AmCham Update Vol. 5 #38

Moody’s Maintains Stable Credit Rating Outlook, Jokowi Meets Apple CEO, AI Law Coming Soon, Modest Consumer Confidence Improvement, First Nusantara Staff Relocation

Apr 19, 2024

Moody’s Maintains Stable Outlook on Indonesia’s Credit Rating

Rating agency Moody’s affirmed Indonesia’s sovereign credit rating at Baa2, one level above investment grade, with a stable outlook on April 16, reflecting global confidence in the nation's ability to maintain prudent monetary and fiscal policies to support macroeconomic stability and positive medium-term economic prospects.

Moody’s forecasted Indonesia’s economy to maintain a steady 5 percent growth rate from 2024 to 2025, surpassing other Baa-rated countries at around 3 percent, driven by structural reforms boosting the investment climate, foreign investment, export growth and government revenue. Moody's also sees sustained external sector resilience with an increasing trade surplus, supported by downstream policies to enhance export diversification and reduce price sensitivity.

Bank Indonesia (BI) Governor Perry Warjiyo reiterated the central bank’s continual vigilance of global and domestic economic trends. The government will also continue to safeguard investor confidence and domestic purchasing power amid global geopolitical uncertainty, said Coordinating Minister for Economic Affairs Airlangga Hartarto.

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Jokowi Meets Apple CEO Tim Cook

Apple CEO Tim Cook met with President Joko Widodo at the Merdeka Palace on Apr 17, as part of a government initiative to attract investment from key players in the technology sector. The meeting focused on plans to establish a fourth Apple Developer Academy in Bali with a total investment of Rp 1.6 trillion, joining existing academies in Batam, Surabaya and South Tangerang, which have generated 2,000 graduates. President Widodo has also asked Apple to invest in the smart city aspects of the new capital Nusantara.

The meeting was also attended by Coordinating Minister for Maritime and Investment Affairs Luhut Binsar Pandjaitan, who has been appointed as the coordinator for Apple's investment plans in Indonesia; Minister of Communication and Information Technology Budi Arie and Minister of Industry Agus Gumiwang Kartasasmita.

During the visit, Cook also met with President-elect Prabowo Subianto, exploring the potential establishment of an iPhone manufacturing facility in the country, as the government expressed its support for Apple's intentions to invest in Indonesia.

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Kominfo to Issue New AI Law Before October

The government is speeding up the issuance of its artificial intelligence (AI) regulation, aiming for release before October this year, said Deputy Minister of Communication and Information Technology (Kominfo) Nezar Patria. The regulation is needed to reinforce Minister of Kominfo Circular 9/23 on AI Ethics.

While the initial circular received positive feedback from industry, Nezar noted the need to strengthen certain provisions, particularly regarding copyright. Discussions have been ongoing regarding the legal stance of intellectual property rights for AI products in Indonesia. The circular, issued last year, aims to establish guidelines for the ethical development and utilization of AI. While not legally binding, violations are subject to existing laws such as the Electronic Information and Transactions Law and the Personal Data Protection Law.

Nezar also warned the public about AI exploitation in online shopping scams. He said that the ministry collaborates with digital platforms to monitor the misuse of AI technology, especially concerning the manipulation of the voices of public figures and celebrities to endorse products they have not approved.

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Consumer Confidence Sees Modest Improvement

Indonesia’s consumer confidence index edged up by 0.7 points, from 123.1 in February to 123.8 in March, according to a Bank Indonesia (BI) report. The slight increase was fueled by optimistic views of the current economic situation, although consumers displayed less positive expectations for the future.

The report highlighted that consumer confidence was particularly strong among younger Indonesians, especially those aged 20-30, who reported the highest levels of optimism. This age group typically spends between Rp 4.1 million and Rp 5 million monthly, whereas confidence tended to dip among those over 60. The Strong Economic Condition Index (IKE) and the Consumer Expectation Index (IEK) held steady at 113.8 and 133.8 points, respectively, said BI Spokesman Erwin Haryono.

The report also noted an increase in the average propensity-to-consume ratio from 73 percent in February to 73.6 percent in March, a decrease in the debt-to-income ratio to 9.4 percent, and a slight rise in the savings-to-income ratio to 17 percent.

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Gov't Announces First Staff Relocation to New Capital

The government has revealed the first batch of 38 ministries to be relocated to the new Nusantara capital city (IKN) by September this year, prioritizing their distribution according to those most needed and the readiness of housing. The move will involve relocating 11,916 civil servants across three phases of priority segmentation, said Minister of State Apparatus Utilization and Bureaucratic Reform (PAN-RB) Abdullah Azwar Anas.

Among the agreed allocations are key institutions including the Secretariat General of the House of Representatives (Setjen DPR) and Regional Representatives (Setjen DPD), and the People's Consultative Assembly (Setjen MPR). Crucial ministries include the ministries of defense, foreign affairs, energy and mineral resources (ESDM), finance, trade, health and communication and information technology.

Other bodies such as the Supreme Court (MA); Supreme Audit Agency (BPK); the Judicial Commission (KY); the Pancasila Ideology Development Agency (BPIP); the National Intelligence Agency (BIN); the Presidential Staff Office (KSP); the Presidential Advisory Council (Wantimpres); National Food Agency (Bapanas); National Cyber and Crypto Agency (BSSN); Meteorological, Climatological, and Geophysical Agency (BMKG); and the Corruption Eradication Commission (KPK) are also included in the plan.

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Indosat and Mastercard Cybersecurity Center of Excellence

Indosat Ooredoo Hutchison (IOH) and Mastercard signed a memorandum of understanding (MoU) to collaborate toward safeguarding Indonesia’s digital economy through the launch of the Indosat-Mastercard Cybersecurity Center of Excellence (CoE), on April 18.

The announcement was made at an event attended by Minister of Communication and Information Technology Budi Arie Setiadi, Mastercard CEO Michael Miesbach, and other senior executives from Indosat and Mastercard.

The center of excellence marks a significant milestone in the two organizations’ journey toward safeguarding Indonesia’s digital future. With its focus on capacity and skills development, the partnership aligns closely with the government’s Golden Indonesia 2045 vision, which seeks to position Indonesia as the fourth largest economy in the world by 2045, with upskilling and human capital development key pillars.

By leveraging their collective global and local expertise and resources, the Indosat-Mastercard Cybersecurity CoE is poised to play a central role in enhancing Indonesia’s cybersecurity ecosystem, elevating the nation’s position as a digital frontrunner on the global stage.

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Update is AmCham’s regular newsletter on developments related to investment, the economy, regulations and issues related to doing business in Indonesia. It comes out three times a week. It is edited by AmCham Managing Director Lydia Ruddy and written by the AmCham Staff. Paul L Goddard is the Managing Editor.

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