Indonesia, Malaysia beat growth expectations

MONTREAL - Both Indonesia and Malaysia, two countries that export more to the dynamic Asian markets than they sell to the lethargic countries of Europe and America, surprised consensus growth estimates to the upside for the fourth quarter of 2011.

Indonesia grew 6.5% year-on-year, marking the fifth consecutive quarter where growth exceeded 6.4%. Growth for the whole year 2011 also came in at 6.5%, up three-tenths of a point over 2010

 
and significantly above the 5.7% average for the second half of the last decade.

A month ago, Moody's increased its credit rating of Indonesia's sovereign debt to "Baa3", which is the lowest investment-grade rung. This came a month after Fitch raised Indonesia to its own lowest investment-grade rating of "BBB-". Standard & Poor's will likely follow suit in the near future.

In Malaysia, industrial production in December rose 3% year-on-year, driven by manufacturing and the electricity sector. The 5.2% growth in Malaysia's economy in the fourth quarter was down from 5.8% in the third quarter and 7.2% in the second, but still robust due to still strong domestic demand.

Malaysia's economic growth for the whole year 2011 was 5.1% as the first quarter had registered only a 4.8% figure. According to CIMB economic research head Lee Heng Guie, the principal drag on Malaysian growth in the fourth quarter was stagnant external demand for consumer electronics, as quoted by the Kuala Lumpur-based newspaper The Star.

The economy is generally expected to limp along in the first half of 2012, strengthening only in the second half, when questions around the eurozone sovereign debt crisis are better clarified.

Household and business spending continued to accelerate in the fourth quarter, driving a 10.5% expansion in domestic demand, but Malaysia looks to be more affected than Indonesia by the drop in external demand due to slowing global growth.

Indonesia is better placed than Malaysia to continue with some momentum, however diminished, because its population of 237.6 million (2010 census) is the fourth-largest in the world after China, India, and the US. Two thirds of the population is between the ages of 15 and 64, while a quarter is between 0 and 14.

This very dynamic population structure has produced a relatively young emerging middle class that is an excellent market for such goods as electronics and automobiles. Consumption of consumer goods by this population cohort represents as much as half of the Indonesian economy.

The Indonesian equities bellwether Jakarta Composite Index (JCI) has been oscillating around the high 3,900s for over two months, trying to see whether it has the power to break through the medium-term double top (August-September 2011) at 4,000. Above that level lies the all-time high of 4,193. Short-term technical indicators have been on-again, off-again; at present, they are weakening.

At the end of January and beginning of February, the Kuala Lumpur Composite Index (KLCI) in Malaysia successfully, perhaps surprisingly, filled a gap-up from early August late year between 1,497 and 1,545. Congruently to the JCI's structure, the KLCI is up against an intermediate high in its mid-1,500s that is surmounted by the all-time high at 1,595.

The short-term technical indicators for the KCLI are actually more favorable than for the JCI, and the short-term (since the end of last September) is more definitely monotonic. It has recovered 18.2% to its present level from an intra-day low of 1,311 on September 26 last year.

One of the reasons why Malaysia surprised observers was the strength in its foreign direct investment (FDI), which was up 12.3% in 2011 over 2010. This strength derives in part from the fact that most FDI in Malaysia comes from Asia and not from developed economies that would be more susceptible to drawing back.

According to the Malaysian Investment Development Authority, Japan, South Korea, and Singapore alone account for 53% of all FDI in the country, with Japan representing nearly one-third of the total. (Other countries in the top five are the US and Saudi Arabia.) Among the 10 members of the Association of Southeast Asian Nations, Malaysia was outpaced only by Singapore and Indonesia in the race for FDI inflows.

The five largest FDI contributors to the Indonesian economy in 2011 were, in order, Singapore, the US, Netherlands, South Korea, and Japan. Overall FDI in Indonesia rose 20% in 2011 over 2010. There is a good deal of ink being spilt over the prospect of Indonesia, already a member of the Group of 20 nations, this year becoming the 15th country with a gross domestic product (GDP) exceeding $1 trillion.

The biggest potential weakness is the country's export reliance upon resource-based products; industries in this area do not create jobs as prolifically as do services and manufacturing.

By Robert M Cutler
*Source :  http://www.atimes.com/atimes/Southeast_Asia/NB25Ae01.html

JCI Still Continue Strengthening

JAKARTA - JCI is still continuing the positive trend with edged up 1.50 points to 4106.67. LQ45 index was up 1.03 points, or 0.1 percent, to 709.56 and the Jakarta Islamic Index (JII) rose 1.48 points, or 0.3 percent, to 580.81.
Regional exchanges also seem moving in either direction where the Shanghai index 7.78 points, or 0.35 percent, Hang Seng index dropped 121.95 points, or 0.59 percent, the Nikkei fell 37.08 points, or 0.37 percent, and the index Straits Times gained 10.94 points, or 0.37 percent.
In daily research MNC Securities, said the frenzied related economic and political will of the country was busy starting a long wait of action related to market participants on whether the increase in fuel premium to be decided through a vote in the Plenary Session of Parliament who has been delayed several times.
"There are three positive things that could potentially be able to withstand even today pushing the composite index rose upgrading of a few houses on the foreign stock index, lagging the increase exchanges Indonesia compared to other regional exchanges as well as the plan dividend yield of issuers that are very tempting," said the research, Friday (3/30/2012).
A total of 131 stocks fell, with 88 stocks advanced, 103 stocks and stagnant. Transactions occur with the carrying reach Rp1, 968 trillion from the volume of transactions amounted to 2.132 million shares traded. Foreign investors buying record tracked by Rp295, 45 billion.
JCI sectors moving in either direction with the infrastructure sector fell 1.46 points, or 0.2 percent, the mining sector fell 15.51 points, or 0.6 percent, while the various sectors of the industry successfully climbed 10.32 points, or 0.8 per cent and the sector manufacturing rose 4.29, or 0.4 percent.
Stocks that moved higher (top gainers), among others, PT Lion Metal Works Inc. (LION) rose Rp1.000 to Rp6.200, PT Astra International Tbk (ASII) rose 650 to Rp73.600, and PT Petrosea Tbk (PTRO up Rp275 to Rp4.225.
Stocks that moved down (top losers), among others, PT Goodyear Indonesia Tbk (GDYR) down 200 to Rp12.100, PT Bank Rakyat Indonesia Tbk (BBRI) down Rp100 to Rp6.900, the One Mighty and PT Surya Tbk (Essa) down Rp100 to Rp2.200. (Mrt)

*Source :  http://economy.okezone.com/read/2012/03/30/278/602518/ihsg-masih-lanjutkan-penguatan

Indonesia's Oil Problem

WERE one told a decade ago that oil prices would quadruple but not seriously hurt growth in emerging economies, it would have seemed fantastic. (After all, the oil shocks of the 1970s substantially curtailed growth in Latin America). Yet this is precisely what has happened. As oil prices approach $100 a barrel, economists are wondering why.
Jon Anderson at UBS has a note out this week titled, "Why Doesn’t Oil Matter?” with a few ideas. The most interesting one is the smaller role oil plays in energy consumption in emerging economies relative to developed ones. Roughly 40% of primary energy used in developed economies comes from oil, as against 28% in emerging economies. Coal is still pretty much king in developing economies, at 49%, whereas the equivalent figure is 20% in developed economies. For India and China, the reliance on coal—mostly domestically produced—is even greater, at 67%.
But the "emerging" category conceals some radical differences across countries. Indonesia, for instance, is actually more oil-intensive than most developed countries, with oil at 47% of consumption. As a result, oil price increases hit Indonesia hard. Indonesia's uniquely high oil intensity is probably thanks to domestic production; the Southeast Asian country only became a net oil importer in 2003, and prior abundance left any notion of scarcity alien to industry and households.
Dependence on cheap oil begins in poor households, which usually use government subsidised kerosene instead of gas (which is cheaper and simpler to use). "It is a total waste to cook with jet engine fuel", quipped Jusuf Kalla, the country's vice-president, in 2007, but poor Indonesians have struggled to make the transition to gas, which they perceive as more dangerous. In 2008, a 30% fuel price hike led to widespread rioting.
The middle class is also addicted to cheap oil in the form of fuel subsidies that continue to bludgeon public finances, with roughly 10% of tax revenue—or $10 billion—spent on them. But a recent effort to remove the subsidy was derailed by a 14-hour parliamentary gabfest—an Indonesian filibuster. Prices are still much lower than anywhere else in the world—unsubsidised, private car owners would pay Rp. 5,600 per liter (about 0.62 cents per liter, or $2.35 per gallon) instead of the current Rp. 4,500 per liter. But the plan to scrap subsidies has been postponed by at least six months.
Even at the level of industry, tremendous inefficiencies reign. In Indonesian Papua, for instance, the state electric company's (PLN) entire energy generation capacity is diesel-based (diesel is a derivative of oil). In Java, higher oil prices are forcing PLN to shut down four power plants, this in a country where power demand is growing at around 9% per year. Many factories in the Jakarta area also use diesel as backup electricity, and trucks use it to transport goods, including food products, which have seen significant inflation, sparking public debate.
In short, higher oil prices are reconfiguring the entire Indonesian economy, and forcing it to confront a new world of scarcity.

*source :  http://www.economist.com/blogs/freeexchange/2011/01/commodity_prices

World's fourth-most populous nation is top destination for investment

Indonesia has one of the world's fastest growing economies, and it's already the largest economy  in Southeast Asia.
Indonesia's  population in 2011 is estimated 239,870,940  million people make it the world's fourth-most populous nation.
Indonesia has abondent natural resources oil, natural gas, bauxite, silver, tin, copper, gold, coal, timber,  and rubbe.
Indonesia produces  rice, palm oil, and  coffee.
 Indonesian manufacturing  produces garments, footwear, electronic goods, furniture, paper products,  and automobiles.
Trade: Exports in 2011 are estimeted  at $160 billion including oil, natural gas, crude palm oil, coal, appliances, textiles, and rubber.
Indonesia major export  trading partners are Japan, U.S., China, Singapore, Malaysia, and  South Korea. Imports in 2011 are estimeted at $140 billion including oil and fuel, food, chemicals, capital goods, consumer goods, iron and steel.
Indonesia major import partners are Singapore, China, Japan, U.S., Malaysia, Thailand and South Korea.
 Indonesia is the world’s largest archipelago, containing 50 000 km2 of coral reefs. This is roughly 18 percent of the world’s coral reefs.
The Indonesian coastal and marine  is a significant productive asset for the country and millions of  fishers depend on them.
Tourism : Indonesia encompasses more than 17,000 islands  with breathtaking scents of landscapes.
Indonesia has diverse cultures which are inhabited and richly layered diversity.
The resorts, hotels and restaurants of Bali has a precocious style.
Indonesia’s cities are in a constant state of urban, infrastructure and tourism evolution .
Indonesian  territory remains unexplored, beaches and desert islands remain pristine while the tourist trail heads elsewhere. The jungles Indonesia are a world's zoological wonders, revealing impish monkeys, stoic sun bears, leopards, orang-utans and remarkable marsupials.
Albanian Minerals is investing in Indonesia and consider Indonesia a standout global investment destination.

*by  Sahit Muja
President and CEO
Albanian Minerals
New York

Indicators or Factors that will Affect Economic Condition in Indonesia

The indicator that will affect economic condition are Produk Domestik Bruto (PDB) or we called GDP and inflation.

PDB or GDP (Y) has 5 components, they are consumption (C), investment (I), governance expenditures (G), export (X) and import (M).

Y = C + I + G + ( X – M )

1. Consumption -> spending on goods and services, with the exception of purchases of new housing. Key factors are interest rates and the availability of debt, and consumer confidence.

2. Investment -> is the purchase of goods that will be used in the future to produce more goods and services, such as capital equipment (can be human resources, natural resources, and capital resources), structures, and inventories. Key factors are the quality of human resources, decreasing in natural resources, technological knowledge, inflation and tax.

3. Governance Expenditure -> include spending on goods and services by local, state, and federal governments. Key factors are culture, total population, and inflation.

4. Export and Import

Export ->  goods and services shipped outside a country.

Import ->  goods and services shipped into a country.

Key factors are exchange rates.

Second indicator is inflation. It is bad for economy because make the value of money decrease, the purchasing power will also decrease, increase poverty, reduction of local product competitiveness compare to imported products, and increase crime. Key factors are money supply and rising labor wages.

4/30/2011 until 3/7/2012