Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT)

The Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT) collaboration was established at the 1st Ministerial Meeting (PTM) in Langkawi, Malaysia, on July 20, 1993. IMT-GT is intended to improve the welfare and economic growth of the community in the border regions -negara IMT-GT. Through IMT-GT cooperation, the private sector continues to be encouraged to become an “engine of growth”. For this purpose, a forum for entrepreneurs in the IMT-GT area called the Joint Business Council (JBC) has been formed. JBC is actively involved in the IMT-GT SOM / MM series every year.

The Indonesian territory that is part of the IMT-GT collaboration is the provinces: Aceh, Bangka-Belitung, Bengkulu, Jambi, Lampung, South Sumatra, Riau, Riau Islands, North Sumatra and West Sumatra

IMT-GT development

At the 5th IMT-GT Summit in Hanoi, Vietnam, on October 28, 2010, the IMT-GT leaders adopted the Joint Statement of the 5th IMT-GT Summit which included: the development of IMT-GT projects especially those relating to embodiment of sub-regional connectivity in supporting the ASEAN Connectivity, Mid-Term Review of the IMT-GT Roadmap 2007-2011, Business Process Review conducted by the Eminent Person Group (EPG), the importance of the role of the private sector and local government in IMT-GT development ADB as IMT-GT Development Partner, and cooperation with IMT-GT with Japan in the Economic Research Institute of ASEAN and East Asia (ERIA). Until now there have been 15 Senior Official Meetings (SOM) and Ministerial Level Meetings (MM) and 5 IMT-GT Summits.

IMT-GT Sub-Regional Connectivity

The 2nd IMT-GT Summit in Cebu, Philippines, 12 January 2007 has agreed to develop the IMT-GT Connectivity Corridor to be the center of economic activities that can encourage economic growth in the sub-region.

Implementation of the IMT-GT Connectivity Corridor concept in 5 (five) economic corridors which are considered the most potential and have relatively high traffic and need to be improved, namely: (i) Songkhla-Penang-Medan Economic Corridor economic corridor, (ii) Malacca Strait economic corridor , (iii) Banda Aceh-Medan-Dumai-Palembang economic corridor, (iv) Melaka-Dumai economic corridor and (v) Ranong-Phuket-Aceh economic corridor.

At the 4th Summit in Hua Hin, Thailand, on February 28, 2009 the IMT-GT leaders again stressed the importance of the construction of the IMT-GT Connectivity Corridors. Development of connectivity corridors needs to be included in national development planning. In addition, the IMT-GT leaders also saw the need to strengthen maritime transport links and trade through the Malacca Strait. In this case there have been 13 (thirteen) ports that are incorporated in the IMT-GT Coastal Network Joint Business Councils (JBCs).

IMT-GT has established IMT-GT Baseline Priority Projects Connectivity (PCPs) in order to improve connectivity in the IMT-GT area. Among projects within the framework of PCPs are the Sumatra Ports Development Project, Melaka-Dumai Economic Corridor Multimodal Transport Project, Melaka Pekanbaru Power Interconnection, and Development of Aceh Highway Facilities.

At the 5th Summit in Hanoi, October 2010, the IMT-GT leaders stated that PCPs can be concrete and visible building blocks for the ASEAN Master Plan on Connectivity.

Source :

Moody’s Raises Indonesia’s Rating to Baa2 with Stable Outlook

The credit rating agency Moody’s has today awarded a rating upgrade for Indonesia, from Baa3 positive outlook to Baa2 stable outlook (equivalent to BBB level). Thus, Indonesia has possessed Baa2/BBB rating from four institutions, namely Fitch (December 2017), JCRA (February 12, 2018), R&I (March 7, 2018), and Moody’s.

In its report, Moody’s stated that the rating upgrade is supported, among others, by the more credible and effective policy framework of the Government and other authorities in supporting the macroeconomic stability. According to Moody’s, more prudent fiscal policy and monetary conducive policy can reduce pressure from both internal and external sources. Moody’s also appraised that the improved diversification of export bases has helped to maintain the economic stability, especially in the improvement of the current account deficit. In addition, Indonesia’s high and stable economic growth, as well as the healthy banking system, also became a positive note in the upgrading of Indonesia’s credit rating.

From a fiscal perspective, the deficit in the State Budget (APBN) which is always below 3 percent indicates the Government’s discipline in maintaining sustainability and fiscal health.
Based on the Moody’s projection, by taking into account the financing needs for productive expenditure acceleration, the Government of Indonesia’s debt level will remain below other countries in the investment grade group. This demonstrates the optimism of external parties towards Indonesia’s fiscal health, both for current and the future.

According to Moody’s rating definition, Baa2 rating implies that Indonesian securities belong to the category of “moderate credit risk” and “medium grade”. Stable outlook describes the rating position that is predicted to be stable in the foreseeable future, as well as showing a balanced risk. Some countries in the same rating position as Indonesia among others are Spain, Colombia, Uruguay, Philippines, Bulgaria, India, Italy, and Panama.

The decision to upgrade Indonesia’s credit rating indicates that the Government’s structural and fiscal reforms along with other stakeholders including Bank Indonesia are considered satisfying. Nevertheless, the Government is also aware that there are still a lot of challenges to overcome in encouraging the more sustainable and equitable economic growth. The Government has and will continue to take proactive actions to actualize such targets through the management of the state budget along with credible and effective fiscal policies.

Nufransa Wira Sakti – Head of Communications and Information Services Bureau

Ministry of Finance – Republic of Indonesia

General Secretariat of Communication Bureau and Information Service

Making Indonesia 4.0: Indonesia’s Strategy to Enter the 4th Generation of Industry Revolution

Recently, Indonesia’s Ministry of Industry has designed ‘Making Indonesia 4.0’ as an integrated roadmap to implement a number of strategies to enter the Industry 4.0 era. The roadmap requires collaborative actions among multiple stakeholders that range from government institutions, associations and industry players, to academic elements.

“Indonesia has been entering the new era of Industry 4.0 which marked by the increasing connectivity, interaction, as well as more convergent people, machines and other resources as the result of information and communication technology advancement,” said the Indonesian Industry Minister Airlangga Hartarto at the Socialization of Implementation Roadmap for Industry 4.0 in Jakarta. Airlangga further explained the first generation of the industrial revolution is characterized by the use of steam engines to replace human and animal power. The second generation is distinguished by the application of mass production concept and the beginning of electric power utilization. The third generation is marked by the use of automation technology in industrial activities.

“In the fourth generation of industrial revolution, it becomes a major leap forward for the industrial sector, where information and communication technology is fully utilized. Not only in the production process, but also across the industry value chain hence creating new business models on a digital basis to achieve higher efficiency and better product quality, “Airlangga said.

In this matter, the national industrial sector needs a lot of improvements particularly in technology mastery aspect, which has become the ultimate key to competing in the Industry 4.0 era. Five main technologies to support the development of Industry 4.0 are the Internet of Things, Artificial Intelligence, Human-Machine Interface, robotic and sensor technology, and 3D printing.

The implementation of Industry 4.0 has tremendous potential in overhauling the industrial aspects, and even being able to change various aspects of human life. According to Airlangga, Indonesia already has a strong domestic market, as well as sufficient talents from the number of universities, thus guarantee the availability of talent pool. Improvement of human resources competencies through the link and match program between education and industry should be the initial step, and this will be accomplished in mutual synergy between related ministries or institutions such as Ministry of Industry, Ministry of National Development Planning (Bappenas), Ministry of State Owned Enterprises, Ministry of Manpower, Ministry of Education and Culture, and Ministry of Research, Technology and Higher Education.

The implementation of Industry 4.0 aims to achieve the great national aspirations, which are bringing Indonesia upward to reach 10 biggest economies by 2030, returning the industry net export rate to 10 percent, doubling the labor productivity rate over the labor costs, and allocating 2% of GDP to R&D and technology innovation fields (or 7 times higher than current allocation). To reach this, Indonesian government has formulated ten national priority strategies as follow: reforming the flow of materials, industrial zone redesign, improvement of human resources quality, empowerment of Micro Small and Medium Enterprise (UMKM), incentives implementation on technology investment, formation of innovation ecosystem, attracting foreign direct investment, harmonization of policy and regulations, building the national digital infrastructure, and accommodating sustainability standard.

Secretary-General of the Ministry of Industry Haris Munandar on the same occasion also revealed that one of Indonesia’s strategies to enter Industry 4.0 is preparing five manufacturing sectors to become pilot in strengthening the fundamental structure of the national industry. The five sectors namely Food and Beverage Industry, Automotive Industry, Electronic Industry, Chemical Industry, and Textile Industry.

The strategy thus will drive the Indonesia Investment Coordinating Board (BKPM) to carry out its role in promoting foreign and domestic direct investment specifically into the five aforementioned industry sectors. Previously, BKPM data mentioned that investment realization in 2011 – 2017 was dominated by secondary sector, those which relate to primary industry. Food Industry reaches the biggest share with total investment realization (both foreign and domestic) worth IDR 302.8 trillion. This is followed by Basic Metal, Metal Goods, Machine and Electronics in the second place (IDR 299.0 trillion); Basic Chemicals, Chemical Goods and Pharmaceuticals in the third place (IDR 285.5 trillion); and Other Transportation Industry in the fourth place (IDR 160.3 T). Textile Industry as the last component of main Industry 4.0 sectors is in the eighth place with investment realization value worth IDR 58.3 trillion. Based on this record, Indonesia is already on the right track to welcoming the Industry 4.0 era.

Manufacturing Revitalization

Meanwhile, Head of Agency for Industrial Research and Development (BPPI) Ngakan Timur Antara mentioned that the implementation of Industry 4.0 will bring great opportunity to revitalize the manufacturing sector and become an accelerator to reach Indonesia’s vision to be the world’s top 10 economies in 2030. The application of Industry 4.0 is predicted to generate more specific new job opportunities, specifically those which need high competencies. Thus, the transformation of skills for Indonesian industrial human resource into the information technology sector would be necessary.

“Recent study in German concludes that labor demand will increase significantly by 98 percent, mainly in R&D and software development,” Ngakan said. He also added that work-shifting preference as the effect of Industry 4.0 implementation will develop not only to manufacturing sector but also into the supply chain, logistics, and R&D sectors. With the use of the latest technology and internet-based, according to Ngakan, there is also a lot of demand for new types of work such as managers and digital data analysts, as well as professions that are able to operate robot technology for industrial production processes.

There are several potential benefits generated as a result of the Industry 4.0 concept, among others are the ability to create higher efficiency, reduce production time and cost, minimize human-errors, and improve product quality and accuracy. To ensure the implementation of Industry 4.0 concept runs optimally, according to Ngakan, some supporting prerequisites must be fulfilled by the industry. The supporting needs include the availability of abundant, cheap, and continuous electricity sources, as well as the availability of Internet network infrastructure with substantial bandwidth and wide coverage.

Moreover, the availability of data centers with sufficient storage capacity, safe and affordable, also the availability of modern logistics infrastructure and employment policies that support industry will be essential for the Industry 4.0 characters. In addition, Ministry of Industry also encourages not only large-scale industries but also small and medium industries (IKM) to participate in capturing opportunities in the era of Industry 4.0.

Indonesia pursuing deregulation to raise investments

Indonesia Investment Coordinating Board (BKPM) chairman Thomas Lembong said the continuous efforts of the Indonesian government to improve the investment climate have paid off, as has been indicated by the increase of its economic output during the last three years.

“Indonesia has managed to improve its business climate and its ranking in the ease-of-doing-business global competitiveness index. Indonesia has in fact achieved a lot in the last
four years. The Indonesian economy today is 20 percent larger than when President Joko “Jokowi” Widodo took office in late 2014. Last year, we became the number 16th country in the world’s history to cross $1 trillion per year in GDP [gross domestic product]. So, over the last three years, our annual economic output has gone from $830 billion per year to $1 trillion. That is a very sizeable increase in annual economic output,” he told Shoeb Kagda in a special interview during the HSBC Infrastructure Forum recently.

However, he said that to continue generating higher economic output in the era of digitalization and migration of economic activity into the online realm, Indonesia and other
countries have to deregulate fast enough to survive the current economic situation and grow even stronger.

“If we don’t deregulate fast enough, if we don’t modernize our regulations, our laws, our tax regime, our own people will move into the informal economy online. That is easier and
easier for our people to do as economic activity shifts online where it becomes harder and harder for us to even track it or even detect it, so billions of citizens around the world have a very viable alternative to the poorly regulated, often corrupt formal sector,” the BKPM chairman said.

He said the real challenge for Indonesia and potentially for every country in the world in the era of digitalization and the migration of economic activity into the online realm is that it has to continue deregulating. “So, for me, it’s a battle to claw back or to incentivize our people and our businesses to stay in the formal sector by making the business climate and the regulatory climate user friendly enough, consumer friendly enough and just realistic in the context of consumer demand, especially millennial and Gen Z who have almost no tolerance for nonsensical regulations and irrational policies. So, we have to be realistic and adjust our laws, rules and regulations, our way of treating consumers and businesses in accordance to what they want,” he said.

On the world economy, he said for the next three years the big challenge is for the major central banks in the United States, Europe and Japan to allow their economies to grow higher. In addition to that, it is also urgent for the world to address the problem of too dependence with the US dollar. The world’s over dependence on the US dollars has placed an undue burden on the US and created dangerous risks on the world’s financial system.

“We are finally seeing decent wage growth and household income growth in the US, Europe and Japan and it’s feeding through into consumption and restoring household savings in the advanced economies,” Thomas said.

“It’s also drawing in imports from developing countries, which sends hard currency to the developing countries. Socially, the wage growth and household income growth are also
helping reduce inequality in the developed countries, which is a highly desirable phenomenon. Frankly, the only one that will be faced with slightly negative repercussions is corporate profit as companies may see heightened labor costs. But from my perspective, the corporate sector in the advanced economies has been enjoying disproportionately high profits for many years now and it’s time for a healthy rotation in terms of the division of the pie back toward workers and households.

“Personally, I credit the perseverance of major central banks in advanced economies for getting the world this far. First, they had to resist incredible political attacks that warned that the monetary stimulus would lead to hyperinflation and other problems. Secondly, they have had to be incredibly progressive in the way they modeled the likely forward path for inflation and debt levels or the impact of fairly high debt levels or the deflationary effect of technology.”

According to him, four to five years ago the real threat was the deflation that had worried the world at that time. The central banks should be highly appreciated for their success solving the problem of deflation and in raising wages in advanced economies amid the high levels of debt.

“So, the biggest threat to the world economy, I would argue, is not trade wars but premature tightening by the world’s major central banks, choking off what is currently a very healthy reorientation away from corporate profits toward household income growth, which is a win-win-win for just about everyone,” he said.

The increase of household income in the developed economies will in turn raise the exports of the emerging economies to the developed ones, while the higher inflation will help the indebted economies in easing their debt burdens.

“Higher income, higher spending and higher nominal economic growth will make it significantly easier to repay huge debts in the advanced economies,” he said. (*)

Investment Grade in Indonesia

The debt rating agency, Fitch, has announced Indonesia’s debt rating which remain in BBB position with a stable outlook. Fitch stated that a positive factor in Indonesia’s debt rating was a low level of government debt burden and a good economic growth. More specifically, Fitch underlined the government’s efforts to maintain stability amid the pressure experienced by developing countries, such as Bank Indonesia’s policy of raising interest rates, controlling capital outflows, and keeping inflation at a low level.

Fiscal Consolidation: Indonesia’s Investment Grade Solution

Indonesia’s own debt rating, by Fitch, has entered the investment grade category since 2011 and increased to BBB level in December 2017. Previously, in May, Standard and Poor’s (S & P), in its press release set investment in Indonesia credit rating at BBB- with projected investment prospects to be stable.

The ratings are driven by the improvement in commodity prices in Indonesia which can be seen from Indonesia’s stable inflation. Until last June, based on data from the Central Statistics Agency (BPS), Indonesia’s inflation rate was at 1.90%. This means that the average increase in commodity prices is 1.9%. This achievement is better than the 2017 January-June inflation of 2.38%. This is also supported by looking at the ratio of government debt to gross domestic product (GDP) which is considered stable. The risks to the external financing burden faced by Indonesia are also considered to have declined.

In terms of ratings by Fitch, Indonesia’s external financial condition, according to Fitch, is stronger than the 2013 Tantrum Paper period as a result of fiscal policy discipline and macro-prudential measures that can reduce the sharp increase of private foreign debt. In addition, bilateral swap agreements with Australia, Japan and South Korea, as well as participation in the Chiang Mai Initiative are also things that support stability. According to Fitch, fiscal consolidation can improve Indonesia’s public debt position which is currently at a low level compared to the average peers’ countries. Fitch also said that Indonesia’s GDP growth was better than growth in peers countries. Fitch estimates that Indonesia’s GDP will increase by 5.2% in 2019 and 5.3% by 2020 supported by increased public infrastructure spending.

Fitch’s move in placing Indonesia in the rankings shows that the government’s focus on maintaining stability amid global turmoil is considered good, and structural and fiscal reforms are also considered positive. It also shows international confidence in the Indonesian economy. Appreciation of leading international institutions, such as rating agencies, on Indonesia’s economic performance is very important to realize a healthier, fairer and more independent APBN.

In this case, of course the government must be aware of various challenges to encourage economic growth through proactive steps through the management of the state budget and credible and effective fiscal policy. In addition, the role of the community and various parties is also important to realize an inclusive economy in the future.


Siaran Pers Kementerian Keuangan Republik Indonesia – Sekretariat Jenderal Biro Komunikasi dan Layanan Informasi Nomor 25/KLI/2018—inflasi-tertinggi-terjadi-di-tarakan-sebesar-2-71-persen-.html

Indonesian Tourism Investment: How Is It Looking?

The Indonesian tourism industry may grow rapidly, but how about Indonesian tourism investment? Since the industry is aimed to be the nation’s top foreign exchange earner, its role toward the national economy is strengthened. The government itself is ambitious to be a world-class sustainable tourist destination.

At least, it’s not an empty ambition. In 2014, there were 9.4 million overseas tourists came to Indonesia. By 2017, the number has climbed to over 14 million and continues to grow. With such a big number, the foreign exchange earnings are automatically increasing. It also leads to new job opportunities for local workers and businesses.

Transition to digital

If we see the global tourism market, there is actually a decline in amount. There was a decrease of 20% in 2018, compared to the previous year. However, Indonesia is still optimistic about its targets. Seeing the number of overseas visitors in Indonesia, the growth in the airline industry and change of lifestyle, the chance is still open.

Today, tourists rely on their gadget and technology to explore new places. When they look for accommodation, they look on their gadget. When they seek local delicacies, they go to Google to get a recommendation. This unconscious transition turns out to have such a huge impact on Indonesian tourism investment.

The Indonesian government aims this transition to increase their global competitiveness. By creating a technology-friendly destination and accommodation, Indonesia will look more appealing for the investor to invest. This strategy is reasonable if we see Indonesian digital market. In 2017, it had reached US$27 trillion and predicted to grow as high as US$100 trillion in 2025.

Tourism 4.0

The digital tourism, tourism 4.0, aims for more millennial tourists. Until now, among the total inbound tourists come to Indonesia, 50% of them are millennials. In the future, the number is predicted to double.

Spain and Malaysia are such perfect examples of this. They aimed to multiply the number of millennials by 4 times bigger in 2030. Spain is already on the way to achieve that target. The European country now equips its main destinations with the digital ecosystem. It isn’t only limited to the tourist attraction, but also the arrival experience on the airport to the post-trip experience.

Priority destinations

Aside from the digital transition, the Indonesian government also designates some places as priority destinations. There is a total of 10 tourist attractions that make to the list. They spread all over Indonesia, from Sumatra, Java, Sulawesi, Maluku, and East Nusa Tenggara.

A couple of designed destinations have already managed to grab the deal of investment. Lake Toba in North Sumatra is one of them. Currently, the combined value of projects in the Lake Toba area has already reached IDR1 trillion (approximately US$69 million).

There is also Mandalika on the island of Lombok. The designed place has already managed to attract IDR13 trillion (approximately US$89t million). Since it’s also designed as Special Economic Zone (specialty on agro and ecotourism industry), investors can have the benefit of financial incentives if they are investing there.

The Indonesian tourism industry has experienced rapid growth lately. The growth is not only about the number of tourists that comes to the country, but also with the investment. The Indonesian government had already proven that they are serious in developing their tourist destination. The crystal clear planning combines with the beauty of Indonesia itself is an arsenal to get more investment for the tourism sector. Ready to invest in Indonesian tourism?

Renovation in Older Homes

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Finishing Window Threatment on Skyscrapers

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Plumbing and Sewer Installation

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Big, Wall UV Protected Windows

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