The government plans to build a large number of industrial estates outside Java within the next two decades, aiming to spread industrial growth to less developed regions and to create significant multiplier effects in Southeast Asia’s top economy.
The Industry Ministry’s secretary-general Ansari Bukhari said Monday that the ministry would set up at least 36 industrial estates over the next 20 years on islands other than Java, which has already received multi-billion dollar investments in previous years.
The new estates are to serve as supporting infrastructure to help develop the regions that are slated to become the nation’s key industrial centers.
“As industrial infrastructure, industrial estates are public goods. And the government is in charge of it because the private sector has no interest in it,” Ansari told reporters at his office.
The government’s move, part of its mandate under the Industry Law passed late last year, will help meet its target of raising the ratio of manufacturers outside Java from 27 percent of the total to 40 percent
The ministry’s priority until the end of this year is to complete the development of two industrial estates in Morowali, Central Sulawesi, and Kuala Tanjung, North Sumatra, along with two special economic zones in Palu, Central Sulawesi, and Bitung, North Sulawesi.
A greater spread of industrial estates to islands other than Java will allow the regions to increase their share of the country’s gross domestic product (GDP) from the current 42 percent.
Fifty-five of the country’s total 74 industrial estates that were in existence last year are located in Java, Indonesia’s most populous island.
Those 55 cover 22,795.9 hectares, which represents 75 percent of the total size of all industrial estates, according to Industry Ministry statistics.
The government’s role in the development of industrial estates in Indonesia still lags behind its Southeast Asian peers.
The Indonesian government is only involved in 6 percent of existing industrial estates in the country, with the majority of the remainder being controlled by private developers.
That compares with 78 percent involvement by the Malaysian government and 48 percent by the Thai government.
The minimal government ownership of industrial zones has played a role in pushing up selling prices, as well as rents, nationwide.
The selling price of land in Bekasi and Karawang in West Java hit US$191 per square meter in 2012, which is much higher than in other countries.
In Manila, the Philippines, the selling price of land stood at between $52 and $102 per square meter. Meanwhile, in Bangkok, Thailand, it was at $119, according to data from the Japan External Trade Organization (JETRO) compiled by the ministry.
Similarly, monthly rent prices in Bekasi and Karawang reached $19.10 per square meter, which was more expensive than the $2 to $6 per square meter charged in Manila and $6.95 in Bangkok.
Indonesian Institute of Sciences (LIPI) economist Latif Adam said the government’s plan to spur the development of industrial estates in regions outside Java had emerged back in the 1980s, but it proved hard to realize because of several issues, particularly human resources, infrastructure and governance.
Learning from its past failure, the government decided it needed to pay attention to these factors to implement its plan.
“The principle of equal distribution practiced through building one industrial estate in each province must be abandoned,” Latif said.
“The government should lay out carefully which regions are ready to do that viewed from the readiness of their human resources, infrastructure and governance.”
Source : Jakarta Post | July 22, 2014
The Swiss and Chinese central banks signed a currency swap agreement in Beijing on Monday (July 21), marking an important step in the development of a market for yuan in Switzerland, the Swiss central bank BNS said.
The agreement, highlighting steps towards international use of the yuan, ensures that Swiss francs will be available in China and that yuan, also known as renminbi, will be supplied to financial centres in Switzerland.
The BNS statement said that the agreement was “an important step” for the renminbi business in Switzerland. The agreement permits the two central banks to buy up to a maximum of 150 billion yuan or 21 billion Swiss francs (17.3 billion euros, US$23.4 billion, S$29.9 billion). The deal was signed by the governor of the People’s Bank of China Zhou Xiaochuan and BNS president Thomas Jordan.
The BNS also obtained a quota of investment in yuan which opens the way for it to invest part of its currency reserves on the Chinese bond market. Under this arrangement, the Chinese central bank allows BNS a quota of 15 billion yuan or about 2.0 billion Swiss francs to invest on the Chinese interbank bond market.
In a separate statement, the Swiss finance ministry welcomed the agreement with China, saying it showed that Switzerland was playing an increased role in the internationalisation of the Chinese currency.
A free-trade agreement between China and Switzerland took effect on July 1. It is the first agreement of its type between China and a European country. China is the sixth-biggest export market for Switzerland, and the fourth supplier to it.
Switzerland hopes that with this agreement it can get ahead of other European countries, acting as a bridgehead into Europe for Chinese trade and companies, and also as a centre for finance in yuan. Switzerland is not a member of the European Union but has close trading relations with it.
The Swiss finance industry is also re-structuring its activities to compensate for constraints arising from new international agreements, and from US action clamping down on cash outflows into foreign banks.
Source : Channel News Asia | July 21, 2014
Chinese President Xi Jinping signed a raft of oil and mineral deals with Venezuela on Monday (July 21), his latest stop on a Latin American tour showcasing China’s growing influence in the region.
During his four-country visit to what is often considered America’s back yard, Xi has reached out to resource-rich countries such as Venezuela and Argentina at a time when they are often shunned by the United States and Europe.
In Venezuela, he visited the mausoleum holding late president Hugo Chavez, an inveterate antagonist of the US, and signed 38 deals with Chavez’s successor, Nicolas Maduro.
The deals spanned a range of sectors from oil to infrastructure and included $4 billion for a joint development fund, US$691 million to explore Venezuela’s gold and copper reserves and an agreement to develop the countries’ third joint satellite.
“Venezuela has become one of the top countries for Chinese investment… our seventh oil supplier and fourth Latin American trade partner,” Xi said in Caracas.
The Venezuela visit comes after the Chinese leader agreed to an US$11-billion currency swap with Argentina and extended much-needed investment to President Cristina Kirchner, whose cash-strapped government, locked out of capital markets since defaulting on its debt in 2001, is staring down the threat of another default.
Xi kicked off his tour last week by proposing a new US$20-billion infrastructure fund for Latin America, underlining the fast-growing Asian giant’s increasing interest in the region.
He also launched a new US$50-billon development bank along with the other emerging powers of the so-called BRICS group – Brazil, Russia, India and South Africa – at a summit in Brazil.
The move, which creates an alternative to the Western-dominated World Bank, was hailed as contributing to “a new international order” by Cuban President Raul Castro – Xi’s host at the next and final stop on his tour.
But although Xi has spent his trip rubbing elbows with leftist leaders who tend to view the United States with a critical eye, his tour is less about ideology than business, said Venezuelan political analyst Carlos Romero.
“China’s political and economic expansion is pragmatic in character. It’s not about ideology or competition with the United States, but a Chinese policy of looking long-term for natural resources in different parts of the world,” he told AFP.
“China knows Argentina and Venezuela hold huge natural resource deposits, particularly two they are desperately searching for to fuel an economy and a society like China’s: oil and food in the case of Argentina, and oil and gas in the case of Venezuela.”
The partnership comes at a welcome time for Venezuela, which is in the midst of an inflation crisis and struggling under a pile of unpaid debts to foreign firms.
China, the second-largest market for Venezuelan oil after the United States, pays for its average 640,000 daily barrels in part by writing down the US$17-billion debt Caracas owes it.
Both countries have said they want to increase oil exports to one million barrels a day in the coming years.
Chinese trade with Latin America has grown rapidly in recent years, reaching US$261.6 billion in 2013. China is now the second-largest trading partner of many countries, including Argentina and Cuba, and has been Brazil’s largest since 2009.
In 1990, China ranked just 17th on the list of Latin American export destinations.
Beijing has also ramped up investment in Latin America to about 20 percent of its total foreign direct investment of US$90 billion last year.
This is Xi’s second visit to Latin America and the Caribbean since taking office in 2013. Last year he toured Mexico, Costa Rica and Trinidad and Tobago.
Source : Channel News Asia | July 22, 2014
Chinese President Xi Jinping pressed a charm offensive with Latin American leaders on Thursday, highlighting Beijing’s growing interest in a resource-rich region traditionally considered the backyard of the United States.
Xi was welcomed by Brazilian President Dilma Rousseff at the Planalto government palace in Brasilia with a military honour guard and a cannon salute before private talks.
The two presidents will later meet with four leaders of the CELAC group of Latin American and Caribbean states, including Cuban President Raul Castro.
Xi arrived in the country this week for a summit of the BRICS group of emerging powers — Brazil, Russia, India, China and South Africa — and South American presidents.
“China is willing to combine efforts with Brazil and other countries in the region to become good friends and allies in a shared destiny, and walk in sync,” Xi said in a speech to Brazil’s Congress on Wednesday.
The visit is Xi’s second to Latin America since taking office last year, when he toured Mexico, Costa Rica and Trinidad and Tobago.
This week, the BRICS agreed to launch a New Development Bank to fund infrastructure projects in developing nations and an emergency reserve, drawing praise from South American presidents who see them as alternatives to Western-dominated financial institutions.
After bilateral talks with Rousseff, Xi will launch the China-Latin America Forum with the CELAC, a 33-nation grouping that will be represented on Thursday by Castro and the leaders of Ecuador, Costa Rica and Antigua and Barbuda.
With the visit, Xi is presenting China as an alternative to the United States in the region, analysts said.
“China is an option that matches with the leftist political sympathy that it has with some countries in the region,” said Rubens Figueiredo, foreign relations professor at Sao Paulo University.
“It is looking for a different economic role from that of the United States and Europe,” he said.
China’s massive purchases of commodities and exports of manufactured goods to the region have boosted its two-way trade with Latin America to a total of US$261.6 billion last year, according to China’s customs.
The world’s second-largest economy has overtaken the United States as Brazil’s top trade partner.
During a preparatory visit in April, Chinese Foreign Minister Wang Yi said Beijing wants to invest more in the region, including in energy and infrastructure projects.
Last October, a multinational consortium with Chinese participation won rights to develop Brazil’s biggest oilfield.
For its part, Brazil wants to diversify its exports to China, with iron ore, soybean, oil and paper representing 80 per cent of it.
Brazilian officials also want to complete the sale of several Embraer planes and convince Beijing to lift a ban on Brazilian beef that was imposed after an isolated case of mad cow disease in 2012.
Rousseff said last week that Brazil was looking to collaborate with China in the construction of railways in the South American nation.
After Brazil, Xi will head to Argentina, a key source of soybeans for China, before visiting oil-supplier Venezuela and long-time political ally Cuba.
Despite China’s growing investments in the region, it will be hard for Beijing to dislodge the United States in Latin America, said Yun Sun, East Asia expert at the Washington-based Stimson Center think tank.
“US-Latin America long-standing, traditional ties will not be easily affected by the Chinese political and economic engagements, which are more recent and less comprehensive than US-Latin American relations.”
Source : Channel News Asia | July 18, 2014
The Republic has been ranked as the sixth-most desirable country in the world and third in Asia Pacific by companies looking to expand their business overseas, a survey by communications company BT found.
Released on Wednesday (July 16), the survey said respondents cited Singapore’s potential customer base and affluence of citizens as the most crucial factors contributing to the country’s high ranking. The nation’s IT skills, quality of governance and IT security, were also named as factors attracting businesses to expand here.
About 41 per cent of the respondents in India chose Singapore as an excellent destination to grow their business. Furthermore, 47 per cent of respondents in India and 48 per cent in China are currently or planning to expand into Singapore, the survey found.
SINGAPORE BUSINESSES BRANCHING OUT
Among the Singapore respondents, 76 per cent believe that international expansion is highly essential for the success of their organisation. A total of 84 per cent said that growth opportunities are the main reason prompting them to expand overseas.
Singapore businesses chose the United States and Hong Kong as their desired destinations for expansion due to their potential customer base, followed by China, Indonesia and Thailand.
Respondents to the survey indicated that the lack of an adequately competent IT infrastructure was one of the key challenges hindering their overseas growth. A total of 96 per cent of Singapore respondents said they were hindered to some extent by the digital infrastructures of their most desired markets.
The report surveyed 1,150 business leaders in 13 regions, including 350 respondents from Asia Pacific. The survey was conducted online between April and May this year.
Source : Channel News Asia | July 16, 2014
China’s economic growth hit 7.5 per cent year-on-year in April-June, official data showed Wednesday, ahead of expectations as the world’s second-largest economy was boosted by government stimulus. The second-quarter figure announced by the National Bureau of Statistics compared with 7.4 per cent in the previous three months and exceeded the median forecast of 7.4 per cent in a survey of 17 economists by AFP.
“Generally speaking, China’s economy showed good momentum of stable and moderate growth in the first half-year,” said NBS spokesman Sheng Laiyun. “However we should keep in mind that the domestic and international economic environment is still complicated and the national economy still faces many challenges.” The NBS also said China’s economy expanded 7.4 per cent in the first half of the year.
The results come after Beijing introduced a series of policies in April in response to concerns over slowing growth, including tax breaks for small enterprises, targeted infrastructure spending and the encouragement of lending in rural areas and to small companies.
Wendy Chen, Shanghai-based economist with Nomura International, said: “A series of policy easing measures have taken effect, and the economy has already bottomed out and recovered.” Growth would be “slightly better” in the second half of the year, she said, but added: “We expect more policy easing in the third quarter, in all aspects including the property sector.”
Despite the short-term stabilising effect of the efforts, which economists have dubbed “mini-stimulus”, some analysts remain pessimistic on the full-year outlook given persistent concerns over the huge but troubled property sector. China’s economy grew 7.7 per cent in 2013, the same as 2012, which was the worst pace since 7.6 per cent in 1999. For full-year 2014, the median forecast in the AFP survey is for an expansion of 7.3 per cent — down from 7.4 per cent in the last quarterly poll three months ago.
If realised, 7.3 per cent growth would be the weakest annual performance since the 3.8 per cent of 1990. China in March set its annual growth target for this year at about 7.5 per cent, the same as last year. The objective is usually set conservatively so as to ensure being met. The last time China missed the target was in 1998, during the turmoil of the Asian financial crisis.
Officials including Premier Li Keqiang earlier this year emphasised that the goal was flexible — widely seen as a hint it may not be realised. But last month, Li called achieving it the “inescapable responsibility” of local governments and urged “no delay” in action, an indication of concern.
China’s leaders consistently say that slower growth is good for the country as they try reduce decades of over-reliance on the huge though often inefficient investment projects that have girded expansion. They envision a new model in which the country’s increasingly affluent consumers drive activity, generating slower but more sustainable growth in the long run.
Economists expect refinements to the limited stimulatory efforts to continue in the form of “targeted” steps, though they differ on whether authorities will go so far as cutting interest rates or reserve requirement ratios for all banks. Separately, the NBS said China’s industrial production, which measures output at factories, workshops and mines, rose 9.2 per cent year-on-year in June.
Retail sales, a key indicator of consumer spending, increased 12.4 per cent in the same month, while fixed asset investment, a measure of government spending on infrastructure, rose 17.3 per cent on-year in the first six months.
Source : Channel News Asia | July 16, 2014
India’s new right-wing government on Thursday unveils its maiden budget that investors hope will spell out Prime Minister Narendra Modi’s strategy for restoring the country’s economic and fiscal health.
“Hopes are high Modi will usher in much-needed reforms to invigorate the economy and eventually do what it takes for India to live up to its economic potential — like China has,” Deepak Lalwani, head of India-focused consultancy Lalcap, said.
Shares have rocketed on expectations the Bharatiya Janata Party (BJP), which took office in May, will use the budget to flesh out campaign promises to lift Asia’s number-three economy from its longest stretch of sub-five per cent growth in a quarter-century.
Analysts say Finance Minister Arun Jaitley may slightly reduce a yawning fiscal deficit — the gap between revenue and spending — which stood at 4.5 per cent of gross domestic product last year.
But they say he is unlikely to reduce growth-promoting capital spending in the budget for the eight months left in this financial year to March 31, 2015 to significantly reduce the deficit.
“Reforms are likely to be piecemeal rather than in one ‘Big Bang’ package,” said Anjalika Bardalai, analyst at Eurasia Group.
Also, with two-thirds of India’s 1.25 billion population living on less than $2 a day, according to World Bank figures, and worries about a below-average monsoon hitting poor farmers, big subsidy cuts are unlikely, analysts say.
They expect Jaitley instead to outline steps to steer India from a culture steeped in bureaucratic red tape to a growth-boosting and more business-friendly investment climate that stresses fiscal discipline.
Growth has crashed from near double-digits a few years ago to 4.7 per cent in 2013, marking the second straight year of sub-five per cent expansion amid high interest rates, falling investment and wage-eroding inflation.
The finance ministry’s India Economic Survey forecast Wednesday the economy could expand 5.4-5.9 per cent this year, but cautioned the patchy annual rains, running at 42 per cent below average, threatened growth.
Since taking charge after a landslide win over the left-leaning Congress, swept out by voters angry about weak growth and scandals, Modi has sent strong signals he will pursue his “Modinomics” agenda of “maximum governance, minimum government”.
Modi has consolidated ministries and scrapped cabinet panels to streamline administration and speed decisions.
Jaitley has criticised “mindless populism” burdening public finances, and analysts say he may start paring expensive fuel subsidies.
Other highlights could include moves to exploit a surging stock market, fuelled by the BJP’s election, to seek to more than double privatisation revenues — a move that would lower government borrowing needs and please global credit ratings agencies.
To woo foreign investment, New Delhi may also scrap a controversial decision by the last government to retroactively tax overseas business deals involving Indian assets.
The levy prompted a $2.4 billion tax row with British mobile phone giant Vodafone, and was denounced as “tax terrorism” by critics who said it showed hostility to foreign investment.
Other announcements could include plans to move ahead on a nationwide goods-and-services tax to replace a complex web of levies to facilitate business transactions, and widening the tax net to raise revenues.
Also in the budget could be proposals to loosen complicated land-buying rules to speed up industrial projects and create jobs for a burgeoning youth population.
Source : Channel News Asia | July 10, 2014