SingCham Weekly: Moody’s upgrades Indonesia’s Sovereign Credit rating

Monday, 9 April 2018

Government to raise Rp1tr from bonds sales
The government is seeking to sell retail sovereign bonds online in a bid to raise Rp1tr and attract domestic investors, particularly among the internet-savvy younger generation. The online sales, would offer prospective investors a more efficient and easier way to purchase sovereign bonds. Investors can purchase the sovereign bonds, called SBR003 at between Rp1-3m, lower than previous bonds – SBR002 which were sold at Rp5m and Rp5bn. The debt paper that has a 2 year tenor promises a coupon rate that follows the movement of Bank Indonesia’s reference rate – BI 7-day reverse repo rate. THE SBR003 will be the first sovereign bonds the government has sold to the prime market online, besides offline means. To enable purchasing the bonds to be as easy as opening a mobile-based application, the government will team up with financial technology (fintech) companies and has partnered with 9 financial institutions namely Bank Mandiri, BNI, BRI, BCA, DBS, Permata Bank, Trimegah Securities, Bareksa, and peer-to-peer lending platform Investree for the initial online offering.

Pertamina & AKRA will have to report price increases
The government will soon put up a mandatory requirement for both Pertamina and AKRA to consult before raising fuel prices. The policy is intended to allow government to do an initial assessment whether the price increase to inflation. Pertamina and AKRA are both distributors of the subsidized fuel (Premium and Solar) and non-subsidized fuel (Pertalite, Pertamax, and Pertadex). Previously, both Pertamina and AKRA as business entities have never been required to report to the government if they want to raise prices. Government indicated that the new policy will be applied through a regulation to be issued by the Ministry of Energy and Natural Resources.

Waskita gets management shake-up to improve safety
The government has overhauled top executive positions of Waskita Karya. Waskita Karya President Director M. Choliq was replace by I Gusti Ngurah Putra who previously served as Hutama Karya’s President Director. I Gusti Ngurah Putra has worked for Waskita Karya from 1984 to 2011. Harris Gunawan, who previously worked for Adhi Karya as Finance Director was appointed to a similar position in Waskita Karya replacing Tunggul Rajagukguk. Waskita’s three operational directors’ positions were filled  by Didit Oemar Prihadi, Fery Hendriyanto and Bambang Rianto. Hadjar Seti Adji was named as the Human Capital Management Director. Waskita’s management overhaul also included the addition of an QHSE Director, filled by Wahyu Utama Putra, to lead the team in anticipating accidents at construction projects.

BBRI will issue convertible bonds and add stake in Bahana Ventura 
Bank BRI ensured that it will issue Rp500bn of convertible bonds before the end of 2018. The decision was approved during the previous shareholder meeting. The convertible bonds will be considered as tier 2 capital, according to the management. It also guided that it will increase the stake in Bahana Artha Ventura to 65% from 35% currently.

Ciawi-Cigombong toll road to operate in July 2018
President Joko Widodo is targeting Ciawi-Cigombong toll road (15.35 km) as part of the Bogor-Ciawi-Sukabumi (Bocimi) toll road project in West Java which stretches across 54 km to operate in July 2018. Land acquisition progress and construction work have reached 99% and 77% respectively in Ciawi-Sukabumi section I toll road. Total investment value of Bocimi toll road reached Rp15.9tr.

Academics sign open letter in support of historian for academic freedom

More than 130 academics from around the world have put their names to an open letter in support of academic freedom and historian Thum Ping Tjin, four days after the document was put up. The list included those who have taught or previously worked with Dr Thum — an Oxford University research fellow — as well as several academics working in Singapore universities. Dr Thum was involved in a marathon exchange lasting about six hours with Law & Home Affairs Minister K Shanmugam at a public hearing conducted last month by the Select Committee studying deliberate online falsehoods. The session saw both men engaging in a back-and-forth on Dr Thum’s interpretation of events in Singapore’s history. The open letter questioned the motive behind the “grilling” of Dr Thum by Mr Shanmugam. Leiden University Professor of Law & Society Adriaan Bedner criticised Mr Shanmugam’s attitude as “disrespectful, hostile and insinuating”. Dr Allan Patience, a Principal Fellow at the School of Social & Political Sciences in the University of Melbourne, said the committee’s treatment of Dr Thum shows that academic freedom is under serious threat in Singapore, which is why scholars find Singapore so unattractive.


Tuesday, 10 April 2018

Jokowi to drop parts of infrastructure projects
President Jokowi is set to cancel some of his 245 National Strategic Projects, mostly in infrastructure and particularly those that would not to be completed in 2019, the last year of his five-year term. The projects and two programs were stipulated in Presidential Regulation No. 3/2016 and amended to become Presidential Regulation No. 58/2017 on the acceleration of the implementation of infrastructure projects. Investment for the projects is estimated to reach Rp4.43quadrillion (US$322bn). Head of the Prioritized Infrastructure Acceleration Committee Wahyu Utomo declined to elaborate on the exact number of projects that would be canceled. On the progress of the projects, he previously revealed that the government had managed to complete 26 projects by the end of 2017 – comprising 20 projects in 2016 and six projects in 2017. He said many projects could be canceled because of various reasons, including resistance by local people, failure to get approval from local governments, failure in land acquisition and based on research recommendations.

Government tightens control over gasoline prices
President Joko Widodo, who is seeking a second term in office, appears keen to boost his image with a new policy aimed at curbing gasoline price increases to keep inflation in check. The government announced on Monday that all gasoline distributors in the country, including Pertamina, Shell and Total SA, must get approval from the Energy and Mineral Resources Ministry before increasing the prices of their gasoline. So far, gasoline prices fluctuate in accordance with global oil prices and the rupiah exchange rate, with the government limiting the profit margin of all business entities to a range of 5 to 10% of the basic gasoline prices. Through the revision, the ministry will scrap the minimum margin of 5%. Hence, gasoline distributors might be forced to sell their products below economical prices.

Government to set deficit below 2%
The government is confident of reducing the state budget deficit in 2019 to below 2% of GDP, which is projected to rise above Rp16,000tr next year. Finance Minister Sri Mulyani said the 2019 state budget design still shows stimulus to the economy, but does not create too much burden. The Ministry of Finance targets the country’s total revenue in 2019 to increase by 7.6% – 13%. Meanwhile, for state expenditures, particularly the central government, will rise 7.3%. Meanwhile for regional spending including transfers and village funds will increase 8.3.

Motorcycle sales grow 4% in 1Q18
Domestic motorcycle sales in the first quarter of 2018 reached 1,457,494 units, up 4% over the same period last year of 1,401,538 units. This is bolstered by economic recovery, as commodity prices rise. AISI commercial head Sigit Kumala said economic improvements boosted people’s purchasing power. Based on AISI data, total motorcycle sales for domestic and export in the first quarter of 2018 reached 1,587,346 units, up 6.55% over the same period of 2017, as many as 1,489,789 units. Domestic sales reached 1,457,494 units and export 125,840 units. Meanwhile, total sales in March reached 588,523 units, domestic sales reached 535,371 units while exports 49,140 units. Sales in March rose 23.05% compared to 478,265 units in the previous month.


Underemployment of Spore ‘graduate poor’ earn less than $2,000

A survey, among the first of its kind, has revealed “worrying statistics of seriously underemployed Singaporean graduates”, in the words of a labour MP. The survey conducted by the Lee Kuan Yew School of Public Policy and Ong Teng Cheong Labour Leadership Institute canvassed responses from 1,626 Singapore workers between August and November last year. It found that about 70, or 4.31%, of the respondents were severely underemployed. These were degree-holders earning less than S$2,000 a month, despite holding full-time jobs. The majority of them were from the health and social services (18%), financial services (12%), transport and education sectors (both 7%). They were mostly female (63%) with a median age of 35, and had 10-15 years of work experience. While a small group, these graduates had fallen into “involuntary underemployment” by circumstances beyond their control, Mr Zainal Sapari, an assistant secretary-general with the National Trades Union Congress (NTUC), wrote in the labour movement’s blog.


Wednesday, 11 April 2018

OJK to issue fintech regulation soon
As the Financial Services Authority (OJK) finalizes its proposed regulation (POJK) on financial technology (fintech), it is expected to introduce comprehensive stipulations on all types of digital businesses. The upcoming regulation, which would be launched before mid-year, would be a kind of umbrella policy as it would cover various types of fintech businesses, said Sukarela Batunanggar, the deputy commissioner for the OJK institute, a research center under the financial regulator. Among the major types of fintech business included in the proposed policy are those involved in peer-to-peer (P2P) lending, investment and payments.


Mortgage giant taps into student loans
Bank Tabungan Negara is ready to leave its comfort zone by financing students in pursuit of a higher education, including those looking to secure a doctoral degree. In its newly launched student loan program, BTN is offering a Rp200m (US$14,547m) credit ceiling with a 6.5% interest rate over a five-year period. The lender plans to allocate Rp500bn this year to finance the program. During a trial phase, which will run until June, BTN will only target its existing 7 million mortgage clients. Meanwhile, Bank Mandiri is set to launch its student loan program next week, with an interest rate of 4%.


New Naratif website ‘contrary to national interests’

Historian Thum Ping Tjin and freelance journalist Kirsten Han had sought to register a company indirectly funded by Hungarian-American financier George Soros to organise activities such as workshops and “democracy classroom” sessions and support their media venture – a new website called New Naratif. But their application was rejected by the Accounting and Corporate Regulatory Authority (Acra), which said that the registration of the firm, OSEA Pte Ltd, would be “contrary to Singapore’s national interests”. Acra said that the website’s political activities “would appear” to be funded not only by foreign entities but also citizens of other countries.



Thursday, 12 April 2018

Jasa Marga upbeat despite debt concerns
Jasa Marga CEO Desi Arryani said the firm would focus on finishing at least four toll road projects, especially the three sections that form part of the more than 1,000km Trans-Java toll road. Jasa Marga has three sections of Trans-Java toll roads that will likely be completed this year, namely Batang-Semarang and Salatiga-Kartasura in Central Java and Solo-Ngawi, which connects the two cities in Central and East Java. Meanwhile, in Sumatera, the company is expected to complete the remaining part of the 61km Medan-Kualanamu-Tebing Tinggi toll road. The company has set aside at least Rp30tr in capital expenditure to finish all the projects this year. This year, it plans to initiate a new type of financing called the limited participation mutual fund (RDPT) on three of its toll road section. These loans have contributed to the company’s total liability to surge to Rp60tr, almost double from the previous year, which was at Rp37tr.

Pertamina’s insurance unit eyes expansion after IPO

Pertamina’s subsidiary PT Tugu Pratama Indonesia is seeking to raise up to Rp1tr in IPO to finance its expansion plan. The company will release 282.3m shares, equivalent to 15% of its capital, with the offering price set at between Rp3,850-5,000. The IPO would be used for business expansion such as developing its existing insurance businesses and opening more branches from six currently. It also plans to increase customer access to its products through rebranding and promotion as well as infrastructure development.

Bank Muamalat waiting for potential investors 

Bank Muamalat’s management cited that it has several potential investors that are interested to subscribe to its rights issue, including a domestic private firm, and foreign investors from Singapore, Malaysia, and Middle East. Management also hopes that SOE banks (or its sharia subsidiary) to participate in injecting capital. According to the CEO, the bank currently needs c.Rp4.5tr of new capital.

MNC Studio eyes Rp1.4tr from IPO

PT MNC Studios International will release 30% of its shares to the public and eyes Rp1.4tr proceed from IPO. The company will allocate 30% of the proceed to acquire 20 channels in MNC Channels and refinancing PT MNC Pictures’ medium term notes (MTN).


Grab, Go-Jek could face punishment if not registered

The Transportation Ministry will punish ride-hailing apps companies Grab and Go-Jek if they refuse to register as transportation companies, ministry transportation and multi-mode director Cucu Mulyana said. He said the legal basis to change their status was being prepared and would be ready within two months. The punishment could be in the form of a fine or the freezing or revocation of their permits. “We have a mandate from the prevailing law,” Cucu said. He called on the companies to immediately register with the ministry for the status change, adding that the companies would be given time to adjust to their new status.

Shell braces for upcoming fuel price control

Oil and gas firm Shell Indonesia, the local subsidiary of Netherlands-based Royal Dutch Shell, has stated that the government’s plan to regulate gasoline prices could negatively affect the sustainability of its business.  The Energy and Mineral Resources Ministry recently announced a plan to revise Regulation No. 39/2014 on gasoline retail prices. Through the revision, all gasoline distributors in the country, including Shell Indonesia, must obtain approval from the ministry before increasing the price of gasoline in the general fuel type (JBU) category, except for jet fuel and industrial fuel. “The certainty of being able to sell gasoline in accordance to its actual [international market] price is fundamental to maintaining the investment climate and Shell’s sustainability in its fuel distribution business,” Shell Indonesia retail director Wahyu Indrawanto said.

Friday, 13 April 2018

Protocol to welcome ASEAN banks
Indonesia is set to open its banking industry to banks from ASEAN member countries as the House Commission XI, which oversees financial affairs, approved to ratify a protocol under the ASEAN Framework Agreement on Services (AFAS). “The protocol framework allows our domestic banks to tap in to other ASEAN country’s market. We also hope that with this protocol in effect, there will be healthier competition in domestic financial services, which will benefit the public through better services with lower fees, Finance Minister Sri Mulyani said. She added that the government would open channels of communication with ASEAN member states to ensure their market would be accessible to Indonesian banks. He further said it would pave the way for Indonesia to conduct bilateral negotiations with other ASEAN countries to hash out further details. Under the ASEAN Banking Integration Framework (ABIF), qualified ASEAN Banks (QAB) are allowed greater access to the market of other ASEAN countries if they meet certain capital and corporate governance requirements and obtained a recommendation from their authorities.


PTPP to issue continuous bonds Rp1.5tr
Pembangunan Perumahan targets Rp1.5tr worth of funds through continuous bonds (PUB) offering to be issued in the 2Q18. Agus Purbianto, finance director of the company explained that the funds obtained from the first phase of the PUB will be used for refinancing worth Rp700bn. While the rest will be used for working capital and investment. He estimates that the coupon will range from 7.25% – 8%. He added that PTPP is able to maintain the gearing ratio at 0.6 times in 2017.

Antam to sharpen focus, divest businesses
Aneka Tambang is Aiming for inorganic growth this year in addition to growing organically, as it plans to divest some of its less fruitful businesses while focusing more on resources with the most gains. The company is also slated to raise its ownership of a ferronickel mine in North Maluku and a bauxite mine in West Kalimantan. Antam has also remained steadfast in its plan to part ways with Japanese miner Showa Denko for their joint bauxite mining company PT Indonesia Chemical Alumina in Tayan Hilir, West Kalimantan, as the former will acquire the remaining 20% of Showa Denko’s shares in ICA. Additionally, Antam is arranging a shares increase with Singaporean Ocean Energy Pte. Ltd. to 51% from 20% in its joint-venture blast furnace facility in Tanjung Buli, North Maluku. Speaking at the same occasion, Antam development director Sutrisno S. Tatetdagat would also likely become Antam’s new interest, as in 2017 it managed to record a reserve of the commodity for the first time in its history.

LINK aims for 13-14% revenue growth 
PT Link Net TBK (LINK) is targeting 13-14% revenue growth in 2018. This is still below 2017’s revenue growth achievement of 14.9% yoy. Management also allocates a total capex of Rp1-1.2tr in 2018, mainly to sourced internally. The capex will primarily be used to add 180k homepass. So far, Link Net has coverage over 7 locations, namely Jakarta, Bandung, Surabaya, Malang, Medan, Batam, and Bali, with a total fiber optic length 11,723km. By end of 2018, it expects to have a total homepass of 2.2m units


Moody’s upgrades Indonesia’s sovereign rating

Moody’s Investors Services upgraded Indonesia’s sovereign credit ratings a notch above its lowest investment grade, citing effective policies to support broad economic stability. Moody’s said it now rates debts of Southeast Asia’s largest economy at ‘Baa2’, up from the previous ‘Baa3’ with a stable outlook. The move followed Fitch Ratings’ upgrade in January to also one notch above the lowest investment grade. Indonesia’s debts are now rated the same by the two rating agencies, while S&P still rates Indonesia at the bottom of its investment grade scale. The Moody’s decision bolsters President Jokowi’s ambitious multi-billion dollar effort to spruce up Indonesia creaking infrastructure — part of a broader goal to foster faster economic growth. The nation could count on foreign investors to provide some of the financing, given a ratings upgrade generally means more capital inflows for a country as its default risk is considered lower.

Singapore tightens monetary policy first time in 6 years

The central bank has tightened monetary policy and signaled that it would seek an appreciation in the Singapore dollar, amid solid economic growth prospects and signs of improvement in the labour market. The move by the Monetary Authority of Singapore (MAS), which uses the exchange rate as its main policy tool, showed that the Republic’s economy grew more than expected in the first quarter of the year. “The Singapore economy is likely to remain on its steady expansion path in 2018,” MAS said in announcing a widely expected move to “increase slightly” the slope of the Singapore dollar’s policy band from 0% previously.