The Indonesian government has further reformed its decade-old fuel subsidy policy in a move to streamline - and make more structural use of - public spending. The latest change is effective from today (1 January 2015) and thus Indonesia moved a step closer to applying a market-based price mechanism. The government now uses a fixed diesel subsidy of IDR 1,000 (USD $0.08) per liter, while subsidy for low-octane gasoline is scrapped altogether (however the government will account for gasoline distribution costs outside Java, Madura and Bali).

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On Sunday 28 December 2014 an Indonesia AirAsia flight lost contact with Indonesian air traffic control en route from Surabaya (East Java) to Singapore. AirAsia flight QZ 8501, carrying 155 passengers and seven crew members, departed from Surabaya at 5:35 am local Surabaya time and lost contact above the Java Sea (between Java and Kalimantan) at 6:17 am local time. The Airbus A320-200 was supposed to land in Singapore at 08:30 am Singapore time.

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Starting from January 2015, Indonesian tobacco products are subject to an average tax rise of 8.7 percent. The excise tax on machine-rolled cigarettes becomes IDR 355 (USD $0.03) and on hand-rolled cigarettes IDR 290 (USD $0.02) per stick. The tax hike is implemented by the government in a move to increase state income through tax revenues. The higher excise tax is expected to have a minor effect on tobacco sales in Indonesia as retail prices for cigarettes remain among the lowest in the Southeast Asian region.

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On 28 December 2014, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website in the last seven days. Most of the topics involve economic matters such as rupiah exchange rate performance, a geothermal energy update, forecasts for Indonesia’s November trade balance and December inflation, as well as the breaking news story about the missing AirAsia airplane.

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