NISP Producers responded negatively on electricity tariff adjustment

• Indonesian producers responded negatively to the government’s plan of increasing electricity tariff by 10% - 15% in 2H10. Most producers cited that this plan will reduce competitive advantage as higher cost would require a higher selling price and hence affect their market share amid recent AC-FTA condition.

• The producer said that on particular sectors such as furniture, the 15% adjustment on electricity tariff requires a 30% upward adjustment on their selling price in contrast with the government study on the impact of the adjustment that would only increase cost by 1.6% - 7.6%.

• Furthermore, this adjustment may affect domestic inflation where the market expects there would be an additional inflation of up to 0.3% from the adjustment. However, this is likely to be expected and the government sees that its 5.3% inflation target for 2010F is still intact.