CFO of Bank Danamon, Vera Eve Lim, was today interviewed by Eric Bellman, the Jakarta correspondent for the Wall Street Journal. Bank Danamon is one of Indonesia’s largest banks by assets. She emphasized that infrastructure is “what keeps her up at night”. As I have said time and time again, the dire need for infrastructure will be a brake on future growth.
Lim commented that the underinvestment in infrastructure will result in Indonesia economically evolving into a case similar to India. That is, inflation will persist above targets, and, GDP growth will slow. The government of Indonesia, can continue to subsidize fuel, but it will all be in vain if the economy cannot grow because it is too expensive to move goods and services around the country. The central bank’s priority of managing inflation is weakened by the infrastructure impact on costs. As I have previously written, the governor of Bank Indonesia, Darmin Nasution was quick to emphasize such at his recent dialogue at the Consulate-General of New York.
Lim is not alone amongst experts in seeing this risk. Bellman and his colleagues at the WSJ’s blog, SoutheastAsiaRealtime, also wrote today of the increasing consensus the government is following the India path. This they say is reflected in the recent weak performance of the Indonesia Stock Exchange and the Indonesian Rupiah in international currency markets.
While I remain bullish on Indonesia, I am concerned that heading towards the election cycle, the government and the legislature will play more politics and theatre than good policy. With Europe grinding to a halt, Jakarta has a choice before her- sit and rest, or, push harder than ever to ensure the economy has the capacity to grwo.
The situation for Research in Motion (RIM), the maker of Blackberry, continues to be deteriorate. With continued departures of senior executives, and, expected losses in coming quarters, the options for the business are getting limited. JP Morgan has been retained by the board to assist with strategic options.
Indonesia continues its passion for Blackberry. It was only a couple of months ago that riots occurred in Jakarta over the new release of a phone model. The government of Indonesia and in particular Minister of Trade, Pak Gita Wirjawan has courted RIM to invest in Indonesia. I recently met a friend to discuss my impending extended trip to Jakarta. She advised me, that while my passion for Apples iMessage was all well and good, I cannot survive in Jakarta without a Blackberry and a Blackberry PIN for the Blackberry Messenger System.
RIM’s misfortune could be a interesting opportunity for one of the aggressive competitors out there. The smartphone is the primary internet device for millions of Indonesians. Could a Facebook or Google have the gumption to take over RIM? Would RIM help an ailing Nokia, transform its position. What about Microsoft? What does Samsung think or care about this?
Clearly the question with RIM and Indonesia, is not just about selling more handsets, but how can acquiring create this primary internet device, lead to expanded revenue opportunities? Surely one f these companies wants a share of this lucrative potential market in Indonesia? We’ll have to wait and see.
This week in New York it has been Fleet Week. Fleet Week is a tradition where active ships of the US Navy and Coast Guard will visit a city for a week. In New York, it was over this Memorial Day long weekend, and in conjunction with the celebration for the bicentenary of the Battle of 1812.
Usually addition to American ships, there are ships from other navies joining the festivities. This year Indonesia was represented by the tall ship the KRI Dewaruci.
This ship holds a very special significance for my family. My grandfather’s brother, Kapten Oentoro Koesmardjo, gave the Dewaruci her name. He was tasked by Indonesia’s first President, Sukarno, with heading to Germany and overseeing the final completion and delivery of this ship. Eyang Oentoro was the senior Indonesian born officer who accompanied the German born mariner, Captain Rosenow, in taking delivery of the Barquentine from the shipbuilders and sailing it home to Indonesia. A little know historical fact is Kapten Oentoro, on this same journey to Germany would meet and fall in love with his future wife Evy- the daughter of Captain Rosenow.
As a boy who grew up on the water and around boats, I thought the Dewaruci looked in good shape for a ship they first started building before World War II and delivered in the early 1950′s. This will probably be her last circumnavigation cruise. The Indonesian navy currently has plans for one or two more overseas goodwill missions with the Dewaruci before retiring her in the next year or so.
She will, if all goes according to plan, be replaced by a new tall training ship, and happily for our family, be renamed the Dewaruci.
More photos from the visit to be posted
Indonesia’s history is naturally tied to it’s harbors and ports. Indonesia owes it economic success, national unity and Muslim majority to the sea.
A battle of wills is occurring in Jakarta’s port of Tanjung Priok (often shortened to ‘Priok’) between the economic demands of modern Indonesia and the historic legacy of Indonesia. Tucked in a corner of the Tanjung Priok is a mosque housing the grave site of Mbah Priok, a cleric missionary who was key in bringing Islam to west Java.
Hutchinson Whampoa, the Hong Kong global port operator founded by Li Ka-Shing, has for over a decade been a primary private operator at Priok in partnership with state-owned operator, Pelindo. Hutchinson is undertaking a $100 million development to expand the capacity of the container terminal at Priok. This plan calls for the development of an area of 34 hectares but intersects with 5.4 hectares claimed by the descendants of Mbah Priok. While the grave site and mosque is around 320 square meters, the descendants of Mbah Priok, hold a property deed issued by the Dutch in the 1930′s for 54,000 square meters. Mbah Priok’s remains were moved to a public cemetery in 1997.
The Hutchinson operated Jakarta International Container Terminal currently handles around 2 million TEU’s (Twenty foot equivalent units – the primary container measure) plus with the other adjoining terminals, Priok in total handles 5 million TEU’s. This compares to 20 million TEU’s handled by the Port of Singapore. For a archipelago nation and as the primary port for the most populous island, Java, this is clearly insufficient. Singapore over the last decade has increasingly handled transshipment traffic as traffic is loaded on to smaller ships headed for Indonesia.
As most foreign investors to Indonesia understand, relying on the local courts and judicial system is undertaken at your own risk. In this case the government is the co-operator with the foreign firm, against local parties, with significant emotional and historical weight on their side. The courts have already ruled in favor of the government in a suit brought by the Mbah Priok descendants in 2002. In April 2010, the area exploded in violent riots between local Muslim residents and the north Jakarta police.
Given this previous ruling and the weakness with courts, the issue is now back with Pelindo and the national government. How Jakarta peacefully resolves this issue will be an interesting case study for how the country balances its past with its future.