AmCham Update Vol. 5 #79

Manufacturers Still Hurting on Import Reg, Economic Growth Slows in Q2, Mixed Reviews on Health Law Implementation, Luhut Won’t Serve in Prabowo Cabinet, IKN Infrastructure Troubles Limit Independence Day Celebrations, Bronze in Badminton for Indonesia

Aug 05, 2024

Import Woes Continue for Manufacturers

Some businesses are continuing to feel negative fallout from Ministry of Trade Regulation 8/2024. The Association of Indonesian Metalworking and Machinery Companies (Gamma), for example, said that its members are having difficulty importing raw materials for foundries and spare parts.

Dadang Asikin, Chairman of Gamma, called for a re-evaluation of the policy and to strengthen the optimization of local content (TKDN) requirements in the procurement of goods through the state budget and state-owned enterprise projects.

Indonesia’s Purchasing Managers’ Index (PMI) – which tracks market conditions in the manufacturing and services sectors – slumped sharply from 54.2 in March to 49.3 in July, according to data published by S&P Global on Aug 1, the first contraction in two years. A PMI below the 50 point benchmark indicates shrinking activity in manufacturing and services.

Darmadi Durianto, a member of House of Representatives (DPR) Commission VI, said that illegal imports contributed heavily to lower productivity in domestic industries, which have spurred mass lay-offs in textiles, apparel and ceramics manufacturing. He called on the government to implement Anti-Dumping Import Duties – known locally as BMADs – sooner rather than later, especially in sectors that have been hit by Chinese imports, according to Durianto.

The trade ministry plans to impose BMADs on seven categories – textiles, apparel, ceramics, electronics, cosmetics, finished textile products and footwear.

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Indonesia’s Economic Growth Declines to 5.05%

Statistics Indonesia (BPS) reported that Indonesia's economic growth rate for Q2 2024 was 5.05 percent, year-on-year (YoY), a slight decrease from the 5.11 percent growth recorded in Q1 2024 and 5.17 percent in Q2 2023, according to Moh. Edy Mahmud, Deputy for Balance Sheet and Statistical Analysis.

Despite this decline, all business sectors experienced positive growth consistent with seasonal patterns observed in previous years, noted Edy.

Manufacturing was the largest contributor, accounting for 0.79 percent of the 5.05 percent growth. Other significant contributors included the construction sector (0.67 percent), the trade sector (0.63 percent), and the information and communication sector (0.50 percent).

Minister of Finance Sri Mulyani described the 5.05 percent growth as a fairly good achievement, reflecting the sustained momentum of economic expansion. She emphasized the need for the government to maintain this momentum, particularly in the context of a weakening global economy, to achieve the targeted growth range of 5.1-5.2 percent for the year.

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Luhut Won’t Serve in Prabowo Cabinet

Coordinating Maritime Affairs and Investment Minister Luhut Binsar Pandjaitan has said he won’t join the cabinet of President-elect Prabowo Subianto. The powerful minister said it was time for a new batch of politicians to step forward. Luhut was speaking last week on CNBC Indonesia.

Luhut added that he is willing to advise Prabowo on the basis of his experience during the current administration, especially concerning the many relationships he has made globally. Luhut has been in his current post since 2016 and has been the lead negotiator for the government on numerous investment deals.

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IKN Infrastructure Worries Limit Independence Day Festivities

Preparations for Indonesia’s 79th Independence Day on Aug 17 are ramping up at the site of the new Nusantara Capital City (IKN), but the celebrations will be scaled back and will not include foreign representatives due to the limited infrastructure available, Minister of State Secretary Pratikno said.

The event will primarily focus on ceremonial rites with very limited invitations. “The available accommodations are inadequate, and the airport in IKN is not prepared to handle aircraft landings,” Pratikno added.

In addition, the Presidential Palace has scheduled a Cabinet Ministers Meeting in IKN on Aug 12. Deputy for Protocol and Media of the Presidential Secretariat, Yusuf Permana, confirmed that all ministers are invited to attend. President-elect and Defense Minister Prabowo Subianto has also confirmed his attendance at the meeting.

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Indonesia Wins Bronze in Olympics Women's Badminton

Indonesia’s Gregoria Mariska Tunjung won the country’s first medal at the Paris Olympics, securing bronze in the women’s singles badminton. She was awarded the medal after Spain's Carolina Marin withdrew from the competition due to a knee injury.

Gregoria had previously lost to An Se-young of South Korea in the first semifinal match on Aug 4, ending Indonesia’s hopes for a gold medal in badminton. She was set to face Marin for the bronze medal on Aug 5, but after Marin withdrew from the competition, Gregoria was awarded the bronze by default.

"It's a tough situation. It feels wrong to celebrate when it means another player is injured. While I’m thankful for winning a medal, I’m not sure if I can truly feel happy about it," Gregoria said.

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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.

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