All charged up and ready to go

INDONESIA - Report 31 Mar 2021 by Cyrillus Harinowo

Recently Credit Lyonnais Securities Asia published a report on the Indonesian electric vehicle industry that underscored its confidence in the Indonesian government's support for the industry, from nickel production for batteries to the prospects of Indonesia's becoming part of the global production base for electric vehicles. The report, entitled “All charged up,” outlined the government's policies regarding the development of electric vehicles as well as the prospects for the development of the batteries for electric vehicles.

This report was in contrast to the World Bank Report in 2019, which said there was no likelihood that Indonesia would become part of the global supply chain for electric vehicles. However, Indonesia had already exported 332,000 units of completely built up (CBU) vehicles using combustion engines in 2019. In addition, exports of completely knocked down (CKD) cars were more than half a million units. Therefore, the two forms of vehicle exports reached nearly 1 million units. The improvement in export infrastructure with the partial completion of car ports in Patimban, in West Java, may help significantly raise vehicle exports in the coming years.

The significant role being played by Indonesia in the production of nickel, which is one of the main raw materials for the EV battery, as well as the fact that Indonesia is already part of the production base of the global automotive industry, suggests that the likelihood that Indonesia will be part of the supply chain for electric vehicles is certainly high. The report by CLSA is indeed encouraging.

In the midst of this situation, the Indonesian balance of trade for the month of February 2021 registered another large surplus. Exports in February 2021 reached $15,265.1 million, marginally lower, by 0.19%, than in January 2021 but up by 8.56% from the same period of the previous year. Meanwhile, imports reached $13,264.1 million, a marginal decline of 0.49% from the previous month, but a rise of 14.86% above the previous year. The increase in imports compared with the previous year indicates that the economy has shown a recovery back to its pre-Covid condition. The trade balance for February registered a surplus of $2,001.0 million, a continuation of the series of surpluses from previous months. With the surplus in February, the total trade balance for the first two months of 2021 was $3,964.8 million.

The Central Board of Statistics also released the inflation report, which showed inflation of 0.10% for the month of February. With that performance, year-over-year inflation stood at 1.38%, a level below the target corridor of the Central Bank. However, in light of maintaining stability in the exchange rate while still providing stimulus to the economy, the Central Bank decided to keep the benchmark interest rate at 3.50% at its Monetary Policy Meeting of March 2021.

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