Tue, 01 Jul 2008
An economic slowdown has not put a brake on credit expansion, according to a central banker, with total outstanding credits up by 33%.

In the year ending June 30, banks disbursed Rp284.29 trillion ($31 billion), increasing the total figure for disbursements to Rp1,145.7 trillion, Asia Pulse reported Bank Indonesia deputy governor Muliaman D Hadad as telling Investor Daily.

Hadad attributed the increase to active development of the infrastructure, plantation and manufacturing sectors.

Based on data from April 2008, 71% of the bank loans were for working capital and investment, he added.

The highest credit increase was recorded for the mining sector, which almost doubled to Rp27.75 trillion from Rp14.9 trillion during the period.

Hari Azhar Azis, deputy chairman of the parliamentary budget commission, said the parliament had agreed to the government’s estimate for growth in 2009 to reach between 6% and 6.4%. Inflation will slow to between 5.8% and 6.5% next year, he said, Bloomberg reported.

The upbeat mood was reflected by a projection by PT Semen Gresik, the country’s largest cement maker, that its half-year profit could be up by as much as 40% from the Rp700 billion ($56.03 million) it reported in the first half of last year, Reuters reported.

Dwi Soetjipto, the firm's president director, said cement demand was continuing to grow from the residential and infrastructure sectors.

He said he sees domestic cement sales volume rising 9% in 2008, higher than last year's growth of 6.6%.

Gresik is to spend $1.5 billion on expansion, including the construction of its own power plants.

The government added to the positive mood with statements from Sri Mulyani Indrawati in her new role as coordinating economics minister and from investment board chief M. Lutfi.

Indrawati, speaking at a handover of the position from previous incumbent Boediono, promised immediate action on policies that have been awaited by the business community for some time.

Indrawati, who also retains her position as finance minister, said the joint positions would require far greater efficiency.

"Decisions have to achieve quick results in order to provide certainty to the public and the business world. For this reason, my priority is to finalize a number of policies the business community has been waiting for immediately," a press release quoted her as saying.

These included regulation of investment services, fiscal benefits for investors, the development of Special Economic Zones including Batam, Bintan and Karimun; and improvement of performance in the logistic sector, the release stated.

She said the presence of Boediono in his new position as governor of Bank Indonesia, would enhance the coordination with her own Ministry of Finance to achieve macroeconomic stability.

Food, energy and infrastructure were the government's priorities, she said, adding that she would continue to press reforms already underway in the department of finance.

M. Lutfi, the head of Indonesia's Investment Coordination Board (BKPM), said UK-based steel giant ArcelorMittal was looking at projects in East Java and Batam.

Lutfi said Indonesia's main drive was to encourage the development of processing industries for Indonesia's wealth of commodities. Using cocoa as an example, he said he was concerned that nearly 50% of Indonesia's cocoa production was refined in Singapore. Tax holidays would be offered to investors in the processing sector, he added.

He named Riau, Bengkulu, Central Java, Central Sulawesi, Gorontalo, Maluku and Papua as priority growth areas. In Papua, areas to be developed for plantations would be carefully mapped and investors would be required to replant other damaged areas.

Asked about Indonesia's investment prospects, he said 2009 would be a challenge. Performance had been strong in the first quarter of this year and enough projects were in the pipeline to put on solid growth this year.

Lutfi also stated that the government would be pouring $4 billion into infrastructure developments and public-private partnerships were expected to make a strong contribution to economic growth in this area.

Duty-free trade will begin with Japan on July 1 under the terms of the Economic Partnership Agreement (EPA) between the two countries.

Indonesia will allow Japanese commodities grouped in 58% of the country's 11,163 tariff categories to enter its market without import duty while Japan will exempt Indonesian commodities listed in 80% of its 9,275 tariff categories, Asia Pulse reported.

The Indonesia Stock Exchange Composite Index finished the week at 2,332.12, hardly changed over the week from the previous Friday close of 2,371.78, Agence France-Presse reported.

Gains in telecommunications and plantation stocks on Friday helped cushion the market from the impact of a big fall on Wall Street, dealers said.



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