Commentary: Can Indonesia afford presidential candidates’ election promises?

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ECONOMY IN MEDIUM TO LONG TERM

As it stands, the candidates are optimistic that their policies will boost economic growth.

The annual GDP growth of 5.5 per cent to 6.5 per cent as targeted by Mr Anies for the 2025 to 2029 period is considered more realistic than the 6 per cent to 7 per cent target of Mr Prabowo and the 7.5 per cent to 8 per cent target of Mr Ganjar.

With historical precedence, a more realistic growth potential for Indonesia – based on its performance in the last decade – should be somewhere between 5.5 per cent and 6.0 per cent, especially since momentum seems to have stagnated after growing 6 per cent in 2012.

Global economic uncertainty, sluggish consumption and the low manufacturing capacity are some of the reasons why a higher growth target is difficult to achieve. These all call for a strategic structural transformation in the areas of improving overall productivity, revamping investment incentives, and prioritising fiscal expenditure in sectors that can bring about higher fiscal multipliers to the overall economy.

Nonetheless, it goes without saying that whoever is elected the new leader would want to see a progressive Indonesia with a stable and stronger economy.

The country’s long-term prospects are brighter than ever, with its young, digitally savvy population, abundance of natural resources, growing consumer spending and strategic location at the heart of Southeast Asia.

Indonesia gets to choose from three suitors on Valentine’s Day. We are confident that it will be a happy marriage, whomever she chooses.

Enrico Tanuwidjaja is ASEAN economist at UOB. His coverage focuses on Indonesia and Thailand.

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Commentary: One of aviation’s biggest challenges played out on a Tokyo runway

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If the coast guard plane touched down on the tarmac, that would be an instance of a runway invasion, which is risky but fairly popular. &nbsp,

Most of the time, it goes unnoticed and is referred to as an aircraft incident—an event that occurred without having an impact. However, occasionally they lead to accidents, in&nbsp, with a motion or injury. It is difficult to track the scope of the problem worldwide because accidents are reported to authorities and the nbsp while incidents does not. &nbsp,

QUIET CALLS

According to data from the International Civil Aviation Organization of the United Nations, runway safety accounts for nearly 60 % of all accidents, far outpacing loss of control in flight, which occurred in about 30 % of cases ( an event can have multiple causes ).

The fact that airport attacks have remained stable andnbsp over the past ten years at a rate of only under five per day in the United States rather than declining in line with increased overall aviation security is of the utmost concern.

In the roughly 16, 000 airport attacks that the Federal Aviation Administration has documented over the past ten years, 63 % of them were caused by pilot deviation, or when the pilot violated federal aviation regulations by crossing a runway without permission. Control and actions by air traffic and nbsp were the second-biggest factor, accounting for 18 %. &nbsp,

The National Transportation Safety Board’s Chair, Jennifer Homendy, stated at a convention on airport security in May that” the most dangerous attacks, the closest names, appear to be on the rise.” She remembered one new incident from February of last year among others. When a passenger aircraft with 131 people on board and nbsp, in its path on the ground away, the pilot of the cargo plane saw it abort its landing in Austin, Texas. The two planes approached each other by 35 meters.

That close call is oddly comparable to what occurred in Tokyo.

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Commentary: Hong Kong’s economy struggles to get back on its feet

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HONG KONG: Following COVID-19 at the start of 2023, Hong Kong was one of the last states in the world to resume. The ensuing financial treatment was softer and short-lived than anticipated. The city may not regain its pre-pandemic luster due to a combination of fundamental and cyclical factors, such as geopolitical unrest and global monetary policy.

Hong Kong’s personal use increased throughout the year, but imports and exports remained subpar. Tourism and investment investments have also been underwhelming. Visitor visitors were only 65 % of their 2018 level nine months after the opening. The commodity markets in Hong Kong are in similar challenging situations.

Personal property prices briefly increased at the start of the year but quickly lost momentum and fell in the second half, falling by about 5 % from year to date. Even as the S&amp, P 500 in the United States increased by about 25 % the same year, the Hang Seng Index fell by more than 15 % in 2023 and appears to be decoupled from the global market.

In the first quarter of 2023, Hong Kong stocks reached a four-year small with an average business of just US$ 14 billion. Problems that Hong Kong has lost its luster as an global economic center were raised when money raised from initial public offerings cratered to a 20-year low during the same time period.

In light of this, the government reduced its most recent quarterly GDP forecast from over 4.5 percent to just 3.2 %.

STRUCTURAL AND CYCLICAL FACTORS

Both seasonal and structural factors contributed to Hong Kong’s underwhelming post-pandemic economic performance. On the continuous side, rising regional interest rates as a result of US Federal Reserve rate increases made real estate an undesirable investment. Due to Hong Kong’s robust local currency, locals prefer to shop abroad while visitors find the city to be expensive.

Hong Kong is a victim of political tensions between the United States and China on the fundamental front. Trade relations between the two markets have decreased as a result of trade restrictions and tech restrictions, and more goods are now being rerouted around Hong Kong through next nations like Vietnam and Mexico.

Geopolitical unrest might have wider effects than just business. As a gate to and from island China, Hong Kong enjoyed long-term success. Hong Kong’s reputation as an East-meets-West hub has been fueled by financial services, buying and logistics, hospitality, and specialized services. Any departure from this agreement could pose a city-wide existential threat.

The significant wage and price difference between Hong Kong and the nearby city of Shenzhen is a significant structural component. For a fraction of the cost, Hong Kong residents can then access roughly comparable service nearby.

Residents of Hong Kong will continue to benefit from cheaper services and goods near as their economy more tightly integrates with the area, despite government initiatives to revitalize local businesses like the Night Vibes Hawaii campaign.

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Commentary: AirAsia boss Tony Fernandes’ topless massage during meeting is not ‘open’ workplace culture

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Perhaps, Mr Fernandes’ behaviour could be justified as part of a relaxed, easy-going and informal workplace culture – where staff do not bat an eye at the big boss showing some skin and adeptly multi-tasking. A spokesperson from AirAsia later defended this incident, speaking to the “fun, friendly and open culture” of the airline company.

But, commenters on the now-deleted LinkedIn post were quick to point out it is unlikely other AirAsia employees could get away with the same behaviour in a professional meeting.

Rather than culture, it is probably Mr Fernandes’ position of status and authority that allowed him to behave this way. How many employees would voice their objection or discomfort?

PERSONAL BRAND AFFECTS CORPORATE REPUTATION

Moreover, Tony Fernandes has cultivated a public persona characterised by his unorthodox approach to business and willingness to take risks. Indeed, some netizens have come to his defence, citing his unconventional leadership style and his right to make choices that align with his personal brand.

But what’s the cost of aligning personal branding with actions that challenge traditional norms? It becomes a delicate balance between individuality and the image of the company.

While individuality and personal branding are essential, boundaries should be respected. The behaviour of CEOs is not merely personal but an integral facet of a company’s branding and reputation.

Personal conduct can be a form of reputational risk. Bernard Looney, CEO of BP, resigned in September for failing to fully disclose previous relationships with colleagues. The energy company said leaders are “expected to act as role models and to exercise good judgment”.

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Commentary: Deflation is the last thing China’s recovery needs

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CHEAPER STUFF ISN’T A BLESSING

Given the surge in inflation in most major economies last year, you might think cheaper stuff is a blessing for China – or any country. Not really. A protracted fall in prices tends to create the expectation that, if companies or consumers wait a bit longer to make a major purchase, then things will be even less expensive.

Businesses relentlessly seek ways to cut their own costs, including investment and, in time, wages and jobs. In a widely cited 2002 speech, Ben Bernanke, then a Fed governor, left no doubt about its corrosiveness. “Sustained deflation can be highly destructive to a modern economy and should be strongly resisted,” he warned.

Interest rates can be cut. The PBOC has been lowering them for a while, though it’s been reluctant to make deep reductions. Bloomberg Economics projects a trim of 10 basis points in the main rate next week.

There’s a huge role for fiscal policy, too, and Beijing appears to be on board. Last month, the legislature green-lighted the deficit exceeding the traditional limit of 3 per cent of GDP. There’s now a greater sense of urgency.

The dour statistics remind us how far China has to go before its economy can hum again – at a pace of growth more like that of other major powers, not the exceptional beast of yesteryear. Given the traumas in global policymaking in the past few years, it’s easy to forget that in 2017 Janet Yellen, then Fed chair, almost sounded wistful about perky inflation.

Its quiescence in the midst of a long expansion was dubbed a “mystery” by Yellen, who is now Treasury secretary. China can probably relate. Such is the tyranny of being a grown-up economy, complete with ups and downs.

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Commentary: Indonesia’s ‘golden visa’ pitch to big-time investors must endure beyond Jokowi’s term

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DRUMMING UP Growth Money

Indonesia invested US$ 5.7 billion in standard copper mine for the first half of 2023, both domestically and abroad. In the same six-month phase, the telecommunications and transportation industries booked US$ 5.1 billion.

The four pillars of Jokowi’s growth strategy for attracting foreign and domestic investment were discussed by Luhut in a new website interview.

The first step is downstreaming. This is the domestic production of goods that benefit from Indonesia’s nutrient and plentiful resources. This might increase regional income, lower buy spending, and boost export income.

Copper metal mined in Sulawesi Island is the subject of a significant downstreaming plan. Jokowi wants to use metal internally to produce higher generating batteries for electric vehicles and has banned the trade of nickel as a natural material. Similar river manufacturing of numerous metal-based tools, including cookware and health utensils, is also possible with tin, bauxite, and copper.

Algae and hand fuel stand out on bio-based products. High-value seaweed extract carrageenan is primarily used in food and cosmetics as a gelling broker. Alternative uses include biodiesel, fertilizer, animal feed, waste therapy, and bioplastic to address the problem of plastics clogging the atmosphere. Seaweed is get downstreamed as biodiesel along with fuel palm, lowering Indonesia’s oil import bill. Indonesia had a$ 13.3 billion oil and gas industry gap in 2021.

The next component is digitization. Nowadays, digitalization is used for nearly all government document. On bright phones or personal computers, people can fill out forms for investment, tax returns, business allows, documents, and doctor visits at common health facilities and facilities.

Indonesia wants to create an AI ecology as well. Potential online applications for broadband attract major players like Sam Altman.

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Commentary: Malaysia sets it sights on wealthy investors

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THE GLOBAL RACE FOR INVESTMENT

Malaysia’s pursuit of wealthy investors is part of a larger global race among nations to secure foreign capital and talent. In 2022, global foreign direct investment (FDI) flows reached US$1.3 trillion. For Malaysia specifically, FDI accounted for 61.7 per cent of total approved investments in the country last year, or RM163.3 billion (US$34.8 billion).

The infusion of wealth and capital from rich investors can have a transformative impact on Malaysia’s economy. These investors bring not only financial resources but also expertise, networks and connections that can stimulate local industries.

One of the key strategies Malaysia has implemented to attract overseas retirees and wealthy investors is the Malaysia My Second Home programme (MM2H).

Launched in 2002, the programme grants eligible participants a multiple-entry social visit pass, allowing them to stay in Malaysia for up to 10 years, with the option of renewal. Between 2002 and 2019, close to 50,000 foreigners were approved under the MM2H programme.

In a surprising move, however, the government in 2021 introduced more demanding requirements, reducing uptake for the scheme. This included a quadrupling of the minimum monthly income to RM40,000 and increasing the required period for physical presence to 90 days in a year.

This was not all. More onerous was the new bank deposit requirement of RM1 million, up from the previous amount of RM150,000 to RM300,000, and that of liquid assets of RM1.5 million (up from RM350,000 to RM500,000 previously).

It was almost as if the revised MM2H wanted to dissuade potential applicants since other countries in the region had less stringent thresholds. Since the regulations were tightened in 2021, there have been a 90 per cent drop in the number of applicants.

A second programme to attract wealthy foreigners is the Premium Visa Programme (PVIP). This programme is not by any stretch of imagination less demanding in its requirements than that for MM2H, with applicants having to open a local fixed deposit account of about RM1 million.

PVIP differs from MM2H in that it allows applicants to conduct business and seek employment; it does not require a minimum period of stay in Malaysia and waives the need to show proof of liquid assets.

At first glance it is quizzical why a country that seeks to attract wealthy investors should raise the thresholds; and why it should position itself to be less competitive than other countries in the region.

There have been calls from various quarters for the MM2H regulations to be eased, with the Johor sultan urging the government on multiple occasions to revise the conditions. In April, the government confirmed that it would review the criteria for the programme.

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Commentary: Why would foreigners want an Indonesian golden visa?

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Washington doesn’t follow a meal, according to the Congressional Budget Office. Rather, it predicts that over the next ten years, the fiscal deficit will total at 6.1 percent of the gross domestic product. The government has already spent the highest amount since 1998 — 14 %— on net interest payments.

Treasury bonds may no longer be owned by long-term investors, according to Jefferies capital strategist Christopher Wood.

Financial Control IN INDONESIA

Purchasing US$ 350,000 value of local government bonds appears to be a safer bet in this world environment. Indonesia also upholds fiscal discipline, possibly in large part as a result of the cash outflows it experienced during the Global Financial Crisis.

These days, Jakarta maintains a 3 % self-imposed cap on its fiscal shortfall, even at the cost of slower growth. The most recent Income forecast for 2024 is 2.29 percent.

This conservative stance is a welcome story in an environment full of purchase. Buyers are concerned about how little debt is excessive and when a full-fledged economic collapse may occur in China, the European Union, and the US.

However, in Indonesia, household debt only makes up 9 % of GDP andnbsp; in fact, less than 60 % of the country’s 274 million young people have bank accounts.

For tech companies who want to be more than quiet investors and experiment with banking and financial participation, this balance-sheet environment offers a great option. People prefer to possess smartphones over televisions and washing machines because portable devices are so common.

Social media sites like TikTok, on the other hand, have a significant impact on Gen Z because they connect Indonesians while also protecting them from the turbulent, debt-fueled world.

And Bali, the sub-tropical riding and yoga haven, should not be overlooked. I observed young digital nomad typing frantically on their laptops in chic cafes last summer while participating in a yoga retreat it.

I felt jealous. I’d like to relocate it. The beautiful visa of Indonesia certainly merits a good look.

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Commentary: Does India’s disruption of the global rice market pose new threat to food security?

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BALANCING DOMESTIC NEEDS WITH EXPORTS

As chair of the 2023 G20, and with Indonesia’s successful 2022 G20 Summit still fresh in mind, India seeks to balance domestic needs with export reliability.

As the Indian shock to the world rice market unfolds, three countries are in the spotlight.

First, the question remains whether Indonesia will receive the full 1 million tonnes of rice it contracted from India. If it does, that will calm the whole world rice market.

Second, the status of the Philippines’ rice stocks is crucial. A number of experienced technocrats in the Philippine Cabinet have likely planned for this contingency.

Third, Vietnam’s export patterns warrant scrutiny. While its crop outlook seems good, there is always the danger that the Vietnamese government might restrict exports in response to domestic hoarding. Managing price expectations in Vietnam will be critical.

In a rice emergency, all eyes inevitably turn to China. Its rice production has suffered significantly from heat and floods. The exact level of rice stocks is a state secret but they are by far the largest in the world. Still, they are dispersed geographically, which somewhat limits central government access and control.

Food security in China is a high priority, and with both wheat and rice prices rising, it is hard to tell what the Chinese response will be. Any effort to pre-emptively procure more imports will spook the market.

In a real rice panic, Japan might play a similar role as in 2007. Then, the mere announcement by Japan’s prime minister that Japan would start negotiations with the Philippines to sell some of its surplus WTO rice was sufficient to prick the speculative bubble. This sent world rice prices sliding.

Japanese rice stocks are smaller now than in 2007, but even an offer of half a million tonnes to the neediest buyers in the region could calm any panic buying.

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Commentary: Japan’s high standards of service face ‘shrinkflation’

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JAPAN’S CHRONIC LABOUR SHORTAGE

Even global brands such as McDonald’s which seek to replicate a particular dining experience across the globe know they have to raise their game in Japan – and have historically done so.

The variable these days is Japan’s chronic labour shortage – a slow-burning crisis of demographics and hesitancy about immigration which, as examples highlight almost daily, is making its mark across the economy. Last week, in a Kyodo survey of 114 of Japan’s largest companies, 49 per cent said they were short of staff. Tokyo Shoko Research, meanwhile, reported that in the first six months of this year, bankruptcies directly caused by staff shortages were 2.5 times higher than the same period in 2022. 

Versions of the crisis are everywhere – some are unsettling. In a country where most of the land mass is hills and valleys, members of the Japan Society of Civil Engineers worry about the huge national shortfall of expertise in bridges and tunnels. 

But for now, at least, large parts of consumer-facing Japan are entering a complex charade that seems to draw inspiration from another bit of corporate gamesmanship. After many years of deflation and loss of pricing power, Japanese food companies became absolute masters in the dark arts of “shrinkflation” – reducing the quantity of product while maintaining familiar sizes of packaging. Japan was hardly alone in this practice, but squeamishness around raising prices meant it became a more entrenched habit than elsewhere. 

Grumpy Japanese websites track in great detail the ways, measurements and timeframe in which shrinkflation has reduced the length of beloved ice lollies, the number of processed cheese slices in a pack or the number of Melty Kiss chocolates in a sachet. A favourite joke centres on Fujiya’s popular Country Ma’am chocolate chip cookies and the forecast that, under its current rates of shrinkflation, each one will be smaller than a  ¥1 coin by 2040.

The shrinkflation deception uses visual consistency in the packaging to anchor expectations while delivering less. It also postpones for as long as possible a fundamental change of relationship with customers.

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