indonesia economy's blog

Chances behind the issue of ITE Bill

2008-05-01T18:48:00.000-07:00

Just a few days ago, the ITE Bill got approved by our parliament (DPR), honestly speaking, the topics a bit out of our finance, economy and business topics range, but however indirectly this bill has change playing fields within our nation especially ICT context. you can find the bill here (in Bahasa Indonesia) and the discussion here.

By this bill government has acknowledge much more the important of ICT in Indonesia, and furthermore uphold rules in it, thus violation could be minimized. the implication further strengthen the law upholding process within ICT framework. some has fear that this bill will constrain the freedom that blogger once have. Under this bill you may aware of Fitna movie blocking by Indonesian government few weeks ago.

Within Economy and Business context you may aware that now government require a resgistration of ICT based transaction guarantor such as verisign. in my opinion this would encourage investor to establish such company in Indonesia rather than rely on overseas establishment.

Indonesia’s War Against Poverty

2008-04-22T11:25:00.000-07:00

the title above taken from Juwono Sudarsono's writing in his blog. a truly remarkable person yet he is indonesian minister of defense.

the article come with great statistic data upon indonesian welfare condition, and what indonesian has been doing upon poverty eradication. And also as epilogue he write that any element of indonesian citizen could take part in this movement, he take an example of what indonesian army has been done.

this is the article;

since this is blog on indonesian economics so the emphasize was on welfare numbers, but still i couldn't skip the temptation to present to you the indonesian army's website, it's in Bahasa Indonesia though.

bullish on oil price, bearish on welfare ?

2008-04-19T18:11:00.001-07:00

scared was more reliable word to describe my feeling, today in detikfinance i've read that for 1st time in history oil has reach USD 117 per barrel. it was way too expensive. And my worries has risen since indonesian government has policy to subsidized it's retail gasoline consumption. I check the gasoline pump near my house and shocked that the non-subsidized gasoline Pertamax sells at IDR 8600, which is almost twice as the subsidized gasoline Premium (sells at IRD 4500).

What this would mean? This would mean that government spending on gasoline subsidy will increase also, leaving other development program unfinanced. and though the broad consumed Premium subsidized, it is another story for industry-oriented gasoline. The gasoline increase means increase in the price of energy, for some who processed natural oil derivatives product (plastics, etc) this also mean increase in raw material.

Government has launch conversion program, for kerosene (used as cooking fuel in indonesian households) converted to natural gas, the conversion wasn't a smooth one, in many cases the kerosene supply stopped before natural gas pack available on market, leaving most people unable to cook, not to mention that rumors has a telling that cooking pad which given by government has a lack of safety and causing several serious fire blaze (they say there is problem with parts that channeling gas from its pack to a cooking pad). Though not perfectly launch i still have support on this programs, do you know that actually kerosene produced using the same oil fracture as airplane fuel?

Some opinion has come up that government should rise the Premium price to release heavy burden on government budget. While I personally quite worry if government rise Premium Price (since this will affect people's pocket much more direct), i can see the urgencies. But however the issue quite sensitive here, we can hear almost everyday "expert" say that government should increase the price of Premium, while other said exactly the opposite. For the ruling government this could also affect their popularity and determine their position in the next election (will held at 2009).

For me, should i retire my car instead .....??

The Poor's Bank

2008-04-12T18:05:00.000-07:00

This post translated from ruli_pribadi@yahoo.com post on PAS-ITB mailing list, the article posted here using explicit permission from the writer.

Approximately 100 years ago, man seek method to flying the sky. Many has doubt on this dream, some thought they were bunch of nuts. But however, in the year of 1903, Wright brothers has flew their first airplane, it only flew for 12 second for 120 feet distance, this is the seed of hope that world will change to a better place, and it was only 65 years later that 1st human arrive on the moon. (Muhammad Yunus Speech in the Micro Credit Summit 1997)

Just a century ago, man assumed going to space was impossible. But these days, in this very 21st Century we witness how the edge of possibility has change. We might have had flew the sky furthermore the space and deny the impossibility of the idea, however the adge of possibility here beneath the sky in our own earth still likely to be the same, we always taught that poverty was absolute, something unchangeable, then we are comforted to believe that without further search.

In a country where social welfare seems to be an imposibility; in a country where woman classified as marginal citizen, overwhelming starvation, political instability exist due to frequent coup d'etat and natural disaster happen so often a phenomenal banking institution had been created, a seed of revolutionary school of thought in combating poverty across the earth.

Muhammad Yunus, a professor in Economics was disturbed by economic study that justify the presence of poverty caused by people unwillingness to be productive; in his search, he found that poverty in Bangladesh primarily caused by nonavailability of people access towards economic assets. Poorest people of Bangladesh always marginalized by banking system; labeled as a non-bankable group, chained by religiousity and old custom; help by government or world institution rarely get into their hand.

The poor which physically weak does not require a donation, for donation only increase their burden, take their incentif and rape their pride, Yunus has found that within everybody’s will there is enterpreneurship available to be valued. The poor survivability was an undeniable proof that they still have willingness to strife, Yunus has proven that beggar, small enterpreneur, house mother has a competency for being a succesful enterpreneur.

Grameen Bank launch a micro credit for the poorest and for they who have willingness to improve their life quality. The credit scheme was given to a group of people, for they can cheer one another. For this scheme, Yunus claim that micro credit not a naif altruistic action, but they have a profit reasoning, NPL for micro credit only accounted for 2%, far superior to investment credit that usually consist of 3-4% NPL.

For 25 year since its establishment Greemen Bank always account a profit balance, this became a proof that the poor also credible for credit stream.

By witnessing this unprecedented fight against poverty, is it not that we reflect upon our own nation, is there anything we could do about it?

Maybank plans expansion on Indonesia

2008-04-06T11:45:00.000-07:00

it's a video from youtube about Maybank plans for BII acquisition (former majority stockholder is Temasek holding from Singapore).

:: sub prime mortgage and Indonesia

2008-04-01T23:39:00.001-07:00

Sid H. Kusuma as published by detikFinance write a comprehensive resume on Sub prime Mortgage in US economy.

For the rest of you who didn't familiar with the topics, let's start with the linguistic terms. To put it simple, Sub prime Mortgage is a mortgage given to a sub prime debtor. in US, mortgage debtor was also rated (that's not happen in Indonesia). The credit firm heavily depend on 3rd party scoring company to classify the fitness of any mortgage application. there is FICO method for example, it give mortgage score of 300 to 850 on account of [1] Payment history 35% [2] Amount Owed 30% [3] Length of Credit History 15% [4] New credit 10% and [5] Type of Credit Used. Sub prime debtor is a debtor with FICO rate less than 620.

Sub prime debtor is a high risk debtor, to overcome this matter credit firm then compensates the high risk profile with higher interest rate as insurance of credit stream in accordance to higher risk higher return philosophy. High interest rate however is hard to sell, since people within sub prime area had less money to pay the interest rate, to overcome this, then credit company develop a product that is affordable by sub prime debtor at least in the earlier year of debtor payment period. The most famous scheme for sub prime mortgage in US is 2/28 ARM scheme in which 75% of Sub prime Mortgage originated, it has 2 years of lower (read: teaser) rate then after 2 years it become adjustable rate.

Problem with sub prime mortgage happen after the teaser period or the 'helping part' is over. Since the idea of teaser period was giving debtor opportunity to increase the quality of their financial performance so they could coup with the interest rate of their mortgage. But, what will happen if their financial strength didn’t get any better? This is the cause of Sub prime Mortgage crisis in US. After certain period of time, the credit quality plummeted, because debtor cannot pay their increasing installment.

The complexity of US economic allows this crisis to be delivered through contagion effect to overall country’s economic condition.

Indonesia not directly affected by this crisis since no Indonesian firm have significant investment on this sub prime mortgage and no Indonesian firm have significant investment on any company affected by the crisis.

But however, the crisis affect Indonesia too, the extraordinary volatility of exchange rate and stock market showing that Indonesian market not immune from the crisis’ contagious effect. Notably, Drajad Wibowo, a legislator at DPR (Indonesian parliament) have comment on sub prime crisis effect upon Indonesian economy that Indonesian economic growth would be lower than it is as predicted by Indonesian government. He said that government prediction of 6,8% of economic growth seems to be impossible, it is appropriate to say that Indonesian economic growth in 2008 only on 6,1% figure.

It is very reasonable for Dradjat Wibowo to say such opinion, since US as world largest consumer basis also consume Indonesian product. By the crisis, inflation are high, rates increase will slow people consumption in US, and if consumption is slow, demand for Indonesian product will be slower too.

:: For fun - Bear Stearns Rhapsody

2008-03-24T02:59:00.001-07:00

It's not something about Indonesia,but still this post is something interesting to be shared. I found this post on Ahli Keuangan mailing list. For my introduction,it is about Bear Sterns having bought at cheap price by JP Morgan.

Bear Stearns Rhapsody
(using Queen's Bohemian Rhapsody tune)

Is this the real price?
Is this just fantasy?
Financial landslide
No escape from reality

Open your eyes
And look at your buys and see.
I'm now a poor boy (poor boy)
High-yielding casualty
Because I bought it high, watched it blow
Rating high, value low
Any way the Fed goes
Doesn't really matter to me, to me

Mama - just killed my fund
Quoted CDO's instead
Pulled the trigger, now it's dead
Mama - I had just begun
These CDO's have blown it all away
Mama - oooh-hoo-ooo
I still wanna buy
I sometimes wish I'd never left Goldman at all.

(guitar solo)

~~~

I see a little silhouette of a Fed
Bernanke! Bernanke! Can you save the whole market?
Monolines and munis - very very frightening me!
Super senior, super senior
Super senior CDO - magnifico

I'm long of subprime, nobody loves me
He's long of subprime CDO fantasy
Spare the margin call you monstrous PB!
Easy come easy go, will you let me go?
Peloton! No - we will not let you go - let him go
Peloton! We will not let you go
(let him go !)
Peloton! We will not let you go - let me go
Will not let you go
let me go (never) Never let you go - let me go Never let me go - ooo
No, no, no, no, No, NO, NO ! -
Oh mama mia, mama mia, mama mia let me go
S&P had the devil put aside
for me
For me, for me, for me

~~~

So you think you can fund me and spit in my eye?
And then margin call me and leave me to die Oh PB - can't do this to me
Just gotta get out - just gotta get right outta here

Ooh yeah, ooh yeah
No price really matters
No liquidity
Nothing really matters - no price really matters to me
Any way the Fed goes.....

:: ID Government debt via ORI v.4

2008-03-19T00:06:00.001-07:00

Debt capability for any enitity either individual nor organization is relative. The simplest example if any of you applying credit card. Some of you will get silver card while other got gold or platinum card, some of you got IDR 4 Mil (about $400) limit while other got IDR 150 Mil (about $15.000) limit. What difference among the applicants that takes into account? To put it simple it was the illusion of repaying capabilities, not the repaying capabilities itself. Statistics you put on the application form will create illusion of your repaying capabilities on the analyst head.

Furthermore, it is exactly the same in the macro level application. The illution in which we ofthen say sovereign credibility is the main item that analyst put into account. If your country on war then your repaying capability would be assumed close to nothing, when your country got a grip on bullish commodities then it's repaying capability would be high. In micro level, i have conducting some analysis about this and has proven, this also happen within enterprise level.The more confidence (not capable) you are, the more aggressive your leverage policy.

Now let say illusion that been performed these days by Indonesian were the uprising price of it's main commodity (nickel, lead, CPO, etc) then it is sufficient for us to say that government still and will more confidence upon the economy in the future, thus ID Government will tend to increase it's debt.

is it good/bad?

there are 2 different opinion on this,

in the long run things are getting better, debt will increase country economic capability and will decrease it's need of finance through debt. (the problem is according to my opinion earlier, the bigger the country's economic capability the more confidence it's government and the more tendency to increase it's debt. This will snowballing 'til something get wrong)
how long is the long run? is it not to account the debt's interest as short term liability, if we continue to increase our debt, is it not increasing the repayment risk?

IMHO, it's all about balance. Balance in this context not define as one point all-problem-solved things. But balance that vary from one entity to other. And yes, we should use the momentum of bullish commodity price to increase our confidence; but still the key point is, the debt we acquire should be able increasing our economic capacity, and we should take into account our repayment capacity.

Now, about ORI (Obligasi Ritel Indonesia/Indonesia Retail Bond); this instrument was created in the circumstances of increasing dollar price,thus issuing bond in dollar might increase risk; this instrument basically is 5 year's bond in small figure nominal, the smallest fracture could be IDR 5 Million(about $500), with the bearish tendency on our key interest rate (which is good!) people seeking alternative to normal time-deposit in bank, while this instrument offering 2-3 percent incentive above normal time-deposit account in banks (ORI 1 gave 12,5% coupon, ORI2 gave about 10% coupon, ORI3 gave 9,25% Coupon, ORI4 will give 9,5% coupon). The issuance of retail bond give ID Gov. several advantage that :

Spread risk, since the fracture size small the bondholder expected to be high. Though in my opinion this advantage would be weaken once the bond entering secondary market.
Decreasing financial dependency on overseas bond

Being a muslim dominated country, however the ORI issuance raise some skepticism among people, since bond, an interest bearing liability (or in Islam called riba') are not allowed. I'm not in any judging position on the religion-context, thus i still say that, what i explained earlier in this post would be my stand point. It's all about ballance. And i'm quite confidence about the way the recent government handling ID businesses environment and furthermore ID economy (which is most likely not corrupt nor reckless).

:: the closing of Adam Air

2008-03-19T00:04:00.001-07:00

To be frank, i hate Adam Air,the management to be precise. It's misconduct for flight safety (search Google for PPRuNe forum then look for Adam Air topics), the infamous ground handling, and foremost it's conspiracy that i presumed there is.

Being a mid-level income people, yes i do thank for the presence of LCC in Indonesia. Garuda, the full-serviced airline price surely will kill my saving account. But it is not like that i will gave my life upon the price (these point is debatable for Indonesian LOL). Now for Adam Air topics, there is some point's i'd like to strengthen about it's closing.

[analyst mode : on]
1st of all, i'd like to say that, my feeling gave me the chill that there is some ill purpose on Adam Air closing. To put is simple it was :

First Lie, in it's management press release. AA Management gave a statement that this closing was due to bhakti investama (50% shareholder) went out of Adam. This is in my opinion was truly a lie. Being a 50% shareholder mean that bhakti does not own majority in stock ownership, mean that bhakti could not easily take it's investment out of a running company like a finger snap, bhakti could sell it's ownership (which is not happen) to claim it's money. The proper statement to be announce should be bhakti did not agree to inject fresh money into the company. Bhakti said, this was due to AA lack of financial disclosure, that is suspicious (bhakti said that they have evidence some cash missing from the cash account).
Second conspiracy, is there anyone notice why AA choose to announce its closing around tha peak hour (there is 4 days holiday near its closing). I presume they want to cash out as many as they can from pre-order, pre-payment ticket. And do we notice that they have some unpaid liability about insurance, airport payment and plane fuel, which sum up to be near IDR 200 Bill (about $20 Mill), is this figure a 5 fivedays liability or this airline has plan this closing (read:cashout) carefully?

This topics is truly interesting that it is giving me some desire to do analysis on its financial statement. pity then, since it is not a public company then it's financial statement not release to public. But.......is there anyone out there able to giving me the fun (read : financial statement), please contact me in person.

opinion :: price hiking in Indonesia

2008-03-02T14:07:00.001-08:00

Just this weekend me and my family go shopping for our routine consumables. Usually it cost about somewhere between 250K to 300K IDR for 2 weeks consumables consist of my baby's consumables (diaper, milk, cotton balls, etc) and few goods for me and wife, But at that time it cost me nearly 500K IDR for my usual stuff. It worry me so i collect few fact on Indonesia's Inflation.

Judging from the trend it is obvious that we experiencing a sharp rising in inflation, not that spiral inflation high or one-shot inflation high like it is in the past, but still it's a price hike. You can fetch the inflation detail here it's in Bahasa thought, so here is the summary of it as of January 2008 :

Food 2,77 percent,
Processed Food, Cigarette and Tobacco 2,02 percent,
Housing, water, electricity, oil and gas 1,80 percent,
Cloth 2,31 percent,
Health 0,72 percent,
Education, Recreation and Sport 0,01 percent
Financial Service, Transportation and Communication 0,24 percent.

And now for the worst part of this log. I just found that in accordance to the inflation fact, Central bank has expected to raise the interest rate. This would mean a slowdown in our economy since ID's economy still recovering from 1998's crisis that LDR is plummeted to lower than 50%, These days we experience a relatively high growth for fact that lower rate had lure more businessman expand their business using the bank's money (debt).

Outlook :: ID Gov choose build a banks holding company

2008-02-14T06:20:00.001-08:00

Kontan, 14 February 2008

as a response to single presence policy by the central bank; ID gov's most likely not to merge some state owned bank, ID gov prefer to form a holding company. This was stated by minister of State owned Company (Meneg BUMN) Sofyan Djalil. It would be difficult to merge state owned banks since foundations and focus on each banks are different.

Outlook :: ID National Banking Industry have a potency for 25% growth

2008-02-13T00:32:00.001-08:00

Okezone.com, 13 February 2008

Though global recession issue still hanging on the cloud, ID banking sector predicted to growth 25%. Small and Medium Enterprises (ID term :: UMKM) would likely be the growth engine on the sector. Municipal Autonomy has develop inter-region transaction to a different level. Though Rudjito, former CEO of BRI (largest SME oriented Bank in ID) said that oil price and US mortgage crisis still be a constrain for an optimum growth.

commodity :: Bullish on coal price

2008-02-12T22:19:00.001-08:00

Kontan, 13 February 2008

Following massive increase in oil price; coal begin to experience scarcity world wide. Coal price has accounted highest growth in history as it increase from USD 89,85/mt in Januari 2008 to USD 127,6/mt. Analyst predict this will trigger tendency to export coal and lead Indonesia towards another chapter of energy crisis. Ironically, ID gov's seem less anticipated the fact.

:: suggested research link

http://www.eia.doe.gov/emeu/international/coalprice.html
http://www.coalindoenergy.com/
http://eneken.ieej.or.jp/en/data/pdf/159.pdf

:: please comment on broken link

Outlook :: Increasing Debt burden

2008-02-12T09:38:00.001-08:00

Kompas Update, 12 February 2008

As stated by General Director of Debt Management at Ministry of Finance, there is an increase in due debt payment in account of exchange rate movement; but however since there is also an increase in debt draw down the overall picture will be likely unaffected. As presented in hearing with tenth commision of the parlemen (Komisi XI DPR); net overseas finance in state budget (APBN) will have an uplift of 4,5 trio IDR; from 16,7 trio IDR to 21,2 trio IDR. On other occassion, Kusfiardi, Coordinator of anti-debt Coalition said that moratorium is the only way that gov. should seek in order to relieve debt burden and also gov. are required to maintain more controlled exchange rate to preserve stability.

Investment :: ID Gov's : Newmont fail on divesting ownership to local

2008-02-12T00:58:00.001-08:00

Kontan, 12 February 2008

Angered by Newmont [NNT] persistence on divesting 10% of its ownership to local, Gov's official send a letter claiming that NNT default on the issue. According to contract NNT was supposed to divest 7% of its share worth USD 282 Mio on 2007 and 3% of its share worth USD 109 Mio on 2006. Official has stated that NNT has deadline of February 22, 2008.

If NNT fail to perform on this issue, Gov's are most likely to cancel its contract with NNT.

NNT comment on slow divestiture was because of the price of the share, NNT still no deal of private co's teaming with local authorities having price as negotiated with indonesian gov's official.

:: Suggested Research Link:

http://www.newmont.com
http://www.mineweb.net/mineweb/view/mineweb/en/page33?oid=19257&sn=Detail
http://en.wikipedia.org/wiki/Newmont_Mining
http://finance.yahoo.com/q/ks?s=NEM

:: please comment on broken link

Outlook :: ID Gov's on 2008 Economic Condition

2008-02-12T00:57:00.001-08:00

Kontan, 12 February 2008

Though most of official's pencil-paper calculation shows that 2008 is going to be a rough ride, government still shows confidence thus setting target for economic growth to be higher
than it was on the previous year.

Ministry of Finance and Central Bank setting target of 6,2-6,7% a year, while Bappenas (Beurau for National Planning) set an eye on 6,3%. Growth was based on government spending, therefore the punctuality is the key issue here (referring to previous year lag on government spending).

:: Suggested Research Link:

www.sinarharapan.co.id/berita/0712/05/eko01.html
www.detikfinance.com/index.php/detik.read/tahun/2008/bulan/01/tgl/13/time/141152/idnews/878312/idkanal/4
www.iei.or.id/publicationfiles/Prospek%20Ekonomi%20Global,%20Indonesia,%20dan%20Fiskal%202008.pdf
www.anggaran.depkeu.go.id/web-print-list.asp?ContentId=177
www.bisnis.com/pls/portal30/url/page/bisnis_indonesia_harian_detail?vnw_lang_id=2&ptopik=A03&cdat...

:: please comment on broken link

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2008-01-10T19:41:00.000-08:00

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