A MINT next door

In Indonesia on 02/02/2014 at 6:32 am

(Asean round-up: Indonesia special)

Last yr Indonesia’s stk mkt in US$ terms was -23%. A fitting tribute to it being a member of the “fragile five”: South africa, Turkey Brazil, India and Indoesia. who are dependent on foreign inflows of capital and hence QE tapering is problematic. This week three of them SA, Turkey and India have craised rates in response to weakish currencies; Turkey has doubled rates by some benchmarks.

But Indonesia (and Turkey) are part of MINT: if Mexico, Indonesia, Nigeria and Turkey get their act together, some of them could match Chinese-style double-digit rates between 2003 and 2008.

The coiner of the term MINT was the guy who coined BRIC: Brazil, Russia, China and India, and readers should know how ell the economies did until recently.

And recently it was reported that Taiwan’s Foxconn Technology Group, the major supplier of Apple Inc’s iPhones and iPads, may build high-tech factories in the United States and low-cost plants in Indonesia as the appeal of ‘made in China’ fades into a burden.

So maybe he will right again. But to be fair, he is least bullish on Indonesia: Indonesia, I am less sure about. The country’s challenges are as big as I thought and I didn’t hear too many things that made me go “Wow” in terms of trying to deal with them. The country needs more of a sense of commercial purpose beyond commodities, and has to improve its infrastructure.

His less bullish stance is supported by a recent govt measure.

The country introduced a controversial ore export ban on Jan 12, although last-minute amendments aimed to ease the impact of the export ban on concentrate miners like Freeport McMoRan Copper & Gold and Newmont Mining Corp. They now face a progressive export tax on concentrates.

“There has been no concentrate export since Jan 12,” Bachrul Chairi, director general of foreign trade at the trade ministry told Reuters … “As of now, no miners or companies have requested export approval for concentrate or processed ore from the trade ministry.”

Freeport Indonesia and Newmont are in talks with the government over the new rules and are yet to resume exports since the new tax was introduced, while the Mineral Entrepreneurs Association has filed a legal challenge against the ore export ban.

The ban on mineral ore exports from Indonesia, the world’s biggest nickel producer, is poised to benefit miners in the neighbouring Philippines, who are predicting an increase in sales. Shares of Nickel Asia Corp advanced to the highest intraday level in two months.

The ban is positive as demand and prices for Philippine supplies will increase, according to Emmanuel Samson, chief financial officer at Nickel Asia. The Taguig City-based company accounts for about a third of Philippine output, Mr Samson said.

While the Indonesian ban is intended to encourage local processing and boost the value of commodity shipments from Southeast’s Asia’s largest economy, the curbs may hand an advantage to rival producers such as Nickel Asia.

Buyers in China, the top user, stockpiled ore before the ban and it may take as long as six months to work off that extra inventory, according to Mr Samson. Producers in China also need to adjust to the lower grade of ore that comes from the Philippines, he said.

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