US$4.7bn in major gas projects approved for Indonesia

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Indonesia’s upstream gas industry regulator BPMigas has approved 10 major projects worth US$4.7 billion in investments over the next three years, claiming that in future, gas will dominate the energy industry rather than oil.

The Jakarta Globe reports all 10 projects would produce gas but one would produce both gas and oil, delivering a total of 1,750 million standard cubic feet per day (mmscfd) of gas and 20,000 barrels of oil per day (bpd). The two largest projects would be operated by the country’s biggest gas producer, France’s Total E&P Indonesie.

Indonesia has seen oil production fall in recent years as its wells have aged, though this has coincided with a boom in gas production which saw the country beat its target of 7,758 mmscfd by 15%. This year’s target of 7,769 mmscfd was reached in the first half of 2011 alone. Indonesia’s oil and gas industry contributed Rp240 trillion ($28.1 billion) in non-tax revenue in 2010.

Much of the gas produced will be gobbled up by domestic power plants and industry, which have been hungry for new finds to fuel Indonesia’s recent growth. State-controlled gas distributor Perusahaan Gas Negara currently has the price at $1.80 mmscfd, but BPMigas is negotiating to raise that to $5.50 in an attempt to boost state revenues.

source & article: The Jakarta Globe

Singapore may benefit from financial gloom: survey

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Singapore will benefit from the current panic surrounding international markets, growing in stature as a financial hub as economic power shifts to the emerging world. Results from a survey by the Association of Chartered Certified Accountants (ACCA) of international financial centers revealed 61% of finance professionals rate the city-state as having grown in importance, well above the global average of 36.

The Global Economic Conditions (GEC) Survey measures the ‘significance’ of global financial hubs and the impact of the 2008-09 Financial Crisis by examining the opinions of 2000+ financial professionals around the world. 46% of all Singapore-based respondents now believe their location is a ‘center of global significance’ compared to the global average 18%, and 34% rated it a center of regional significance.

This is despite a surprising loss of confidence across the Asia-Pacific region, mainly due to disruption caused by the Japanese disasters in March and general pessimism over economic crises in the USA and Europe.

There were also concerns about monetary tightening and inflation, with 32% of respondents claiming to have had difficulty accessing finance and 71% reporting a rise in business costs. Governments around the world would also cut spending in an attempt to reduce inflation.

Darryl Wee, country head of ACCA Singapore, said: “It’s not a secret by now which way the global balance of power is shifting. What’s more interesting are the detailed findings which show a small group of global financial centres, including Singapore, enjoying an ever-growing advantage over their competitors. Going forward we expect that many emerging economies will redouble their efforts to develop global financial clusters.”

source: ACCA Singapore (PDF link to survey report)

AirAsia in share swap with Malaysia Airlines?

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Here’s an interesting story: reports indicate that AirAsia is about to embark on a share-swap deal with its chief competitor and Malaysian national flag carrier, Malaysia Airlines (MAS). Sources have told Malaysian newspapers that the budget carrier will gain a 20% share of MAS under a partnership agreement.

The companies have supposedly been negotiating the deal for the past year. The sources also say the Malaysian government’s investment arm Khazanah Nasional will get a share in AirAsia and Tune Air Sdn Bhd will receive a stake in MAS. AirAsia’s CEO Tony Fernandes is also CEO of Tune Air, which itself owns a 26% share of AirAsia.

Neither Malaysia Airlines or Khazanah Nasional, its 70% shareholder, are commenting on the matter. It’s understood a formal partnership between the two rivals would enable them to compete more effectively in the global market, and bargain from a position of greater strength with airports and aircraft manufacturers.

AirAsia, which focuses on the budget end of the market, recorded a profit in Q1 of 2011 while Malaysia Airlines, which focuses on the traditional and higher end, recorded a loss and is undergoing a management restructure.

source & article: Channel NewsAsia

Japanese M&A activity and FDI grows in Malaysia

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More companies listed on the Bursa Malaysia (Malaysian stock market) are potential acquisition targets for Japanese companies as investment continues to flow in, thanks to a strong yen and a geographic diversification drive gathers pace in Japan.

The momentum was already underway before Japan’s 11 March 2011 disasters highlighted the need for more offshore activity. Between January 2009 and July 2011 Japan was involved in 513 M&A deals worth US$14.2 billion in emerging Asia, reports The Edge Malaysia. This figure includes Chinese and Indian deals as well as those in Malaysia and Indonesia.

Focusing on Malaysia alone, however, Japanese FDI rose 537% year on year in 2010 (compared to 109% in other Southeast Asia), accounting for 12% of all foreign direct investment inflow. Japan was involved in 34% of Malaysian M&A activity.

But this activity might not be what you’d expect from Japanese deals, and is certainly different to those of the previous two decades. UOB Kay Hian Malaysia Research said it’s not the electronics and electrical sector attracting Japanese interest this time. Instead, the Japanese are looking at logistics, financial, healthcare and consumer industries, as well as heavier industries where Malaysia offers a better deal on energy and logistics costs. The research house said Japanese companies were also prepared to pay more for greater control of their acquisitions, like Asahi Group’s purchase of Malaysian bottler Permanis, and Mitsui & Co’s 30% stake in Integrated Healthcare Holdings. Companies that already trade with Japanese firms are seen as more attractive.

source & article: The Edge Malaysia

RIM may set up Blackberry procurement center in Penang

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Canadian technology firm Research In Motion (RIM), makers of the best selling Blackberry devices, has apparently applied to set up an international procurement center in Penang.

RIM hasn’t released an official statement on procurement yet but has confirmed it will manufacture devices in Penang. Business Times reports the Malaysian Industrial Development Authority (MIDA) has received an application for a procurement center, with no further information about its nature or when it would be approved.

The report says photos of a local electronics company which has just received a major contract to manufacture Blackberry devices for the worldwide market was included in the application. Indonesia is also believed to be lobbying RIM to set up a company-owned facility there.

There are already around 209 international procurement centers (IPCs) already based in Malaysia. Many are located around Penang’s technology parks, such as those belonging to German healthcare products maker B. Braun Melsungen AG and Japan’s Toray Industries Inc.

source & article: Business Times

Indonesia strong enough to cope with ‘hot money’, but still wary

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Indonesia’s economy could probably cope with a sudden outflow of ‘hot money’ from its economy but should still be wary of risks presented by such bubbles, said the government.

Bambang Brodjonegoro, The Finance Ministry’s head of fiscal management, said his country should minimize hot money scenarios, or short term investors chasing quick profits on the country’s fast-rising economy. Channeling investments into long-term FDIs (foreign direct investors) and government bonds was preferable to achieve stability and growth.

Foreign investors have become fascinated with so-called ‘emerging’ economies in the past few years as growth opportunities in the developed West have dried up and countries like China, India and Indonesia have boomed. Indonesia’s premier market index, the Jakarta Composite Index (JCI) has risen 6% this year to 4,130.80 and its currency, the rupiah, has increased its value by 5.5% against the US Dollar, to Rp 8,491.

The government may well be getting its wish, as foreign sales of Indonesian government bonds have also risen 31% to Rp 248 trillion (US$29 billion) with 15 year bonds yielding an attractive 9%. The Finance Ministry said foreign investment could reach 40% of all bond holdings after the government sells a further Rp 40 trillion by the end of this year.

Indonesia has suffered in the recent past from rapid foreign capital flight, once during the Asian Crisis of the late 1990s and less severely after the 2008 global financial crisis, which still devalued the rupiah. With the effects of both crises still looming large in memory, fears of hot money and moves to curb short term investments are common across the region.

source & article: The Jakarta Globe

Philippines’ special economic zones expect further growth

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The Philippines Economic Zone Authority (PEZA) said investment in its special economic zones was worth P70 billion ($1.66 billion) as of this year. That’s a 38% growth on the previous year, and PEZA has a target of a further 10% growth this year on the back of growing confidence.

PEZA manages over 240 special economic zones across the Philippines, from areas the size of former US military bases to single buildings. PEZA-accredited zones have access to favorable investment conditions like tax holidays, relaxation of planning and other regulations, and easy access to trained staff and business services. The zones are aimed at export industries, usually in manufacturing or technology.

Initially popular in China and India, other countries have seen the benefits and zones with special economic conditions now operate in Indonesia, Malaysia, Vietnam and Thailand. Trade bodies like JETRO in Japan routinely conduct surveys into special zones in different countries and supply the information to potential investors.

PEZA director-general Lilia De Lima said the Philippines had a healthy supply of qualified engineers and remained cost-competitive compared to other free zones in Asia. The zones had created 790,831 new Filipino jobs, up 17.7% on last year’s figures.

source & article: philstar.com

Corporatize sports funding, says Malaysian govt.

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Malaysia’s government wants all sports development funding to come from private sources by 2020, saying it’s (yet) another reason the country should move from a planned to a market-based economy.

Financial sports events and development nationwide is becoming more expensive, and sports organizations need to move away from sponsorship to a corporate model with “dynamic return on investment,” said Sports Minister Ahmad Shabery Cheek at the Sports Business Conference.

Sports funding is also part of Malaysia’s grand Economic Transformation Programme (ETP) and 2011-12 has been designated Sports Industry Year (SIY) to encourage more economically sustainable, privately funded sports initiatives. Sports activities contributed about RM30.2 million to Malaysia’s GDP in 2009.

source & article: Business Times

 

Google keen on Indonesian market, less keen on local regulation

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Google has plans to expand its operations in Indonesia with a potentially large investment. There is speculation the company will spend anywhere between US$100 million and $1 billion, with Indonesia’s Investment Coordinating Board (BKPM) optimistic the amount will be larger than Google has invested in other ASEAN nations.

Google’s chairman Eric Schmidt met this week with Indonesian Vice President Boediono and high level government ministers to set out the proposals. Google is eager to begin its Indonesian expansion as soon as possible, but is apparently still seeking clarification over online advertising regulations, security, and government involvement in the country’s obligatory local data centers.

Schmidt was in Bali this week as the keynote speaker at the ASEAN Regional Entrepreneur Summit 2011 and was quoted as being surprised by the amount of independent business activity in Indonesia. He said the country’s business environment was very similar to the USA in terms of interconnectivity, market homogeny and large population.

He also met with members of the Indonesian Association of Young Entrepreneurs, where he reportedly told them a reduction in government intervention would speed up Google’s plans to establish an Indonesian base.

sources & articles: The Jakarta Post, e27

More on Indonesia’s entrepreneurial spirit

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Entrepreneurship is a hot topic in Indonesia this week after the Global Entrepreneurship Program Indonesia (GEPI) event in Bali. This article in the Christian Science Monitor adds strength to the BBC’s earlier claim that Indonesia is the best place in the world to be an entrepreneur in 2011.

It’s not Indonesia’s politics or established structures that created this environment, though. In fact, entrepreneurs there seem to thrive despite excessive regulation, poor access to finance and inadequate physical infrastructure. Instead it is Indonesia’s unique cultural environment: a young population, many tech-savvy and with overseas education, leading the way. Young entrepreneurs are looking at their country and trying to solve its problems piece by piece with the resources available.

Indonesia is embracing modern methods and techniques to interact. The country is already home to the world’s second largest Facebook population and its third-largest on Twitter. There’s a proportionately large number of mobile internet users and around 700 active tech start-ups, with a new one each week.

The United States is doing what it can to support the entrepreneurial wave in Muslim-majority countries, and it is Indonesia that has been quickest to make the most of it. The Global Entrepreneurship Program is a US State Department initiative funded in part by USAID and Indonesian partners, and last week’s GEPI event drew at least 11 major US-based angel investors.

source & article: Christian Science Monitor

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