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from Breakingviews:
Indonesia subsidy cut is right plan for wrong time
By Andy Mukherjee
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)
Indonesia’s overhaul of energy subsidies is the right plan, but its timing is highly suspect. Hiking state-controlled diesel and gasoline prices by 22 and 44 percent, respectively, will lift prices when investors are already jumpy: $4.7 billion in financial capital left the country in the last quarter. To prevent higher inflation from spooking investors further, the central bank will have to raise interest rates. That means sacrificing GDP growth.
For the past five years, the government has refrained from raising energy prices, choosing instead to absorb the subsidies - $20 billion last year - in the budget. But with the fiscal deficit ballooning, lawmakers agreed to a price increase, while also handing out $910 million to poor families.
The decision will automatically boost prices. Morgan Stanley economist Deyi Tan reckons inflation will rise by 3 percentage points to around mid-8 percent. It will also prompt domestic investors to demand additional yield as compensation for keeping their wealth at home. In 2005, when Indonesia made two hefty upward adjustments to gasoline and diesel prices, locals took almost $10 billion out of the country, precipitating a mini-currency crisis. That precedent will make Indonesia’s central bank extra careful this time around, especially as markets anticipate the possibility of the Federal Reserve scaling back its asset purchase programme. The central bank last week raised its benchmark interest rate by a quarter of a percentage point.
from Global Investing:
Asia’s credit explosion
Whatever is happening to all those Asian savers? Apparently they are turning into big time borrowers.
RBS contends in a note today that in a swathe of Asian countries (they exclude China and South Korea) bank deposits are not keeping pace with credit which has expanded in the past three years by up to 40 percent.
from Photographers Blog:
The tiger, the pig and the cage
Sumatra Island, Indonesia
By Beawiharta
Over a three-week period in February, I covered two very different animal-related assignments in Indonesia – the slaughtering of snakes in West Java and the preservation of the endangered tiger in Sumatra.
In West Java, Wakira along with his 10 workers kill hundreds of snakes each day for their skin at his slaughterhouse in Cirebon. While in Sumatra, real estate tycoon Tomy Winata saves and releases tigers into the wild at his Tambling Wildlife Nature Conservation. I didn't enjoy the snake slaughterhouse assignment because snakes are dangerous and disgusting, but I really liked visiting the tigers in Tambling.
from Breakingviews:
Southeast Asia is wrong to neglect inflation risk
By Andy Mukherjee
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)
Inflation in the Philippines reached a five-month high in February; prices rose the most in 20 months in Indonesia. Yet, there is no word from the central banks of Southeast Asia’s fast-growing nations on when they are likely to raise interest rates. While their coyness to signal policy tightening is understandable, it is nevertheless a mistake.
from Breakingviews:
Bumi debacle teaches some all too basic lessons
By Kevin Allison and Quentin Webb
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.
The debacle at Bumi teaches some lessons which really should not need to be learned. The story of Nat Rothschild’s London-listed cash-shell, turned into an Indonesian coal miner, has tarred everyone involved, given acquisition vehicles a bad name, and damaged the City of London’s reputation. Concrete policy changes may follow, and alleged financial skulduggery could yet produce more fallout. But most of the mess could have been avoided if Rothschild and his backers had followed what should be standard practices for risky investments.
from Breakingviews:
Bumi shareholders should back incumbent board
By Kevin Allison
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
(This view was originally published by Breakingviews on Feb. 13.)
Back the Bumi board. Both the competing plans to salvage value at the coal miner have serious flaws. But the incumbent management looks better positioned than dissident co-founder Nat Rothschild to achieve an all-important split with Indonesia’s Bakrie family. That split should be investors’ top priority.
from Breakingviews:
Fog of Bumi’s battles may be just too tiresome
By Kevin Allison
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Bumi’s minority shareholders are ill-served by the open conflict raging between the coal miner’s board, its founder Nat Rothschild and Indonesia’s Bakrie clan. They deserve an adult debate about the merits of competing plans to unwind a tie-up with its Indonesian backers. They need clarity about the nature of alleged financial irregularities. They are getting a juvenile shouting match.
from Global Investing:
Rupiah decline – don’t worry
Indonesia has just given the go-ahead for another leg down in the rupiah. It has cut its forecasts for the exchange rate to 9,700 per dollar compared to the 9,200 level at which the central bank used to step in. The currency has duly weakened and nervous foreigners have rushed to hedge exposure -- 3-month NDFs price the rupiah at almost 10,000 to the dollar. The rupiah last week hit a three-year low, its weakness coming on top of a dismal 2012 which saw it fall 6 percent as the current account deficit worsened. Traders in Jakarta are reporting dollar hoarding by exporters.
All that is spooking foreigners who own more than 30 percent of the domestic bond market. The currency weakness hit them hard last year as Indonesian bonds returned just 6 percent, a third of the sector's 16 percent average (see graphic).
from Photographers Blog:
Living under sharia
Banda Aceh, Indonesia
By Damir Sagolj
A siren rips apart the silence at the tsunami memorial in Aceh. A short announcement follows, after a greeting in Arabic and blessing from God – everyone is to leave the site immediately. It is time for prayers and the memorial built around a huge ship stranded miles inland during the 2004 tsunami will soon close its gates. Visitors are leaving the site, expected to go to nearby mosque and pray.
I’ve been watching different groups silently walking through the gates - students, business-like people, families and tourists – few went praying. Others were more interested in small shops selling souvenirs and in their pictures being taken. Some stood behind the memorial’s fence, smoked a cigarette and then just boarded their buses.
from Photographers Blog:
Too young to race?
Bima, Indonesia
By Beawiharta
The prize for a horse race in Indonesia's Sumbawa Besar town is woven silk fabric but the prize in Bima is two cows and $100.
I covered the Bima horse races because they use child jockeys, aged between 8 to 12-years-old.
