Wed, 24 Jun 2009
A number of business sectors appear to be experiencing a boost, with higher sales in areas such as automotives and heavy equipment, while banks are starting to lower credit rates, likely increasing the momentum of recovery.

In the automotive sector, while Suzuki said it was reducing output due to lower sales, the country's largest car producer, PT Astra International, booked a 9.5% increase in car in May to 20,891 units.

Another Astra unit, PT United Tractors, said sales of Komatsu brand heavy equipment rose 45% in May compared to April to 303 units on orders from the mining and plantations sectors.

The Indonesia Life Insurance Association (AAJI) said it expects revenue to grow by 30% in the second quarter, slightly higher than first quarter growth as confidence in the economy is rising,

The government however dropped its estimate for full-year growth to 4.3% from 4.5% due to the continuing impact of the global financial crisis.

On the investment front, British American Tobacco paid $494 million for an 85% in the country�s fourth largest cigarette company, Bentoel, and cell phone manufacturers Nokia and Samsung were both considering setting up production plants in Indonesia.

The government meanwhile took a new step to boost exports by establishing the Indonesian Export Financing Agency (LPEI), to take over the role of state-owned Bank Ekspor Indonesia (BEI).

On banking supervision, Finance Minister Sri Mulyani Indrawati said the government would go ahead with plans to set up a powerful new financial services authority (OJK), The Jakarta Post reported.

On Thursday Indrawati said that while the performance of the central bank had improved, it has not done a "perfect" job.

"We see in the past 10 years or more since (the) 1997-1998 financial crisis the evolution of Bank Indonesia's efforts in supervision is not yet perfect, although it is improving," she said.

"The government and BI have agreed that we have the same aim, that is the monetary and fiscal authorities have an interest to design an economy in which the financial system can expand, but it needs to be regulated and effectively supervised," said Indrawati.

She added the government and BI were finding the best form of OJK to be implemented in Indonesia, as the government had learned lessons from the UK, whose central bank and Financial Services Authority (FSA) had experienced problems sharing information, causing flaws in financial sector supervision.

The OJK will need to focus on information sharing with other regulators, including the central bank, to prevent a possible financial crisis, said Mulyani.

"Information sharing or the flow of information needed by the two authorities should be managed accordingly to create synergy leading to reactions if there are problems," she said.

Fuad Rahmany, the head of (Bapepam-LK), and BI deputy governor Muliaman D. Hadad, who is in charge of the banking sector, are heading a team tasked to design the most suitable type or form of OJK to be established in the country.



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