Indonesia to focus on employment in stimulus measures on Thursday : official

Indonesia will revise the way minimum wages are calculated and aims to make it easier for skilled foreigners to get work permits as part of moves to stimulate economic activity, an official in the presidential palace said on Tuesday. 

PHOTO: AFP

OCT 13, 20157:11 PM

[JAKARTA] Indonesia will revise the way minimum wages are calculated and aims to make it easier for skilled foreigners to get work permits as part of moves to stimulate economic activity, an official in the presidential palace said on Tuesday.

President Joko Widodo's administration will announce changes in labour rules on Thursday, the latest in a series of measures rolled out in recent weeks aimed at reviving growth in Southeast Asia's largest economy.

Labour-intensive sectors such as manufacturing and mining have shed thousands of jobs in recent months, as they struggle with a weakening rupiah, faltering consumption and increasing minimum wages.

The changes coming to minimum wages and other labour rules are intended to give employers more certainty about their future labour costs, according to the senior official, who is not authorized to speak to the media.

From November, annual increases in minimum wages will be linked to economic growth and inflation data, rather than determined through yearly negotiations between unions, employers and local governments. "We should have only one formula nationwide," the official said. "The wage increase should reflect inflation to maintain purchasing power and living standards, and should reflect GDP growth to reward labour because they play a key part in promoting productivity and growth." On permits for foreigners, the official said that the philosophy is to make it hard for blue-collar workers to enter"but for white collar, for high-level investors, we'll make it very easy. The government understands perfectly there's a lot of complex but unnecessary regulation concerning working permits."

The government's previous policy announcements have included lowering energy prices and cutting red tape hindering investment and trade.

Thursday's set "will mainly focus on labour issues, mainly it's about the minimum wage," the official said.

Unions said they opposed the government's minimum wage changes and planned to take to the streets on Thursday in protest. "This policy erases the role of the unions in negotiating minimum wages," said the Indonesian Trade Union Confederation, one of the nation's biggest union with more than 1.4 million members.

Faced with rising food prices and a weakening rupiah, union workers have called for at least a 22 per cent rise in the minimum wage in the capital Jakarta, which is seen as a bellwether for the rest of the country. Jakarta last year saw a rise of 11 percent in its minimum wage to 2.7 million rupiah (US$198) a month.

REUTERS

    
 

Indonesia plans to offer tax amnesty soon as revenues slump

OCT 13, 20155:06 PM

[JAKARTA] Indonesia plans to offer a tax amnesty soon to help coax money back into the country and boost dwindling state revenue, the Kontan newspaper reported, citing a draft of a law being discussed by the government and a parliamentary commission.

The tax breaks would be offered to taxpayers with undisclosed wealth at home and abroad, such as in neighbouring Singapore, which has long been a favourite spot for rich Indonesians to park their funds.

Taxpayers who make such disclosures before the end of this year will be taxed at a 3 per cent rate, the newspaper said.

That would go up progressively to 5 per cent for those declaring their wealth in January-June next year and 8 percent in the following six months.

Indonesia's tax rate on individuals can range from 5-30 per cent, and 20-25 per cent for companies.

One member of parliament involved in the discussion, Misbakhun, confirmed the report. Tax office spokesman Mekar Satria Utama declined to comment.

The tax amnesty draft was proposed by the parliamentary commission overseeing tax collection and is subject to government approval. It would still need to be passed by parliament.

The government of Southeast Asia's largest economy is struggling to boost revenues as prices of its key commodity exports slide.

From January to September, the tax office has only managed to collect 686.2 trillion rupiah (US$50.63 billion), or 53 per cent of its full-year target, excluding revenue from excise and export-import duty. That was slightly lower than the same period last year.

The tax office said last week it expected a shortfall of around 112.5 trillion rupiah this year, which could make the budget deficit swell to around 2.23 per cent of gross domestic product - in line with an earlier Finance Ministry projection.

Darussalam, a partner at Jakarta-based tax consultancy Danny Darussalam Tax Center, said next year is the right time to offer a tax amnesty, noting that Indonesian tax authorities will begin sharing information automatically with their counterparts in other countries in 2017 as part of a global agreement. "The era of banking secrecy would end in 2017. So taxpayers should know that they only have until 2017," he said.

Indonesia is Singapore's main source of wealth assets, representing 30-50 per cent of private banking business, according to a private banker in Singapore.

Although it is not clear how much of that money was untaxed, Singapore private bankers said their clients were already worried.

REUTERS

    
 

Members of Japan govt advisory panel want swift corporate tax cut: draft

Some of Japan's top government advisers are pushing for a swift cut in corporate taxes, among measures to spur capital spending and boost wages in hopes of speeding up growth, government officials told Reuters on Tuesday. 

PHOTO: REUTERS

OCT 13, 20157:16 PM

[TOKYO] Some of Japan's top government advisers are pushing for a swift cut in corporate taxes, among measures to spur capital spending and boost wages in hopes of speeding up growth, government officials told Reuters on Tuesday.

The proposals, to be presented on Friday by the four private-sector members of the 11-member Council of Economic and Fiscal Policy, reflect Prime Minister Shinzo Abe's push to get companies to spend their cash piles to drive the economy. "We must promote steps, including swift completion of growth-oriented corporate tax reform, to have corporate profits result in investment," said the proposals, seen by Reuters.

The push comes as minutes of last month's policy meeting of the Bank of Japan showed that board members made a rare reference to expectations for the government to play a role in realising wage hikes.

Policymakers are keen to generate a virtuous economic cycle in which companies spend record profits to raise wages and capital expenditures. That, in turn, should stimulate private consumption, which makes up roughly 60 per cent of the economy.

While household incomes have improved, a deflation mindset persists and consumption has been slow to recover, mainly among low-income groups, the proposals say. Despite record corporate profits, capital spending has been sluggish, they add.

The proposals urge the government to press ahead with steps, including "early completion of growth-oriented corporate tax reform", to pave the way for company profits to spur capital spending, but do not say how much corporate tax should be cut.

Abe has pledged to cut the corporate tax rate to less than 30 per cent within a few years. His government cut the effective corporate tax rate to 32.11 per cent in the current fiscal year from 34.62 percent last year.

It plans to further reduce it to 31.33 per cent, or less, in the year that will begin in April 2016.

The minutes of the BOJ's meeting on Sept 14 and 15 showed many board members saw the pace of increase in nominal wages as moderate, despite record-high corporate profits.

They said the BOJ should steadily pursue its quantitative and qualitative easing to lay the ground for wage hikes, while stressing the importance of meetings among government, labour and management to encourage firms to raise salaries.

The three-way meetings have been held since Abe swept to power in late 2012, with some wary about government intervention in the private sector.

In a show of a positive stance on wages, the BOJ announced on Tuesday that it would raise annual salaries of its general employees by 1.9 per cent in the current fiscal year, including a rise of 0.6 per cent in base pay.

REUTERS

    
 

British inflation falls back into negative territory

OCT 13, 20156:45 PM

[LONDON] Britain's annual inflation rate fell back into negative territory in September, dampened by lower prices for food and petrol, official data showed Tuesday.

The 12-month Consumer Price Index (CPI) inflation rate sank to minus 0.1 per cent last month, compared with zero in August, the Office for National Statistics (ONS) said in a statement.

That matched the CPI reading from April, which was also the lowest level since March 1960. Market expectations had been for no change.

The September rate was also hit by smaller-than-expected increases in the cost of clothing.

Muted inflation means that the prospect of a hike in British interest rates - which have stood at 0.50 per cent for more than six years - is unlikely any time soon, economists said.

In reaction, the pound fell to the lowest level against the euro since May, as investors bet the Bank of England would delay hiking interest rates.

Sterling sank as low as 74.75 pence per euro, hitting a level last seen on May 7.

"UK inflation figures have come in lower than analysts expected," noted analyst Manoj Ladwa at brokerage TJM Partners in London.

"While this is likely to prevent the BoE from hiking interest rates in the near-term, it also further indicates the UK economy is struggling to grow." BoE governor Mark Carney said in August that he "wouldn't be surprised if we have another month or two of negative inflation".

However, the BoE chief has maintained that the likely timing of a rate hike is drawing closer amid growth in wages.

The central bank's main task is to keep 12-month CPI inflation close to a government-set target of 2.0 per cent.

So far this year, inflation has languished close to zero on the back of a fierce supermarket price war, while slumping global oil prices have dragged fuel costs lower.

British finance minister George Osborne stressed Tuesday that negative inflation was not the same as deflation, which refers to a prolonged period of falling prices.

"We shouldn't mistake this for damaging deflation: we remain vigilant and our system is designed to deal with such risks," Osborne said on Twitter.

While a sustained period of falling prices may sound good for consumers, deflation can trigger a vicious spiral in which households delay their purchases and businesses delay investment.

That can throttle demand, cause companies to lay off workers, and put the brakes on economic growth.

AFP

    
 

US small business confidence edges up, sales a worry 

OCT 13, 20156:41 PM

[WASHINGTON] US small business confidence rose marginally in September as stock market volatility raised concerns about sales growth, suggesting the economy was expanding at a moderate pace.

The National Federation of Independent Business said on Tuesday its Small Business Optimism Index gained 0.2 point to 96.1 last month. It said that level was consistent with a 2.5 per cent annualized growth rate.

"Financial markets did not provide any encouragement to owners, instead providing volatility that only a trader could like. This produces uncertainty," the NFIB said.

Seven of the index's 10 components eked out small gains last month, while the share of small business owners expecting stronger sales volumes in the next few months fell six points.

While there were minor declines in labor market indicators, they remained at historically strong levels and the NFIB said actual reported employment was "very" strong. The government reported earlier this month that the economy added 142,000 jobs in September after creating only 136,000 positions in August.

Even as small business owners worried about sales growth, they were upbeat about business conditions over the next six months and profits. They also believed now was a good time to expand. There was a slight increase in the share of owners planning to increase inventory.

The survey continued to point to tame inflation pressures in the near term. Fifteen per cent of small business owners reported reducing their average selling prices in the past three months, up one point from August. A net 15 per cent planned to raise prices, unchanged from August.

Twenty-three per cent of owners reported raising worker compensation, unchanged from August and 2 points below the expansion high reading reached in January and May. The share planning to increase compensation rose 3 points to 16 per cent.

REUTERS

      

Malaysia prosecutor says right to clear 1MDB over central bank report

Malaysia's attorney general said on Tuesday that he was right to close an investigation by the country's central bank into troubled state-owned investor 1MDB as there was no evidence the fund's officials had knowingly flouted the law. 

PHOTO: AFP

OCT 13, 20155:20 PM

[KUALA LUMPUR] Malaysia's attorney general said on Tuesday that he was right to close an investigation by the country's central bank into troubled state-owned investor 1MDB as there was no evidence the fund's officials had knowingly flouted the law.

Last week Bank Negara Malaysia (BNM) said it had urged attorney general Mohamed Apandi Ali to prosecute 1MDB, saying the fund had secured permits to remit US$1.83 billion overseas based on inaccurate or incomplete disclosure of information, breaching domestic regulations.

The central bank's statement raised the pressure on 1MDB, which is at the centre of a political crisis in Malaysia over its debt of nearly RM42 billion (US$10.05 billion) and alleged financial graft.

However Mr Apandi said that at no point in time had the central bank tried to stop 1MDB's overseas transactions, nor had it required the fund to provide details of account numbers it was sending money to or to outline the manner in which the funds would be channeled.

"Since there is no requirement, the omission on 1MDB's officials' part to disclose is not an offence," said Mr Apandi during a press briefing on Tuesday.

The central bank has also asked 1MDB to repatriate US$1.83 billion back into Malaysia, however the fund has said the sum has been spent or ear-marked for debt settlement arrangements.

The money was originally used for equity and loan investments in a joint venture with oil company PetroSaudi between 2009 and 2011.

The central bank did not immediately respond to a request for comment.

On Monday, former prime minister Mahathir Mohamad and several key Umno leaders called for a swift resolution to the ongoing 1MDB scandal, signalling a further divide within Prime Minister Najib Razak's party, the United Malays National Organisation.

REUTERS

    
 

Asia currencies fall as China imports spur return of growth woes

Asian currencies halted a seven-day run of gains as a sharper-than-predicted drop in Chinese imports added to signs the world's second-largest economy is slowing. 

PHOTO: REUTERS

OCT 13, 20155:12 PM

[TAIPEI] Asian currencies halted a seven-day run of gains as a sharper-than-predicted drop in Chinese imports added to signs the world's second-largest economy is slowing.

Shipments of goods into China fell for an 11th straight month, declining 20.4 per cent, more than the 16 per cent estimate in a Bloomberg survey. The figures paint a gloomy picture for exports from South Korea and Taiwan, which count China as their biggest overseas market. Indonesia's rupiah led losses as an index of commodities dropped overnight, damping the outlook for the producer of palm oil and coal. The Malaysian ringgit slumped after a plunge in oil on Monday.

"Overnight we've seen the crude oil prices turning back," said Sim Moh Siong, a currency strategist at Bank of Singapore Ltd. "Investors are waiting on the sidelines to see what's transpiring in the fundamental picture, but the fundamental picture hasn't changed all that much in terms of slowing emerging-market growth."

The Bloomberg-JPMorgan Asia Dollar Index fell 0.4 per cent, after rising 1.7 per cent in the previous seven days. The rupiah weakened 1.6 per cent, the most since December, and the ringgit depreciated 1 per cent. The commodities gauge rose 0.1 per cent after a 1.1 per cent loss on Monday and Brent crude dropped 5.3 per cent overnight in New York.

While Chinese imports dropped, exports fell a less-than- forecast 3.7 per cent in September from a year earlier but have still contracted in the last three months, underscoring concern expressed by the US central bank for not raising interest rates last month. The Bloomberg Asia dollar index rallied by the most since 2011 in the five days through Oct 9 after American employment numbers prompted futures traders to cut bets for monetary tightening by the Federal Reserve this year to less than 50 per cent. It has two more meetings in 2015, in October and December.

Australia & New Zealand Banking Group Ltd warned of a false rally in Asian currencies on Oct 9, while Pacific Investment Management Co said this week it's standing by its pessimistic outlook on emerging-market currencies.

Elsewhere in the region on Tuesday, the Philippine peso dropped 0.8 per cent and the Thai baht fell 0.4 per cent. South Korea's won was down 0.5 per cent and the Indian rupee was 0.5 per cent lower. Vietnam's dong lost 0.1 per cent, while Taiwan's dollar weakened 0.6 per cent.

"Some was short covering, some was a jump onto the bandwagon," said Sim at Bank of Singapore, referring to last week's rally. "But I don't think there was a high conviction to stick with long emerging-market currency positions." BLOOMBERG

    
 

Norway PM says tap oil fund more to cope with asylum seekers: report

Norway may have to tap its US$856 billion sovereign wealth fund than planned next year to cope with a rising number of people seeking asylum, Prime Minister Erna Solberg was reported as saying on Tuesday. 

PHOTO: REUTERS

OCT 13, 20154:36 PM

[OSLO] Norway may have to tap its US$856 billion sovereign wealth fund than planned next year to cope with a rising number of people seeking asylum, Prime Minister Erna Solberg was reported as saying on Tuesday.

Solberg's right-wing government said last week it would make the first net withdrawal from the fund to finance tax cuts and boost a slowing economy hit by weak oil prices.

Its 2016 budget planned to spend 2.8 per cent of the fund's value in 2016, up from 2.6 per cent this year, equivalent to an extra 23 billion crowns. But that sum may now increase. "We must use more money because we can't stop everything that is happening in Norway just to pay for the flow of refugees," Solberg was quoted as saying in the business newspaper Dagens Naeringsliv on Tuesday.

Asked whether this will mean an even greater use of money from the oil fund, she said: "Yes, I don't think we can manage this just by reallocating." She said the country would have to spend "billions of crowns" on the issue but did not give a precise figure.

Last week, Oslo raised its projections for asylum seekers arriving this year, the third such increase in just a few weeks as the influx from Syria to western Europe's northernmost nation grows.

The Norwegian Directorate of Immigration (UDI) said it now expects to receive 20,000-25,000 asylum applications in 2015, an increase from the 16,000-20,000 estimation it gave on Sept 16.

In 2016, more than 30,000 people will probably arrive, it said. Norway has a population of 5.2 million people.

Solberg was due to address parliament on the issue later on Tuesday.

REUTERS

    
 

German inflation back to zero in September: data

Consumer prices in Germany, Europe's biggest economy, did not rise in September, data showed on Tuesday, raising pressure on the ECB to prevent the wider euro area from slipping into a dangerous cycle of falling prices. 

PHOTO: AFP

OCT 13, 20152:38 PM

[FRANKFURT] Consumer prices in Germany, Europe's biggest economy, did not rise in September, data showed on Tuesday, raising pressure on the ECB to prevent the wider euro area from slipping into a dangerous cycle of falling prices.

Germany's national inflation yardstick, the consumer price index, showed zero change this month, after rising by a meagre 0.2 per cent the previous month, the federal statistics office Destatis said.

The main factor behind the slowdown was a renewed decline in energy prices, the statisticians explained.

Using the Harmonised Index of Consumer Prices (HICP) - the barometer used by the European Central Bank - the inflation rate in Germany actually declined by 0.2 per cent year-on-year in September, the statisticians said.

The ECB regards annual inflation rates of close to but just under 2.0 per cent as conducive to healthy economic growth and has recently launched a raft of measures to kickstart prices and push area-wide inflation back up nearer that level.

A controversial programme of sovereign bond purchases, known as QE or quantitative easing, was rolled out in March and initially appeared to work.

But the economic slowdown in China and depressed oil prices have pushed inflation expectations back down again.

The final data on Tuesday confirmed a preliminary flash estimate published at the end of last month.

Analysts said the data will raise the heat on the ECB to step up its anti-deflation measures.

AFP