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Business Times
24 minutes ago
- Business Times
Indonesia's Prabowo rolls out first of 80,000 cooperatives to boost growth
[JAKARTA] President Prabowo Subianto on Monday (Jul 21) launched the first of thousands of planned new community cooperatives, betting on a top-down approach and billions of dollars in loans from Indonesia's state banks to spur development and food self-sufficiency in the South-east Asian nation. Prabowo, speaking at a launch event in the central Java town of Klaten, described the initiative as part of his administration's efforts to shorten distribution chains and improve access to essential goods across the sprawling archipelago nation. Especially for 'those with weaker economic conditions,' he added. 'They must have access at affordable prices.' Zulkifli Hasan, Coordinating Minister for Food Affairs, said that more than a hundred of the new cooperatives are now operational, with plans to replicate the results in more than 80,000 communities across the country in the next three months. The ambitious initiative represents a significant state-driven effort to stimulate economic growth by channelling as much as US$15 billion in state-bank loans directly into local communities. The plan, which seeks to establish cooperatives in each village and urban ward across a nation of more than 280 million people, aims to bypass traditional bureaucratic and supply chain hurdles, expanding the president's grassroots influence. The rollout extends a string of populist measures introduced by Prabowo in his first year in office, following a countrywide free meals programme, enhanced health checks, and an economic stimulus package. The push is part of his broader strategy to boost food security and reduce rural poverty, as well as to eliminate predatory lending, long-standing challenges in the region's largest economy. He also hopes they'll play a role in his signature goal of boosting economic growth rates to 8 per cent, a mark last seen three decades ago. 'We shouldn't rely on food imports,' Hasan said in describing the administration's hopes for the initiative. 'We must be sovereign.' A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up Named 'Red-White cooperatives' after Indonesia's national flag colours, the community-run facilities are envisioned as centres for local economic activities ranging from grocery distribution, fertiliser supply, subsidised cooking gas distribution, financial services, logistics and health care. Officials expect the initiative to create 2 million jobs while improving supply chain efficiency by eliminating middlemen and reducing the influence of loan sharks. Village heads are expected to lead the cooperatives. The Red-White cooperatives can each propose borrowing of as much as 3 billion rupiah from state banks, potentially placing collective lending at more than 240 trillion rupiah (S$18.8 billion). Critics have cautioned that the model could strain rural budgets and expose some of the nation's largest banks to heightened credit risks. In November, Prabowo directed state banks to forgive as much as US$550 million in bad loans held by micro and small businesses, particularly in agriculture and fisheries sectors, stoking concerns of the banks' exposure. The cooperative concept has deep roots in Indonesia, with mixed historical results. Cooperatives existed during the Dutch colonial era, and upon independence the concept was enshrined in Indonesia's constitution as foundational for economic democracy – aimed at promoting social equity and preventing economic domination by foreign powers or domestic elites. Founding president Sukarno championed cooperatives as tools of food self-sufficiency, though many remained informal and loosely organised. Under Suharto, the country's long-ruling strongman, cooperatives expanded dramatically beginning in the late 1970s. His centrally managed Village Unit Cooperatives, backed by state mandates and subsidies, played a central role in distributing fertiliser and rice and providing credit to farmers, often enjoying local monopolies. While credited with helping Indonesia achieve rice self-sufficiency in the 1980s, their top-down structure, close ties to the ruling Golkar party and heavy dependence on state support made them susceptible to inefficiency and politicisation. Many faltered following the 1997–98 Asian financial crisis, when subsidies were slashed and political support evaporated. Thousands were dissolved in the years that followed, leaving behind a legacy of public distrust and institutional fragility that continues to cloud perceptions of state-led cooperatives today. Still, they remain common, with active cooperatives numbering more than 130,000 nationwide last year. Membership comprises more than 10 per cent of the population. 'A cooperative is the tool of the weak,' Prabowo said at the launch event. 'A single stick is fragile and breaks easily. But when dozens or even hundreds of sticks are bound together, they become a powerful tool.' BLOOMBERG
Straits Times
2 hours ago
- Straits Times
China stops US commerce employee from leaving, reports say
Find out what's new on ST website and app. The US Commerce Department employee, an American citizen, had travelled to meet relatives, the Washington Post said. China has stopped an American citizen who works for the US Commerce Department from leaving the nation for several months, according to media reports – an episode that coincides with Beijing and Washington trying to arrange a leaders' summit so they can address their differences on trade. The Chinese-American individual who works for the Patent and Trademark Office had travelled to meet relatives, the Washington Post reported, citing four people familiar with the matter, who asked not to be identified discussing the sensitive issue. The US sent a very high-level message to Beijing to let the man depart, the newspaper added, citing one person. It said it didn't know the name of the man facing a so-called exit ban, which was put in place over an apparent failure to disclose on a visa application that he worked for the US government. Officials from Beijing and Washington – including in the Commerce Department – are negotiating a trade deal after US President Donald Trump hit goods from China with heavy tariffs that he later paused. Mr Trump also wants a meeting with Chinese leader Xi Jinping to sort through their problems, which also touch on technology curbs, rare earths and the status of Taiwan. To get the sitdown and a trade pact, Mr Trump has recently softened his harsh campaign rhetoric that focused on the US's massive trade deficit with China and resulting job losses. Earlier this month, US Secretary of State Marco Rubio said after meeting his Chinese counterpart, Mr Wang Yi, that there was 'a strong desire on both sides' for a Xi-Trump meeting. The outlook for such a meeting could be complicated if the episode involving the employee of the US Commerce Department escalates. The man, a veteran of the US army, was detained when he arrived in the southwestern city of Chengdu in April, the South China Morning Post reported on July 20 , citing a person familiar with the situation. He was being prevented from leaving China because his case was 'related to actions Beijing deemed harmful to national security,' the newspaper reported, though the specifics couldn't be confirmed. Since the man arrived in Chengdu, he had also traveled to the Chinese capital with a US official, the newspaper reported. The Patent and Trademark Office the man works for handles US patents and registers trademarks. It says on its website that its 'mission is to drive US innovation and global competitiveness'. A spokesperson US Embassy in Beijing said that its 'highest priority is the safety and security of US citizens overseas'. It added that 'we track these cases closely, and have raised our concern with Chinese authorities about the impact these arbitrary exit bans have on our bilateral relations and urged them to immediately allow impacted US citizens to return home'. The Foreign Ministry in Beijing didn't respond to a request for comment. China's use of exit bans has been a point of contention between Beijing and Washington in recent years. The US State Department has repeatedly advised citizens to reconsider travel to China based on what it called the 'arbitrary enforcement of local laws, including in relation to exit bans'. Wells Fargo recently suspended travel to the world's second-biggest economy after one of its top trade financing bankers was blocked from leaving. Ms Chenyue Mao, an Atlanta-based managing director who was born in Shanghai, was banned from departing after entering China in recent weeks, according to a person with knowledge of the situation. The case underscores multinational companies' fears about the risks of operating in China, especially in regard to staff safety and restrictions on movement. Among notable cases in recent years, the Wall Street Journal in 2023 reported a senior executive at US risk advisory firm Kroll was prevented from leaving China. In 2019, Bloomberg reported that a UBS Group AG wealth manager was detained for about three months before returning home. An academic analysis published in 2022, based on data from six governments, found 128 cases of foreign citizens facing Chinese exit bans, with at least a third of the cases driven by business disputes. Chinese law prohibits people suspected of crimes from leaving the country. Chinese citizens judged to have endangered national security can also face exit bans under the country's recently updated espionage law. BLOOMBERG
Business Times
4 hours ago
- Business Times
CGSI downgrades Wilmar, lowers price target amid heightened regulatory risk from Indonesia
[SINGAPORE] CGS International (CGSI) analyst Jacquelyn Yow downgraded Wilmar international from a 'hold' to a 'reduce' call in her Jul 18 report, with a lowered target price of S$2.70 from S$3.15. This is due to increasing uncertainties from Indonesia over land confiscation issues and ongoing investigations on alleged cases related to palm oil and rice, cited the analyst. Yow said: 'While the contribution from Indonesia's rice business to Wilmar's overall operating profit is likely not significant, recent developments in the country – including land confiscations and alleged corruption cases – have introduced increasing uncertainty for the group.' Earlier on Jul 15, Indonesia Business Post reported that the Indonesian National Police Food Task Force had launched an investigation into four major rice producers including Wilmar. This was over allegations of mislabelling, where lower-grade medium-grain rice was blended with premium rice and sold as higher quality. Wilmar also separately placed a security deposit of 11.8 trillion Indonesian rupiah (S$929 million) with the Attorney General's Office on Jun 17. This was linked to an ongoing legal appeal concerning alleged corruption in the issuance of palm oil export permits in 2022. 'We estimate that the potential financial impact of this to be nearly 2 per cent of its total net profit for FY2025, with the potential loss from the interest income amounting to US$729 million,' she said. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up These regulatory issues in Indonesia, coupled with the rising volatility of commodity prices from the US tariffs and geopolitical tensions, are likely to continue to cast a shadow over Wilmar's near-term outlook, noted the analyst. 'As such, we cut our FY2025 to FY2027 forward core net profit by 0.4 to 12.5 per cent, factoring in lower margin for the feed and industrial segment due to lower soybean crushing margin, and a lower palm refining margin,' the analyst said. Q2 earnings expectations For the second quarter of 2025, CGSI's Yow expects the group to report a net profit of US$260 to US$270 million, down from US$343 million in the previous quarter, and year on year from US$278 million in Q2 2024. 'This is mainly driven by lower margin for its feed and industrial segment, due to a decline in soybean crushing margin despite better demand for soybean meal (in light of cheaper pricing than other animal feedstocks),' she said. In addition, the analyst said that the palm oil refining margin is likely to be lower in Q2 to Q4 FY2025, largely due to the revised Indonesian export levy which had resulted in lower refining margin. She also said the overall sales volume of its food product segment remained muted due to lower demand coupled with high promotional expenses, especially for the consumer product sub-segment, which may result in a lower margin. Her report in particular cited 'overall soft consumer consumption in China' as a factor affecting the sales volume in this segment. Increasing stake in AWL Agri Business Earlier on Jul 17, Wilmar had announced plans to acquire up to a 20 per cent stake in AWL Agri Business, formerly known as Adani Wilmar, from Adani Commodities, for 275 rupees per share. The transaction is part of the option agreement signed in December 2024, which had set a maximum price of 305 rupees per share, and came after Adani Commodities said it will exit the venture joint venture. While the final structure is under negotiation, Wilmar has stated it will acquire no less than 11 per cent and no more than 20 per cent of AWL's equity under this agreement. Yow said that the agreed purchase price of 275 rupees per share reflects an approximate 10 per cent discount to the previously capped price, indicating a more favourable valuation outcome for Wilmar. 'The deal strategically enhances Wilmar's control and long-term growth visibility in India, while also marking Adani Group's full exit from the fast-moving consumer goods space as it shifts focus towards infrastructure and energy. We believe the acquisition helps reinforce Wilmar's presence in India's fast-growing packaged food and edible oil market,' she wrote in her Jul 18 report. The analyst added that she view this as a 'prudent move' by the group to ensure continuity and support Wilmar's long-term ambitions in the market, given the difficulty of replicating a local partnership of Adani's scale. Following the transaction, Wilmar's effective stake in AWL would increase from 44 per cent to around 55 to 64 per cent, resulting in AWL becoming a subsidiary and enabling full financial consolidation. 'We remain neutral on the transaction, as the purchase price implies a FY2025 P/E of around 29 times – a premium to global peers – despite a relatively moderate earnings growth profile,' said the analyst. 'We reckon that the near-term operating conditions in India's consumer staples sector remain soft, which may limit upside in the immediate term,' she added. As the deal is still under negotiation, however, Yow does not expect any material impact on Wilmar's FY2025 forward financials. 'That said, based on AWL's FY2025 net profit of around US$145 million, full consolidation could potentially increase Wilmar's net profit by nearly 10 per cent moving forward,' she said.
