Jakarta. General Motors Indonesia has appointed a new president director to make the company profitable again after it closed its assembly plant outside Jakarta and continues to lose ground to Japanese rivals.

“Our aim right now is to stabilize the company in Indonesia,” Gaurav Gupta, the new president director of GM Indonesia, said recently.

“We want to make sure we are able to take care our customers, improve our dealer network and make sure we could engage our consumers on a regular basis.”

Gupta previously served as managing director of GM Vietnam before being appointed to head the Indonesia office in July. The previous GM Indonesia chief, Michael Dunne, resigned in February, and chief financial officer Pranav Bhatt served as interim president director until Gupta was named.

Gupta has worked for GM since 1997, from retail network operations regional manager for GM Asia Pacific, based in Singapore, to strategic business and utility vehicles director for GM India.

In his latest posting, he faces a stern test getting the company’s finances in order in a market where GM has long lagged behind Japanese automakers such as Toyota, Daihatsu and Honda.

GM Indonesia reported losses of $200 million from 2013 to 2014 due to a poor sales and high operating costs, and closed down its assembly plant in Bekasi, on the eastern outskirts of Jakarta, in June this year – just over two years after opening it to great fanfare to produce its Chevrolet Spin MPV.

The Spin was meant to compete against the best-selling models in the country, such as the Toyota Innova and Honda Mobilio, but failed to break the chokehold that the Japanese carmakers had on the market.

‘Worrisome’ market

Gupta acknowledges that he comes into the market at a shaky time for the domestic car industry.

Sales in the first half of 2015 amounted to just over 525,000 units, down 18 percent from the same period last year, according to the manufacturers’ association, or Gaikindo. The association has cut its full-year sales target to 1.1 million this year, from initial target of 1.2 million, which would mark the second straight year of declining sales.

“The current trend, which is lower than last year, is a bit worrisome for everybody, but we do understand there are investments being made and some policies being done by the government to build up the economy,” Gupta said.

“The fall in six or seven months will be difficult to recover in the next five months, but we are optimistic for the future and we will bend accordingly for the future.”

Consistent policies

GM Indonesia continues to sell the Spin as well as the Chevrolet Orlando MPV and Captiva SUV which it imports from South Korea and Thailand, respectively. Unlike some other importers, it benefits from a lower import tax under Indonesia’s free-trade agreement with Asean countries and the bloc’s major trading partners: Japan, South Korea and India.

The arrangement also shields GM Indonesia from an increase in the import tax that took effect last month. Under that new policy, all vehicles imported from outside the FTA countries are now subjected to a 50 percent tax, up from the previous 40 percent, for completely built-up cars, and 10 percent for completely knocked-down cars.

Gupta said GM Indonesia was “supportive” of the policy.

“We really hope and wish that the policies that are implemented are going to be stable and consistent. That is very important for any company or any investors from a planning perspective,” he said.

Gupta said he had devised a new marketing strategy centered around consumers’ needs. This includes setting up better training programs for front-line employees in workshops and call centers, and providing a 24-hour help desk.

“Our objective will be to make the Chevrolet business into a sustainable and profitable business by focusing on our customers and keeping them as the center of everything we’re doing,” he said.

GM Indonesia will be among the carmakers taking part in the inaugural Gaikindo Indonesia International Auto Show, which opens at the Indonesia Convention and Exhibition (ICE) center in the BSD township west of Jakarta.

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Tangerang, Banten. President Joko Widodo inaugurated on Tuesday the Indonesia Convention Exhibition, the nation’s biggest exhibition center and the latest landmark venue to showcase its economy.

The massive center set investors property giant Sinar Mas Land and media conglomerate Kompas Gramedia Group  back Rp 3.8 trillion ($282 million).

It marks the former’s efforts to expand recurring revenues from meetings, incentives, conferences and exhibitions, while providing Kompas an avenue to push beyond its print-media business and boost revenues.

“We are eager to use ICE to promote various products from Indonesia’s creative industry to the regional and international markets,” Joko said during his opening remarks at the inauguration ceremony.

ICE has already been used to stage concenrts, but its official launching ceremony was held on Tuesday in conjunction with the 2015 Indonesia Creative Meeting. The event showcases various products from the domestic creative sector from Saturday through this coming Sunday.

The ceremony was also attended by Industry Minister Saleh Husin, Communication and Information Minister Rudiantara and Creative Economy Agency director Triawan Munaf.

Sinar Mas and Kompas set up joint venture called Indonesia International Expo in 2011 specifically for the exhibition center, with Kompas owning a 51 percent stake in the company.

Located in BSD City, a Sinar Mas Land township in South Tangerang in the southern outskirts of Jakarta, the convention hall offers 66,000 square meters of indoor space for exhibitions and conventions, dwarfing the 37,500 sqm of indoor space of the Jakarta International Expo in Kemayoran in North Jakarta.

ICE also has 50,000 sqm of outdoor space available to exhibitors.

“It’s the biggest exhibition center in Indonesia and one of the biggest in Asia,” said Ishak Chandra, IIE’s president director, adding that the second phase of development would add another 220,000 sqm to ICE.

The center’s day-to-day operations is supervised by Hanover, Germany-based exhibition operater Deutsche Messe Venue Operation (DMVO).

IIE seeks to tap into Indonesia’s meetings, incentives, conferences and exhibitions market, Ishak said, providing Sinar Mas and Kompas with recurring income “for the long run.”

“Indonesia’s is a big market,” Ishak said.

Indonesia is home to some 250 million people, accounting for 40 percent of Southeast Asia’s total population.

“Foreign tenants from all over the world are eager to market their products to Indonesian consumers,” he added.

Sinar Mas raked in $120 million last year, or a fifth of its revenues, from recurring incomes from malls, office buildings and its waterpark in Bekasi, West Java, according to the company’s financial report.

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Jakarta. President Joko Widodo has inaugurated some major infrastructure projects this year as part of his administration’s effort to stimulate the economy, including:

Jan. 28 – Rp 4.99 trillion Kuala Tanjung Port in North Sumatera that is developed by state-port operator Pelindo I, in cooperation with the state-owned infrastructure companies Waskita Karya and PP; Rp 1.6 trillion Medan-Binjay Highway, and a $2 billion aluminium smelter owned by state aluminum producer Inalum in Kuala Tanjung.

Feb. 9 – Ciawi-Sukabumi toll road. This 54-kilometer toll road needs Rp 7.7 trillion in investment and has four sections, all are scheduled to be completed in 2017.

Feb. 23 – Serang-Panimbang toll road in Banten province. The 80-kilometer toll road — which costs $385 million — will  connect Serang to Panimbang in West Java, is scheduled to be completed in 2018.

March 9 – A $750 million Arun LNG Storage in Aceh. The plant produces liquefied natural gas from the now-depleted wells previously run by Perta Arun Gas, a subsidiary of Pertamina Gas. Pertamina invested $750 million for an Arun Regasification and Storage Terminal.

March 9 – Krueng Keureuto Dam in Pay Bakong, North Aceh. The Rp 1.7 trillion Krueng Keureuto is one of 13 dams to be built in Indonesia this year.

April 30 – Trans-Sumatra toll road construction kicked off. This 2,818-km road will connect Aceh to Lampung. The ambitious project needs Rp 300 trillion.

April 30 – Solo-Ngawi and Ngawi-Kertosono toll roads. This project is worth Rp 625 billion.

May 4 – Three power plant projects: Jatigede (West Java), Takalar (South Sulawesi) and Pangkalan Susu (North Sumatra). He also signed a Power Purchase Agreement (PPA) in Samas (Yogyakarta) and Kendari (Southeast Sulawesi), a Heads of Agreement (HoA) in Sidrap (South Sulawesi), and an Engineering, Procurement, and Construction (EPC) in Grati (East Java) at the same day. These projects are part of the Rp 1,100 trillion 35,000 megawatt electricity project.

May 19 – Broadband Fiber Optic Sulawesi Maluku Papua Cable System (SMPCS). The broadband initiative needed Rp 3.6 trillion.

May 22 – Multipurpose Terminal at Teluk Lamong Port in Surabaya, East Java, worth Rp 23.4 trillion. The port is operated by the state-owned Pelabuhan Indonesia III.

May 28 – Integrated smelter project in Morowali, Central Sulawesi. The smelter is owned by Sulawesi Mining Investment, a joint venture of Chinese stainless steel producer Dingxin Group and local conglomerate Bintang Delapan. There are three stage of developments: one worth $635 million; the other $1.04 billion and the last one $820 million.

June 12 – Gempol-Pandaan toll road. The 130-km highway, which is worth Rp 1.47 trillion, is set to ease freight traffic in East Java.

June 20 – Cikopo-Palimanan highway and Tanjung Batu Port. The Rp 13.7 trillion Cikopo-Palimanan raod construction was started back in 2011 during the presidency of Susilo Bambang Yudhoyono.

July 19 – Holtekamp Bridge in Papua. Joko witnessed a contract signing to build the 433-meter bridge worth Rp 856.72 billion by a consortium of state-owned construction companies: PP, Hutama Karya and Nindya Karya. The bridge is scheduled to be finished in 2019.

July 26 – Solo-Kertosono toll road.

Aug. 2 – A slew of energy-related projects worth billions of dollars in Banggai, Central Sulawesi. Some of them include a $1.2 billion Central Processing Plant operated by Joint Operating Body Pertamina Medco Tomori Sulawesi and $830 million ammonia plant owned by Panca Amara Utama in Central Sulawesi.

Source: Various reports, government data

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Jakarta. Bank Central Asia, Indonesia’s most valuable lender, saw its profit growth slow in the January to June period, dragged down by higher operating costs, an executive said on Wednesday.

Net income at BCA grew 8.8 percent to Rp 8.5 trillion ($632 million) in the first six months of the year from the same period last year. It was far slower than the 24 percent pace of growth last year.

BCA’s net interest income increased 11 percent to Rp 17.2 trillion as net interest margin – the difference between interest charged to debtors and that paid to depositors – rose to 6.6 percent, or higher than last year’s 6.5 percent. The bank’s non-interest income grew 24 percent to Rp 5.4 trillion.

But overhead costs jumped 24 percent to Rp 11.2 trillion, following an expansion of branches and ATM points across the country in anticipation of heightened competition from regional lenders in the Asean Economic Community that that takes effect at the end of the year, said  Jahja Setiaatmadja, BCA’s president director.

The bank plans to open 50 to 60 new branches this year and add up to 2,000 ATMs to its network that is already the widest in the country. The new machines will allow for both cash withdrawal and deposits, Jahja said.

A weakening rupiah, down 11 percent against the US dollar year-on-year, and rising wages also exacerbated overhead costs, he said.

The bank’s total outstanding loans grew by 8 percent to Rp 347.1 trillion at the end of June, led by consumer loans that grew 9.2 percent to Rp 96.4 trillion. Last year, BCA’s loans grew by 14.6 percent. Bad loans account for 0.7 percent of total loans.

“The slowdown in the Indonesian economy impacts the banking sector,” Jahja said.

He added the slowdown was discouraging people from taking on more debt. Indonesia recorded its weakest pace of economic growth in five years in the first quarter of 2015, at 4.71 percent. Bank Indonesia expects growth in the second quarter to be at roughly the same level.

Jahja was optimistic that BCA would achieve its loan growth target of 12 percent. “I’m sure the growth will pick up later this year. [...] If the loan demand goes up, we are ready,” he said.

BCA’s third-party funds – which consist of savings, time deposits and current accounts – expanded to Rp 455 trillion, up 8 percent from a year ago. That allowed the lender to keep its loan-to-deposit ratio at 76 percent, within Bank Indonesia’s requirements.

BCA’s total assets grew 9.2 percent to Rp 571.6 trillion.

BCA shares closed 1.2 percent lower at Rp 12,850 in Wednesday trading in Jakarta.

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Jakarta. Bank Central Asia, Indonesia’s most valuable lender, saw its profit growth slow in the January to June period, dragged down by higher operating costs, an executive said on Wednesday.

Net income at BCA grew 8.8 percent to Rp 8.5 trillion ($632 million) in the first six months of the year from the same period last year. It was far slower than the 24 percent pace of growth last year.

BCA’s net interest income increased 11 percent to Rp 17.2 trillion as net interest margin – the difference between interest charged to debtors and that paid to depositors – rose to 6.6 percent, or higher than last year’s 6.5 percent. The bank’s non-interest income grew 24 percent to Rp 5.4 trillion.

But overhead costs jumped 24 percent to Rp 11.2 trillion, following an expansion of branches and ATM points across the country in anticipation of heightened competition from regional lenders in the Asean Economic Community that that takes effect at the end of the year, said  Jahja Setiaatmadja, BCA’s president director.

The bank plans to open 50 to 60 new branches this year and add up to 2,000 ATMs to its network that is already the widest in the country. The new machines will allow for both cash withdrawal and deposits, Jahja said.

A weakening rupiah, down 11 percent against the US dollar year-on-year, and rising wages also exacerbated overhead costs, he said.

The bank’s total outstanding loans grew by 8 percent to Rp 347.1 trillion at the end of June, led by consumer loans that grew 9.2 percent to Rp 96.4 trillion. Last year, BCA’s loans grew by 14.6 percent. Bad loans account for 0.7 percent of total loans.

“The slowdown in the Indonesian economy impacts the banking sector,” Jahja said.

He added the slowdown was discouraging people from taking on more debt. Indonesia recorded its weakest pace of economic growth in five years in the first quarter of 2015, at 4.71 percent. Bank Indonesia expects growth in the second quarter to be at roughly the same level.

Jahja was optimistic that BCA would achieve its loan growth target of 12 percent. “I’m sure the growth will pick up later this year. [...] If the loan demand goes up, we are ready,” he said.

BCA’s third-party funds – which consist of savings, time deposits and current accounts – expanded to Rp 455 trillion, up 8 percent from a year ago. That allowed the lender to keep its loan-to-deposit ratio at 76 percent, within Bank Indonesia’s requirements.

BCA’s total assets grew 9.2 percent to Rp 571.6 trillion.

BCA shares closed 1.2 percent lower at Rp 12,850 in Wednesday trading in Jakarta.

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Jakarta. Two Singapore-controlled lenders operating in Indonesia have posted starkly differing earning results, with one strongly affected by slowing demand for loans amid the economic downturn and another managing to buck the trend.

On Tuesday, Bank Danamon Indonesia, of which its shares are mostly controlled by Asia Financial a unit of Singapore’s Temasek, announced its net income dropped to Rp 1.25 trillion ($93.18 million) in the January to June period from Rp 1.49 trillion in the same period last year.

The lender’s net interest income, or income from interest charges minus the cost of paying depositors, declined slightly by 0.059 percent to Rp 6.74 trillion. Bank Danamon is Indonesia’s sixth largest lender.

Its other revenue source — fee based income, or fees from non-interest charges — slipped 11 percent to Rp 1.87 trillion.

“The challenging macroeconomic conditions in the first half of 2015 impacted our business, leading to lower demand for loans,” said Sng Seow Wah, Danamon’s president director.

Still, he added the bank’s deposits and funding continued to improve, “ensuring ample liquidity,” the bank owns.

Sng — who took Henry Ho’s position as the president director at the lender in late February — once said one of his main focuses is to improve the bank’s current accounts and savings accounts (CASA) in the coming years to make the lender better equipped to generate cheap funds to finance lending operations.

Danamon’s outstanding loans dropped 3 percent to Rp 136.28 trillion as of end of June, while its total third party funds — which includes savings, current account and term-deposits — grew 8 percent to Rp 147.4 trillion.

The net interest margin, or a measure of a bank’s profitability of lending money to customers, declined to 8.1 percent from 8.4 percent.

Meanwhile, the lender’s gross non-performing loan (NPL) ratio — a figure measuring the level of bad loans in a bank — increased to 2.9 percent of its lending from a previous 2.1 percent.

Vera Eve Lim, finance director at Danamon, said the rise in NPLs were driven by Indonesia’s slow-performing economy.

“But it’s still well bellow the regulatory limit of 5 percent,” she said.

Danamon’s shares declined 0.37 percent to Rp 4,085 at Tuesday’s closing, compared to a  1.185 percent decline of the market’s benchmark index.

OCBC NISP

Another Singapore-controlled lender, Bank OCBC NISP which is controlled by OCBC Overseas Investments, a unit of SIngapore-based OCBC Bank, posted a different earning results.

Its net income increased 16 percent to Rp 735 billion.

The lender managed to post an 8 percent growth in net interest income to Rp 1.95 trillion. Other operating income also increased 5 percent to Rp 443 billion.

OCBC NISP booked Rp 74.21 trillion in outstanding loans as of end of June, up 13 percent from the same period last year.

“The credit growth in the first semester is slightly lower which matches our principle to keep our asset quality,” said Parwati.

Loan growth of 13 percent was slower than the 15 percent year-on-year loan growth over January to June 2014. Amid the slowing economic growth, the lender managed to lower its gross NPL ratio to 0.7 percent from 1.1 percent last year.

Parwati said the lender remains optimistic on its performance this year, noting that the Indonesian economy will improve in the second semester and the bank would  “achieve growth target as planned in the bank’s focus in the small medium enterprise segment.”

OCBC NISP’s total third party funds grew 19 percent to Rp 84.7 trillion from Rp 71.4 trillion in the same period last year.

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Jakarta. Liquor, beer, and wine drinkers will have to pay more than double the price for imported drinks in coming months after the government raised import tariffs.

Brandy, whiskey, vodka and other imported liquors will now be subject to a 150 percent import tariff. Drinks that have alcohol content of less than 46 percent are currently subjected to a Rp 125,000 import tariff per liter.

Other alcoholic beverages of less than 15 percent alcohol volume in a tw0-liter units will be subjected to a 90 percent import tariff. Currently they are subjected to a Rp 55,000 import tariff per liter. Malt beers are subjected to a Rp 14,000 import tariff per liter.

Heru Pambudi, the Finance Ministry’s director general of customs and excise, said on Thursday the new regulation was meant to promote the growth of local brewers by balancing the supply from local factories with imported goods.

Following the news, the share price of Multi Bintang Indonesia, Indonesia’s biggest beer producer and local unit of Dutch brewer Heineken, rose 1.8 percent to close at Rp 7,000 at Indonesia Stock exchange, amid 0.1 percent decline of the market’s benchmark index.

The Finance Ministry also hopes the new regulation will boost the country’s revenue from the import duty, Heru said.

“We made this regulation to be more proportional. We could add bigger import tariffs for the higher alcohol content,” he said.

Heru said an importer must pay Rp 2,500,000 for every one-liter bottle of whiskey worth Rp 1,000,000. A whiskey drinker, on the other hand, must pay more than Rp 2,500,000 as he should also pay a 10 percent value added tax.

BPS data showed Indonesia’s import on beverages with alcohol content — from sparkling wine, wine, sake, brandy, whiskey, rum, gin and vodka — in 2014 reached 2.6 million kilograms or worth $13.1 million, but only accounted for 0.007 percent of overall imports in 2014.

Apart from alcoholic beverages, the government also raised import duties on clothes, condoms, carpets, electronic devices, vehicles and foods.

Suahasil Nazara, head of the finance ministry’s fiscal policy, dismissed concerns that the new duties would increase inflation and curb the consumption growth. “I think the effect will not be big,” he added.

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Jakarta. Indonesia’s foreign debt grew at a slower pace in May as the public and private sector hesitated in adding more overseas bills while faced with a weakening rupiah and slowing economy.

The country’s total foreign debt rose 5.9 percent to $302.3 billion in the January-May period, according to a report by Bank Indonesia on Wednesday. The growth was slower than the 7.7 percent pace in April.

Public foreign debt rose 1 percent to $133.5 billion in May, slower than the 1.5 percent pace of the previous month. The debt accounted for 44.2 percent of the country’s total foreign debt.

Meanwhile, private companies’ foreign debt also increased 10.2 percent to $168.7 billion, a slower pace compared to the 13.2 percent pace in a month earlier. Private sector debt accounted for 55.8 percent of the country’s total foreign debt.

According to the central bank, most of the debts are due in more than a year’s time, sparing the country from liquidity risk. The long-term external debt of the public sector reached $130.3 billion, or 97.6 percent of the total public sector external debt. The long-term external debt of the private sector stood at $126.4 billion, or 74.9 percent of the total private external debt.

Private sector foreign debt remains concentrated in the financial, manufacturing, mining and utility sectors.

Bank Indonesia said it  considered external debt growth as “healthy”, but would closely monitor private companies, preventing them from taking on excessive amounts of foreign debt.

“[The monitoring] is aimed to make sure the role of external debt in supporting development financing without adding risks that may affect macroeconomic stability,” the central bank said in a statement on Wednesday.

Bank Indonesia has pushed local companies, including state-owned companies like PLN, Krakatau Steel, Pertamina and Garuda Indonesia, to hedge their foreign exchange liabilities to help mitigate the risks rupiah volatility. The rupiah has fallen 7.46 percent against the US dollar so far this year.

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Jakarta. The property market in Indonesia may go through the same cycle as in China, which has entered a mature phase where developers see sales bottoming out, increased competition, and more rapid consolidation, Standard & Poor’s Ratings Services said in a report.

In a report published on Monday titled, “Indonesian Property Development Through the Lens Of China’s Experience,” the international rating assessor points out a similar stage of development of Indonesia’s property market with development in China, now is a more mature market.

Standard & Poor’s credit analyst Kah Ling Chan said the overall property market in Indonesia is, by size, much smaller than China’s and it differs in their stages of development, regulations, and market dynamics, “but a comparison of the sectors in these countries is meaningful for investors.”

Indonesia is the world’s fourth most populous nation with around 250 million population and China is the largest with more than 1.3 billion population.

“We expect Indonesian developers to largely go through the same credit trends as the cycle expands and matures,” Chan said.
According to the S&P’s report, Indonesia’s property sector is still at “a high-growth stage” on the back of the country’s rising household income, growing population and expanding middle income class, which led to roughly 15 million units of housing shortage.

The ratings agency expects Indonesian developers to get 10 percent to 15 percent sales growth for the full-year of 2015.

It was lower than most developers’ target of 20 percent, despite most of developers still met their targets in the first quarter of this year.

Still, Indonesian developers have limited funding channels to answer the housing shortage and pay for the land acquisition, which push them to tap the low-rate US bond market and make themselves prone to currency risks.

S&P noted that the current property market boom in Southeast Asia’s largest economy dates back to about 2010, where only a handful of major players dominate the industry.

Some years ago, many developers in the archipelago nation focused on landed housing, using land reserves acquired when land costs were low.

The trend has changed now, as the rating agency pointed out that developers are increasingly building high-rise apartments to boost volume and maximize the value of their land banks, instead of building landed properties and low-rise apartments.

S&P noted the property development is most active in Jakarta, the capital city, home to the bulk of the middle-class population resides.

However, the agency highlighted the poor transportation infrastructure in the capital, which has led to slow traffic and long commutes, is “a key impediment to growth”.

China experience

Developers in China, on the other hand, have gone through a longer growth phase since the government liberalized the housing market in early 2000s.

“The market also benefited from strong economic growth, infrastructure development, and rapid growth in mortgage financing by banks,” S&P’s report said.

However, S&P said, as developers in the world’s second-biggest economy, had gone through the booming period, developers now facing large unsold inventories and have seen their leverage rose significantly in 2014 when the overheated market started correcting.

After negative rating actions, the S&P’s doesn’t expect the credit profiles of most Chinese developers to recover until 2016.

“Selling prices are slowly on the mend [in China], particularly in higher-tier cities. Sales are likely to have bottomed out in the second quarter [of this year], so we expect the market to recover in the second half, with support from more project launches and lower mortgage rates ahead. However, profitability will continue to weaken given the flagging prices since early 2014,” S&P’s report said.

“We expect average prices in China to be flat to 5 percent lower in 2015 with no volume growth. This effectively means that sales, in value terms, are likely to range between minus 5 percent to flat,” the report said.

“In our view, the experience of Chinese property developers, which have  entered a matured phase, provides context for Indonesian developers’ growth strategy and financial management,” Chan said.

S&P provides ratings assessments for five Indonesian developers: Alam Sutera Realty, Kawasan Industri Jababeka, Lippo Karawaci, Modernland Realty, Pakuwon Jati.

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