Brief Macro: Prabowo Errs Again; Widodo Lead Intact; Riady’s Mei-Egg-Karta; BI Holds; Repsol’s Find; Debate Text and more

In this briefing:

1. Prabowo Errs Again; Widodo Lead Intact; Riady’s Mei-Egg-Karta; BI Holds; Repsol’s Find; Debate Text
2. US Dollar Demand – Fading Appetite
3. The Internet: Hacks, Clicks, and Money
4. China’s Pharmaceutical and TCM Industry
5. ECB, BoJ Suck Wind – EA Threatened with Japanisation

1. Prabowo Errs Again; Widodo Lead Intact; Riady’s Mei-Egg-Karta; BI Holds; Repsol’s Find; Debate Text

Prabowo again squandered a chance in a debate to gain ground, as Widodo appeared more confident and in command.  Prabowo’s incessant efforts to sow fear of foreigners does little to weaken his opponent.  Widodo’s lead was intact as of late January, despite claims from two pollsters (Indomatrik, Median) who are demonstrably unreliable or even fraudulent.  Lippo Group owner James Riady suffered repudiation: after having testified in court that he met the Bekasi District chief by coincidence and did not discuss his Meikarta project with her, KPK prosecutors played a phone recording that shows otherwise.  BI has held rates steady, citing the current account deficit after a gaping January trade deficit.  The government continues its efforts to sack more than 2,000 civil servants who are corruption convicts.  Repsol discovered gas in South Sumatra. 

Politics: The second of five debates in the presidential election marked another missed opportunity for Gerindra Chair Prabowo Subianto to gain ground on President Joko Widodo.  Instead, the incumbent again landed blows that hurt the retired general, highlighting his unfamiliarity with e-commerce jargon and drawing attention to his land assets measuring 340,000 ha.  For his part, Prabowo pointedly projected a conciliatory demeanor, perhaps to dispel perceptions that he is temperamental, but it squandered a chance to assail the incumbent and thereby persuade voters to opt for change.  Prabowo adhered to form by advocating protectionism and expansion of state involvement in the economy.  He used nearly every answer to disparage foreigners, which is an error: sowing suspicion of foreigners does little to weaken his opponent (Page 2) (Transcript translated by Ref Wkly, p. 8).  Hard‑line Islamic groups convened again in Jakarta (p. 3). 

Surveys: In the July 2014 election, the Center for Strategic Development and Policy Studies (Puskaptis) performed a Quick Count survey of ballot‑station results that declared Prabowo the winner, and the Association of Polling Firms (Persepsi) ousted Puskaptis from its ranks.  But the head, Hasan Yazid, has re‑emerged as the founder of Indomatrik, another purported polling firm.  Yazid claims to have findings showing Prabowo’s support on par with Widodo’s.  Along with supposed findings from another obscure agency, Median, this is injecting confusion into perceptions of the presidential election.  In fact, two reputable agencies determined in late January that Widodo’s lead was intact (p. 4).   

Justice: In the Meikarta‑Lippo bribery scandal, prosecutors dispute the testimony provided in court last month by group owner James Riady (p. 5).  Information Minister Rudiantara faced questioning from the Election Oversight Agency (Bawaslu) for having jested, in an event with ministry personnel, about preferences for presidential tickets (p. 7).

Policy News: Cabinet members are preparing measures that will finally force regional officials to sack civil servants convicted of corruption (p. 7). 

Energy: Spain’s Repsol announced the largest gas discovery in 18 years – a reservoir in Musi Banyuasin, South Sumatra measuring two trillion cubic feet (p. 8).

Economics: Bank Indonesia (BI) kept its benchmark rate unchanged at 6.0% (p. 9).

Appendix: The presidential candidates debated the topics of infrastructure, the environment and natural resources on 17 February (transcript and analysis, p. 9).

2. US Dollar Demand – Fading Appetite

In 2011 the world experienced the best year of demand expansion – in US dollar terms – in any year since the financial crisis, until 2018 that is. But you would hardly realise that that was the case by reading the newswires, the stories there since early 2018 have been about ‘synchronised slowdown’ and, in particular, the demand downdraft from China. The reality is that developed countries (the US, EU, UK and Japan) plus developing Asia (China, India and the Asean-4) produced US$4.1trn of ‘new’ GDP demand in 2011 and in 2018 was on course to produce US$4.1trn in new dollar demand.

3. The Internet: Hacks, Clicks, and Money

There is this thing called the internet that can be pretty cool sometimes. In all seriousness though, the internet is a driving force for making money and spending money. Last week we took a long look at mobile phones and continuing a deep dive on technology today we take look at the internet in China. This will not be a total encyclopedia but a snap shot of some key features.

4. China’s Pharmaceutical and TCM Industry

Chinese healthcare is fascinating in that one minute you can visit a doctor practicing the latest modern medicine and then stop at the corner store for traditional Chinese medicines specializing in random herbs and fungi. The dichotomy is a truly Chinese experience. However, China is increasingly a manufacturing and therefore export destination for both modern and traditional Chinese medicines (TCM).

5. ECB, BoJ Suck Wind – EA Threatened with Japanisation

By Charles Dumas, Chief Economist

• Monetary stimulus fails export-dependent savings glut countries
• Japan now accepts huge budget deficits and negative interest rates
• EA needs broad structural reform to avoid Japan’s deep malaise