Author: OBG Admin

Nhon Luc Ly-CEO-AIA Myanmar; Son Nguyen-Country President-Chubb Life Insurance Myanmar; Daw Zarchi Tin-CEO

Oil prices impact Indonesia’s trade balance

Posted OBG AdminPosted in Uncategorized

Following a few challenging years that saw Indonesia’s trade balance fall into the red for the first time in years, the country’s trade deficit is rapidly shrinking in the wake of a decline in global oil prices. Although it reached nearly $2bn in 2014, the deficit still stood at less than half its 2013 level, while modest surpluses in early 2015 indicate the nation is beginning to benefit from falling oil prices, which are projected to remain depressed in 2015. Although the recent decision to eliminate fuel subsidies will present challenges should oil prices rebound, growth in value-added non-oil exports and a falling energy import

Mark Geilenkirchen-CEO-Port of Sohar

Foreign banking regulations in Indonesia seek to protect local institutions

Posted OBG AdminPosted in Uncategorized

In an effort to protect its domestic banking industry from foreign competition, the Indonesian government has imposed restrictions on foreign banks operating in the country, introducing ownership restrictions in 2012, and drafting new regulations that would oblige foreign banks to become locally incorporated entities. The nation’s banking sector has been criticised as too liberal compared to its regional neighbours, and restrictions on Indonesian banks in markets such as Malaysia and Singapore have led the government to adopt a more protectionist approach to financial services, while the authorities have increasingly emphasised reciprocity in international banking negotiations. However, the next draft bill could see the most stringent

Chaim Zach-Managing Director and CEO-Agric International Technology and Trade; Kabiru Rabiu-Group Executive Director-BUA Group; and Aliyu Abbati Abdulhameed-Managing Director

Indonesia’s trade ties with Japan have expanded in recent years

Posted OBG AdminPosted in Uncategorized

Indonesia’s trade ties with Japan have shown tremendous growth in recent years, with Japan now its second-largest source of investment and second-largest trade partner, despite a decline in investment in 2014. Bilateral ties are expected to grow on the back of new opportunities in manufacturing, defence and energy, although a persistent trade imbalance between the two has led Indonesia to begin reconfiguring its relations with Japan in a bid to reduce its trade deficit. While renegotiating the terms of its free trade agreement (FTA) could prove challenging, particularly given ongoing issues facing Japanese investors, Indonesia’s vast domestic consumer base and strong track record of economic

Daouda Coulibaly-Managing Director-Société Ivoirienne de Banque

Subsidy cuts create fiscal space to boost infrastructure spending in Indonesia

Posted OBG AdminPosted in Uncategorized

In 2014 Indonesia elected a new president, Joko Widodo – a development of significant interest to both national and regional stakeholders, as well as global investors and economists. A self-made businessman whose background and policies have resonated with Indonesians, Widodo ran on a platform that included cracking down on corruption, improving the quality of life outside the country’s major urban centres, boosting foreign direct investment (FDI) and increasing government expenditure on critical infrastructure. After being elected, Widodo announced the government would eliminate billions in fuel subsidies, creating the fiscal space to increase public spending. New Leader Widodo ran on a nine-point platform of reform and

Stuart Tait-Regional Head of Commercial Banking-Asia Pacific

Indonesia’s government focuses on FDI and reducing the current account and trade deficits

Posted OBG AdminPosted in Uncategorized

A key goal of Indonesia’s new president, Joko Widodo, is to boost GDP growth to 7% during his tenure, after it fell to a five-year low of 5.02% in 2014. He will face several challenges in this endeavour. Oil and gas revenues have declined on the back of a drop in prices, while falling global prices for other commodities have translated into weaker demand for Indonesian exports. At the same time, Indonesia must work to reduce its trade and current account deficits, while building on recent successes in attracting unprecedented levels of foreign direct investment (FDI). The new administration’s agenda focuses heavily on “economic diplomacy”,

Stuart Tait-Regional Head of Commercial Banking-Asia Pacific

Indonesia’s prudent policies get a helping hand from global markets

Posted OBG AdminPosted in Uncategorized

In a momentous development for the country, the newly elected president, Joko Widodo, followed through on campaign promises to do away with fuel subsidies in Indonesia. In addition to a 30% petrol price hike unveiled in November 2014, the new administration announced it would eliminate the majority of support beginning in 2015, ending a 48-year-old programme that cost the government billions of dollars each year. Removing subsidies to make room for infrastructure development has been a priority for decades, but Widodo appears to be the first president able to effectively end petrol subvention since it began, thanks in large part to near-perfect timing. When the

Ali Bongo Ondimba-President of Gabon

Indonesia’s remittance services improving

Posted OBG AdminPosted in Uncategorized

Though not as significant as in the Philippines, remittances to Indonesia from overseas foreign workers (OFWs) are crucial for thousands of families in the country. Remittances have shown strong growth in recent years, providing valuable opportunities for Indonesia’s sizeable excess labour force. Strong recent growth and new banking regulations have been a boon to the industry, leading to the proliferation of a host of new remittance service options. With workers overseas faced with the cost burden of high remittance and hiring fees, and a persistent skill gap, demonstrated by the preponderance of female domestic staff amongst its OFW population, new payment platforms could bring much-needed

Mark Rutte-Prime Minister of the Netherlands

Competition between China and Japan should benefit Indonesia

Posted OBG AdminPosted in Uncategorized

The rising attractiveness of Indonesia as a regional destination for foreign direct investment (FDI) has been highlighted by its growing trade relationship with China, with leaders from both nations announcing over $60bn in potential new investments and financing in early 2015. Indonesia’s planned wave of national infrastructure projects is expected to gain from competition between China and Japan as both vie to establish stronger economic ties with the country, although the Indonesian government is now facing the complicated task of carefully balancing and prioritising its burgeoning relationships with both nations. At the same time, the Sino-Indonesian trade relationship does face challenges: while China has become

Pham Hong Hai-CEO-HSBC Vietnam

Indonesia building an industrial base

Posted OBG AdminPosted in Uncategorized

Indonesia is currently in the process of transforming from a resources- and consumption-based economy to a more manufacturing- and investment-oriented one, working to build an industrial base that will allow it to reduce its dependence on imports and keep more value within the economy. It is a vital transition, one that recognises the new realities of the global economy and at the same time sets the country up for long-term, sustainable growth. If Indonesia successfully adjusts and realigns the economy, it will insulate itself from commodity price swings and ultimately avoid the middle-income trap. “During the [Susilo Bambang Yudhoyono] era, it was more a commodity

Xi Jinping-President of China

Education seen as the key to more skilled workers and wealthier consumers in Indonesia

Posted OBG AdminPosted in Uncategorized

The burgeoning middle class has been a crucial growth driver for Indonesia over the past decade, helping mitigate investment risks and solidifying the foundation of economic growth. Expansion of this demographic is expected to continue, driving urbanisation and expanding a consumer class that will bolster growth across a range of sectors. However, incomes are still comparatively low in Indonesia, and the middle class remains highly vulnerable to price shocks, a sluggish global economy and natural disasters. The government is taking steps to reduce the barriers to socio-economic mobility, most recently with a revised 2015 budget targeting infrastructure investment and social spending. Class Size While the