Wednesday, 16 February 2011
In our case here in Indonesia, insurance associations like the Association of Indonesia Syariah (AASI) have agreed to scheme up standardization as contribution from the Association to the Government whereby the Syariah insurance industry may run healthily and profitably. Information from the Deputy Chairman of the Association of Indonesia Syariah (AASI), Technical and Standardization Division Yudhi Pratama, had it that standardization proposal had been submitted to the regulator. He claimed to have forwarded standardization proposal to the Board of Stockmarket Control and Financial Board (Bapepam-LK) some days ago. “The proposal has been forwarded in early January 2011” Yudhi Pratama said.
To realize and activate this standardization process, meeting between the association and Bapepam-LK as regulator of industry need to be more frequently held to synchronize perception between regulator and players of the insurance industry.
The standardization is applicable to four products automotive insurance, fire insurance or property personal accident insurance and heavy equipment insurance.
There are four points in this insurance which will be included in the rules of standardization, i.e.
1. the concept of risk sharing
2. Elaboration of terminology of definitions in Syariah
3. Clausule on agreement
4. the Clausule of dispute
5. the Clausule of haram
Furthermore in terms of insurance-policy standardization, AASI in the process of discussing a number of model of management and insurance funding and premium of customers of the tabaruq fund which underscores Syariah principles and additional agreements in the application of the principles of funding insurance.
Some practitioners of Syariah insurance were of opinion that standardization of Syariah insurance was extremely important in managing rights and responsibilities for stakeholders and customers alike, and even more important for regulators as benchmark to appraise whether an insurance compay follows the applicable standard or not. The standard could be a regulating instrument in controlling and nurturing. One of the observers of Syariah insurance Hadry Harahap stated that today each company were making insurance police police rules, agreements or others merely on the basis of company rules which were not formal and standardized. He believed that this standardization would be beneficial not only to the customers but also to the companies themselves as well as the regulators.
To the customers, it would mean legal assurance and convenience because life insurance or general insurance are truly Syariah based whilst for companies, it would make it easy for them to market their products to the regulators, standardization could serve as indicator for reference in giving guidance, nurturing and control.
As known, there are always Syariah insurance system that differ from conventional insurance such as treatment on tabarruq (collected) fund, for collective interest of policy holders. In conventional insurance, this tabarruq fund is non existent, this is not to mention other differences between to the two which may not be known by holders of the new Syariah insurance.
Comprehension of product types and insurance rules is most important so there would soon be no different perceptions which end up in disputes which disadvantage all parties.
Anywhere at all in the world of modern industry, standardization is of utmost importance. Although it has been applied for long in Indonesia, standardization, although too late, need to be supported by the Government and by the Syariah industry. Publication and illumination of the philosophy and characteristics of the Syariah insurance, and the difference between Syariah insurance and conventional insurance become imperative so the development of Syariah insurance industry will not be obstacled just because of different public perceptions.
Perceptions of the Syariah insurance among stakeholders or related parties such as operators of Syariah insurance, regulators, insurance policy holders and the public must be synchronized so as not to hold back development of Syariah insurance in the future. The Syariah insurance industry in Indonesia could learn from Syariah industry in Malaysia which is ten years older by experience in this business line.
Indonesia was among the selected nations beside India, China, South Africa, Ghana, Vietnam and Columbia to implement the SCORE program considering that 65% of Indonesia workers are working in small business (UKM).
Score was intended to analyze advancements in the implementation of cooperation in working environment in pilot project companies and to allow those companies to share test practices, to learn lessons and face challenges in cooperation development in working environment more effectively in future.
The seminar was also aimed at giving recommendations on the successful cooperation in working Environment which would eventually jack up productivity, foster managerial collaborations and strengthening competitiveness.
The program which is financed by the Swiss State Secretariat of Economic Affairs (SECO) focused on five small business companies with 50 to 200 workers as pilot project. The five companies PT. Tjokro Bersaudara, PT Trijaya Teknik, PT LestariDini Tunggal, PT Inprantama and PT. Tresna Inovono.
On observation visit to a series of training discovered that the companies feel they are having up lifted productivity, better working condition, and improved communication between management workers. The companies noticed less repeated work and product projects.
Sugar producing companies of Java contribute 1.327 million tons of sugar, obtained from sugarcane fields covering 263,729.66 ha, yielding 21.860 million sugarcane for mill with average yields of 6.08%. the sugar mill producing most sugar is PT Perkebunan Nusantara X (PTPN X) amounting to 408.688.25 tons, followed by PTPN XI(301,568.00 tons ), PT PG Rajawali (163,335.05 tons),PT Kebon Agung (143,921.84 tons), PTPN IX (123,9356.41 tons) and PT PG Rajawali II(103,226.24 tons).
Sugar mils outside Java contribute sugar production to the amount of 795,891.01 tons, obtained from sugarcane fields producing 134.04 ha for milling, with total weight of 10.664 million tons and average yields of 7.47%. the sugar mill producing most sugar is PT Gunung Madu Plantation (195,015.37 tons ) followed by PT Gula Putih Mataram (129,373.98 tons ) and PT Sweet Indolampung (126,957.96 tons).
Furtermore AGI also noted there are some investors interesting in investing capital in the sugar industry. A Singapore company ( Listed Indofood Agri resources Ltd or Indo Agri) is now building a sugar mill in South Sumatra, scheduled of operations in 2010. furthermore there is PT Laju Perdana Indah of salim Group who also build a sugarmill in Sumatra at the capacity of 8.000 tons of sugarcane/day.
Some similar projects are also planned to be built in Merauke by investor Hardaya Papua Plantation, Rajawali Corp, and Wilmar, Meanwhile permata Hijau Resources plan to build sugar mill in Sambas, West Kalimantan at the capacity of 8,000 sugarcanes/day. South Korea’s Park Energy PTE Ltd are doing feasibility study for new sugar mill at Bener Merah, collaborating with the Provincial Government.
Furthermore, 4 State Owned Enterprises (PTPN IX,X, and PT RNI) had signed MoU for building a sugar mill Merauke, Papua, collaboration with the local Government of the Czech Republik had been given green light to build a sugar mill in Mojokerto, East Java, collaborating with PT Rosen Kencana the sugar mills has the capacity of 6,00 tons sugarcane/day, the cost of project is worth around US$ 100 million.
The amount of fund in the State Budget increases year after year, but the problem of low utilization of budget always prevail all year through. The council understand that among the stagnating factors of budget absorption is the fear of legal consequences caused by executing programs. For that matter, breakthrough is need such as by way of applying more flexible regulations related to state budget, provided that they are accountable.
Breakthrough is needed to avoid the tradition of increased budget utilization toward year end. Absorption of budget started early in year would supposedly contribute to stimulating economic growth.
House noticed that the structure of allocations in State Budget 2010 was for the most part used for paying debts, giving subsidy, and employess salaries, However House appreciatedthe Government for having increased allocations for capital spending in State Budget (APBN) 2010 such as in building infrastructure.
Through the said policy it is expected there would be output in the State Budget to support national economic growth of 2011. Supposedly growth is beneficial to people welfare, as reflected in the increase of labor accomodation and lessened poverty.
Setting Target for 70 Bills of Priority
Through 2011 House set target to dissect and accomplish 70 law proposals of priority. Of the 70 bills 37 stemmed from House initiative while 33 are proposed by Government. In addition to that House plan to discuss 5 bills openly.
Considering the so many bills to be passed by 2011, it expected that legislation function of house could be enhanced and carried out effectively and efficiently through stronger emphasis on substantial matters. For that matter, Chairman of House asked house members to be present in every discussion of bills so the task could be accomplished according to the agenda.
As the workload of house is quite heavy, It is expected that harmonious teamwork between house and Government could be fostered to accomplish all the task prioritized for 2011. through better coordination and learn lessons form 2010 experience, Chairman of house is expecting that the task of legislation for 2011 would be better than that of 2010.
Furthermore there are still the Pasar Ikan Fishmarket, Muara Angke Wharf which are functioned as fishmarkets, plus number of traditional markets. According to Assistant of Economy and Regional Secretary of Greater Jakarta Hasan Saleh in Jakarta on Tuesday (11/1) beside issues on logistics, there were other issues that emerged at Year End Reflections 2010 and Economy Perspectives 2011 such as the need for infrastructure, although it would not be easy to amange those problems, considering that not all of the authority is in the hands of the Jakarta Municipality. Therefore, to be responsive to a number of issues, sometime in the future a forum of joint Effort Group would be set up which as planned would involve all stakeholders. In that opportunity Chairman of the Indonesian Chamber of Commerce (KADIN) of Greater Jakarta Edy Kuntadi set forth, based on the principles of space planning and city planning, balance of growth among regions is necessary by also observing relocation spects. Therefore it is necessary to modernize logistic centers to ensure efficiency and effectiveness for Jakarta.
The condition of Jakarta according to Hasan Basri is showing heartening resuts as indicated by economic growth of last year which was posted at six percent so it would be even higher by next year. As with infrastructure development in Jakarta, utilization of budget has been satisfactory because absorption of fund was posted at 82.42 percent. In December 2010 inflation reached 0.621 percent. As far as trade is concerned, growth was chalked up at above seven percent.
In 2011, it is expected that of total State Budget of Rp 29.7 trillion, growth would hoover around 6.2% to 6.5%, while inflation is estimated at six percent. Broadly speaking he is looking forward to a better picture of 2011 compared to 2010 although all analysis of Bank Indonesia with considerations of the regional climate and position of Jakarta.
The Condition of Indonesia
Until quarter III of 2010 economic growth of Jakarta was posted at 6.5 percent, while Jakarta’s economic structure was dominated by tertiery sectors like service and trading 71.2 percent, secondary sectors 28.3 percent ; primary sectors 0.5 percent. Jakarta’s economy constitutes 17 percent of national economy. Inflation by end of year of Quarter II rose by 5.4% (y o y) especially due to price increase of 9 essential commodities (caused by supply shortage due to extreme climate) and purchases made at point of production reducing supplies to traditional central markets. Inflation was also triggered by increase of electicity tariff, toll road tariff, and non subsidized oil fuel.
Last year the Indonesia Chamber of Commerce (KADIN) of Greater Jakarta had fostered synergic collaboration of KADIN at trans-provincial level including Greater Jakarta (DKI), West Java and Banten. According to presentation of sugiyono of INDEF, based on data of the Ministry of trade, Jakarta’s share of exports against Indonesia for was 31.27 percent, whilst trend of jakarta’s export in 2005-2009 was 6.13 percent, while through 2009-2010 was 213.48 percent. Jakarta’s share of non oil-gas products through 2005-2009 was 22.5 percent, meanwhile through 2009-2010 was posted at 50.09 percent. All these facts testify the role of Jakarta as the biggest market of good and services in Indonesia.
Thomas Sembiring, Executive Direct of the Indonesia Meat Importers (Aspidi) told Business News in Jakarta on Tuesday (11/1) that last year import of meat was post at 110 thousand tons, when the Government sets target at only 73 thousand tons. Even in 2011, it is estimated that import of meat would rise again to 112 thousand tons to 113 thousand tons.
The high volume of meat imports proved Government’s failure to fulfill need for beef for the domestic market. And yet with the growth of economy, the demand for beef should increase “ Apparently the import volume of meat depends on Government’s capability to cover up need” Thomas was quoted as saying.
The growth of demand for beef in 2011 was projected at 6.5% which means growing demand in terms of volume and therefore calls for additional import. Meanwhile meat consumption rose from 2 kg per capita in 2010 to become 2.02 kg per capita in 2011. Hence the need for meat this year is estimated to increase to the level of 487 thousand tons.
The cause of Government’s unsuccessful efforts supplying meat for domestic need was because the efforts of increasing meat production had not been significant enough. The indication fund was insufficient for procurement of calves, female cows and failure in preventing slaughter of productive female cows.
Other hindrances which held back Government effort in increasing livestock population was the system of livestock rearing at home. For comparison: cattle rearing abroad is effort to produce meat so livestock farming serves as cores business ; but Indonesia, cattle rearing is merely side business.
Other hindrances to the pusuit of self-supporting in meat bu 2014 is confused data of livestock farm. Under such circumstances the spidi Association eas expecting the Government to maximize performance of the Monitoring Team formed. The team is expected to make a monthly evaluation of livestock population as part of livestock sensus of 2011 and 2012.
The minitoring team can also make evaluation or import process of meat and cow. For that matter Aspid proposed that the application letter (SPP) for import of meat and cow be efective not for six month but three month instead. The reason was that if the validity was three months, evaluation could be faster, impoters colud even report execution of import immediately.
Therefore it must never happen that the data compiled by the minitoring team is wrong, as it may pose as boomerang in making the self-supporting plan. Soon with the better data, the Government could take realistic measure including the plan of supporting in meat.
For the short run, Aspid asked the government not to force execution of meat self supporting plan because if mis calculated, what would happen is turbulence in that line of business which would disadvantage the people.
For this year in particular, businesspeople predict price of meat would inch up increased price of meat would be felt by the time businesspeople buy meat for February delivery.
The problem now is that many producer countries are reducing their production and switch rearing land for agro lines. For example Brazil is reducing cattle population to switch form rearing to sugarcane growing. In Argentine. Vast areas of livestock rearing changed function into soybean planting in Australia many livestock centers are flooded, so many cows of that region could not be taken out.” As the world supply of meat drops but demand for meat increases, price of meat would definitely rise” Thomas Sembiring was quoted as saying.
Minister of Agriculture: Revise Roadmap of Self Supporting in meat
Meanwhile the Ministry of Agriculture stated that with limited budget, most likely the Government is must revise the roadmap for Self Supporting in meat. However, the Government is determined to pursue self supporting in meat by 2014.
Moreover that fact is that by 2010 production of meat increased by 13.3 percent to become 450 thousand tons. Somehow the production output is sufficient to meet domestic demand. Some efforts in jacking up production are among other saving productive female cows, enhancement of artificial insemination and controlling animal diseases.
It is not unusual that an ordinary company suddenly grows into a giant company after undertaking Government project such as toll road development, powerhouses, telecommunication etc. but in the era of “Good Governance “, this Government-private collaboration had been frequently accused and often end up in court. It could be because corruption is on the Government’s side, or the private partner reap profit beyond control. The retired economist and ex-Minister Kwik Kian Gie even remarked” It’s allright to make profit, but ethics should be observed.”
The grievances was expressed by Kwik in relation to the “ Sisminbakum” project, i.e registration of companies the electronic way at the Ministry of Law and Human Rights confided to PT Sarana Rekatama Dinamika (SRD) between 2001-2009. for the past two years this project has been an endless controversy and even resulted in unexpected indirect effect, i.e. the resignation of Supreme Prosecutor Hendarman Supanji.
The Sisminbakum (Legal Body Administration) project is meant to replace the procedure of registration by manual way which is regarded as out of date-with speedy computerized system. The registration process may be shortened to a matter of days at maximum fee of Rp 1.3 million per service. The cost is relatively inexpensive considering the benefits and that is exactly the point why the system is applied in the first place.
What has become Kiwik’s grievances is that the initial investment for running the system is only around Rp 500 million to automatocally serve more tan 30,000 late payers, plus new applicants who each day number around 200 applicants. So enormous is the income obtained if the number is multiplied by the access fee being collected. Supposedly in just one short year return will be obtained by the state, but in reality SRD (the company) is given the opportunity to run the system for 10 years.
That is not all. SRD is given the right to control 90 percent of income while 10 percent belongs to the cooperative society of the Ministry. SRD income over the period of “disproportionate revenue Split” reaches more than Rp 400 billions and to be borne in mind the initial capital was only Rp 500”If I as an economist were asked, whether such is proper, the answer is certainly: not proper. It’s Ok Million to make profit but surely to be proper is a must” said Kiwik after expressing his opinion at the Attorney General’s Office (5/1).
From the layman’s viewpoint, deviation in this project is much too obvious. How could services rendered by the Government but the right to manage income is given to private company? How could SRD collect payment on behalf of the state without approval of the parliament? How can it be that the Government receive only a very small portion of income in a decade? And even that small portion is given to the cooperative society, not to the state’s treasurer?
If a private company manages registration of tens of thousand companies in Indonesia, would it not mean to give unfair advantage to a company because the company would know the confidential data of private companies registered in Indonesia ? but in this messy legal system, questions remain unanswered, to make the confusion even worse. This matter had been investigated since October 2008, but when convict was undergoing punishment less than halfway, he was sentenced to full punishment. Ex Minister Yusril Izha Mahendra who was a convict and was deeply hurt, accused the Attorney General at that time Hendraman, and as known the Constitutional Superme Court (MK) was on Yusril’s side. The MK discharged the Superme Court in their verdict set free Romil Atmasasmita the convict but other hand sentenced Samsudin Manan Sinaga in the same cases by the same court. Readers area free to judge what sort of justice is going on in this country.
Cases of unfair distribution of income in Government-private partnership are also happening in many other project. The individual officials are advantaged, but not the state. Definitely the state is disadvantaged. Therefore all cases for big project that are regarded as controversial need to be reviewed, involving auditor team and independent investigators, because there are already articles of the law which regulate obligations to run open tenders for investment of certain value.
For a project which require initial capital of only Rp 500 million, in fact it would not be necessary to involve a private partner, but it should be enough to function petty cash of Ministry’s cashier. As partner, the related private company must be open to inspection and re-ex-aminations by the “project giver” because they will be safe anyway, if only “they do business honestly and properly.”
Electronic transfer activities through BI-Real Time Gross Settlement (RTGS) and Bank Indonesia National Clearing System (SKNBI) in the past 5 year increases 3.1 percent a year in volume and 20.7 percent in value. The quite high increase is related to increase in economic operators for a fast and efficient payment system.
Meanwhile, value of electronic transaction circulation processed through BI-RTGS system reaches Rp.196.6 trillion a day throughout 2010. the highest transfer value through BI-RTGS is fund transfer in the framework of monetary management. on the other hand, electronic transfer activities throughout 2010 reach 81.9 millions with a value of Rp.1,574 trillions or an average of 360,000 transactions with a value of Rp.6.9 trillions daily. A major part of electronic transfer activities through SKNBI is fund between bank customers. While, electronic transfer through BI-RTGS varies from transfer between customers, capital market, monetary management, up to transactions of government.
Based on data of the Directorate General of Taxation, tax revenues from individual taxpayers will be increased this year since there is potential loss as a result of shift of revenue from land building acquisition tax (BPHTB) and exit tax. “ there is a potential which is not yet cultivated properly. So, we will pursue individual taxpayers is still low”, said Tjiptardjo.
One of the factors that cause distorted achievement of a number of targets of the Directorate General of Taxation is the Gayus case that it encourages the Directorate General of Taxation to perform internal improvement. Institute for Development of Economic and Finance’s (INDEF’s) Analysis.
Disobedience of the middle to high class society is one of the reasons of low tax revenue. Currently, the number of middle-class society who is obedient in playing taxes is only around 10 percent. This matter is conveyed by INDED’s political observer, Denny Adi Purwanto.” The relatively low tax revenue is due to low tax base. The number of obedient taxpayers is very low, and the number of Indonesia rich and middle class society who is tax-obedient is only around 10 percent.”
The effort to increase of tax revenue should be done by increasing the number of individual taxpayers. And, the government must also maintain growth momentum, because if economic growth is high, tax revenue will increase.
INDEF is in the opinion that tax instrument is like a double-edged blade. If efforts to increase tax revenue through tax intensification and extensification could not be implemented effectively, it will be counter-productive to the economy.” High tax burden will kill business operator and will finally unable to give contribution to tax payments. But, if the government gives tax incentive, at the beginning, it will reduce potential tax revenue, but if it is able to jumpstart industrial growth it will be potential to increase revenue in the long run.
Many of the national roads, provincial roads, and regental roads have been severely damaged, bridges broken, and landslides happen. News coverage of many information media reported that in Karawang area its surrounding areas, 159 km of roads are damage and 3 bridges broken. The total repair budget estimated is Rp. 42.5 billions. The Transportation and Irrigation Agency only has a budget of Rp. 3 billions.
In Anyer, the road to recreational area is also severely damage. Tourist visit in New Year 2011 drop up to 40 percent. In Kudus, 176.3 km of roads are severely damage and 151.02 km is suffering from medium damage. Only 17.4 km that has been repaired. In Riau, on Pekanbaru-Dumai route, many road points are severely damage. While, in fact, this route is passed by a quite high volume of vehicles.
Many provincial roads in Bengkulu are severely damaged as a result of coal transportation with a weight of 28-34 tons each truck. The road tonnage for 3rd class trucks with a capacity of 12 tons.
Land transportation form Jakarta to southern part Sumatera was delayed 3 to 4 hours. Hundreds of kilometers of provincial roads in North Sulawesi are severely damage. Road condition as reported by many information media is, for the most part, national and provincial roads.
In 2011, the road problem demands immediate repair. If not this could become a problem in achieving target of economic growth, reduction of poverty, and prevention of food problem.
But, the main problem is insufficient budget. It is impossible to collect money form the private sectors because the private sector is not interested in toll road projects. In the State Budget Plan (RAPN) 2011, road infrastructure is not on government’s priority list. We could only expect that the rainfall in 2011 will not damage be as heavy as in last year so that the number of damage roads as a result of open pools of water, flooding, and landslides will not increase.
A new problem faced by the Ministry of labor and Transmigration is that more than 50 percent of work in Indonesia are elementary school graduates. And, the level of education of workers does not match the requirements of the available job opportunities. Muhaimin said that his party was establishing a social networking trough educational and non-governmental institutions. Starting from 2011, information on job opportunities will be spread more expansively by utilizing the television and educational institutions. There are three parties involved in the spreading of information on job opportunities, they are the industries, the educational community, and government the facilitator. ”the society must also be proactive by frequently accessing communications with the local labor agencies”, he explained.
A new research stated that Indonesia’s high economic growth rate is not closely related to social welfare. Particularly, if is measured by unemployment and poverty rates. This condition is evident in Indonesia, where high economic growth has a less co-relation with decline of unemployment and poverty rates.
The effectiveness of budget support for poverty reduction should be question since it is unable to reduce poverty and unemployment rates significantly. In 2009, the total budget allocated reaches Rp. 71 trillions to reduce a number of 1.51 millions (2009) to 31.02 millions (2010). It means that to reduce one poor person in 2009, a budget of Rp.47 millions is required, and frequently it is deemed irrational.
Researcher of Economic Research Center (P2E) of Indonesia Institute of Sciences (LIPI), Wijaya Adi, said that the government usually uses data on open unemployment to measure the co-relation between economic growth and labor absorption. While, in fact, such data does not reflect the actual welfare rate of the society. The fact is workers with low income and workers with workhours below standard are not classified as unemployment.
“Therefore, the Indonesia Institute of Sciences uses the term” under unemployment” for those who works for lees than 35 hours a week in order to describe welfare state”, he said. The Indonesia Institute of Sciences recorded that number of citizens that are put under the category of “under unemployment” constantly increases in the past five year. From 29.64 million people in 2005 to 32.8 millions in 2010. it is predicted that in 2011, the number of citizens put under the category of under unemployment will increase to 34.32 millions.
Data of the Ministry of Industry has it that need for urea fertilizers will still be increasing in 2011. Today the capacity of urea fertilizer production is posted at 8 million tons, but the output of 2010 was only 6.6 million tons. With the expansion plan of some fertilizer factories in 2011, production target would remain to be attaied. Among the fertilizer producers who plan to expand is PT Pupuk Kalimantan Timur V (PKT V) in Bontang who plan to build a new plant worth US$ 828.6 million.
Pursuant to the revitalization plan of the national fertilizer industry, the Government plan aging factories and develop multi-purpose fertilizer (NPK). The seven aging plants are one unit of plant belonging to PT Pusri, one unit of PT Petrokimia Gresik, one unit of PT Kalimantan Timur (PKT), one unit PT Kujang, and one unit of PT Pupuk Iskandar Muda ( PIM ). In term of execution, in the next four next years the government would focus effort on re-structurization of three fertilizer plants, i.e. the fertilizer plant of Kujang, PKT and Pusri. According to government’s estimate, development of fertilizer plant would go in tandem with the growing need of national fertilizers.
In 2011 the ministry of Agriculture allocate fund for subsidy amounting to Rp. 16.38 trillion for attaining a volume of 11.28 million tons of fertilizer. The strategy of fertilizer subsidy is still felt necessary to support objectives in agriculture for 2011. Today a regulation is being prepared by the Ministry of Agriculture on the need for Ceiling Retail Price (HET) of subsidized fertilizers for the agricultural sector in 2011 after getting approval from the ministry of Finance.
The size of fertilizer subsidy for 2011 is less compared to that of 2010 which was posted at Rp 148.41 trillion. Reduction of subsidy fund for 2011 is adjusted to absoption level of fertilizer at farmers stage which tend to lower. Farmers are beginning to realize that application of excessive chemical fertilizers might damage soil and tends to lower plantation productivity. For 2011 the government set target for rice production amounting to 58.8 million tons of Dry Milled Grains (GKG), 22 million tons of dry flakes, 1.01 million tons of soybeans and 3.87 million tons of sugar.
In line with the use of subsidized fertiklizers, farmers in some areas in Biruen are now having planting season. The problem is they admit that it is getting hard to obtain subsidized urea fertilizer. Farmers are not aware of the cause of problem. If this were let to continue to happen, it is feared that the price of fertilizers will increase, the same grievances was also voiced by some farmers in the regency of Peudada, Jeumpa, and Peusangan, and some other regencies. Farmers informed that scarcity of fertilizer have been going on for the past one month.
Today the price of subsidized fertilizer in the free market is Rp 2,00.-/kg or Rp 85,00.- per sack, while the formal ceiling price (HET) is supposed to be 80,00 per sack of Rp 1,600.- per kg.
Farmers in the Regency of Rembang are confused in trying to find urea fertilizers because stock of fertilizers suddenly disappear from the market. Even if there were any, farmers have to edge one another to get share due to limited stock. Scarcity of fertilizer was beginning to be felt by farmers since December 2010.of the proposed Definitive Plan for Group Need ( RDKK ) amounting to 32 ton proposed by 4 farmers group in the village of Pamotan, Regency of Rembang, not all are being distributed. The same thing was experienced by farmers of the village of Bogorame, District of Sulang. The total area of ricefleds in the village of bogorame today is 40 ha to 50 ha.
According to the Agricuture and Forestry Division (Distanhut) of the Regency of Rembang, the fertilizer problem at beginning of planting season (MT I ) occurred because the Permentan Regulation and Governor’s Regulation (Pergub) on allocation and HET of subsidized fertilizer for 2011 had not been issued. The result was that the Regency Government referred to the old regulation whereby to fulfill farmers’ need
The case was different in the areas along the northern coastline of java. Survey and monitoring over farmers toiling on land showed that they have no difficulty in finding urea or NPK fertilizer,- monitoring over authorized distributors or trade in market, including warehouses of Pupuk Kujang showed that stock was abundant. In the warehouse in subang today there are 875, 10 tons of urea fertilizer being stored whilst NPK fertilizer is posted at 337, 40 tons.
Meanwhile restructurization at State Owned Enterprises (BUMN) in Indonesia finally takes place. Since January 11 2011, a new fertilizer company was founded, namely PT Pupuk Sriwidjaja (Pusri) Palembang. This new company stemmed from Spin Off PT Pusri (Persero) as holding company. With the change of status from operating holding into holding, PT Pusri would be more focused in their effort on synergic collaboration of operational corporations among subsidiary companies especially in production and marketing. With the founding of PT Pusri Palembang, furthermore there will be five fertilizer producing companies under PT Pusri (Persero), i.e. Pertrokimia Gresik (Petrogres),PT Pupuk Kaltim (PKT),Pupuk Iskandar Muda (PIM) and PT Pusri Palembang and two non fertilizer producing companies,i.e PT Rekayasa Indusrti and PT Mega Eltra.
Profit-taking action and massive selling action in the last two finally puts pressure on the Composite Share Index(IHSG).In the opening in the first week of this year, IHSG experienced correction by 1,9%( down by 1,9% percent ) and closed at level 3,631.453 on Friday, January 7,20011. During trade on that date, foreign investors sold shares of up to Rp.1.5 trillions after they recorded a net selling worth Rp.260, 613 billions. The massive selling action made IHSG to lose up to 23.81% and made IHSG to experience further correction after it lost 1.25% on Thursday.
Not only foreign investors, local investors also take selling action, and all sectors experienced selling pressure with a quite significant decline of prices, the blue chip or the second and third layer shares. Share trade today draws a quite large number of investors with value of trade reaching Rp.6, 656 trillions. PT Kapita Sekurindo, in its researching, after closing of trade in the week, stated that IHSG experienced pressure since Thursday which continued until Friday after a long rally in the past two week. Correction of share with large capitalization that have been overbought is the cause of fall of IHSG.
External factor in the form of correction of major part of the regional share market brings a negative sentiment on local share market on Friday. A majority of shares in the Asian share market lost points. This condition caused the regional share market to show the worst record in the past four years. The cause of the fall of the regional share regional this time is down of commodity prices. “Currently, shares in the Asian share market were no longer cheap. What is needed is positive data from the United States that could accelerate increase of share prices to a higher level. This will help balance concern over China policy tightening and Europe debt crisis”, said Jamie Courts, sales manager of BGC Partners in Singapore.
PT eTrading market flash wrote that correction of share prices in the Indonesia Stock Exchange and in the regional market was affected by decline of the Dow Jones Index in Wall Street, as a result of increase of values of some shares that become overweight. And, increase of commodity prices threatens rate of labor absorption.
PT Indosurya Securities in its research, said that near the end of the week, many investors were taking profit-taking position by using the available information, such as concern over increase of domestic inflation, down of commodity prices, appreciation of the USD currency, decline of Australia’s economic performance due to the effect of the flood, and uncertainty about economic recovery in the Eurozone.
Actually, such action has been evident since Wednesday (January 5, 2011 ) where selling and buying activities performed by foreign and domestic investors have to diminish, and the effect was felt on Thursday trade. Even though there was a fall, volume of share trade increased. Selling activities by foreign investors also rises if compared to one day before.
From the technical aspect, according to Indosurya’s research, IHSG already touched overbought area and would moves reverse. Investors will ignore positiveness of economic data and will be more focused on realizing shorterm gains. Strengthening of dollar against other world’s currencies is a factor that causes fall of IHSG. To IHSG, designation of interest rate by Bank Indonesia at level 6.5% on Wednesday (January 5 ) only gives a stimulant for temporary strengthening of IHSG, while trend of increase of oil price that has reached USD90 per barrel cause high fuel subsidies becomes a concern to Indonesia’s economy in a long term, according to research of Kapita Sekurindo.
“IHSG has reached an overbought area, correction is needed to provide an opportunity for IHSG to do further strengthening”, wrote Kapita Sekurindo. According to Purwoko Sartono, research analyst of PT Panin Sekuritas, fall of share indices, local and regional, is also due to concern over increase of interest rates in China and India.
“from domestically, investors were monitoring threat of high inflation following increase of food prices as well as plan of limitation of subsidized fuel in March “, he said.
Bank Indonesia is confident that core inflation this year will be below 5% and cumulative inflation will not exceed 6% Bank Indonesia’s Director of Economic Research and Monetary Policy, Perry Warijyo, stated that the confident was based on prediction of appreciation of Rupiah value during the year and the strategy so that increase of international prices of commodities would not affect prices domestically. Government’s plan to limit subsidized fuel and to increase production basic price (HPP) of rice and highest retail price (HET) of fertilizers, according to him, would not have a direct on core inflation.
Minister of Finance’s Response
With regard to fall of IHSG in the first week in 2011, Minister of Finance Agus Martowardojo, met journalists at his office.” Fall of IHSG is neither a big problem nor a capital outflow. Based on our opinion, fall of IHSG happens in the beginning of each year. The reason is that investors and analysts were studying the condition of the share market. There is nothing to worry about.”
He opposed the idea that the fall IHSG is a capital outflow.” There is not need to concern about. It is a normal thing that after year-end holiday, the houses open their activities and make a little bit adjustment”, he said.
Yet, however, the minister stated that he would monitor movement of the share market, particularly when a quite significant correction happens. ”if someone makes a strategy correction, we just monitor and stay alert, but in general everyting is okay.”
Data at the Directorate General of Debt Management of the Finance Ministry show that the amount of foreign funds coming into SUN rose Rp. 197.89 trillion in January 4, 2011 from Rp. 195.76 trillion in December 2010.
The trading value of SUN is now totaling Rp. 641.21 trillion. Banking still controls the largest share, valued at Rp. 215.31 trillion. Next come insurance industry (Rp. 79.89 trillion), mutual funds industry (Rp. 51.05 trillion), persion funds (Rp. 36.71 trillion), Bank Indonesia (Rp. 17.12 trillion), securities industry (Rp. 130 billion) and others (Rp. 43.43 trillion). The amount of foreign funds invested in SUN rose by Rp. 88.89 trillion to Rp. 195.76 trillion in 2010 from Rp. 108 trillion in 2009.
Secretary General of Aprisindo, Binsar Marpaung, when contacted by Business News on Wednesday (January 5), stated that a very high dependence on import leather raw material has caused low competitiveness of domestic shoe products. And, in the free trade era (AC-FTA), local shoes are less competitive in terms of price if compared to imported shoes which are sold at very cheap prices. “Therefore, we urge the Ministry of Industry to immediately take concrete steps to solve scarcity of leather”, Binsar said.
Binsar said that he has coordinated with the Ministry of Industry to discuss about the plan on establishment of raw material center (RMC) which was once delayed due to differences of opinion between Aprisindo which represents shoe producers and the Ministry of Industry representing the government. Binsar said that the existence of RMC is very important for the smoothness of process of shoes production, particularly for small and medium businesses.
With an integrated raw material center, it will be easier foir shoe producers to fulfill their needs for raw materials. Binsar said that currenlty, in Jakrta particularly, raw material centers and shoe accessories are only available in Harco Mangga Dua. The location is deemed less strategic because it is mixed with other products, and not all shoe producers know about raw material market in that location.
Binsar said that Aprisindo and the Ministry of Industry are visiting the location to see whether it is possible to be developed in to RMC. In the meantime, the best alternative is WTC Mangga Dua. Besides its large size of area, many people are already familiar with WTC. “We and the Ministry of Industry will try to make approaches to the WTC management about the possibility to rent WTC as a center of raw materials of shoes”, he said.
According to him, sellers of raw materials for shoes who are currently opening shops in Harco Mangga Dua were quite enthusiastic about this and they supported the establishment of RMC. They said that they are willing to open new shops in RMC which is facilitated by the Ministry of Industry. To attract the sellers to open shops in RMC, the government should provide incentives, such as offering free rent for the first year.
“The coal and palm business yielded enormous profit in the past few years” according to Forbes, who noted that there were 16 top richest men (in Indonesia) who reaped profit 12 billion US dollars or equal to Rp. 109 trillion (rate 1 US$ = 9,100). Increasing price of the two companies and palm operators to be on top of the list of the stockmarket in Indonesia.
The Association of Indonesian Coal Miners (APBI) predicted coal production to reach 300 million tons by 2011. Chairman of APBI Bob Kamandanu stated that, if the production target were realized, it would surpass Government’s target of 250 million tons. In 2010 production of coal could reach 280 million tons. Bob who is also President Director of Berau coal stated that in 2009 production of coal also surpassed government’s target which was also 230 million tons. By end of 2009 production of coal was predicted at 260 million tons.
“Indonesia’s export destination countries are still India, China, and Japan, mostly used for power plants while domestic buyer remains the State Electric Company PLN”. The Director General of Coal Mineral and Thermal Heat Bambang Setiawan disclosed that in 2010 PLN’s consumption of coal increased. Today PLN’s need for coal was around 40-45 million tons, by 2011 would increase to 60-70 million tons.
In 2009 last according to Bambang, Indonesia’s production output of coal was still 230 million tons, of which 6805 million tons was used for domestic consumption of that amount, around 54-46 million tons was allocated for powerhouses.
Meanwhile the Ministry of Agriculture RI estimated production of CPO in 2020 would be 40 million tons the increase would be attained through promoting quality of premium palm seed, not through land expansion.
Deputy Ministry of Agriculture Bayu Krisnamukti stated that in 2010 production of CPO was posted at around 20 million tons. In the next ten years, through quality and productivity of premium palm seeds CPO production was projected to reach 40 million tons.
“So if production output of CPO were to be doubled through the use of highly productive premium seeds, now is the time for rejuvenation of plantations” Bayu was quoted as saying at the Ministrial Building in Jakarta. According to Bayu, rejuvenation of palm plantation was estimated to cover areas of 250 to 300 thousand hectares of land per year. Naturally the rejuvenation project would need enormous quantity of seeds of high quality as well.
At the same opportunity the Directorate General of Plantation, Ministry of Agriculture of RI Achmad Mangga Barani stated that in the future development of CPO would be focused on efforts to intensify existing soil and to limit plantation expansions. Expansion would still be necessary, but not related to the effort to attain the target of 40 million tons of CPO in 2020. the Government planned to develop CPO industry through intensification, not extensification.
By 2020, according to Mangga Barani with CPO production attained at 40 million tons, total area of plantation would reach 9.127 million hectares, with soil productivity of 4.5 tons per hectare. Furthermore he disclosed, by 2010 total plantation are was only posted at 8.127 million hectares producing 23.199 tons of CPI, meaning productivity of palm plantations would be 3.717 tons per hectare.
Meanwhile Secretary General of the Association of Indonesian Palm Producers (GAPKI) Joko Supriyono reminded the Government to protect and support the palm industry sector considering the tremendous potentials. By calculation, demand for CPO would accelerate faster than production which meant that market opportunity would remain to be highly prospective and selling price would remain to be highly prospective and selling price would remain high.
Production increase and rising price of coal and palm automatically jacked up wealth status of Indonesian businesspeople fantastically. An example was Martua Situros whose wealth in 2008 was “only” US$ 55 million, but his owner of Wilmar International who ran business in palm increased his income impressively to US$ 55 million, but his owner of Wilmar International who ran business in palm increased his income impressively to US$ 3.2 billion. Another businessman who reaped profit from the same field was Eka Tjipta Widjaja who ranked third as Indonesia’s richest man. Eka Tjipta Widjuan ran business through his son Franky, owner of Golden Agri Resources. Eka Tjipta Widjaja’s wealth was now US$ 6 billion or equal to around Rp. 54.6 trillion. A businessman in cal mining industry and also politician Aburizal Bakrie was in 10th position with wealth posted at US$ 2.1 billion.
Chief Editorial Advisor of Forbes Indonesia disclosed that there were seven newcomers in the coal industry sector of palm sector who were included in the list of 40 richest men in Indonesia including Sandiaga Uno and Agus Sudwikatmono.
Somehow the coal industry, while being dominated by a few profit makers, still leave room for new players to pursue business in the field. Although the number of entrepreneurs constituted only 0.24% of total workforce, their “achievements” in tapping wealth of resources were not to be under estimated. Coordinating Minister of Economy Hatta Rajasa disclosed that the number of businesspeople constituted only 0.24 percent of total people of the productive age bracket, the number of entrepreneurs were only 564 thousand or around 0.24 percent” he stated in a presentation at the SMESCO UKM Jakarta.
The situation in Indonesia, according to Hatta, was different from that in other countries. Supposedly the number of entrepreneurs in a country constituted only 5 percent of population. He mentioned that in America the number of businesspeople constituted 11.5 to 12 percent. Singapore 7 percent, China 10 percent, India 10 percent and G-20 states 5 percent on the average. For new candidate entrepreneurs Hatta pled to be highly motivated and determined, those were important qualities needed in running business. He further said “Never think that we are not born as entrepreneurs, that’s wrong”.
Meanwhile the price of other vegetables like cabbage and tomato also rose by Rp. 400 to Rp. 1,000 against previous price. Price of tomato rose to Rp. 5,000 against previous Rp. 4,000. The price of cabbage was between Rp. 3,000 to Rp. 3,500 per kilogram. Jengkol rose from Rp. 22,000 per kilogram to Rp. 24,000 per kilogram.
The condition was different with chicken sellers. The increasing price of chicken which today rose to Rp. 28,000 per kilogram apparently made the number of buyers drop. According to Muksin, 39, a chicken seller, today he slaughtered only 40 chickens per day before price increase, he used to cut at least 50 chickens per day. He disclosed that the price of chicken today was most expensive even compared to the price during the fasing month of 2010. At that time the price of chicken was only Rp. 26,000 per kilogram.
Having triggered inflation in general, the price of red chili in some areas in South Sumatra continued to ascend. In some marketplaces in Palembang the price of chili had reached Rp. 50,000 per kilogram. Similarly in Kayu Agung (84 km from Palembang) since last week the price of chili at the Pasar Pagi Market had reached Rp. 60,000 per kilogram. Similarly in Kota Pagaralam (290 km from Palembang), a place known as vegetable center for South Sumatra, price of chili had come to Rp. 70,000 per kilogram.
Compared to previous week the price of red chili in the markets had skyrocketed to Rp. 70,000. The increasing price of red chili, according to traders was due to limited stock. In case of local red chili, supply was short since farmers were reluctant to grow chili because of foul weather. Even if they persisted to plant, the risk of harvest failure was too high.
Chili was Hard to Get
From Sangata it was reported that since early July scarcity of chili at the Sangata Market, East Kutai, East Kalimantan continued to happen, and this caused to price to soar high. For the past week Chili was hard to find and the price continued to increase.
Observations of market price concluded that certain types of chili were high priced, such as big green chili priced at Rp. 15,000 per kilogram. Furthermore the price of Tiung Chili Rp. 40,000 per kilogram. And big red chili priced at Rp. 44,000 per kilogram. Against the previous Rp. 35,000 per kilogram against previous price of Rp. 24,000 per kilogram.
Four weather that swept over some regions in Indonesia incurred loss on certain farmers business, among others the way it happened in Nganjuk. Tens of hectares of plantations were severely damaged resulting in harvest failure and loss of millions of Rupiahs.
The loss had aggrieved Wagimin, a farmer from the district of Lengkong, who strived hard to fertilize chili, but pest and fungi attached the plant and made things even worse. Failure of harvest also happened in the regency of Nganjuk, where many hectares of chili plantations were damaged. Farmers were hoping that related institutions could at least give their guidance in anticipating damage of chili during long rainy season.
Meanwhile Head of the Horticulture Division of Nganjuk, Ahmad Zakin stated that he had made announcements and illuminatios to farmers in trouble shooting fungi and pest attack on chili. He said that the rainy season was not the right time to plant chili because chili was sensitive to diseases in the rain. Farmers were advised to quickly pour plain water on rain-soaked chili, to protect them from fungi.
Market Operation (OP) run by Government evidently had not been effective in preventing up jumping price of food like sugar, frying oil and flour which seemed anxious to follow the steps of chili. Today the price of Chili skyrocketed to level up with the price of one kilogram of beef. The slow and difficult process of price recovery was because the Government simply left pricing to the mechanism of the market. The Government was unable and unwilling to control price turbulence due to acts of speculators and poor infra structure. This was the conclusion of an economist who was also member of Commission IV of House Herman Khoiron presented Separately in Jakarta sometime ago. Prices had been skyrocketing in a maddening manner year after year. “Because the Government leave pricing entirely to the mechanism of the market, without any effort or intervention”. Hendrawan remarked.
According to Hendrawan, increasing price of food occurred during religious or national festive days until new year’s day, should anticipated beforehand, certainly through certain effective measures. Moreover other factors like poor infrastructure in some regions, market structure, distribution, ware housing and transportation contributed to price fluctuation of food. Therefore, Hendrawan underscored, various obstacles which were the cause of price increase of food commodities should have been overcome.
However, entering 2011, optimism about the more significant growth of the construction sector comes. The Indonesian National Construction Developers Association (Gapensi) predicts that national construction expenditure in 2011, resulting from state budget, regional budgets, state and regional administration-owned enterprises and private will reach Rp. 204 trillion thanks to the increase in the budget of the Public Works Ministry by Rp. 56.5 trillion.
The construction expenditure is predicted to be higher than the realized spending this year, estimated at Rp. 184.2 trillion. In view of the huge amount of expenditure, it’s reasonable if the construction service constitutes a sector playing importance role in driving up economic growth, including the opening of significant job opportunities.
Data presented by the Government disclose that the sector ranks sixth of the nine sectors contributing Gross Domestic Product (GDP). For instance, the construction sector contributed Rp. 555 trillion or 9.9% to GDP in 2009. In the case of manpower, the sector absorbed 5,438 people or 5.3% of the total Indonesian manpower.
In line with the rising budget of the Public Works Ministry to Rp. 36.3 trillion in 2010, the construction sector ranked fifth in the list of the nine sectors, which constitute the main contributors of GDP.
If the contribution is predicted to increase by only 7.5% in 2010, the sector makes up Rp. 600 trillion of the total GDP and the absorbed manpower is estimated at six million. In view of the trend, construction service providers are still optimistic that the relatively stable growth of Indonesian economy in the last several years was supported by among others the role of the private sector in the provision of infrastructure.
In addition, construction service providers have also continued to grow, from 105,510 business entitles in 2008 to 154,000 in 2010. However, the construction service providers were dominated by small-scale companies. For example, the business entities operating in the provision of construction service totaled 105,510 in 2008, of which some 94,968 (89.8%) are small-scale companies, 10,057 (9.5%) are medium-scale companies and only 755 (0.7%) are large scale companies.
The number of construction service providers is predicted to increase to 162,000 in 2011, of which 139,520 (86%) are small-scale companies, 19,987 (12%) are medium-scale companies and 2,493 (1.04%) are large-scale companies.
However, the quantitative increase has not been followed by the improvement of qualification and performance, reflected by the quality of products, punctuality of realization, efficiency in the placement of human resources, capital, and technology. Consequently, local players have not been able to complete with foreign construction service providers operating in Indonesia, currently totaling 150.
Business communities concede that the condition is attributed to, among others, improper regulation ob business requirement and qualification or skilled manpower. In addition, classification of business field has not been competitive with business classification internationally and assessment of business entity capability has not been executed by competent assessors as well as personnel in change of technical affairs have not been empowered accordance with the existing regulation.
The construction service will grow positively if the issues are solved and the central and regional governments are committed to boosting the development of infrastructure projects. We must concede that the principal of the construction sector is infrastructure so that the development of physical facilities and infrastructure, such as toll road, seaport, airport and other public utilities need support of the construction service sector.
Commenting about the stagnant development of infrastructure, the government has realized that the issue is attributed mainly to arduous licensing, non investor-friendly bureaucracy, overlapping regulations and complicated land appropriation. Actually infrastructure projects could be realized easily if the government has strong political will to overcome problems which have long encountered the construction business communities.
Infrastructure projects will not only enhance competitiveness of Indonesian economy but also create multiplier effects resulting from the acceleration of economic growth, manpower absorption and enhancement of the people’s welfare.
The funds provided in the state budget are quite abundant. In addition, financing sources also come from banking, capital market. Shortly the sector encounters no problem financial but the issue resides in the field. Once again if the government is able to overcome the problems, economic growth will be better.
Interregional, insular and city connectivity requires linkage through highway and toll road facility and infrastructure as well as transportation facilities to facilitate the transport of goods, people and service. The success of China and India to develop their economy so as to be able to grow double digit is driven by strong political will of the governments of the two countries to build and provide adequate infrastructure and support of the whole people. Hopefully the success of the two countries could inspire the Indonesian government to do the same thing in Indonesia.
In fact there are two dangerous types of virus in the world’s economy. One is the virus of the state budget and the other is the virus of debt of the private sector. Fortunately Indonesia had taken antibody drugs to anticipate the two viruses. Ever since the crisis of 1998 this body had been very effective, so effective it even had its side effect of killing other cells in Indonesia’s body in the past few years.
So strong were these antibodies, the Government had been unable to liquidate fund for projects on time. Just look at the figures on December 23, 2010 word was out the Government only managed to liquidate 83.4% of fund, against 2009 which was 86.5%. Far from being ideal. This degradation process must be stopped in 2011, because by expenditure of economic growth, people and Government’s consumption were still the primadona of Indonesia’s economic growth. Although the other two sectors the investment sector and export had been greatly contributive in 2010, most likely they would turn to become a risk factor in 2011.
The main internal risk is inflation, particularly that of food and energy. Food (rice), a strong component of inflation, is most likely to have price increase. This is caused by weather factor which threaten Asia, particularly a rice producing countries like Indonesia, Thailand, and Vietnam. Two neighboring countries are having sharp drop of harvest, and most likely unable to export rice to a rice consumer country like Indonesia.
On the contrary if pressures of inflation strengthened, the Government must put brakes on the projects so as to prevent excess liquidity to minimize the pressures of inflation.
Inflation might also occur in a condition of over heating, where demand explodes faster than production. At this point the expenditure sector (consumer demand) becomes the determinant factor (more than 50% of GDP). By the time Bank Indonesia controlled interest rate with the intention to jack up investments, the people are having extra cash, which motivate people to shop. This drive could be excessive because the balance sheet structure of the banking system remain unchanged, so even at low level of interest the banks are still reluctant to extend credit and prefer to enter the bond market of corporations and the state. Back to the above scenario, the Government must put brakes on liquidation of project funds to that excess liquidity of the financial system will not have excess baggage and boost inflation faster.
Fine tuning of Government’s shopping greatly affects Indonesia’s economic growth so by the time the Government stop projects, the economic development would slowdown and vice versa. Under such circumstance, the Government’s action in project coordination, particularly in liquidating fund of the State Budget, must be improved as soon as possible. Government’s shopping becomes a counter cyclical act to fight inflation, in addition to the instrument used by Bank Indonesia such as selling of bonds to absorp excess of liquidity.
The external factor is the weary economic recovery of the world, particularly the USA and Europe. Some of the world’s economic surveyors predict that the real economic growth of the world would slump from 4.1% in 2010 to become 3.7%. America would grow by 2.7% in 2011 (against 2.8% in 2010) while Europe would grow by 1.7% in 2011 (against 1.8% in 2010). Even China would slump from 10% growth in 2010 to the level of 9% growth in 2011.
In short, the world’s economic growth would slowdown because the global economic recovery of 2011 was not caused by improvement of the bottom line (increasing demand and production of goods) but rather by betterment of balance sheet (minimizing debt and efficiency measures) of 2010. It comes as no surprise that the world’s economy is not sustainable and highly sensitive to minor turbulences.
If this scenario materialized, Indonesia’s prospect of investments and export are most unlikely to be as bright as in 2010, especially when things are made worse by reversal capital outflow which caused sudden weakening of the Rupiah that drives imported inflation and reduced the potentials of foreign investment. Slowdown of economic growth in China may reduce Indonesia’ export opportunities to China especially of mineral products an other natural resource materials.
Business News predict that Indonesia’s real economic growth could reach 6.5% with inflation potentials of 6.3%, and most likely Bank Indonesia would maintain 50 basic points above inflation, at least by end of second quarter.
Share index is predicted to increase by at least 12.8% (as much as nominal growth of GDP) with the potential of 20% by year end, or maximum index reaching 4,440 by end of period. Meanwhile emitence of corporate bonds could rise steeply due to increased investment grade from both sovereign and corporates so with spread yields Government Bonds of 100 to 150 basic points (1% - 1.5%) against inflation, Government Bonds could range around 7.5% (one year) while Corporate Bonds could reach 8.5% (for one year). The dynamics of yield would depend on change of demand magnitude due to liquidity excess which would eventually downpress yields the way it happened in 2010.
Again the important issue of 2011 is to maintain momentum, so by the time infra-structure projects run and electicity powerhouses completed by end of 2011, Indonesia’s economic growth could happen faster through elimination of bottlenecks on the supply side.
“Obstacles of regulations we would overcome, from bottlenecking to the Law and Land Procurement at Parliament, we responded to tax regulations to create a new climate in Indonesia”, Hatta Rajasa told the press amidst interval of meeting on economy led by President Soesilo Bambang Yudhoyono at the Bogor Palace, Thursday [30/12].
The targets for economic growth set above, according to Hatta were in accordance with the roadmap of 2014. Based on the assumptions, economic growth by 2025 would be above 7% to 8%. With reference to economic growth the 2010 which was posted at 6%, today Indonesia ranks among the 16 top high-growth countries of the world.
Furthermore, Indonesia has the opportunity of more economic growth, considering the range of infra-structure projects begun, starting from infra-structure building at Tanjung Priok Seaport and Mass Rapid Transportation to commence construction by 2011, the ground breaking of which start in 2012, not to mention toll road construction in various locations. The Government planned to start to build monorail integrated in Jakarta Metropolitan transportation system.
To be Among Top Ten Nations
Furthermore in was envisaged that by 2025, Indonesia would be one of ten greatest economic powers of the world. By that time, Indonesia’s Gross Domestic Products would reach US$ 3,7 to US$ 4.4 trillion while per capita income would reach US$ 12,800 to US$ 16,160 per annum. These are all written in Vision 2025 prepared by the Government.
Pursuant to that matter the Government had drawn a roadmap in which six corridors of forex resources had been designed. The corridors were designed by sectoral and regional approach. They were designed to manage natural resources that were manufacturing oriented. They were more than just designed to export raw materials. “We have identified all corridor regions starting from Sumatra, Kalimantan, Papua, Sulawesi, Northern Maluku, West Nusa Tenggara, and Bali. Clear enough, there is no natural resources which we do not benefit and turn them into forex”.
In the clusters in Java was being developed textile industry and automotive industry. Kalimantan, Sulawesi, up to Papua were being developed as well. For example, development of food estate and mineral industry in Merauke, food industry in Mebneramo, and petro-chemical industry in Mimika and surrounding. “We have schemed up the time frame and hopefully things start to roll by 2011” Hatta remarked, and added that Indonesia had a wealth of resources such as natural gas, geothermal, coal, cacao, palm oil, tin, nickel, and bauxite which were golden opportunities not being exploited to the maximum.
Monday, 14 February 2011
Sunday, 6 February 2011
Vice Chairman of Commission IV Anna Mu’awanah stated, production of seaweed in 2008 reached 400 tons, in 2009 it slipped down to 132 tons, while in 2010, up till August, no sign of harvest was in sight. So far fishermen have not received compensation urged Government to immediately forward compensation claim for the sea pollution.
Vice Chairman of Commission IV of Parliament, Anna Mu’awanah stated that production of seaweed in 2008 was posted at 400 tons, in 2009 it slumped to 132 tons, while 2010 was not showing any sign of sign of harvest. So far fishermen had not received any compensation. Therefore, Commission IV of Parliament had urged the Government to immediately forward compensation claim caused by pollution.
Member of Commission IV of Parliament Siswono Yudho Husodo stated that around Rote nDao island, 16.420 sq M of water was polluted by oil spill, resulting in destruction of seaweed and reduction of fish yields to a quarter of the normal amount. Amount of the compensation claim by the Provincial Government of NTT to Montara Oil explorer to the Government of Australia was ESTIMATED AT Rp. 2.7 trillion to Rp. 3 trillion. This amout is way below claim of the USA Government to British Petrolium (BP) which amounted to US$ 5 billion or around Rp. 50 trillion.
Member of Commission IV from the Province of Province of East Nusa Tenggara. Honing Sanny stated that it might take ten years for sea pollution to recover. Honing added that the Governor of NTT had sent a letter to the Coordinating Miniser of Economy Hatta Rajasa on the estimated loss caused by sea pollution. Meanwhile another member of commission IV of Parliament Viva Yoga Mauladi stated that up till now the oil spill amouting to 400 barrels per year was presently still contaminating the Timor sea. Viva regretted the statement of apology made by Indonesia’s Minister of Maritime and Fishery Fadel Muhammad to the Government of Australia. Supposedly it was Australia who apologized to Indonesia, especially to the people around Rote Ndao.
Head of the National Land Board (BPN) : DRAFT OF PROPOSED LAW ON LAND PROCUREMENT READY FOR SUBMISSION TO STATED SECRETARIAT
The Law Proposal for Land Procurement is aimed at accelerating some infra-structure that the law would be passed this year 2010 “Precisely when, depends on discussions with Parliiament”.
This Law for Procurement which has been the grievances of developers in building infra-structures. Compared to former laws, this new law will show fundamental differences in terms of principles of land procurement will be made easier while on the other hand people’s right would be well secured. To illusatrate, if it were agreed upon that a certain location was allocated for public utility, the magnitude of compensation would be evaluated by an independent appraisal team; thereby the amount of compensation would be fair but land would be available for use.
Furthermore, the land clearing mechanism would be more democratic but effective. For example, soon there will be mutual agreement about locationas agreed by the people themselves, and the people may decide whether they would release their land now or during land procurement “There will be a lot of changes, and God willing, the law would be effective”.
The effort to troubleshoot oil spill was to do sprouting 300 lires of aqua quick to separate oil spill to minimize effect of oil spill on environment, operating vacuum truck while preparing a fire brigade to anticipate conflagration, cleaning of polluted areas and repairing damaged facilities.
The fire occurring in the pipelines was suspected as veiled that the fire coincided with two missing bolts and to spill out of pipe and fire flared up at 06.30 on Friday August 13, 2010. Fire was finally estinguished at 16.40 on Friday August 13, 2010.
To troubleshoot oil spill, overflow of oil was accommodated in pipe segments from km 8.3 to km 27 on tank booster sloops at km 27 and changing of pipe lines. In 2010 PT Pertamina Gas Coy as subsidiary company of Pertamina specializing in oil and gas transportation had planned gradual replacement of pipes. This multii-year program is aimed at upgrading quality and safety measures on the Tempino Plaju for 257 km long ; this year pipe renewals are being carried out for 20 km long.
CBM is deleloped as alternative source of cheaper and more efficient primary energy whereby the Government may use to enhance efforts to electrify remote villages which are beyond PLN’s network. The development of CBM’s potential is also in line with PLN’s plan to enhance power generating by changing from oil energy to gas.
In the effort to enhance efficiency in power generating, PLN is ready to use power generated by CBM developer, particulary in the effort to support the Government in electricity procurement plan or remote villages.
The Govertnment has appointed one undertaker, i.e. Exxon Mobil to carry out intial study and survey for CBM development potentianls in Kalimantan as coal producing zone. It is expected of this potential development of CBM would be known.
It is expected that the initial study of CBM potentials would help to create a promising business climatewhereby by investors would be enthusiastic about developing CBM potentials for power generating. Target is set that within 5 years Indonesia would be able to produce 500 mmscfd CBM estimated to generate 2,000 MW of electricity. In advanced stated like Australia, the CBM potentials had been developed to a great extend.
The development of Coalbed Methane (CBM)in Indonesia is carried uot by Government’s policy stipulated by the Minister of Energy and Mineral Resources as break tjrough effort in response to slump of oil production in Indonesia. CBM is a natural gas with dominating metana gas in addition to other hydro-carbon contained in coal, resulting from some chemical and physics process.
CBM is the same as the conventional natural gas known today; the difference is that CBM associates with coal as source of rock and reservoir while the gas known today, although some originate from coal, are produced from reservoirs of sand, gamping or fragments of frozen stones.
Other things which differentiate the two are the ways of development where CBM reservoir has to be engineered first before gas is produced. Apart from chemical process CBM can be formed from activities of metanogenic bacteris in water which is trapped in coal, especially lignit.
The contingency fund in State Budget 2010 consist of rice reserve fund Rp 1 trillion and fund for price stabilizer Rp 1 trillion. Today there is a trend of price increase in world’s food, due to drop of the world’s food production on account of climate change. For example Russia was swept by heat wave, so production of wheat dropped to 2 percent, forcing Russia to stop exporting wheat. This step was followed by other states, dragging other commodities up in pricing. “We are cautious of the possibility of the world’s food crisis affecting the local food market” Minister Hatta underscored.
Indonesia, according to Hatta, was learning a lesson from 2008 experience when food crisis swept the world but fortunately Indonesia was having food surplus. At least there were four steps taken by Indonesia to manage the impact world’s food crisis. i.e. to maintain food productivity and growth, to adapt to changing climate, to maintain stability of food price through market operation (cheap market) and accelerating supply of raskin (rice for the poor) rice.
The Government protect farmers by way of channeling fertilizers, procuring land, and seeds subsidy. Meanwhile supply of rice is sufficient, posted at 4.7 million tons, which means there is nothing to worry about.
Without mentioning price of the future, Wawan pointed pout that the trend of price increase was already notable in China. Most likely price would increase next September.
“The trend is also indicated by the increasing price of steel raw materials like scrap and billet which was priced at US$ 300/ton three months ago, within a few short week the price has risen to around US$ 400/ton. With the increasing price of raw materials, it is almost certain that the price of end result products like hot steel (HRC) and cold steel (CRC) will also rise, although the percentage of increase is not known yet” Wawan remarked.
About the trend of world’s demand, it is estimated that the world’s production of steels might total up to 1.2 billion tons, of which China’s share alone is 600 million tons. Meanwhile the world’s demand for steel depends on the economic climate of the world. If the world’s economy shows for the better in the next three months, then world’s demand for steel would be good as well.
Upon embarking on Quarter III and Quarter IV next year, the curveline of price would again move in the positive course. The price of the world’s steel once slumped, initiated by the fall of some stock in the American stockmarket in 2008, so within 3 to 4 months the price of steel dropped to follow trend of the stockmarket.
Domestic Demand for Steel Projected to Rise between 5% to 10%
In view of the present condition, in the next Quarter IV it is expected that the condition of the steel market will undergo bullish, while the domestic condition will show increasing demand for steel between 5 to 10 percent each year.
Today production capacity of Krakatau Steel. Soon when the joint venture company between KS and Poco begins operations by 2014, it is expected that steel production would develop while the joint venture company would attain production output of 3 million tons/day.
By that time it is expected that total production of steel in Indonesia had reached 5.5 million tons the expectation is that starting from that year, Indonesia’s dependency on imported steel could be drastically minimized to 70 to 80 percent. Today Indonesia is still importing certain kinds of steel not produced at home, amounting to 8 to 9 million tons a year. Meanwhile of all the steel produced by domestic steel factories, the total national production is between 4 to 5 million tons.
The kind of steel needed is special steel used producing automotives. The needed is special steel used for producing automotives. The special steel will soon be produced by a joint venture company Posco and Krakatau Steel, capable of producing steel of maximum 2 meter thickness.
Realization of the Posco-KS joint venture is at the moment at the stage of negotiation with Posco to determine who is to manage marketing and also stipulations on how many percent of the production output is to be allocated for domestic need and how many percent for export, but it seems that the company would prioritize on fulfilling domestic need.
There was also question regarding declining shrimp farming activities. Based on data acquire in 2006, number of fishing households (RTP) reached 1.14 millions. In 2007, the number dropped to 1.3 millions. And, data on year 2008-2009 was not yet available. Concerning farmers’ welfare, it was necessary to perform an audit on shrimp farms in Indonesia, whether private-owned or traditional ones.
Officials of the Ministry of Marine and Fisheries were required to help solve the problems faced by shrimp farmers. They needed government’s support to improve their income. Subsidies from the Ministry of Marine and Fisheries were expected to support the farmers. It was expected that there will be concrete steps from the Ministry of Marine and Fisheries to improve quality of human resources and to release the shrimp farmers from poverty.
Minister of Marine and Fisheries, Fadel Muhammad, stated his shame about the living condition of the shrimp farmers who were very poor. One shrimp farmer only earns an income of Rp. 7 millions a year or Rp. 600,000 a month.
Chairman of the Meeting, Drs. H. Akhmad Muqowam, asked the Minister of Marine and Fisheries to analyze the problems faced by the farmers because they need special and concrete attention. Commission IV asked the Ministry of Marine and Fisheries to improve quality to networking with institutions outside the Ministry and with the related Ministries including the Ministry of Transport.
Inflation was due to price increase as shown of increase of following indices of food by 4.69 percent; ready-to-eat food, beverages, cigarettes, and tobacco by 0.65 percent; water, electricity, gas, and fuel by 0.26 percent; health by 0.27 percent; educations, recreations, and sports by 0.86 percent; and transportations, communications, and financial services 1.51 percent. While, clothing, in this month, experienced decrease of index by 0.09 percent.
Commodities which experienced price increase in July 2010 included, amongst others : rice, services for arranging extension of period of motor vehicle license, purebred chicken meats, red chili, garlic, red pungent chili, fresh fish, purebred chicken eggs, red onion, potatoes, rice and side dishes,refined sugar, tariff of house contract, air transportation tariff, cow meats, kangkung (a kind of vegetable growing in water), green chili, carrorts, apple, orange, fried chicken, filter clove cigarettes, tariff of house rent, wages of non-supervisor construction workers, fuel for household uses, elementary school tuition fee, secondary school tuition fee, high school tuition fee, university tuition fee, and services for arranging driving license. And, commodities which prices decreased included : gold jewelry, cherry tomatoes, tomatoes, and cooking oil.
Categories of commodities that gave contribution to inflation in July 2010 included : food 1.80 percent; ready-to-eat food, beverages, cigarettes, and tobacco 0.12 percent; housing, water, electricity, and fuel 0.07 percent; health 0.01 percent; educations, recreations, and sports 0.06 percent; and transportations, communications, and financial services 0.25 percent. And, clothing, in this month, gave a contribution of 0.02 percent to deflation.
Tuesday, 1 February 2011
The Government would not loosely implement renumeration at the ministries/institutions (K/L) who asked for renumeration fund at least in 11 K/L from 2010 to 2011. Secretary General of the Ministry of Finance Mulya Nasution stated that K/L asking for fund were obliged to meet the three requirements, i.e. organization, administration, and management.
“One thing to obsever is that giving away of renumeration is important to accomplish independent bu reaucracy and must be exercised as soon as other requirements are met” this was disclosed by Mulya Nasution at the National Convention on Accountancy for Government’s Financial Report in Jakarta, Tuesday (27/7/2010)
As known, the first requirement was that K/L must restructure organization “And to make sure that the main task is appropriate, whether decentralization from central to regions has been exercised, and whether thestructure is not over-expanded causing unemployment in disguise Secondly, reformation of administration and reformation of the management and human resourcer. The requirements are set forth so renumeration can bet set on the right target. It must not happen that after renumeration was given there will be stow aways on board because performance appraisals has not been made”.
At the moment the Ministry of Finance was discussing with the Ministry of Empowerment of State Aparatus to evaluate requirements for renumrration for 11K/L. The accomplishmemt now was 60% to 70%.
Director of Traning Security : THE SHOE INDUSTRY WARNED TO ANTICIPATE ANTI DUMPING DUTY IMPOSED BY BRAZIL
The Government warned players of footwear industry in Indoesia to anticipate the possibility of anti dumping duty (ADD) imposed by
Ernawati, Director of Trade Safeguarding, Directorate General of International Collaboration in trading, Minisitry of Trade, disclosed to BusinessNews on Monday (26/7) that the World Federation of Sporting Grade Industry (WFSGI) informed that the Brazil footwear industry had urged the Anti Dumping Authorities to impose ADD of US$ 13.85% on products from China, who also intended to impose ADD on some countries including Indonesia.
This was due to grievances among the footwear industry in
The Brazilian Shoes Producers Association had asked the Anti Dumping authorities in
Eddy Widjanarko, Chairman of the Association of Indonesian Footwear Produces (Aprisindo) remarked that the plan to implement ADD by the Government of Brazil on Indonesian footwear products must be seriously responded by players of the national footwear industry. This was important because export of shoes to this giant soccer nation was considerably big. Aprisindo recorder US$ 20.3 million, constituting 1.2% of total national footwear export of US$ 1.7 billion.
“We will foster coordination with the Ministry of Trade to anticipate plan of the Brazilian Government. A good number of out members export footwear to