Dear our stakeholders,
Implementing a mandate to the support National Export Financing, Indonesia Eximbank in 2017 carried out various efforts. Among them were our bonds issuance and borrowings, which were important to increase capital funding. We also expanded our exporter base and succeeded in adding six new exporters, improved service quality, and executed Special Assignments from the Government.Banking and financial services industry in 2017 grew at pace with economic growth. The Financial Services Authority (OJK) noted that the banking industry in general was in sound condition with manageable credit risk, stable liquidity, stable profitability and solid capital position.
In 2017, banking loans amounted to Rp4,782 trillion or grew 8.35% year-on-year from 2016 position. Financing growth was mainly driven by working capital financing and consumption loan, and was accompanied by nonperforming loan (NPL) at 2.59%. For Indonesia Eximbank, export financing in 2017 amounted to Rp101 trillion in value, or up 14.1% from Rp88.5 trillion in 2016. In terms of customer segment, Indonesia Eximbank’s financing in 2017 was mainly disbursed to Industry sectors (51.6%); Agriculture, Labor, and Agricultural Facilities (13.6%), and Construction (7.8%).
The significant amount of financing provided to Industry sectors reflected the Government of Indonesia’s priority of creating added value by strengthening industrial activities. Industry sectors have been consistently triggering multiplying effects to the national economy at large; the sectors, for example, create added value for domestic raw materials, create jobs, generate foreign exchange reserves from exports, and contribute the highest tax and excise payments. Aligned with credit growth, Capital Adequacy Ratio (CAR) industry-wide stood at 23.26%, while Indonesia Eximbank’s CAR was at 17.99% in 2017 from 16.72% in 2016. Sound profitability of the banking sector was reflected from Return on Assets (ROA) at 2.48% in 2017 from 2.31% in the previous year, although Net Interest Margin (NIM) declined to 5.31% in 2017 from 5.35% in 2016. For Indonesia Eximbank, ROA and NIM in 2017 stood at 1.17% and 2.25%, respectively.
In the credit guarantee market, data from the Association of Indonesia Credit Guarantee Corporation (Asippindo) indicates that credit guarantee sector has been growing around 30% in the past several years. Meanwhile, according to OJK data, the outstanding credit guarantee amounted to Rp178.86 trillion in 2017, up 33.6% from Rp133.52 trillion in 2016. Against these numbers, Indonesia Eximbank provided a total of Rp10.55 trillion of Export Guarantee in 2017, up 30% compared to Rp8,125.56 billion in 2016.
Indonesia Eximbank also executed the instruction of the Finance Minister stipulated in Ministerial Decree No. 374/KMK.08/2017 dated 12 May 2017 concerning Special Assignment to LPEI to Provide Export Financing of Train Carriages to Bangladesh. By virtue of that decree, we disbursed Rp350 billion from a total of Rp1 trillion allocated. We also had two other special assignments, i.e. export financing for aircrafts and promotion of exports to African countries, and we coordinated with relevant agencies.
In conclusion, we would like to extend our gratitude to our shareholder, the Ministry of Finance, for the guidance shown throughout our business activities. We also wish to express our appreciation to the Board of Directors for their advisory and oversight.
As an institution established exclusively through Law of LPEI, Indonesia Eximbank plays an important role in improving the economy of Indonesia, encouraging national export performance, improving the competitiveness of export business operators as mandated. The business strategy in the realization of the mandate, Indonesia Eximbank makes an effort to channel financing to: 1) the sector of government leading commodities such as palm oil and coal; 2) supporting export sectors including infrastructure sectors such as construction and power plant in industrial areas; as well as 3) suppliers of supporting export activities, providers of raw materials/goods of export production the majority of which is SMEs segmentation. This is expected to be able to increase the competitiveness of Indonesian businesses in the global market.
In addition to providing financing in the country, Indonesia Exibank provides financing abroad by fostering cross border transaction in the form of overseas financing called the buyer's credit, overseas investment financing and overseas project financing. The development of overseas financing until the end of semester I of 2015, LPEI has financed one new project. This aims at expanding the range of products and/or services of Indonesia in the international market and helping exporters to expand their foreign business.
In addition, the development of Indonesia Eximbank guarantees and insurance is growing from year to year.
In order to increase added value and competitiveness, Indonesia Eximbank also provides guidance and Consulting Services Program for SMEs, including SMEs that support export in order to increase the technical capabilities and production capacity for either direct or supporting exports. One form of the Consulting Services Program owned by Indonesia Eximbank is the Coaching Program for New Exporter (CPNE), which is a series of special training programs consisting of aspects of the product to the marketing aspect given to SMEs for the duration of one year. The benefits of CPNE for SMEs are among others, in order to improve and have product quality that provides added value and marketability in the global market which is ultimately expected to perform initial export.
As set forth in Law of LPEI, the composition of funds resource structure of Indonesia Eximbank consists of the issuance of lending securities and the State Investment (PMN). The Government Supports to Indonesia Eximbank through PMN which are provided periodically and continuously help to strengthen the financing structure of Indonesia Eximbank so that opens the opportunity for Indonesia Eximbank in offering a competitive interest rate to exporters through the provision of financing, guarantees and insurance.
One of the important tasks mandated by the Government to Indonesia Eximbank related to fiscal functions is in the form of Export Special Assignment program or called the National Interest Account (NIA). Through the Regulation of the Ministry of Finance No. 134/PMK.08/ 2015 on the Special Assignment to the Indonesian Export Financing Agency issued on 14 July 2015, Indonesia Eximbank gets a legal basis in the implementation of NIA. NIA is an assignment given by the Government to Indonesia Eximbank to provide export financing for the transaction or project that is commercially difficult to implement, but it is considered necessary by the Government to support export policy or program. The Special Assignment is given in selective and limited manners to: a) economy sector; b) commodities; c) export destination country; d) criteria of exports agents; and e) the form of export financing. The transaction/ project that may be submitted using the NIA Program has the following criteria: a) to increase the competitiveness and value-added of Indonesian products; b) to support the growth of the domestic industry; and c) to have the potential for improvement and development of long-term export.
The Government assignments are reflected on the vision of Indonesia Eximbank, namely "To Be Superior and Credible Eximbank in Encouraging High Competitiveness National Export on the Global Level". The vision will be pursued through the achievement of the mission to (i) drive a sustainable conducive business climate to sustainable national export growth, (ii) provide qualified national export financing and consulting services as a solution to the needs of Indonesian exports, and (iii) to increase the ability of businesses, including small and medium enterprises, to produce superior and competitive export-oriented products.
With the tremendous support from the Government to exporters, in the future the chance to increase Indonesian market penetration abroad is getting broader, so that more domestic entrepreneurs have the capability to go international.
2014 was a challenging year for the economy of Indonesian. The slowdown and uneven global economic recovery affected the national economy. The economic recovery of the United States (US) seemed to be more solid. Oppositely the economy of the European region and Japan remained relatively weak. The emerging countries such as China and Russia also experienced an economic slowdown. China’s economic slowdown impacted the Asian emerging countries. In Russia, the depreciation of the Rubel has weakened the Russian economic sectors. Nevertheless, the economy of India showed improvement along with the increase of consumption activities and the reform agenda by the new Government.
The downward trend in global commodity prices continued throughout 2014. The decline of the world oil prices was driven by the high oil supply from the non-OPEC countries, particularly the United States and the slowing oil demand in the emerging countries. The decline of oil prices in turn lead to a reduction of nonoil commodity prices, including Indonesia’s leading export commodities, such as palm oil and rubber.
Indonesia’s economic growth in 2014 grew by 5.01% lower than the previous year, which was 5.78%. The consumption sector, particularly household consumption remains the pillar of economic growth in spite of the growth being not as high as the previous year. Meanwhile, investment was still limited due to the weakening of exports and the slowdown of household consumption.
In line with the economic slowdown, bank credit grew only at the level of 11.58% (yoy) lower than previous year, which grew 21.60% The growth of banking export credit decreased significantly from 30.79% to -2.41% in 2014.
The dynamics of the global economy has affected Indonesia’s export performance. In 2014, the performance of trade balance recorded a deficit of USD1.89 billion, contributed by oil and gas deficit amounted to USD13.12 billion, while non-oil trade balance experienced surplus of USD11.24 billion. The deficit of trade balance was not as high as the previous year which amounted to USD4.08 billion.
In 2014, Rupiah depreciated against the US Dollar, as also occurred in almost all other currencies in the world. Rupiah was recorded to be at Rp12,385 per US dollar at the end of 2014, or weakened by 1.74% (yoy). The high appreciation of the USD against most of the world’s currencies was in line with the improvement of the US economy and the Fed’s plan to increase interest rates.
Opportunities, Challenges and Strategies in 2015
The predicted slowdown in global economy going forward remains as a challenge that should be considered. International Monetary Fund (IMF) has revised its global economic growth projection in 2015 from 3.85% to 3.50%. This revision reflects the non recovery of economies in Europe and Japan, as well as a slowdown in China.
However, the Board of Directors remains optimistic on the performance of Indonesia Eximbank going forward. Fresh breeze will come from the more solid economy of US and India, as well as a number of ASEAN countries which are Indonesia’s export destinations. In addition, in line with the strategy to expand into non-traditional markets, demand from emerging economies in Africa remains strong with a opside potential.
Entering 2015, Indonesia Eximbank will start a new chapter in the Long Term Plan (RJP) phase II. The main objective is to support increased competitiveness of the national exports. The vision of Indonesia Eximbank is to become a superior Eximbank and credible in encouraging national export with high competitiveness on the global level is realized through the mission to: (1) foster on-going conducive business climate for sustainable growth of the national export; (2) provide the service of National Export Financing and consulting services as the solution to the needs of Indonesian exports; and (3) improve the ability of business players, including small and medium enterprises, to produce a superior and competitive export-oriented products. To that end, Indonesia Eximbank’s strategies in 2015 are directed at improving the portion of financing, Guarantee and Insurance in sectors that support the improvement of competitiveness, such as: infrastructure, energy and transport. Indonesia Eximbank will also provide financing with competitive interest rates in order to support increased competitiveness of Indonesia’s exports. Increased financing to the SME segment will also be conducted to increase the role of SME in international trade (exports). Indonesia eximbank will also strives to improve cross-border transactions in the form of overseas financing through buyer’s credit, overseas investment financing and overseas project financing.
In addition through Financing, Guarantee and Insurance, support for the SME segment will also be enhanced through the provision of guidance and advisory services for SME including the supporting SME to improve technical capabilities and production capacity either in direct export or export support.
We express our appreciation to the Ministry of Finance, Ministry of Trade, correspondent partners, creditors, customers and all stakeholders for the trust and support given to Indonesia Eximbank.
We also express appreciation to all ranks of the Board of Directors, Executive Director, and all Employees of Indonesia Eximbank for their commitment and dedication during the year 2014. May the good cooperation be sustained in 2015 upholding the principles of GCG and cultural values of the Company, namely TRUST (Trustworthy, Reliable, Unique, Service Excellence and Teamwork).
Having passed the year 2013, Indonesia Eximbank successfully booked an increase of 39.42% (yoy) from the previous year to a total assets of Rp46,473.15 billion. Correspondingly, disbursed financing reached Rp40,491.63 billion, an increase of 49.67% (yoy). This growth is proudly achieved comparing to previous year of 31.71% (yoy) and average growth of 35.68% throughout 2009-2013.
Financial indicators and ratios marked Indonesia Eximbank as being in a healthy and sound condition which reflected in the positive growth of its Return on Assets (ROA) and Return on Equity (ROE). ROA was recorded at 2.49%, improved than the previous year at 2.34%, while ROE 10.60%, improved from 8.26% of the previous year. Expansive Financing was followed by compatible financing quality, reflected by the low gross NPL and net NPL, respectively at 3.26% and 1.09%.
Guarantee and Insurance underwriting also showed significant improvement. Guarantee grew by 85.09% (yoy) to Rp2,033.20 billion from the previous year of Rp1,098.46 billion. Meanwhile, the insurance coverage grew by 75.19% (yoy) to Rp261.52 billion compared to the previous year realization of Rp149.28 billion. To support the needs of
the exporters, Indonesia Eximbank had committed itself to continue improving export related guarantee and insurance products to explore new potentials to be exploited.
Indonesia Eximbank continuously committed to support SMEs capacity building through mentoring as well as advisory which resulted in SMEs as new debtors through mentoring activities and Consultancy Services (upon own initiation as well as in cooperation with agencies, ministries and local governments) in 2013. The total value of endorsements reached Rp31.50 billion.
Economic Situation in 2013
In 2013, Indonesia’s Gross Domestic Product (GDP) slowed to 5.78% compared to the previous year of 6.26%. (source: Statistics Indonesia). Indonesia had to cope with a number of challenges throughout 2013, among others: the slowing growth of domestic consumption since the reduction of fuel subsidies, up to the weakening of the rupiah, which was driven by the uncertainty of global financial markets, triggered in turn, by the constrained economic recovery of Europe and the reduction of fiscal stimulus in the United States (USA). Domestic consumption contributes the majority of Indonesia’s economic growth in 2013 with a share of 54,81% of the total GDP, followed by investment at 26,78% or with a total cumulative investment reaching Rp398.6 trillion. Even though pressure is still looming on Indonesia’s external factors, Indonesia experienced a net export deficit of USD4,077 million in 2013 compare to a net export deficit of USD1,659 million in the previous year. (source: Statistics Indonesia)
The debt rating trimming of the Government of the Republic of Indonesia by Standard & Poor’s (S&P) from positive outlook (‘BBB-‘) into stable outlook (‘BB+’) on May 2013, has caused a challenge for Indonesia to compete with other countries in the ASEAN region to obtain foreign funding. Throughout 2013, we continue to support value added export products reflected in the financing that was given to processing and industrial sectors contributing to 41.64%. Long term investment financing grew from 39.39% in 2012 to 46.29% in 2013 to support entrepreneurs in upgrading their production line which will increase the value added. Investment financing was also disbursed to, neither stateowned
nor private entities, supporting export infrastructure sectors. Cross border transaction in the form of buyer’s credit as well as overseas financing were done to give a direct impact on the trade balance.
We are reasonably optimistic in the growth of the Indonesian economy in 2014. The Indonesian Government projects national economy will grow by 6.0% (source: 2014 State Budget), better than 2013 performance. Even though consumption as yet to be the main driving force in the economic growth, export sectors will also improve and suppress the trade budget deficit. The International Monetary Fund (IMF) projected global economic growth in 2014 to reach 3.7% or more prospective as compared to the year 2013 of 3.0%.
The improving global economic conditions will stimulate the demand of Indonesia’s trading partners, namely USA and European Region thereby increasing national exports. Meanwhile, banks credit growth is projected to slow down, being positioned in the range of 17-18%, lower than the projected growth of credit at the end of 2013, which was around 21.80% (yoy). Indonesia Eximbank optimistically able to reach 20% of a challenging yet healthy growth.
Act No. 4 Year 2009, which implies the stipulation of the Regulation of the Minister of Energy and Mineral Resources (ESDM) No. 1 in 2014 on the Added Value of Minerals Through Mineral Processing and Refining Activities domestically and the Regulation of the Minister of Finance No. 6 Year 2014 on the Stipulation on Exportable Goods Subject to Export Duty and Tariff as such is projected to cause a deficit in the Indonesian short term trade balance. This policy will act as an opportunity and a challenge for Indonesia, as well for Indonesia Eximbank to drive the increase in added value of Indonesian export oriented commodities, by means of providing Financing, Guarantee and Insurance. It is expected if minerals and mining products being processed domestically, thereby added value of exports of mineral and mining commodities will increase as well as the economy in the mining areas.
Strategy in 2014
In 2014, Indonesia Eximbank continues its strategies to achieve the goals that was set out in the corporate Long Term Plans (RJP) I of 2010 – 2014. As part of the effort to increase exports as well as the competitiveness of national products, in particular sectors that are being prioritized by the Government, Indonesia Eximbank will undergo
strategies by ways of increasing long term investment which encourage exporters to upgrade their machineries to improve the value added of the commodities, increase investment financing to export supporting infrastructures, increase SME financing, increase cross border transactions, increase integrated cross selling Financing, Guarantee and Insurance, and increase mentoring and consultancy services to prospective exporters.