Indonesia

The Krakatau Report 31-Oct-2019
Top 3 Company Headlines
Gojek co-founder leaves to join Indonesia’s new cabinet (Financial Times 21-Oct)
Bukalapak’s Online Mall valued at $2.5bn after landing investment (Bloomberg 04-Oct)
Indonesia's Lion Air set to list shares (Business Times 11-Oct)
Top 3 Macro and Risk Headlines
ADB's $500m loan to improve public expenditure management (ADB 25-Oct)
Q3 foreign direct investment rises 17.8% yoy (Business Times 31-Oct)
2019 fiscal deficit seen widening up to 2.2% of GDP (Business Times 26-Oct)
The Krakatau's View
Widoko begins his second term by inviting Gojek’s former CEO to join Indonesia’s cabinet. Mr Makarim’s appointment signals a further shift to more favourable policies for businesses, including revising several tax laws and regulations. While potentially creating a better environment for investment, the decision raises questions about corruption and the concentration of power around the technocratic elite, which are likely to create social tensions.
The ADB’s loan comes at a crucial time of a widening fiscal deficit and is likely to improve Indonesia’s expenditure management. The Krakatau sees the ADB’s focus on SDGs as an opportunity to enhance social indicators, including education, health and labour mobility. 
Fun Fact: Indonesian students use puppets to banish ‘big ghost’ of plastic waste (Reuters 28-Oct)


The Krakatau Report 30-Sep-2019
Top 3 Company Headlines
Geo Energy majority stakes in 2 coal mines, US$25m (Business Times 24-Sep)
Grab in talks to merge payment firms to overtake Gojek (Reuters 11-Sep)
SGX-backed CIC inks US$8.5m clean coal deal (Business Times 28-Sep)
Top 3 Macro and Risk Headlines
Central bank says wildfires pose economic risk (Bloomberg 25-Sep)
Tax overhaul planned to make tech firms pay VAT (Business Times 04-Sep)
EU grant US$16.37m to ease trade negotiations (Jakarta Post 30-Sep)
The Krakatau's View
As wildfires rage around Indonesia, severely affecting economic activity and local residents, the government intensifies efforts to tackle the global slowdown through increased expenditure and rate cuts. The new bill obliging tech companies to pay VAT is seen by Widoko as a crucial step in tackling tax avoidance. The increased transparency would create a more favourable climate for investment.
Tensions with the EU over palm oil exports are easing as Indonesia receives a new grant. A deal struck with CIC to supply clean coil might signal a shift to more sustainable energy, further setting the EU at ease.
Fun Fact: Indonesia could be global hub of modest fashion (Jakarta Post 27-Sep)


The Krakatau Report 31-Aug-2019
Top 3 Company Headlines
WhatsApp in talks to launch mobile payments in Indonesia (Business Times 21-Aug)
Amazon (AMZN:US) in talks for stake in ride-hailing startup Gojek (Business Times 29-Aug)
AKR Corporindo (AKRA:IJ) to expand its gasoline station JV with BP (Bloomberg 07-Aug)
Top 3 Macro and Risk Headlines
EU imposes duties on Indonesian biodiesel (Business Times 15-Aug)
Nickel prices hit 4-year high on Indonesia export ban (Financial Times 30-Aug)
Indonesia has room to cut rates further (Bloomberg 27-Aug)
The Krakatau's View
Indonesia is set to become the seventh largest economy in the world in 2030 (as projected by McKinsey) amid a growing trade dispute with the EU over palm oil. The finance minister remains committed to monetary stimulus through rates cuts in order to tackle external pressure.
The government’s efforts to modernise the economy attract major investors such as WhatsApp by Facebook to the rapidly emerging field of e-commerce. The decision to ban exports of nickel is seen as an incentive to move away from raw materials to more technologically advanced sectors. 
Fun Fact: Indonesia millennials' coffee craze may spur record consumption (Business Times 28-Aug)


The Krakatau Report 31-Jul-2019
Top 3 Company Headlines
Softbank (9984-JP) commits $2bn to Indonesia via Grab (Financial Times 29-Jul)
Visa (V:US) invests in Indonesia’s Go-jek (South China Morning Post 17-Jul)
Indonesia logistics startup Waresix raises $14.5m in Series A (Business Times 05-Jul)
Top 3 Macro and Risk Headlines
Central bank makes first rate cut in almost 2 years (Business Times 18-Jul)
Jokowi vows to fight the EU over slumping palm oil prices (Bloomberg 12-Jul)
China to impose anti-dumping tax on stainless steel from Indonesia (Business Times 22-Jul)
The Krakatau's View
Widoko’s ambitious infrastructure projects & increased investment in logistics startups such as Waresix could improve Indonesia’s position in the supply chain and spur trade. As the currency stabilises, the central bank’s renewed efforts to lift economic growth result in rates cuts aimed to boost investment.
These efforts to boost exports could be held back by EU regulations on palm oil, especially as Indonesia faces competition from Malaysia. China’s threats to tax steel could hurt relations with Indonesia’s largest trading partner.
Fun Fact: Indonesia is returning containers of waste to France and Hong Kong (Business Times 30-Jul)


The Krakatau Report 30-Jun-2019
Top 3 Company Headlines
Toyota to invest US$2bn in developing electric vehicles in Indonesia (Business Times 27-Jun)
Pertamina (PTPP:IJ) expects to book $677m Q1 net profit (Jakarta Post 28-Jun)
Indonesia’s unicorn Bukalapak looks to expand into the Middle East (CNBC 27-Jun)
Top 3 Macro and Risk Headlines
Indonesia & India set $50bn trade target at G20 (Hindu Business Line 29-Jun)
More tax breaks planned to lift GDP growth (Business Times 22-Jun)
CB Chief sees room to cut interest rate (Bloomberg 17-Jun)
The Krakatau's View
Indonesia recorded a $207m trade surplus in May amid the escalation of tensions between the US and China. A commitment made at the G20 summit to strengthen bilateral trade with India could further boost exports. Jokowi’s govt has proposed tax breaks to spur the economy, particularly benefiting real estate investment. Widoko has also promised to support businesses through major infrastructure projects.
With the CB announcing possible interest rate cuts, the monetary policy might be easing in favour of fiscal stimulus through govt spending on infrastructure development.
Fun Fact: Indonesia considers relocating prisons to uninhabited islands (Jakarta Post 26-Jun)


The Krakatau Report 31-May-2019
Top 3 Company Headlines
SKK Migas, Inpex Corp agree on $20bn Masela gas block framework (Business Times 27-May)
CVC-backed PT Softex Indonesia could raise $500m IPO (Bloomberg 24-May)
Indonesian unicorn Bukalapak kickstarts global expansion (Business Times 20-May)
Top 3 Macro and Risk Headlines
Indonesia posts biggest monthly trade deficit on record  (Financial Times 15-May)
Jokowi’s government has a US$564bn plan to invest in infrastructure (Business Times 17-May)
Indonesia moves to manufacturing as commodities wither (Bloomberg 07-May)
The Krakatau's View
Indonesia’s economy grew at a slower rate than anticipated in Q1. Exports were hit by price volatility following the escalation of the US-China trade war. The trade deficit was also a result of falling commodity prices, particularly palm oil and coal. The govt’s plan to revive the export sector relies on attracting foreign investment in manufacturing and developing infrastructure. However, ambitious building projects will put additional pressure on the already fragile fiscal deficit.
Fun Fact: Indonesia is moving its capital from Jakarta due to flood risk (Washington Post 03-May)


The Krakatau Report 30-Apr-2019
Top 3 Company Headlines
Go-Jek becomes Indonesia’s first company valued at $10bn (Jakarta Post 05-Apr)
Govt seeks Volvo (VOLVB:SS), Renault (RNO:EN) investment in electric vehicles (Bloomberg 09-Apr)
Astra International (ASII:IJ) reports 5% growth Q1 (Business Times 25-Apr)
Top 3 Macro and Risk Headlines
Govt forecasts multibillion-dollar belt and road investments (SCMP 29-Apr)
Stocks and rupiah climb as Jokowi wins second term (Bloomberg 18-Apr)
Interest rates cuts could be underway in the light of Jokowi’s re-election ( Bloomberg 24-Apr)
The Krakatau's View
Following Widoko’s victory in presidential elections, markets have responded with a strong stock and currency jump. The Krakatau believes Jokowi’s record of stable growth and low inflation is likely to create favourable conditions for investment. Further commitment to pro-China policies could boost infrastructure development as a result of the Belt and Road Initiative.
A reduction in interest rates seems possible considering a stable currency and a renewed effort to boost economic growth after re-election. Easing of the monetary policy would make space for ambitious infrastructure projects.
Fun Fact: Komodo Island shuts because of Komodo dragon smuggling (Washington Post 02-Apr)


The Krakatau Report 31-Mar-2019
Top 3 Company Headlines
Garuda (GIAA:IJ) cancels 49-plane Boeing 737 order ( The Jakarta Post 22-Mar)
Nebras Power QSC considers selling its stake in PT Paiton Energy (Bloomberg 27-Mar)
Grab secures US$1.46b investment from SoftBank Vision Fund (Business Times 06-Mar
Top 3 Macro and Risk Headlines
Indonesian property stock soars 1,700% since January IPO (Business Times 11-Mar)
Australia and Indonesia Sign Free-Trade Deal (Bloomberg 04-Mar)
Indonesia threatens to quit Paris climate deal with EU over palm oil (Reuters 27-Mar)
The Krakatau's View
As presidential elections loom over Indonesia, Widoko’s populist agenda could slow down the economy, currently projected by the WB to grow at a 5.5% rate. Development of infrastructure and revival of manufacturing will pose the main challenges. A US-China trade war might help attract investment as textile and footwear companies plan to relocate supply chains abroad. A sharp rise in property stock prices raises the question of the sustainability of investment in the real estate market.
Growing environmental pressure from the EU could hurt palm oil exports. However, a new trade deal with Australia offers opportunities to boost exports in the car industry.
Fun Fact: Indonesia is opening its first underground train system in Jakarta (Bloomberg 24-Mar)