Starting 2016 With New Determination

INDONESIA - Report 28 Jan 2016 by Cyrillus Harinowo and Maria Kartika Purisari

Executive Summary

Walini is the name of an unproductive tea plantation outside Bandung, the provincial capital of West Java. At the time of this writing, President Jokowi broke ground for the development of the first high-speed train to connect Jakarta and Bandung. The 140 kilometer distance between the two cities will be reached in 35 minutes when the train is completed. The plantation itself will be converted into a new and modern township that will also host a station for the high speed train. The groundbreaking itself showed the strong determination of the President to accelerate development.

The development of the high speed train took place alongside the development of the first corridor of Jakarta’s rapid mass transit program, light rail transit in several corridors in Jakarta, as well as various other public infrastructure works. The high-speed train program was developed by a joint venture between an Indonesian state-owned company and the Chinese Railway Company and was financed outside the Indonesian government budget.

Just a week after the bomb attack by terrorists in Jakarta’s thoroughfare, the groundbreaking took place. The country was not deterred by the attack. In fact, after killing all the terrorists, the special police force caught and detained more than ten people linked to the attack. Aside from the police actions, many communities reacted strongly to the attacks to show the radical group that the Indonesian people are not deterred by such attacks. This attitude helped significantly to protect the economy from slipping.

In the midst of this situation, the trade balance in December showed a deficit for the second time this year. While Indonesian exports improved considerably, imports experienced a similar increase. The deficit for the month reached $235.8 million, lower than the deficit for November 2015, which was $408.3 million. Exports reached $11,886.3 million in December, considerably above November’s, showing an increase of $775.1 million or 6.98%. Meanwhile, imports reached $12,122.1 million in December, compared with $11,519.5 million in November, an increase of $602.6 million or 5.23%. In 2015, exports were $150,252.5 million while imports reached $142,739.6 million, for a trade surplus of $7,512.9 million, despite the trade deficits in November and December this year.

In the meantime, the month of December was also marked by a surge in monthly inflation, which reached 0.96%, led by a sharp increase in the volatile food category. Yearly inflation in December 2015 was 3.35%, a level at the low end of the Central Bank’s inflation target. Confidence in the development of the external balance, and with inflation in check, Bank Indonesia cut the benchmark rate by 25 basis points, to 7.25%.

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