I NDONESIA T RADE & C OMMODITY F INANCE C ONFERENCE 2016 Rangga - - PowerPoint PPT Presentation

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I NDONESIA T RADE & C OMMODITY F INANCE C ONFERENCE 2016 Rangga Cipta Samuel Sekuritas Indonesia T HE BIG PICTURE TRADE FLOWS Indonesia trade balance ($ mn) 50,000 Trade Balance 40,000 30,000 20,000 10,000 - (10,000) 1990 1991

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SLIDE 1

INDONESIA TRADE & COMMODITY FINANCE CONFERENCE 2016

Rangga Cipta Samuel Sekuritas Indonesia

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SLIDE 2

THE BIG PICTURE – TRADE FLOWS

(10,000)

  • 10,000

20,000 30,000 40,000 50,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Trade Balance

Source: BPS, IMF Samuel Sekuritas Indonesia

Indonesia trade balance

($ mn)

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SLIDE 3

THE BIG PICTURE – FINANCIAL FLOWS

(40,000) (30,000) (20,000) (10,000) 10,000 20,000 30,000 40,000 50,000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Current Account Financial Account

Source: BPS, IMF Samuel Sekuritas Indonesia

($ mn)

Indonesia balance of payment

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SLIDE 4

THE BIG PICTURE - GROWTH

  • 12,000
  • 10,000
  • 8,000
  • 6,000
  • 4,000
  • 2,000

2,000 4,000 6,000

  • 80,000
  • 60,000
  • 40,000
  • 20,000

20,000 40,000 60,000 80,000 Dec-00 Sep-02 Jun-04 Mar-06 Dec-07 Sep-09 Jun-11 Mar-13 Dec-14 Growth Speedometer - HP Cycle Current Account ($mn) (RHS)

Growth cycle and current account

Source: BPS, Bloomberg Samuel Sekuritas Indonesia

  • verheating zone

cooling down zone

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SLIDE 5

THE DUTCH DISEASE

50.00 60.00 70.00 80.00 90.00 100.00 110.00 Jan-00 Aug-01 Mar-03 Oct-04 May-06 Nov-07 Jun-09 Jan-11 Aug-12 Mar-14 Oct-15

Rupiah - REER Average (1995-2014) Rupiah - REER

SamuelSekuritas Indonesia Source: BIS

Restoring competitiveness

commodity boom episode The collapse of Lehman Brother Bernanke's tapering off

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SLIDE 6

SOARING EXTERNAL DEBT

0% 50% 100% 150% 200% 250% 300% 350% 400% 450%

External Debt ($), 2000=100 External Debt (Rp), 2000=100

Source: Bank Indonesia, MoF SamuelSekuritas Indonesia

Indonesia external debt

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SLIDE 7

THE GLOBAL SECULAR STAGNATION

Source: WTO

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SLIDE 8

CONNECTING THE DOTS

DUTCH DISEASE CAPITAL OUTFLOWS MOUNTING EXTERNAL DEBT GLOBAL SECULAR STAGNATION ECONOMIC POLICIES

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SLIDE 9

IMPOSSIBLE TRINITY

Source: various

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SLIDE 10

MONETARY POLICY FRONT

  • Export Proceeds and Foreign Debt

Withdrawal

  • Foreign reserves swap deals
  • Maintaining IDR stability
  • Enhancing IDR liquidity management
  • Advancing forex supply and demand

management

  • Mandatory use of IDR
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SLIDE 11

FISCAL FRONT

  • Energy subsidy elimination
  • Tax amnesty
  • Lower tax on revaluations
  • Employee income tax
  • Industry investment taxes
  • Cash transfer scheme
  • Higher non-taxable income
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SLIDE 12

TRADE FRONT

  • Ease regulations in the trade sector
  • Ease restrictions on foreign visas
  • Continue development of special industrial

zones

  • Advance export-financing activities
  • Business regulation easing
  • Lower taxes for strategic sectors
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SLIDE 13

GROWTH FRONT

  • Energy price cut
  • Electricity tariff cut
  • Continue development of special industrial

zones

  • Advance export-financing activities
  • Removal of REIT double taxation
  • Interest rate caps
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SLIDE 14

MANDATORY USE OF IDR

 According to BI, the dollar transaction within

the Indonesia territory reached $7 billion.

 BI reports that the use of dollar has been

reduced due to around $3-5 billion post the mandatory use of rupiah.

 Macroeconomics wise, this kind of policy is just

another form of soft capital control which is also implemented in many countries especially during the heavy outflows episode.

 The

policy does reduce the dollar demand however it doesn’t change the economic fundamental in a country.

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SLIDE 15

INVESTMENT APPEAL

  • 8.00%
  • 4.00%

0.00% 4.00% 8.00% 12.00%

  • 20.00%
  • 10.00%

0.00% 10.00% 20.00% 30.00% 40.00% Mar-11 Dec-11 Sep-12 Jun-13 Mar-14 Dec-14 Sep-15 FDI YoY - BKPM Real Investment YoY - BPS (RHS)

Source: Bloomberg Samuel Sekuritas Indonesia

Investment growth

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SLIDE 16

WAGES COMPARISON

50 100 150 200 250 300 350 Philippines China Thailand Malaysia Indonesia Vietnam

Regional Wages Comparison - 2015 ($/m)

source: World Bank SamuelSekuritas Indonesia

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SLIDE 17

MINIMUM WAGES IN INDONESIA

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 200 400 600 800 1000 1200 1400 1600 1800 2000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Indonesia Minimum Wages

Indonesia Minimum Wages (Rp 000'/m) YoY (RHS)

source: CEIC SamuelSekuritas Indonesia

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SLIDE 18

THE PROSPECT OF GROWTH - GOVERNMENT

  • 10.00%
  • 5.00%

0.00% 5.00% 10.00% 15.00% 20.00% 0.00% 4.00% 8.00% 12.00% Mar-08 May-09 Jul-10 Sep-11 Nov-12 Jan-14 Mar-15

Real GDP YoY Government Spending YoY (RHS)

Government spending and growth

Source: BPS, Bloomberg Samuel Sekuritas Indonesia

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SLIDE 19

THE PROSPECT OF GROWTH - PRIVATES

  • 60.0%
  • 40.0%
  • 20.0%

0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 0.00% 4.00% 8.00% 12.00% 16.00% Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15

Investment YoY (LHS) Indonesia Exported Commodity Index YoY Exports YoY

Commodity prices, exports and investment

Source: BPS, Bloomberg Samuel Sekuritas Indonesia