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

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 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: BPS, IMF Samuel Sekuritas Indonesia

T HE BIG PICTURE – FINANCIAL FLOWS Indonesia balance of payment ($ mn) 50,000 40,000 Current Account Financial Account 30,000 20,000 10,000 0 (10,000) (20,000) (30,000) (40,000) 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 Source: BPS, IMF Samuel Sekuritas Indonesia

T HE BIG PICTURE - GROWTH Growth cycle and current account 80,000 6,000 overheating zone 4,000 60,000 2,000 40,000 0 20,000 -2,000 0 -4,000 -20,000 -6,000 -40,000 -8,000 cooling down zone -60,000 -10,000 Growth Speedometer - HP Cycle Current Account ($mn) (RHS) -80,000 -12,000 Dec-00 Sep-02 Jun-04 Mar-06 Dec-07 Sep-09 Jun-11 Mar-13 Dec-14 Source: BPS, Bloomberg Samuel Sekuritas Indonesia

T HE DUTCH DISEASE Restoring competitiveness 50.00 Rupiah - REER Average (1995-2014) Rupiah - REER 60.00 The collapse of Lehman Brother 70.00 80.00 90.00 100.00 commodity boom episode Bernanke's tapering off 110.00 Jan-00 Aug-01 Mar-03 Oct-04 May-06 Nov-07 Jun-09 Jan-11 Aug-12 Mar-14 Oct-15 Source: BIS SamuelSekuritas Indonesia

S OARING EXTERNAL DEBT Indonesia external debt 450% External Debt ($), 2000=100 External Debt (Rp), 2000=100 400% 350% 300% 250% 200% 150% 100% 50% 0% Source: Bank Indonesia, MoF SamuelSekuritas Indonesia

T HE GLOBAL SECULAR STAGNATION Source: WTO

C ONNECTING THE DOTS DUTCH CAPITAL DISEASE OUTFLOWS MOUNTING GLOBAL EXTERNAL SECULAR DEBT STAGNATION ECONOMIC POLICIES

IMPOSSIBLE TRINITY Source: various

M ONETARY 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

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

T RADE 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

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

M ANDATORY 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.

I NVESTMENT APPEAL Investment growth 40.00% 12.00% 30.00% 8.00% 20.00% 4.00% 10.00% 0.00% 0.00% -4.00% -10.00% FDI YoY - BKPM Real Investment YoY - BPS (RHS) -20.00% -8.00% Mar-11 Dec-11 Sep-12 Jun-13 Mar-14 Dec-14 Sep-15 Source: Bloomberg Samuel Sekuritas Indonesia

W AGES COMPARISON Regional Wages Comparison - 2015 ($/m) 350 300 250 200 150 100 50 0 Philippines China Thailand Malaysia Indonesia Vietnam source: World Bank SamuelSekuritas Indonesia

M INIMUM W AGES IN I NDONESIA Indonesia Minimum Wages 2000 25.0% 1800 Indonesia Minimum Wages (Rp 000'/m) YoY (RHS) 1600 20.0% 1400 1200 15.0% 1000 800 10.0% 600 400 5.0% 200 0 0.0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 source: CEIC SamuelSekuritas Indonesia

T HE PROSPECT OF GROWTH - GOVERNMENT Government spending and growth 12.00% 20.00% Real GDP YoY Government Spending YoY (RHS) 15.00% 8.00% 10.00% 5.00% 4.00% 0.00% -5.00% 0.00% -10.00% Mar-08 May-09 Jul-10 Sep-11 Nov-12 Jan-14 Mar-15 Source: BPS, Bloomberg Samuel Sekuritas Indonesia

T HE PROSPECT OF GROWTH - PRIVATES Commodity prices, exports and investment 16.00% 100.0% Investment YoY (LHS) Indonesia Exported Commodity Index YoY 80.0% Exports YoY 12.00% 60.0% 40.0% 8.00% 20.0% 0.0% 4.00% -20.0% -40.0% 0.00% -60.0% Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Source: BPS, Bloomberg Samuel Sekuritas Indonesia