Analysys – The Jakarta Post April 2012

Posted on May 1, 2012


Analysis: Guess who gets the raw deal every time?

Debnath Guharoy, Roy Morgan | Tue, 04/03/2012 11:27 AM

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All over the world, the economic slowdown is taking its toll on just about everybody. In developed countries like Greece, Ireland, Spain and Portugal, it is the jobless and the middle-class who are feeling the pinch most of all. Except of course the 1 percent at the very top and their coterie of another 3-4 percent, give or take. Just about everywhere, life’s getting even better for that 5 percent. Only for the remaining 95, the degrees of pain and grief vary in their intensity. They are the people feeling the brunt of the austerity drives, the cutbacks and the rollbacks, nobody else. It’s the same people, the overwhelming majority, who get hurt every time. Without exception.

The self-proclaimed champions of democracy and free-market capitalism, the mighty United States of America, have laid bare the obvious truth yet again. While poverty grows, the super-rich will continue to get tax-deductions on their Learjets, Warren Buffet will pay less tax than his secretary and Obamacare will be repealed if the Republicans could have their way. Fortunately, for most Americans that’s an unlikely scenario, thanks to the ineptitude of those challenging their beleaguered president at the next election. Would anybody in this country like to promote that brand of free-wheeling capitalism?

You couldn’t, not really, if you consider the evidence. On the one hand, the last five years have seen exceptional economic progress right across this sprawling country. Poverty is down, but far from beaten. Wages are up significantly, unemployment is down to single-digit. The middle-class, defined by ownership of a refrigerator, a TV set and a car or motorcycle, has grown from 25 to 42 percent of all households. Three out of four Indonesians 14 years of age and older now have a mobile phone. But on the other hand, the cost of everyday essentials has continued to rise, putting the squeeze on just about every home. How the 95 percent respond to that reality is clear.

“I think it is the government’s duty to support those who can’t find work,” say 92 percent of the people, up from 87 five years ago. With unemployment going down but cost of living going up, more people are more compassionate today. The growing sympathy is in itself an indicator of social progress, the haves caring for the plight of the have-nots. In time, a society that can afford to be more caring will see legislators pushing harder for an effective safety net. The pressure on those primarily responsible for wanton corruption and callous law-enforcement will continue to mount.

Those living in homes where the breadwinner has a job aren’t looking at life through rose-tinted glasses. Eight out of 10 Indonesians continue to believe “the gap between the rich and poor is growing”. The fluctuations are negligible. Nowadays, 70 percent say they have “recently cut down my spending”. This has climbed back up from the low of 63 just two years ago. At a time when there has been explosive growth in the sales of motorcycles, refrigerators and TV sets, this may seem a contradiction of thought versus action. The explanation lies in the fact that these “modcons” are no longer luxuries in the owners’ reckoning, they are necessities. We need to remember that only 42 percent of the population live in households with all three of these worldly possessions. This group is growing rapidly and that is good news. Once these acquisitions enter those homes, they become a part of everyday life, nothing particularly special.

Who is to say what is a luxury and what isn’t? There are no constants, except change itself. Proof of those changing perceptions is provided by the 68 percent who “don’t buy luxuries anymore”, moving up from the low of 58 in December 2009. To many, an ice cream is a luxury. To a few, even Gucci is passé.

It is these contrasts that make the BBM debate all the more poignant. Most of those kicking this political soccer around would probably agree in private that a price hike of subsidised fuel is long overdue. If the cost of essentials like transport, education and health were affordable, available and accessible, the prospect of rising costs for food and fuel would have been more palatable than it is now. In public, too many politicians are using the protests of the people as an easy opportunity to curry favor. They forget that the majority of voters aren’t easily fooled. The vacillation of parties changing position has been duly noted. The postponement of the inevitable isn’t a victory, whichever side of the argument you are on.

What we cannot forget is social justice, what we cannot ignore is the growing inequality. Those failures are visible everywhere, from the Occupy Movement, the English Riots to the Arab Street. And presently, on the main streets around Indonesia. Common sense needs to prevail. The lines between ideologies, capitalism versus communism, liberals versus conservatives, often get too blurred nowadays. For the elite, it’s all about “me”, and less about “us”.

These conclusions are based on Roy Morgan Single Source, the country’s largest syndicated survey. More than 26,000 respondents are interviewed every year, week after week. The data is projected to reflect 87 percent of the population 14 years of age and over.

The writer can be contacted at


Analysis: The good, the bad and the ugly

Harry Su, Bahana Securities | Thu, 04/05/2012 9:12 AM

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4Q11 results: Operating deceleration; Bottom line acceleration With the exception of ELTY, 71 companies out of 72 in our coverage (80 percent of JCI’s market cap) have reported 4Q11 results. For the market, 4Q11 operating profit growth rose 17.0 percent y-y, slower 3Q11’s growth of 24.3 percent y-y (exhibit 1). However, net profit growth slightly accelerated, propelled by the coal sector, in particular ITMG, which booked a derivative gain in 4Q11, allowing for 945 percent y-y net profit growth. Overall, 4Q11 results came in below our as well as consensus expectations.

The Good: Coal, Property, Banks

Three sectors: Coal, Property and Banks (exhibit 2) managed to book both operating and net profit performances which were better than the overall market result. The coal sector benefited from higher y-y pricing and volumes on more favorable weather condition and rising demand from China as well as India. On the property front, companies managed to book solid operating and net profit growth in 4Q11 due to high marketing sales in 2010-11, manageable opex and interest incomes. On the banks, while there were pressures on NIMS, some counters benefited from lower provisioning and tax savings, which helped to boost bottom line growth.

The Bad: Infrastructure

Under this category, only one sector (i.e. infrastructure-related) registered mixed performance with operating profit growth higher than the market, but lower net profit growth. Strong operating profit growth stemmed from seasonality factor in 4Q11, allowing for robust top line growth on relatively manageable opex. On the bottom line, earnings were dragged down by higher net interest expense (i.e. ADHI and PTPP).

The Ugly: A record-setting 8 sectors in this category

In this category, there were 8 sectors, the highest ever thus far, that displayed lower y-y growth in 4Q11 than the market at the operating and net profit levels. However, we would like to point out that Consumer, Auto, Cement and Telcos actually still booked positive operating profit growth while the remaining sectors registered earnings contractions. On oil and gas, PGAS continued to see supply constraint while plantation and metal sectors faced lower margins as their average selling prices were rising in 4Q10, but falling in 4Q11 on global economic slowdown.

Low inflationary outlook = Banks, Property & Consumer to perform

With benign March inflation and the government’s decision to delay administered price increases, we reinstate our interest-rate sensitive top picks: ASII, BBNI, BMRI (exhibit 5). On the property front, we continue to like ASRI, CTRA and KIJA (industrial estate), which has reported excellent 4Q11 results. On construction, we continue to like WIKA. Finally, we expect mass market consumer companies like GGRM, ICBP and RALS to benefit from improved purchasing power on contained inflation.

The write is senior vice president/head of research at PT Bahana Securities.


Analysis : If ‘miniskirt porn’ surely ‘minister dinosaur’?

Debnath Guharoy, Roy Morgan | Tue, 04/10/2012 10:07 AM

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Amazing, but true. In a country where Bhinneka Tunggal Ika or Unity in Diversity is enshrined not only in the constitution but emblazoned in its emblem, yet another ridiculous pronouncement was made by a ranking minister last week. Not one of his Cabinet colleagues, nor the president, made any effort to criticize him or distance themselves from him. Where are the protests from activists, from academics, from women at large? I for one have seen precious little, other than the scorn penned by a few journalists and voiced by a handful of commentators.

I can only assume that most people have shrugged this incident off as yet another meaningless meandering of a government that people have learnt to disregard. As if no greater challenge faces the nation, a taskforce has been appointed to set the country’s new moral standards and hemlines above the knee have immediately been named Public Enemy No. 1 by the esteemed leader of the esteemed taskforce.

Most women, leaders of minority groups and cultural troupes, appear to have ignored the assault on their freedom of choice. Conspicuous by their silence, they refuse to bestow any credibility to the proclamation.

The danger to society at large lies in the silence being misunderstood for acceptance. It is entirely possible that a bigoted and myopic individual in a position of power could convince himself that he has spoken for the majority.

The fact that this is the country with the world’s largest Muslim population is well-known. But there are several other facts that seem to have escaped the self-righteous minister’s understanding of circumstances. Among them, the fact that it is not Saudi Arabia, regardless of the origins of Islam. Or the fact that this is not the Islamic Republic of Iran, or anywhere else. Or the belief that democracy of the majority does not mean democracy for the majority and submission by everyone else.

The minister probably believes he has the support of his fellow Muslims to lower hemlines. If so, nothing could be further from the truth. Moving from personal opinion to the opinion of the people, here are some sobering realities. If the minister believes his views are shared by fellow Muslims, he may wish to reconsider. Women do not wish to be treated as chattel in today’s Indonesia. For some years now, only one in three Indonesians believe that “women should take care of running their homes and leave running the country to men”. See what happens when you do that? Just in case the leader and his taskforce have any difficulty in understanding the verdict of the people, approximately 66 percent of Indonesians disagree with the macho view. That includes men and women, young and old. And most importantly in this context, the disdain is shared by the overwhelming majority of their fellow Muslims, men and women alike. Not surprisingly, fewer women than men agree with this archaic view of contemporary life. Fluctuations in trends do occur, especially when economic circumstances unsettle the peace, such as fuel-price hikes. When the impact was felt in 2007-2008, just about 20 percent of Indonesians believed that women should stay at home.

As recovery reclaimed confidence, more among the minority expressed their faith in their perception of traditional gender roles.

His comrade-in-arms, the minister of telecommunications, led a similar assault on freedom by attempting to filter out all porn sites. It would take an 18-year-old less than 30 seconds to prove that the effort is a miserable failure, one that is estimated to have cost the taxpayer over a hundred million dollars.

Coalition politics has rendered the government powerless. But if the ministers who are inflicting their blinkered views of the fundamentalist minority on the moderate majority believe there is a method in their madness, they need to seek out the real truth for themselves. Dubious connections between miniskirts, pornography and rape have no basis in science or research.

Fear of divine wrath keep many believers reciting ancient precepts of religious teachings even today. Regardless, growing numbers of the faithful are learning to take control of their minds. Take for example the issue of adultery. While traditional views condemning the culprits are only to be expected from practicing Muslims and Catholics alike, a softening is noticeable when push comes to shove. The number of people who agree with the shariah law requiring “those committing adultery should be whipped to death in public” is on the decline. In the minority, less than one in three people agree today. If ever there was a need for such punishment, it would have been a very long time ago. Laws such as these were never a part of life in Indonesia, nor is there a desire to have them introduced tomorrow.

Politicians, regardless of their own religious views, need to take note of public opinion, only because dinosaurs head for extinction. Businessmen who fund their campaigns would do well to advise caution as well. Otherwise, the only growth industry in Indonesia could well become the niqab one day. Enough said, for freedom of choice.

These opinions are based on Roy Morgan Single Source, the country’s largest syndicated survey. More than 26,000 respondents are interviewed every year, week after week. The data is projected to reflect the opinions of 87 percent of the population, 14 years of age and over.

The writer can be contacted at


Analysis: 2012 revised state budget update

Arga Samudro, Bahana Securities | Thu, 04/12/2012 11:16 AM

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We recently met with Finance Minister Agus Martowardojo, Deputy Finance Minister Anny Rahmawati, Deputy Finance Minister Mahendra Siregar, Bank Indonesia Deputy Governor Hartadi Sarwono and director general of debt management at the Finance Ministry, Rahmat Waluyanto. The salient points of the meeting and our views are as follows:

While the government hinted that they may increase fuel price in May when the ICP reaches US$135/bbl this month, we are of the view that this is unlikely to occur due to three reasons: (1) The current downtrend in global oil prices; (2) We believe it would be too late for the government to raise fuel prices by June given inflationary pressure would be on the rise leading up to July’s back-to-school and the advent of the fasting month; (3) President Susilo Bambang Yudhoyono’s statement that fuel-price hike should only occur as a last resort.

Additionally, there is currently a legal issue surrounding the government’s plan to increase fuel price as the constitutional court has received a proposal for judicial review on the addition of article no. 6a section 7 in the 2012 revised state budget law. Note that the article is the legal basis for the government to raise the subsidized fuel price going forward. On this matter, the government is optimistic that the constitutional court will reject the proposal as the article has existed before 2012.

That said, in our meeting, we were informed that the government has set a fiscal buffer around Rp 62.4 trillion and plans to cut spending on unnecessary budget items worth Rp 19 trillion to support the need for higher fuel subsidy.

Furthermore, there is also room to optimize 2011’s undisbursed expenditures of Rp 13.6 trillion and allocate additional Rp 24 trillion coming from last year’s excess budget (SAL) to help support the government’s rising budget deficit due to higher fuel subsidy.

Based on our meeting, there is pressure on the 2012 state budget if the Indonesian Crude Price (ICP) were to remain at the upper end limit of the government’s assumption of US$120.75/bbl, as fuel consumption is predicted to reach 44–48 million kiloliters. This will result in energy subsidy (fuel + electricity) ballooning to Rp 300 trillion, much higher than the current assumption of Rp 200 trillion (exhibit 2) in the 2012 revised state budget. In such a case, the budget deficit will surge to 2.6 percent of GDP from the current 2.2 percent. Including the consolidation of the municipal budget, the overall state budget deficit could reach 3.1 percent, breaking cap set by the constitution at 3 percent of GDP.

On the back of continued uncertainties in inflationary expectations ahead, Hartadi Sarwono, the central bank’s deputy governor, stated that Bank Indonesia will continue to apply accommodative monetary policy in response to both external and domestic issues, which could adversely affect Indonesia’s economic growth. This should in turn provide foreign investors the confidence in Indonesia’s macroeconomic prospects.

The writer is an economist at PT Bahana Securities.


Analysis : Auto sales: Strong 4W growth; weak for 2W

Leonardo Henry Gavaza, Bahana Securities | Thu, 04/19/2012 10:36 AM

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Based on sales figures released by Gaikindo, the Indonesian Automotive Association, March 2012 auto (4 W) sales increased 6.8 percent year-on-year (y-y) and 1.6 percent month-on-month (m-m) to 87,761 units. On motorcycles (2W), we observed a decline in March sales, down 13 percent y-y and 7 percent m-m to 619,678 units (exhibit 1 & 2), on numbers released by AISI, the Indonesian Motorcycle Association.

Astra maintained its strong monthly car sales in March reaching 49,663 units, up 10.1 percent y-y but down 0.8 percent m-m, mainly supported by the continued strong sales of its newly launched models Avanza and Xenia. Of the 6 biggest brands, Daihatsu experienced the highest y-y growth of 29.6 percent to 13,198 units while Nissan with its popular new model Juke came second, booking strong growth of 16.7 percent y-y to 5,998 units. Source: AISISource: AISI

Honda managed to recover from the Thai flood and booked 4,686 units, up 12 percent y-y and 146 percent m-m, driven mostly by the jump in Jazz sales.

Honda’s March motorcycle sales were 325,642 units, down 3 percent y-y and 8 percent m-m while closest competitor, Yamaha, booked 246,203 units, down 23 percent y-y and 5 percent m-m.

As a result, Honda’s January-March 2012 market share was 60 percent, just lower than its 2M12 figure of 61 percent but higher than its share of 54 percent in the first three months of 2011.

Outlook: 4W on track to reach our numbers; 2W slightly trailing

Over the longer run, we believe that car sales will continue to achieve a double digit annual growth rate, consistent with many car manufacturers’ decisions to increase their production capacity in Indonesia.

In 2012, we expect most of the sales target to be will achieved in the first half of the year. We expect car sellers will strongly push sales in the next few months before the implementation of the higher down payment policy.

The other impetus will come from the launch of both the low-end Suzuki Ertiga and Nissan NV200 in second quarter 2012. We believe that new models tend to have the propensity to create new car demand, particularly for
first time buyers. These two additions will broaden the choice in the low-end multi-purpose vehicle (MPV) segment that accounts for the largest portion of Indonesian car sales.

Conversely, we note that 2W sales volumes are slightly trailing our full-year growth estimate of 8.2 million units (+2 percent y-y), compared to 2W sales for the first three months of this year of 1.9 million units (24 percent of our full-year — which is already one of the lowest among our peers), down 2.7 percent y-y and slightly lower than the first three months of last year percentage to full-year of 25 percent.

Despite continued strong March automotive sales, we maintain our NEUTRAL stance on the auto sector due to the impact of higher down payments starting from the second half of this year. Having said that, we note that in order to achieve our 4W sales target of 1 million units, the remaining 9 months of 2012 would only require average monthly sales of 83,266 vehicles, lower than March’s sales of 87,761. We advise investors to buy on dips, as we expect positive news outflows to persist in the coming months.

The writer is an analyst at PT Bahana Securities.


Analysis : Gunning engines in the political race

Debnath Guharoy, Roy Morgan | Tue, 04/24/2012 12:56 PM

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Two years away from the polls, the warm-up laps have begun for the parliamentary and presidential races. Ignition on, pistons are getting heated up.

In recent weeks, NasDem have formally emerged as a force to be reckoned with, now ranked No. 9 as a political party. The Golkar machine has been working overtime, grabbing headlines good and bad, scoring 16 percent of intentions and climbing to No. 2. Still ranked No. 1, the Democratic Party continued their slide downhill with only 20 percent. PDI-P went down too, now at No. 3 with 12 percent. Cadres working at the grassroots level have helped catapult Gerindra to No. 4, with 7 percent. PAN moved up to No. 5, with 6. But the prospects of the religiously-influenced parties continue to shrink in the chase for seats in Indonesia’s House of Representatives (DPR).

Asked to choose from a realistic list of 10 presidential hopefuls, respondents from around the country made the picture crystal clear. The opinion poll conducted during the month of March reconfirmed Gerindra’s Prabowo Subianto as the “most likely” choice, with 20 percent of all voters eligible in 2014 giving him the nod. When asked for any other candidate the respondents would consider, the support for military man-turned-businessman-turned-politician increased to 34 percent of voting intentions. He is closely followed by businessman-turned-politician Aburizal Bakrie of Golkar. He scored 19 percent of the “most-likely” vote, climbing to 28 percent of the combined tally. In third place is Sultan Hamengkubuwono X, with 11 percent of “most likely” climbing to 24 percent with “would consider” added in. The gap then widens before Hatta Rajasa, Surya Paloh and Ani Yudhoyono register their presence with single-digit shares of “most likely” voting intentions.

This is the situation, as of March. As soon as the Democrats announce their presidential candidate, it is expected to have a major impact on public opinion. That will mark the real beginning of the contest. Shifts will emerge, new alliances between parties could also tip the scales. When some on the list declare their intention not to run, the scores will change again.

These are some of the key findings of the APAPC Monthly Political Monitor, a neutral survey available to all interested groups ranging from political parties to media outlets. Commissioned by the Asia Pacific Association of Political Consultants and conducted by Roy Morgan Research, the survey was tested during January and February and formally launched with the March edition. APAPC is the regional arm of the low-profile Washington-based International Association of Political Consultants, whose primary mission is to promote democracy in all five continents. Members hail from more than 40 countries.

In 2007, President Yudhoyono received the association’s Freedom Medal on behalf of Indonesia. The medal was awarded in recognition of the progress the country had made in its transition from dictatorship, proving to the world at large that Islam and democracy can coexist. By commissioning the monthly political monitor, APAPC is continuing its mission to promote democracy. The freedom enjoyed today by the country’s press, a vital pillar of an open society, is perhaps one of the biggest triumphs of this presidency. Concentration of media ownership remains a cause for concern but a neutral poll should add some degree of credibility to the real voice of the people.

And the people are indeed keen to exercise their right. While six out of ten Indonesians aren’t really interested in politics per se, seven out of ten say they regularly vote. Healthy numbers, for any democracy anywhere where voting isn’t compulsory. These are early days, more than two years away from the parliamentary and presidential races, but interest is beginning to climb. In March, only 23 percent of respondents remained “undecided” in their “most likely” choice of president. Everybody else seems to have their minds made up, at least for now. The starting gun has gone off, the race has begun. The APAPC poll will track the changing fortunes, each month, right through to the end.

The backdrop of the forthcoming elections is also changing. More and more Indonesians believe that “the country is heading in the wrong direction”, climbing from 34 to 40 percent during January to March. Illustrating the voter’s capacity to distinguish between political and economic circumstances, the KADIN-Roy Morgan Consumer Confidence index continues to soar at record highs. Factors such as the price of fuel and essential commodities will continue to influence the tides. But the Indonesian consumer has learnt to wear a different hat when he or she turns voter. People in power will get more brickbats for political scandals than kudos for economic success.

The monthly APAPC Monthly Political Monitor for March comprised 2,019 face-to-face interviews conducted in 17 provinces that are home to 87 percent of the electorate. These provinces are also the home of 83 percent of the DAPILs or “Daerah Pilihan” and 464 of the 560 parliamentary seats or “Kursi DPR”. The writer is also one of several directors on the board of APAPC.

The writer can be contacted at


Analysis: BI rate may stay on tamed inflation

Arga Samudro, Bahana Securities | Thu, 05/03/2012 8:59 AM
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April’s Consumer Price Index (CPI) rose to 0.21 percent m-m from March’s level of 0.07 percent. This result was slightly higher than our estimate of 0.18 percent but in line with consensus’ 0.20 percent. The monthly CPI also translated to higher April’s CPI of 4.50 percent y-y compared to previous level of 3.97 percent (figure 1).

We note that several commodity prices namely chilies, onions, sugar, cooking oil, processed foods, cigarettes, concrete steel, rentals and airlines tariffs were the main drivers for April’s inflation. On the flip side, lower gold price in April allowed core inflation to slightly ease to 4.23 percent y-y compared to previous level of 4.25 percent.

Going forward, inflationary pressure will hinge on the government’s subsidy policy. Recently we expect 6-month average price of Indonesian Crude Oil Price (ICP) would reach US$119 per barrels per day (bbl) in April (figure 2), almost breaching the upper limit of the government’s ICP assumption and applying pressure on the 2012 revised state budget.

If the government were not to raise subsidized fuel price in 2Q12, ICP has to decline to US$117.2/bbl on average in May-June, otherwise, the upper limit would be broken. This will lead to policy uncertainties particularly if the government does not have the political will to implement a bold subsidy adjustment. However, the government could use fiscal buffer of around Rp 62.4 trillion (US$6.80 billion) and some spending cuts on unnecessary budget items worth Rp 19 trillion to support the need for higher fuel subsidy, maintaining a state budget deficit below 3 percent of GDP.

Meanwhile, to maintain subsidized fuel consumption below 40 million kiloliters, the government plans to prohibit private cars with engine capacities larger than 1,500 cc from using subsidized fuel starting in Java and Bali in the second half of 2012. We expect the impact of the government’s policy would only add 0.4 percent to our 2012 inflation target of 5.2 percent, suggesting inflation should remain benign despite fuel price uncertainties. At this stage, we expect the central bank to maintain BI rate at 5.75 percent on its next Board of Governors meeting on 10 May. Furthermore, we also expect the benchmark rate to remain unaltered throughout 2012 (figure 3).

The writer is an economist at PT Bahana Securities.



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