expedite their entry strategies to ensure getting a share of this lucrative pie.
A report has highlighted the growing potential of digital retail from Indonesia. This is attributed to the increasing use of mobile devices, especially with cheaper smartphones enabling a greater population to access the digital sphere. This rapid growth projects digital ad spending to increase to 20.4% of all media ad spending by 2018, up from 10.7% in 2016. This report illuminates the expanse of Indonesia’s digital ad market that could be further developed, and have an emergent interest in the technology amongst local advertisers.
With the largest population in Southeast Asia, an exponential increase in digital adoption, and a seemingly insatiable appetite for e-commerce and social media, Indonesia is the puzzle every brand wants to solve.
However, does this mean the death of the traditional advertising and offline retail? Are you as a marketer confident in leaving your brand in the hands of the bots?
While digitisation has revolutionised the marketing function in Indonesia, brands cannot assume that a digital presence is the solution to building market share. Because of the increase in digital ad spending cited above, the question of effective brand engagement is more crucial than ever.
So what can brands do to continue engaging their consumers beyond their finger-tips and into their hearts and minds? And more importantly, how can you build loyalty in a competitive market like Indonesia?
Going beyond Digital
The consumer journey is not limited to just the digital sphere. Rather than situating offline and online as extreme entities, they should be treated as a continuum. Take the example of Zalora. Marketed as the leading online apparel retailer in Asia, Zalora launched several pop-up stores in order to let consumers try their items before buying, thereby reducing return rates.
Strategic alliances between logistic services and e-commerce consumer brands like Zalora are revolutionising the customer experience. The traditional is not dead. It is revamped with renewed excitement. Digital is an essential medium for marketers to reach out to their audience. This is more so imperative in the emerging scene of digital marketing in Indonesia to start with the right foot in.
To take a first-hand look at how leading marketers are tackling Indonesia’s digital frontier, be involved in Digital Marketing Indonesia that is happening on 24th and 25th November at Mandarin Oriental, Jakarta.
Brazil has filed a complaint against Indonesia to the World Trade Organization (WTO), challenging Indonesia’s halal certification requirements for imported meat.
The trade dispute has been registered in Indonesia-Measures Concerning the Importation of Chicken Meat and Chicken Products No. DS:484. The second substantive meeting was held on October 11-12 at the headquarters of the WTO in Geneva, Switzerland.
Ahmad Firdaus Sukmono, head of Trade Advocacy Bureau, the Trade Ministry, said that the policy is implemented as part of the government’s consumer protection efforts. “The dispute is focused on Indonesia’s rights to ensure compliance with food safety and halal requirements,” he said on Friday.
Brazil has also lodged claims against Indonesia for its import restrictions, namely the positive list, usage requirements, transportation modes in import and suspension of sanitation requirement approval. Brazil claims that such policies have hampered Brazil’s export to Indonesia.
Being the world’s largest chicken exporter, Brazil sees that the access to Indonesian market has been shut down in the past seven years. Because Indonesia only allows exported halal whole chickens which are slaughtered individually in henhouses. “We suspect that Brazil has yet to implement it,” Firdaus said.
Firdaus said Indonesia has responded to Brazil’s claims. “Indonesia has been very transparent in import regulations and requirements.”
Malaysia had also filed complaints about the difficulty in obtaining halal certification in Indonesia even though Malaysia has got its products halal certified by Jabatan Kemajuan Islam Malaysia, according to Malaysia’s International Trade and Industry Minister Dato’ Sri Mustapa Mohamed. However, Indonesia requires imported products to be halal certified by the Indonesian Ulema Council.
Merpati (MZ, Jakarta Soekarno-Hatta) is planning to resume commercial operations during the course of 2017 the Deputy for Restructuring and Business Development in the Indonesian Ministry of State Owned Enterprises, Aloysius K. Ro, has announced.
Merpati ceased operations in February 2014 after it failed to service nearly IDR7 trillion worth of debt owed to other parastatals including airport operators Angkasa Pura I and Angkasa Pura II and energy company Pertamina among others. It specialized in serving the more remote areas of the Indonesian archipelago using B737 Classics, MA-60s, and DHC-6 Twin Otters.
Speaking to the Tempo news agency, Ro said the relaunch would coincide with the completion of the defunct carrier’s restructuring programme. Thus far, majority shareholder, government, has injected IDR500 billion rupiah (USD38.3 million) into Merpati to cover its debt portfolio while laying off 1,500 staff.
“We hope it can resume operations in 2017 if in the remaining one year it receives a privatization permit from the Finance Minister and investors are ready to invest in it,” he said. “But it is not easy to find investors to invest in air transport business under normal condition, let alone in a difficult one as experienced by Merpati.”
Initial operations will likely focus on Papua, Indonesia’s largest and easternmost province, using a fleet of twenty-seater turboprops.
Indonesia’s promising property market has attracted multinational real estate firms to collaborate not only with domestic peers but also international partners. An alliance between the Astra group, Hongkong Land and Modernland Realty shows this well.
Astra Land Indonesia and Mitra Sindo Makmur have created a joint venture to acquire 70 hectares of land in Cakung, East Jakarta, worth Rp 3.4 trillion. The collaboration was marked under an agreement inked on Oct. 12 in Jakarta.
Astra Land is a joint venture between Astra International (ASII) and Hongkong Land, while Mitra Sindo Makmur is a subsidiary of Modernland Realty (MDLN). The new entity will develop the land for a project dubbed Jakarta Garden City.
This should provide positive sentiments for Modernland, given the fact that the new partners are well-known firms in Asia. Astra is a well-known Indonesian conglomerate while Hongkong Land is a leading property investment, management and development group in Hong Kong, Singapore and mainland China.
They are indirectly affiliated companies as Jardine Matheson sits as the main shareholder, owning more than 50 percent of shares in the two companies.
While Astra has only three years of experience in the real estate business, Hongkong Land has laid foundations in Indonesia for over 30 years. Currently managing US$32 billion of assets in Asia, it has been operating in Indonesia since the 1970s.
Under a collaboration with Central Cipta Murdaya, Hongkong Land built the WTC Complex in Sudirman, Jakarta, as its first project. It has also developed two other big projects in Indonesia, namely Nava Park (joint venture with Sinarmas Group’s Bumi Serpong Damai) and Anandamaya Residence (joint venture with the Astra group).
Financially beneficial
In its latest research report, Mandiri Sekuritas appraised the joint venture as it will provide security for Modernland in terms of marketing sales and earnings, in light of Hongkong Land’s established track record and experience.
Furthermore, this action could benefit Modernland as the cash inflow from the transaction could reduce its debt ratio, especially as it was sealed amid the economic slowdown.
* Bloomberg estimate
As of the first half of 2016, Modernland had booked Rp 1.1 trillion in revenue, down by 18 percent year-on-year from Rp 1.35 trillion last year, due to fewer projects launched this year. This brought down net income by 88 percent to Rp 26 billion.
Therefore, the newly formed joint venture with Astra and Hongkong Land in Jakarta Garden City will give better prospects for Modernland. As for Jardine Matheson group, the joint venture will augment its portfolio in the largest property market in Southeast Asia.
