The Krakatau Report 31-Jul-2020
Top 3 Company Headlines
10% VAT on Amazon, Google, Netflix, Spotify (Business Times 07-Jul)
Occidental discuss $4.5bn asset sale to Pertamina (Bloomberg 29-Jul)
Telkom Group unblocks Netflix as it amps digital push (Reuters 07-Jul)
Top 3 Macro and Risk Headlines
Exports grow for first time in 4 months (Business Times 15-Jul
$40bn bond scheme for pandemic recovery (Reuters 06-Jul)
Bond sale to CB not a threat to rating: S&P (Business Times 06-Jul)
The Krakatau's View
June exports grew by 2.28% in a first expansion seen in 4 months. This signals a potential recovery in external demand following easing of lockdown restrictions in many countries. Imports also overperformed relative to forecasts, hinting at a pickup in domestic consumption. While the fiscal deficit is projected to reach 6.34% GDP this year, an aggressive bond scheme aims to finance increased spending via CB purchases of govt debt at zero interest rates. S&P sees no direct risk of the programme to Indonesia’s creditworthiness. The 10% VAT imposed on tech giants will bring additional revenues, helping to balance the govt budget.
Fun Fact:  Jokowi supports reopening of Bali tourism (Jakarta Post 31-Jul)

The Krakatau Report 30-Jun-2020
Top 3 Company Headlines
Facebook takes Indonesia foothold with Gojek deal (Financial Times 03-Jun)
Hyundai Motor, LG Chem considering EV battery JV in Indonesia (Reuters 23-Jun)
Pertamina creates four new sub-holding units (Business Times 14-Jun)
Top 3 Macro and Risk Headlines
China-backed AIIB approves $1b in 2 loans for Indonesia’s virus battle (Business Times 23-Jun)
Jakarta to use QE for as long as needed to tackle pandemic (Financial Times 15-Jun)
Indonesia cuts key rate as virus drives fear of severe downturn (Bloomberg 18-Jun)
The Krakatau's View
Following the downward revision of 2Q GDP projections to -3.1% by the finance minister, the central bank has stepped in with an unprecedented level of intervention. In addition to cutting the benchmark rate for the third time this year, Bank Indonesia is now allowed to purchase govt bonds in both primary and secondary markets, in an unconventional move to finance gov expenditure through QE. The additional financial support in the form of AIIB loans could further alleviate the pressures on the already overstretched fiscal budget. Whether these measures will succeed in stabilising capital flows and exchange rates as well as improving the confidence in financial markets remains to be seen.
Fun Fact:  Indonesian Air Force gets first female loadmaster (Jakarta Post 27-Jun)

The Krakatau Report 31-May-2020
Top 3 Company Headlines
PT Geo Dipa Energy $300m ADB loan for geothermal electricity (Jakarta Post 28-May)
BNP’s Cardif in talks to buy stake in PT Bank Rakyat (Business Times 14-May)
Garuda to seek 3-year maturity extension for US$500m sukuk (Business Times 20-May)
Top 3 Macro and Risk Headlines
2020 Budget deficit now seen as double the initial target (Bloomberg 18-May)
Govt plans US$8.6bn Covid-19 bailout for state firms (Business Times 18-May)
World Bank approves $250m loan to support Indonesia’s Covid-19 response (Jakarta Post 30-May)
The Krakatau's View
As trade slumps and budget deficit widens to 6.27% GDP, Indonesia’s debt position is likely to turn precarious. Increased government expenditure on stimulus packages and a reduction in the availability of external funding has raised issues of repayment of dollar-denominated debt. This threatens Indonesia’s financial market confidence.
The ability of the govt to formulate a fiscal strategy will depend on the central bank’s willingness to share some of the economic burden through bond purchases, increased tax revenues, and directing financial support to more adequate channels. Currently it focuses on indebted and unproductive state-owned enterprises. 
Fun Fact: In Surabaya a 100 year old woman recovered from catching Covid-19 (Jakarta Post 30-May)

The Krakatau Report 30-Apr-2020
Top 3 Company Headlines
KrisEnergy sells 30% stake in Indonesia exploration block to BP for US$15m (Business Times 08-Apr)
Facebook, 3 Indonesian firms in early talks for mobile payment approval (Reuters 20-Apr)
Gojek raises nearly $1m in funding for “super app” expansion plans (Jakarta Post 30-Apr)
Top 3 Macro and Risk Headlines
S&P revises Indonesia’s credit rating outlook to negative amid virus outbreak (Reuters 17-Apr)
Bank Indonesia buys US$11.2b in govt bonds to support rupiah, financing needs (Jakarta Post 30-Apr)
Cuts in 2020 oil, gas production outlook (Reuters 16-Apr)
The Krakatau's View
The govt’s 2020 growth outlook has been cut in half to 2.3%, with S&P estimating even lower figures of around 1.8%. Growing debt burden and sharp rupiah depreciations led to FDI outflows by panicked investors and a credit rating downgrade due to a “negative outlook”. Meanwhile in the oil market the prices turned negative for the first time in history, hitting Indonesia hard as one of the key producers and raising questions of profitability (if not solvency) and overflowing storage capacity.
The central bank stepped in with an unprecedented level of intervention, buying govt bonds in an attempt to stabilise the currency, stop capital reversals, and inject liquidity into a troubled debt-stretched system. Public expenditure is expected to grow and tax revenues plummet, further widening the fiscal deficit. Whether these steps will be sufficient to restore confidence and avoid total economic collapse remains to be seen.
Fun Fact: Krakatau Volcano has its longest eruption since 2018 (Bloomberg 11-Apr)

The Krakatau Report 31-Mar-2020
Top 3 Company Headlines
Nissan to end car production at Indonesia plant to cut costs (Bloomberg 18-Mar)
Aviva to sell entire stake in Indonesia JV (Business Times 06-Mar)
Olam to sell remaining 50% stake in sugar JV for +US$80m (Business Times 04-Mar)
Top 3 Macro and Risk Headlines
120t rupiah stimulus to support the economy (Business Times 13-Mar)
Plans for bonds to fund cheap loans for businesses (Reuters 26-Mar)
Oil plummets to 17-year low (Jakarta Post 30-Mar)
The Krakatau's View
A bold fiscal stimulus package comprising of extensive tax breaks was introduced to tackle the slowdown resulting from the outbreak of Covid-19. The economic performance will largely depend on the ability of these measures together with the issuance of government bonds for businesses to restore confidence in the market. 
As manufacturing output declines amid plant closures and lack of demand, there are growing concerns over potential capital flight that could trigger the freefall of the rupiah. Indonesia also remains vulnerable to fluctuations in oil revenues following the price war between Saudi Arabia and Russia, which brought price to its 17-year low and risks oversupply in producing countries.
Fun Fact: TV viewership is higher because of Covid-19 ‘stay at home’ policy (Jakarta Post 28-Mar

The Krakatau Report 29-Feb-2020
Top 3 Company Headlines
Indonesia picks McKinsey to revamp firms with $172b sales (Bloomberg 06-Feb)
Gojek buys US$30m stake in Indonesia taxi operator Blue Bird (Business Times 18-Feb)
Grab raises US$850m to fuel efforts to outrun Gojek (Financial Times 25-Feb)
Top 3 Macro and Risk Headlines
Stocks mark worst month in six years (Bloomberg 28-Feb)
Q4 current account deficit widens to 2.84% (Business Times 10-Feb)
Indonesia readies Bill on New Capital as Jokowi seeks funds (Bloomberg 26-Feb)
The Krakatau's View
Markets remain fearful amid speculations of the coronavirus spread, causing the Jakarta Main Index to fall by 8.2% from last month, the steepest drop in six years. Export performance has been hit by sapped Chinese demand for Indonesian products, particularly palm oil and coal, together with volatile metal prices. 
In an effort to counter potential capital flight and sluggish trade figures, Jokowi turns to McKinsey and Boston Consulting Group to restructure state-owned enterprises. The project is set to promote innovation, technological upgrading and improve profitability of previously indebted firms. Widoko set in motion negotiations to construct a New Capital, which could fill the current account gap with foreign investment.
Fun Fact: Pope Francis may lead Mass in Jakarta during September visit (Jakarta Post 28-Feb)

The Krakatau Report 31-Jan-2020
Top 3 Company Headlines
Tokopedia aims to secure $1.5bn investment (Financial Times 22-Jan)
Coal firm Resources Global SGX debut at $0.21 (Business Times 31-Jan)
EV Growth, Jungle Ventures invest $11m more into Waresix (Business Times 14-Jan)
Top 3 Macro and Risk Headlines
Indonesia secures US$22.8bn from UAW for infrastructure & energy (Business Times 14-Jan)
Widoko plans to overhaul laws to raise foreign investment (Financial Times 21-Jan)
Jakarta stock index slips 1.5% as Wuhan virus spreads (Jakarta Post 31-Jan)
The Krakatau's View
Indonesia enters 2020 with a projected GDP growth rate of 5.2% (ADB), largely reflecting the 5.3% government target. The e-commerce sector is booming. However, investors should remain wary as the Jakarta stock index drops 1.5% amid a Coronavirus outbreak.
Widoko views foreign investors as potential engines of modernisation. The govt has taken steps to liberalise the legal framework around labour market and tax regulations in an attempt to attract FDI. This could threaten the protection of basic worker’s rights. The WB warns that weakening social and environmental safeguards may endanger Indonesia’s position in global value chains.
Fun Fact: Taco Bell open its first Indonesian outlet in April (Jakarta Post 29-Jan)

The Krakatau Report 31-Dec-2019
Top 3 Company Headlines
StanChart sells stake in Indonesia’s Permata Bank for $1.3bn (Financial Times 12-Dec
Gojek near $120m deal for mobile payment start-up (Bloomberg 11-Dec)
Alpha JWC Ventures closes $123m tech fund (Business Times 17-Dec)
Top 3 Macro and Risk Headlines
Indonesia files WTO lawsuit against the EU over palm oil limits (Bloomberg 15-Dec)
Lower threshold for import taxes on e-commerce goods (Reuters 23-Dec)
New tax rules for foreign companies with Indonesian online business (Business Times 05-Dec)
The Krakatau's View
Tensions with the EU are intensifying as Indonesia pursues legal action through the WTO. Palm oil has not only been a major commodity export but also a politically sensitive crop for farmers whose livelihoods and incomes the government has promised to protect. The Krakatau warns of the destabilising effects of the uncertainty on the volume of agricultural exports.
Progress has been made in supporting domestic producers and holding multinational firms accountable. More e-commerce goods are classified for import taxation and new tax rules are aimed at addressing tax avoidance by foreign companies. 
Fun Fact: World’s oldest art found in Indonesian cave (Business Times 13-Dec)

The Krakatau Report 30-Nov-2019
Top 3 Company Headlines
Hyundai Motor $1.55bn car plant investment (Business Times 27-Nov)
Japan’s SMFG the most serious bidder for Bank Permata stake (Business Times 29-Nov)
Indonesia overhauls PT Pertamina to reduce oil imports (Bloomberg 23-Nov)
Top 3 Macro and Risk Headlines
$20bn budget deficit set to widen further (Bloomberg 18-Nov)
Banking regulator warns of bad debt risks as loan growth slows (Reuters 29-Nov)
Biodiesel plan fires up palm oil prices (Financial Times 05-Nov)
The Krakatau's View
Following months of bold government spending, the budget deficit is set for a large increase. Investment in heavy infrastructure projects together with rate cuts did not translate into the growth rate that Widoko expected. There have been growing concerns over bad debt as private demand stalls and the number of non-performing loans is rising. The Krakatau warns about potential excess liquidity in the banking sector after four consecutive rate cuts from the CB.
Hyundai’s investment in an Indonesian car plant could signal the long-expected revival of manufacturing, especially as companies are looking to avoid rising costs in China. 
Fun Fact: Indonesian artist wins UOB SE Asian Painting of the Year (Business Times 07-Nov)

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)