Toward the age of the electric vehicle
As the year 2020 quickly approaches its end, Indonesia is weighing the prospects for the country’s economy for the near term, as well as for the medium and long term. For the near future, the fight against the pandemic continues, with the prospect of vaccination becoming the biggest hope. The first batch of Sinovac vaccines has arrived, while the government is negotiating with other vaccine producers. During this crucial time, the government changed leadership in the fight against the pandemic by replacing the Health Minister with a person with managerial decisiveness. This is indeed a critical time for the procurement and, especially, for the distribution of the vaccines to increase their effectiveness.
In the medium term, the Indonesian government is actively approaching decision-makers to relocate their production facilities to Indonesia. The new strategic port in West Java has begun operation, while the industrial zone has been quickly developed, both of which can facilitate inbound investors in selecting production sites. This strategy was developed quickly after learning of the supply chain disruption when the pandemic was taking place in China. For the long term, a project that has started even now is that the Indonesian government is preparing the stage for the incoming age of the electric vehicle.
In the midst of these plans, Indonesia's balance of trade for the month of November 2020 reported another large surplus. Exports in November reached $15,275.4 million, up a significant 6.36% from the previous month and by 9.54% year over year. Meanwhile, imports reached $12,662.8 million, up by 17.40% month over month but lower by 17.46% year over year. The fall in imports compared with the previous year indicates that the economy has still not yet returned fully to its pre-Covid condition. The trade balance for November registered a surplus of $2,612.6 million, a continuation of a series of surpluses from the previous months. With the November 2020 surplus, the total trade balance for the first eleven months of 2020 stood at a surplus of $19,655.5 million.
The Central Board of Statistics also released the inflation report, which showed inflation of 0.28% for the month of November. Thus, Y/Y inflation was 1.59%, a level below the target corridor of the Central Bank. However, in light of maintaining stability in the exchange rate while still providing stimulus to the economy, the Central Bank decided to keep the benchmark interest rate at 3.75% at its Monetary Policy Meeting in December 2020.
Toward the age of the electric vehicle
The age of the electric vehicle has come faster than we expected. After the United Kingdom moved forward the time limit on the production of cars with combustion engines to 2030 from 2040, the Tokyo government also announced a time limit of 2030. The European Union is expected to move in line with the others, while the change of presidency in the United States has also led to expectations that the U.S. will follow suit.
In Indonesia the policy to rapidly move to electric vehicles has been set: by 2025, 20% of auto production should be in the form of electric vehicles. Korean companies have moved fast. Hyundai has started to build a production facility in West Java, Indonesia, in which the first phase will be in the form of a 70,000-unit production capacity for cars with combustion engines. However, in Phase 2, which will start in 2022, Hyundai will start producing electric vehicles in Indonesia, with total production capacity planned at 250,000 units. Toyota, which in the past believed it should concentrate on the production of hybrid cars, is now also moving fast by investing $2 billion to prepare for the production of electric vehicles in Indonesia.
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