Tuesday, 16 December 2008

E-licensing and one stop services to accelerate the bureaucracy reform

The Ministry of Industry issued the Instruction No.901/M-IND/10/2008 regarding E-Licensing and One Stop Services to Accelerate the Bureaucracy Reform (October 13, 2008). The said Instruction stipulates that Director General of Transportation and Telematic Equipment, Metal, Textiles and others, Agro-Industry and Chemical as well as the Head of Industry of Data and Information Centre shall render services of licensing and recommendation with on-line system called E-Licensing no later than December 2008 and conduct one-stop services no later than June 2009.

Bank Indonesia trims growth forecast for banking loans next year

Bank Indonesia has slashed its forecast for bank industry loan growth next year to between 19 percent to 22 –percent from the previous 22 to 24 percent, as the global economic slowdown is expected to impact the domestic economy, Halim Alamsyah, BI’s director of banking research and regulation, said.
Source: JakartaGlobe, Tue 9 Dec, section B

Import handling points will still be in five ports

Trade Minister Mari Pangestu insisted that the government will maintain certain five ports as import handling points, starting from 15 December 2008. She said that in response to the protest by the people in Dumai, Riau Province, whose port is not included in the list. Those five ports are Belawan, Tanjung Priok, Tanjung Emas, Tanjung Perak and Makassar.
Source: PA Asia - Public Affairs and CSR from Media Indonesia, 11 December, p.13

World Bank cites drop in exports and investments: 2009 growth may fall to 4.4%

In a report released on Wednesday, the World Bank said Indonesia’s economic growth rate could slow to 4.4 percent next year from 6 percent in 2008, assumed a prolonged global economic recession affecting both investment and exports. The bank further forecast that Indonesia’s investment growth could be flat in 2009, before recovering to around 7 percent in 2010. Growth in export volume is estimated to slow from 14 percent this year to between 1 percent and 2 percent in 2009, before strengthening to 8 percent in 2010.
Source: JakartaGlobe, Thu 11 Dec, section B.

Wednesday, 10 December 2008

Government lowers growth forecast

The government has slashed its 2009 growth forecast to between 4.5% and 5%, Finance Minister Sri Mulyani Indrawati said on Tuesday, Agence France-Presse reported.
Indrawati told an investor conference the economy would likely grow well below the budget target of 6.1% next year. The minister said year-on-year growth could come in below 6% during the fourth quarter of this year from 6.11% in the third. For the entire year, the economy could expand by 6.2%.
The government will provide tax relief worth an estimated Rp12.5 trillion next year to help businesses, she said. The minister also forecast the rupiah, which has recently sunk to 10-year lows of around Rp.12,500 to the dollar, would average Rp9,675 against the greenback this year.
"Interest rates, given expectations of falling inflation, may be adjusted," Indrawati told reporters.
Annual inflation was 11.77% in October, easing from 12.14% in September due to softer energy and commodity prices globally.

Source: www.ekon.go.id

Bank Indonesia trims key rate to stimulate growth

Defying analysts’ predictions, Bank Indonesian on Thursday (Thu, 4 Dec) cut its benchmark interest rate by 25 basis points to 9.25 percent-the first reduction this year-in an attempt to stimulate the economy and blunt the impact of the global economic slowdown, the central bank said in a statement.
Source: JakartaGlobe, Fri 5 Dec, pg. A1.

Trade Minister foresees tough times for exporters

Trade Minister Mari Pangestu said that exports were set to fall next year due to weak global economic growth, but predicted that a recovery could occur in the second half of the year.
“The first half of 2009 will be the most difficult period,” she said, adding that she was unable to estimate as yet how big the drop would be. She said exports would decline as demand for Indonesian’s commodities and manufactured goods fell in the country main’s main trading partners, particularly in the US.

Source: JakartaGlobe, Fri 5 Dec, section B.

Sunday, 30 November 2008

Income tax facilities

The Chairman of Investment Coordinating Board (“BKPM”) issued the guidelines and procedures for submitting an application of income tax facilities for the Investment Company in the certain sectors and/or regions (BKPM Regulation No.2/P/2008 of 2008)(October 14, 2008). The said regulation sets out the guidelines for the Company to obtain the income tax facilities. The Company shall submit the application of income tax facilities to Ministry of Finance through the Chairman of BKPM. Then, BKPM issues the recommendation letter if the applicant has fulfilled all the requirements. Based on the recommendation letter of BKPM, the Ministry of Finance will issue grant the income tax facilities to the respective applicant.

Economy grows by 6.1% y-o-y in Q3

The economy grew by 6.1% on a year-on-year basis in the third quarter of 2008, with 3.5% growth during the quarter with agriculture putting on the strongest growth at 6.7% during the quarter, according to figures released by the Central Bureau of Statistics (BPS). Without the contribution from the oil and gas sector, growth during the quarter was 3.7%. Trading, hotels and restaurants put on the second strongest level of growth per sector at 4.6%, transport and communications by 4.2%, while manufacturing grew by a surprising 3.2% to take fourth position. Services was the slowest sector with growth of 0.9%. The Business Tendency Index, based on a survey of 2,500 large and medium companies during the quarter, showed a continuing improvement in conditions over the second quarter of the year. All sectors showed improvement except mining, which experienced a slight fall.
Source: www.ekon.go.id

2008 budget deficit likely lower than targeted

Indonesia's 2008 budget deficit is likely to be a lower-than-targeted 1.1% of gross domestic product (GDP) due to higher tax revenue and improved cost efficiency, a top finance ministry official said on Thursday, Reuters reported. The finance ministry had previously forecast a deficit of 1.3%.
"We project a budget deficit at 1.1% of GDP, or around Rp51 trillion," Abimanyu said, adding that the lower-than-expected budget spending was the result of enhanced efficiency in government.
The ministry targeted Rp895 trillion of revenue in its revised 2008 budget, with revenue from tax expected to reach Rp609.2 trillion.
The ministry regularly holds debt auctions every month to finance its budget deficit but in October had said it might cancel its planned domestic debt auctions this year due to turmoil in financial markets.
The ministry had bought back Rp41 billion ($3.37 million) worth of bonds and the central bank bought Rp333 billion worth of bonds in the secondary market as part of the authorities' measures to restore investor confidence and stabilize financial markets.
Source: www.ekon.go.id

TDL will not be lowered

State Electricity Company (PLN) stressed that it will not lower the base electricity tariff (TDL) for households and industries although the price for power plants’ fuel has plummeted. According to PLN’s President Director Fahmi Mochtar, the fall of crude oil price does not impose significant impact to the electricity’s production cost. The weakening of rupiah against the US dollar already affected the SOE’s performance, such as for the maintenance of PLN’s power generation equipments, which are mostly imported.
Source: PA Asia - Public Affairs and CSR from Investor Daily, 24 November, p.20.

European Joint Breakfast Meeting with Chatib Basri:

At a joint breakfast gathering of the European Chambers of Commerce this morning, economic adviser to the government Chatib Basri forecast Indonesian economic growth for next year to fall into the lower part of between 4.5 and 5.5% in 2009. Indonesia has a lower export ratio than most other countries in the regions (around 30% of GDP), but Indonesia will also feel the impact of lower export growth of the industrialized countries in Indonesia that buy Indonesia's raw materials. Moreover, Indonesia as an emerging market, will suffer from capital withdrawals that are caused by the credit crunch in the United States and Europe. Government bonds in the United States are still regarded as a safer investment, and the demand for dollars has been pushing up the dollar against Asian and other currencies. Because of the withdrawals of portfolio investment and lower rates of foreign direct investments, Indonesia's overall balance of payments will deteriorate and put pressure on the rupiah. For next year, a US$-Rupiah rate of between 10.000 and 12.000 is expected. In recent years, growth and credit expansion have been particularly brisk in the outer regions (Sumatra, Kalimantan and Sulawesi), but the lower commodity prices will reduce the economic growth in these areas. Chatib expects commodity prices not to fall any further, but to recover gradually over the next year. The Indonesian government will initially try to reduce the budget deficit from the current 1.9 % of GDP to 1% of GDP, but will also start spending on new infrastructure projects in the course of next year. With this spending, partly in for of cash-for-work local infrastructure, the government will also try to keep consumption going. Consumption at 65% of the economy is an important driver for growth.

Implementation of foundation law

Indonesian Government issues a new Government Regulation regarding Implementation of Foundation or Yayasan Law (“Government Regulation No.63 of 2008 or GR 63/08”)(“September 23, 2008”). This regulation stipulates that Foundation shall be registered on the Registration List of Foundation. The required capital for the establishment of foundation is in the amount IDR 10.000.000 if the founders are Indonesians and IDR 100.000.000,- if the founders are foreigners. The foreign foundation may conduct its activities in Indonesia only in sector of social, religious and humanitarian activities.

Central Java Investment Business Forum, Jakarta November 26

This event will be an excellent opportunity to hear from the recently elected Governor of Central Java, Bibit Waluyo, his top staff, and a number of Mayors and Bupatis, and potential business partners. Information on investment projects will also be available, and there will be time for one-on-one meetings regarding the projects and other business opportunities. You will also be able to meet representatives of the recently launched investment promotion agency Central Java Invest.

Reduced budget deficit forecast for 2008: Government

Indonesia's budget deficit is forecast to drop to 1.1 percent of the country's gross domestic product (GDP) this year due to lower-than-expected spending and a rise in tax revenues, the Finance Ministry says.
"The realization of expenditure throughout the year is forecast to reach 90 percent *of the budget*, while we project tax revenue will reach 105 percent. Therefore, we project only a 1.1 percent deficit," Anggito Abimanyu, the ministry's head of fiscal policy, said Thursday.
The ministry has earlier predicted a deficit of 1.9 percent of GDP, or Rp 90.6 trillion.
Tax revenue makes up about 70 percent of state revenue, which is projected to reach Rp 894.99 trillion in the 2008 budget. Anggito added the government had a surplus in its balance, meaning that available funds could be used to fund the 2009 budget.
"In 2009, the conditions are uncertain. An economic slowdown may adjust the 2009 forecast."
The government has provided a total of Rp 12.5 trillion in incentives -- mostly in the form of reduction or elimination of taxes and import duties -- to industries next year to stimulate the real sector. Only industries operating in the food, energy, public service and selected sectors will receive such benefits, Anggito said.
The ministry expects Indonesia's economy to grow by slightly above 6 percent in 2008, after estimating the budget conditions. "The economy this quarter will be slightly below 6 percent, but overall 2008 (economic growth) will be above 6 percent."
According to the Central Statistics Agency, the economy grew by 6.3 percent in the first nine months of 2008.

Wednesday, 22 October 2008

Arno F. Damien Rizaldi Kwok: The World Bank Doing Business 2009 Certification of Appreciation

Arno F. Damien Rizaldi Kwok: The World Bank Doing Business 2009 Letter of Recognition

Jakarta business opportunities

Jakarta Investment Board (BPM & PKUD), a Jakarta Provincial Government's body that specialized in facilitating foreign investment in Jakarta is planning to held a seminar on investing opportunity in Jakarta with theme "Jakarta Business Opportunities", Jakarta Business Forum - Invest Jakarta 2008. The event will be held in Jakarta on October 23rd, at Gran Melia Hotel Jakarta. For more information about Invest Jakarta 2008, please log on to www.investjakarta.org.

Biofuel policy reduces palm oil exports

Palm oil exports may decline by 1.5 million metric tons following the implementation of a policy on the mandatory use of renewable energy, a government official said Wednesday, Bloomberg reported. “In relation to the mandatory policy for bio-energy issued last month, we see that the use of agricultural products for alternative energy will increase,” Bayu Krisnamurthi, a deputy to the Coordinating Minister for Economic Affairs, said, adding that it will cut palm oil exports.
The government has issued a ministerial decree that will make the use of biofuel mandatory from 2009. The decree states that for biodiesel, transportation must use a blend of 1% palm-based biodiesel and 99% diesel oil, while industry and power plants must use a blend containing 2.5% and 0.25% palm-based biodiesel respectively.
By 2010, the palm-biodiesel content will be increased to between 2.5%-3% for transportation, 5% for industry and 1% for power plants. For bioethanol, the use of a 1-5% blend of bioethanol and 99-95% of gasoline for transportation will become mandatory in 2009. Industry will have to use a 5% blend of bioethanol -- which is made from cane molasses and cassava feedstock -- and 95% gasoline next year, increasing to 7% by 2010.
Evita Legowo, Director General of Oil and Gas, said the government would start trials for the blends from October 1, Reuters reported. Indonesia's biofuel industry can produce between 1.3 million tons to 1.5 million tons annually, said Krisnamurthi. Capacity may double to three million tons by 2010, he said. “The country's palm oil output will be more than 19 million tons next year and exceed 20 million in 2010” he added. Food and chemicals industry may use 4.5 million tons this year and next, and five million tons in 2010, Krisnamurthi said.

Government offers tax benefits to attract investments

The government is offering tax benefits for certain new investments as part of efforts to improve the investment climate amid the deepening global financial crisis, the Coordinating Ministry for Economic Affairs said Monday, Dow Jones reported.
"The government will continue to improve the investment climate and national competitiveness with various policies, which are not only expected to mitigate the impact of the global financial crisis, but also to keep economic growth momentum, which has been on the rise in the last five years," the ministry said in a press release.
The government said that companies investing in certain industries will be subject to lower income tax for six years and will be able to amortize assets over a longer period and may receive compensation for losses for between five and 10 years.
The measures will benefit investors in diverse sectors, including those in steelmaking, forestry, geothermal, animal husbandry, low-rank coal mining, textile, pulp and paper, oil refining, small-scale gas liquefaction, various chemical and agricultural industries, automotive spare parts and electronics.The ministry said the policy will be evaluated within two years. The steps are part of Presidential Instruction No. 5/2008 on Focus Economic Program 2008-2009, and are specifically aimed at improving the investment climate.

Inflation hits 12.14% in September

Inflation during September came in at 0.97%, up on the August figure of 0.51% and taking the year-on-year figure to 12.14%, the Central Bureau of Statistics (BPS) stated on Monday, Detikcom reported.
The cost of food through the Muslim fasting month of Ramadhan was the major contributor to the higher inflation with a rise of 1.9%, Ali Rosidi of BPS told a press conference.
Nevertheless all cost areas showed higher trends. Packaged foods, drinks and cigarettes rose by 0.9%, housing, electricity and other household utilities were up by 1.22%. Clothing rose by 0.5%, health expenses by 0.3% and transport and communications by 0.22%.
Inflation was experienced in every city in Indonesia in which measurements are taken, with the highest in Tarakan in East Kalimantan at 2.8% and the lowest in Manado, North Sulawesi at 0.03%.

Tuesday, 14 October 2008

Report of capital investment activity

After obtaining a BKPM Approval, PT PMA has obligation to submit a report of Capital Investment Activities (“Laporan Kegiatan Penanaman Modal or LKPM”) to BKPM. PT PMA that has not yet obtained a Permanent Business License (“IUT”), shall submit a Semi Annual Report of LKPM to BKPM. Whilst, PT PMA that has obtained IUT shall submit an Annual LKPM. The said report is in the standard form of BKPM. Furthermore, the copies of LKPM also shall be delivered to the relevant government institutions, such as Department of Trade, Bank Indonesia or the Regional Office of the relevant technical department.

Government to cut fuel prices

The state oil and gas company Pertamina announced to cut nonsubsidized fuel prices for industry by up to 13,2 per cent. Premium (gasoline) will be cut by 5,4 per cent, kerosene by 6,9 per cent, diesel by 5,9 per cent, diesel fuel by 6,5 per cent, diesel V10 by 7,8 per cent, and fuel oil by 13,2 % per cent. The new prices will be effective starting from Wednesday (1/10). Pertamina said the price cut was due to lower Mid Oil Platts Singapore by 5,4 per cent to 13,2 per cent and as the rupiah weakened by 2,1 per cent. Pertamina said it is adjusting fuel price twice every month based on the international oil price.

Bank Indonesia to regulate foreign investment products

Bank Indonesia (BI) will soon issue a regulation on foreign investment products to anticipate the future prospects of financial markets. “As a seller and foreign products investor, a bank must be careful,” said BI deputy governor, Muliaman Hadad, last Friday. He said the regulation will involve Stock Exchange Monitoring Agency (BPPM) and financial institutions to avoid overlapping. After the Lebaran holidays, the central bank will hold discussions to accelerate the implementation of the new regulation. According to Muliaman, the bank must be the institution responsible for publishing securities and assuring that concerned banks and securities are registered in the country of origin. The products must also be clearly described so that consumers are aware of the risks involved and the expected revenues.

Indonesia suspends share trading for a third day: official

Indonesia suspended morning trading on the local stock exchange Friday as Asian markets plummeted, backing away from an earlier plan to reopen the bourse after a two-day halt, an official said. "We will suspend share trade in the morning session," Indonesia bourse president director Erry Firmansyah was quoted by AFP as telling Dow Jones Newswires.He said Indonesian authorities will continue monitoring the global market situation before deciding whether to lift the suspension in the afternoon session (starting 0630 GMT).Indonesian Finance Minister Sri Mulyani Indrawati had said Thursday night that trade would resume Friday after a two-day freeze.Trading on the Indonesia Stock Exchange was suspended after it plunged more than 10 percent to a two-year low Wednesday following huge losses on Wall Street, as global financial turmoil hit Southeast Asia's largest economy. Indrawati on Thursday announced a raft of new rules to restore market confidence, including a government pledge to spend four trillion rupiah (420 million dollars) to buy back shares in state companies. The minister also announced new rules allowing companies to buy back up to 20 percent of their paid-up capital in an effort to reduce selling pressure on the local bourse.

Tuesday, 7 October 2008

Micro-small-medium scale enterprises

The government issued a new regulation on the Micro-Small-Medium Scale Enterprise (“MSMSE”) (Law No.20 of 2008) replacing the old law (Law No.9 of 1995). One of the significant changes is the amount capital for the criteria of MSMSE. The criteria of micro scale enterprise is enterprise with net asset IDR 50.000.000,- excluding land and buildings. The criteria of small scale enterprise is the enterprise with net assets more than IDR 50.000.000,- up to IDR 500.000.000,- excluding land and buildings. Then, the criteria of medium scale enterprise in the enterprise with net asset is the amount of more than IDR 500.000.000,- up to IDR,- excluding land and buildings.

Rabobank wants to acquire more banks

Hollands’ Rabobank Group said it sees encouraging prospects in banking business in Indonesia and wants to buy more banks in the country, Asia Pulse reported.R abobank acquired two small banks - Haga Bank and Bank Hagakita - earlier this year. Hagabank, with assets of Rp4.76 trillion ($517 million) and Bank Hagakita valued at Rp1.7 trillion, were then merged into its Indonesian unit PT Rabobank International Indonesia to avoid problems with Bank Indonesia's Single Presence Policy. Rabobank will grab any opportunity to acquire more banks in the country, Antonio da Silva Costa, an official of PT Rabobank told the newspaper Investor Daily.

MRT construction to be delayed

Construction of the Mass Rapid Transportation (MRT) project in Jakarta will be most probably delayed for around two years as the second phase of the agreement with Japan Bank for International Cooperation (JBIC) has not been signed. Originally, it was planned to start construction by end of 2008 so that Jakarta residents would be able to use MRT by 2010. “We hope the second phase of the project will be started end of 2009 or 2010”, said Jakarta Governor Fauzi Bowo yesterday (22/9). The MRT route will run from Lebak Bulus to Dukuh Atas for a distance of 14.3 kilometers.

500,000 irrigation networks damaged

Public Works Minister Joko Kirmanto has said that while the government targeted to repair 1.5 million irrigation networks by 2009, 500,000 irrigation networks has just been discovered to be damaged. “We just have to keep working and upgrading¨, he said when sending off 15 staff from his ministry to the Netherlands on a scholarship program. Indonesia needs to have experts in the future to manage water, added Djoko. Irrigation is important to support rice development in the country.

Forestry Ministry to stop issuing new HTI licenses

The forestry ministry will not accept new applications for licenses to open industrial timber estates (HTI) after the end of October, 2008, a ministry official said, Asia Pulse reported.
The ministry has already issued licenses for 9 million hectares of HTI and new applications have been received for license to open 4 million more hectares, director of HTI development Bejo Santosa said. Santosa said the ministry wants license holders to immediately implement their projects, adding failure will result in revocation of their license. The license holders are given six months to prepare work and if there are no activities after six months their licenses will be given to other investors, Forestry Minister MS Kaban said earlier. Santosa said the ministry has set a target to open up to 15 million hectares of HTI by 2013, adding that therefore 6 million more hectares will be needed.HTI concessions have been grown mainly with acacia trees to feed pulp and paper factories.

Special Economic Zone will replace Free Trade Zone

The Special Economic Zone (KEK) concept is designed to replace the Free Trade Zone (FTZ). The design to attract foreign investors on the KEK is more comprehensive than the FTZ. Bambang Susantono from the Coordinating Ministry for economic affairs said that KEK will be automatically replacing the FTZ. One of advantage points of the KEK is the seven exclusive zones that could be built matched to its classification. They are techno park zone, export processing zone, logistics zone, industrial zone, and other economic zones. Each zone will have special facility in line with its classification, for example, industry that is located at the export processing zone will receive a higher reduction on the export duty compared to other zones.

Thursday, 25 September 2008

The adjustment of article of association of companies pursuant to the new company law

Law 40 of 2007 regarding the Limited Liability Company (August 16,2007) stipulates that the companies that have obtained the legal entity status based on the prevailing laws and regulations must adjust their Articles of Association (“AoA”) within a period of one (1) year as from time of the coming into effect of Law 40/07.
Pursuant to above-mentioned provision, the companies that have not adjusted their AoA up to the dateline of August 16, 2008, the said companies may not access temporary the Administrative System of Legal Entity (SISMINBAKUM) of Ministry of Laws and Human Rights (“MoLHR”) since September 16, 2008. The purpose of closing the access to SISMINBAKUM temporary in order to achieve the administration harmonization on the law services of PT sector.
Furthermore, the said companies that wish to access the SISMINBAKUM again and to adjust their AoA pursuant to Law 40/07 shall submit the application letter to the MoLHR with attachment of the Integrity Pact signed by the Directors.

Purbalingga fish production contributes Rp. 66.9 billion annually

Fish production in Purbalingga reaches 6,337 ton or Rp. 66.9 billion annually. Production includes Lele fish amounting to 2,913 ton or Rp. 38 billion, Gurame 1,267 ton or Rp. 25 billion, Bawal 577 ton or Rp. 5.7 billion, and Nila 585 ton or Rp. 7 billion. “The fish is produced by 13,351 home industries managed by farmers,¨ said Purbalingga regent Triyono Budi Sasongko. However, Triyono mentioned some problems like water insufficiency, under-qualified seeds and technology, and low investment.

Government to reduce port overloads

In addition to accelerating its inspection process, the government is looking to reduce overloading and delays at Jakarta’s Tanjung Priok port by penalizing traders who fail to remove goods that clear customs, The Jakarta Post reported.
A government-appointed team charged with assuring the smooth flow of export and import goods will arrange a series of meetings to provide solutions to the port's overloading problems, Trade Minister Mari Pangestu said.
Among other problems causing delays is the practice of traders who secure a clearance, but choose to store their goods at the port, she said, adding the appointed team would investigate the problem.
"It now takes three to eight days for a container undergoing the redline inspection to go from unloading to customs clearance, with another few days before it's picked up by the importer," Pangestu said Thursday after an inspection at one of the port's terminals.
Many importers choose to store their containers "for months" as "it is more expensive for them to pick the goods up immediately and keep them in warehouses than to keep them here," said a source who spoke on condition of anonymity.
Nearly 185,000 containers move in and out of the port every month, up from 160,000 containers per month last year, said Abdullah Syaifudin, president director of state port operator PT Pelindo II.
"The team is considering applying disincentives in the foreseeable future for importers who have obtained customs clearances but continue to store goods at the port," Pangestu said. The team will also formulate a set of incentives for fast collection of goods.
The team, led by Coordinating Minister for the Economy Sri Mulyani Indrawati, includes, among others, Transportation Minister Jusman Syafii, Public Works Minister Djoko Kirmanto and Pangestu.

ADB predicts 6.0% to 6.5% growth

Indonesia's economy will likely grow between 6% and 6.5% this year, despite high inflation and monetary tightening, Asian Development Bank (ADB) president Haruhiko Kuroda said Wednesday, Dow Jones reported.
"In the long term growth could even accelerate to 7%," Kuroda said. He didn't elaborate.
Bank Indonesia's most recent forecast is for 6.2% growth in gross domestic product this year and 6.3% growth in 2009. Indonesia's GDP grew by 6.3% in 2007.
Kuroda also said the ADB has allocated $1 billion that can be loaned to Indonesia to support economic growth. “In the next three years we are still calculating but we will provide approximately $1.2 billion (in total loans)," he said. Kuroda said Indonesia's inflation rate has likely peaked and should decline. Kuroda reiterated that the ADB plans to issue local-currency bonds to fund its Indonesian projects, but said it is assessing market conditions and doesn't have a fixed date for the issuance. The ADB previously said it would issue an indicative Rp1 trillion in bonds in the third or fourth quarter of this year.

Tuesday, 16 September 2008

Jababeka in container terminal venture

PT Kawasan Industri Jababeka, the operator of the Jababeka industrial estate in Cibitung, hopes to establish a joint venture company with a Japanese partner to build a container terminal in the industrial estate this year, Asia Pulse reported on Friday.Corporate secretary Mulyadi Suganda told the newspaper Investor Daily feasibility study is being finalized.Suganda said Jababeka has signed a memorandum of understanding with the unnamed Japanese partner.He said the company will also cooperate with state-owned railway company PT Kereta Api in the procurement of carriages.The company has provided 6 hectares of land for railway track to be built to link the industrial estates with Jakarta's port of Tanjung Priok.

Franchise operation in Indonesia

Regulation of Ministry of Trade No.31/M-DG/PER/8/2008 regarding the Franchise Operation (August 21, 2008) is required both Franchisor and Franchisee to obtain a franchise business registration certificate (“Surat Tanda Pendaftaran Waralaba or STPUW”) by registering the franchise offering prospectus. STPUW is valid for 5 years period and can be extended for the same period. The foreign franchisors and subsequent foreign franchisor shall submit application of STPUW to the Directorate of Business Development and Corporate Registration, Directorate General of Domestic Trade, Ministry Trade. Furthermore, franchise offering prospectus registered by foreign franchisors shall be legalized by the Notary Public by enclosing the Certificate from Trade Attache or official of representative of RI in country of origin. If the foreign franchisors, foreign franchisees and subsequent foreign franchisors do not register their franchise offering prospectus, they shall pay a fine maximum Rp 100.000.000,- .

Business-friendly tax bill endorsed

The House of Representatives enacted on Wednesday (3/9/2008) a much-awaited amendment to the income tax law aimed at spurring economic activities by providing lower rates and more incentives to businesses, The Jakarta Post reported.
Income tax for corporations will be set at 28% flat next year, replacing the current progressive system, and will be further reduced to 25% at the start of 2010.
The new arrangement will not only benefit firms with high earnings, but also micro, small and medium businesses (MSME), which will have their income tax slashed by 50% from those of corporations. Companies that earn less than Rp50 billion a year are included in the MSME category.
The new law will take effect next year, with the government estimating it will suffer some Rp40 trillion ($4.34 billion) in potential losses from tax revenue during the first year of implementation.
It provides incentives to encourage companies to go public. Companies that list at least 40% of their shares on the Indonesia Stock Exchange will see their tax rate cut by 5% compared to those of ordinary corporations. Tax from the receipt of dividend payments will also be cut, on a progressive basis, to 10% from the current 35%. The incentives are aimed at boosting investment in the country and encouraging companies to pay out dividends.
For individuals, the law raises the taxable income threshold to Rp15.84 million per year from Rp13.2 million per year, with the highest rate set at 30%, down from the current 35%.
Income tax rates for individuals will be divided into four categories: those earning up to Rp50 million per year will pay 5% tax, those earning between Rp50 million and Rp250 million will pay 15%, those earning between Rp250 million and Rp500 million will pay 25% and those earning more than Rp500 million will pay 30%. The Directorate General of Taxation will also eliminate the overseas exit tax of Rp1 million effective next year for registered taxpayers. The tax will be fully eliminated in 2011.

Central Aceh invites investors for sugar industry

The government of Central Aceh is offering incentives for investors that will build sugar industry in order to accommodate the sugar cane production in that region. The community could not take advantage of the big potential of sugar cane in this region without the sugar industry. Therefore, the government will give some incentives for the investors, said Windi Darsa, public relation officer of the government of Central Aceh.

Dredging for Jakarta waterways

The Jakarta government will start dredging the city's main flood channels early in October with equipment donated by the Dutch government, Republika reported.According to Jakarta Governor Fauzi Bowo, the channel dredging will also be conducted for some rivers which are considered too narrow. "At the moment, the equipment is on its way here. I have asked that the administrative process be finished soon so the equipment will not be held up in Customs," Bowo added.

Railway revitalization requires Rp. 19 trillion

The Indonesian government has agreed to revitalize railways in Sumatra, Java, and Jabodetabek (Jakarta, Bogor, Depok, Tangerang, and Bekasi) in 2008-2010. It is predicted that this revitalization will require Rp19.365 trillion, however, the government has only Rp. 7.04 trillion available for this project. The Vice President has asked that these projects should be offered to the private sector through open tender,¨ said Transportation Minister, Jusman Syafii Djamal. Jusman explained that the government plans to develop 501 kilometers of railways out of the total 1,369 kilometers by 2010. The government also plans to reactivate unused 57 kilometers of railway tracks out of the total 187 kilometers.
Furthermore, government plants to build new 116 of kilometer of new railways by 2010. Jusman also mentioned some railway developments that have been initiated by the private sector. These include railways in Tanjung Enim-Tarahan for coal (in cooperation between the state railway company and Bukit Asam), Jalan Simpang Tanjung Api-Api, Baturaja, Lahat-Kertapati, and a project in Bengkulu. “We invite more private sector companies to participate,” he said.

Government infrastructure investment in 2009 to reach Rp. 70.89 trillion

The government has set itself a new infrastructure investment target of Rp70.89 trillion in 2009 to be carried out under a government-private cooperation scheme, an official said, Antara reported.
Dedy Supriadi, deputy to the minister for the National Development Planning Ministry, said the government's investment under the cooperation scheme would increase further to Rp112.24 trillion in 2010 and Rp128.56 trillion in 2011. He said infrastructure to be built under the scheme included power plants, clean water facilities, toll roads, seaports, airports, trains and residential complexes.
The Kualanamu airport toll road in North Sumatra linking Medan with a new airport and the Depok-Antasari toll road in southern Jakarta were among the projected toll roads.

Doing Business 2009 records positive reforms in Indonesia on ease of doing business

The Government of Indonesia has reduced the number of days required to start up a business from 105 days to 76 days as well as the cost and number of procedures. Additionally borrowers now are able to inspect their credit data at Bank of Indonesia which helps to improve the quality and accuracy of the information financial institutions use in assessing the risk profiles of borrowers.
These reforms are among those reported in the Doing Business 2009 Report which was officially released today in Washington DC.
Source: http://web.worldbank.org

Sunday, 7 September 2008

Dairy cow breeding center to be built in Malang

The Malang municipality in cooperation with Bank Indonesia in Malang will build a breeding center for dairy cows worth Rp592 million at Ngantang sub-district. The Ngantang secretary Ruba’i said the breeding center is to increase the milk production. So far, Ngantang produces on an average of 60 tons of fresh milk daily. While PT Nestle Indonesia, the milk production industry in Kejayan sub-district in Pasuruan, requires 70 tons of fresh milk daily. The center will be built on 29,000-meters of land at Tulungrejo village and has been 50 percent completed. Construction is expected to be completed by the end of 2008. “We will also manage the cow waste turning it into biogas,” said Ruba’i to Tempo, Friday (5/9).

Kima is looking for power plant investors

PT Kawasan Industri Makassar (Kima) is looking for strategic investors to build the power plant in the most densely populated industrial area in East Indonesia. Director of Kima, Bachder Djohan, said that they will build power plant that will supply the electricity to their area.

US$70 million loan for dams

The World Bank has granted a US$ 70 million loan to Indonesia through the Dam Operation and Improvement Safety Project to restore 65 dams, said Public Works Department's Water Resources director-general, Iwan Nursyirwan Dian. According to the Iwan, the loan was taken because the government was having difficulty getting funding to repair the dams, which were damaged by sedimentation. The project, which begins next year, is expected to be completed by 2012.

Inflation rate improved in August

The inflation rate in August was 0.5 percent, better than the 0.75 percent recorded in August last year, Central Bureau of Statistics (BPS) head, Rusman Heriawan said in a press conference. This has resulted in the consumer price index going up slightly, from 111.59 in July to 112.16 in August. Rusman said the top five commodity that have supported the August inflation were fish, chicken meat, eggs, household fuels (especially liquid petroleum gas), and senior high school tuition fees. During the month of Ramadan, Bambang Soesatyo, Chairman of the Fiscal and Monetary Committee of the Indonesian Chamber of Commerce & Industry (Kadin), has estimated that there will a 20 percent price increase in basic commodities and LPG.

Sunday, 31 August 2008

Research opportunity in Indonesia

Research Project Maastricht is a non-profit organization related to Maastricht University, The Netherlands. Since 1989 we have been annually conducting research for companies in an upcoming market. This year, fifteen carefully selected students will travel to Indonesia from December 2008 until May 2009. The tailored research RPM can provide your company with is very diverse varying from, for example, an analysis of the market to an assessment of investment possibilities. Are you interested in the opportunities Indonesia has to offer your company? Contact us on 0031-43-3883931 or send an email to contact@researchproject.nl. For more information on Research Project Maastricht please visit http://www.researchproject.nl/

Ministry of Cooperative and SMEs to facilitate SMEs entering modern market

Ministry of Cooperative and SMEs facilitates the packaged food products from SMEs to penetrate the giant retail network in Indonesia. The assistant of Deputy Partnership and Business networking from the Ministry of Cooperative and SMEs, Herustiati, said that the two giant retailers, Carrefour and Alfamart, agree with the offer from the ministry to market the products that comply with the quality and packaging standards.

Government to restrict new factories outside estates

The government is preparing a draft regulation banning construction of new factories including expansion units outside industrial estates, Asia Pulse reported. The draft regulation is expected to be signed by President Susilo Bambang Yudhoyono before the end of this year, said Edy Putra Irawady, a deputy at the Office of the Coordinating Minister for Economic Affairs. The draft regulation will allow exceptions for certain factories which have to use certain basic materials and operate in certain locations such as cement factories, the newspaper Bisnis Indonesia said. Violation of the regulation will face administrative sanctions such as suspension or revocation of business license. The regulation is aimed mainly at simplification in the management and processing of industrial waste and for efficiency in supply of energy and provision of supporting facilities.

Government eyes water transportation system

The government is inviting the private sector to assist it in developing an integrated system of river and railway-based transportation systems across the archipelago. We aim to develop a river transportation system by connecting rivers to rivers, rivers to a port, etc.," Dedy Supriadi Priatna, a deputy at the National Development Planning Agency (Bappenas), said Wednesday in a seminar. "The government also plans to develop and manage an integrated system of land transportation and railway-based transportation and combine both systems with a river transportation system."
The water infrastructure development projects form parts of the 2005-2009 national infrastructure program which requires a massive US$65 billion in investment -- although none of the funds have been allocated to waterway projects.

Four airport railink projects offered to investors

The government offers four airport raillink projects to local and foreign investors. Directorate General Railway of the Ministry of Transportation, Wendy Aritenang, said that for the initial step, the tender for the airport train project in Jakarta was officially opened was opened for the Soekarno-Hatta Airport Railink. In addition to the Soekarno-Hatta Airport Railink project, they will also offer the Kualanamu Airport Railink (North Sumatra), Minangkabau Airport Railink (West Sumatra) and Juanda Airport Railink (Surabaya). "We are giving opportunities to all stakeholders," Wendy said. (Bisnis Indonesia, Aug 22, p. M4)

Tuesday, 26 August 2008

Riau Investment Forum offers 50 projects

The government of Riau province offers 50 investment projects to the local and foreign investors in the Trade and Investment Forum in Pekanbaru. The administrator of Secretary Riau government, Herliyan Saleh, said that these projects consist of 9 investment projects, 11 prospective projects, and 30 potential projects, among other in the field of infrastructure, tourism, industrial area, agriculture, and processing industry.

Cacao export from South Sulawesi increased 44%

In the first semester of 2008, cacao export from South Sulawesi reached US$161.03 million. There was a 44% increase in comparison with the value for the same period in 2007. The Central Bureau Statistic (BPS) of South Sulawesi reported that cacao export in June has reached US$51.61 million exceeding the export in May 2007 of US$ 38.27 million.

Holland company to buy fish from Indonesia

Holland fish-processing company Esro Food Product is going to import fisheries products from Indonesia from three major fish-producing provinces, Jakarta, East Java, and South Sulawesi, starting from September. For a start, Esro will import at least 3 containers of shrimp and kakap fish from Jakarta, while further calculating imports from East Java and South Sulawesi. This was revealed by Director of Foreign Marketing at the Department of Marine Affairs and Fisheries Saut P. Hutagalung yesterday in response to the more open European market following the European Union Commission's decision to loosen quality requirements for Indonesian fisheries.

EU lifts trade barriers for Indonesian fisheries products

The EU Commission eventually lifts the trade barriers for fishery export from Indonesia by easing the national fishery export guidance that freeing the condition of histamine test and lead. The directive 2008/660/EC was issued on July 31, 2008 after the commission was sure about improvements in the quality control and monitoring of Indonesian fisheries products exported to the EU.
The EU Commission has loosened test requirements for Indonesian fisheries products. Previously, the EU upped the requirements through the Commission Directive (CD) 326/2006 (2006/326/EC) dated March 21, 2006. The new directive frees Indonesian aquaculture and fisheries products from histamine and heavy metal tests. However, the EU maintains heavy metal test for Indonesian catch fish. The test requirements previously delivered a fatal blow to Indonesia's fisheries export since exporters had to spend more money on 400-700 samples per container. The requirement also increased the waiting time for Indonesian fisheries products entering the EU ports to two weeks and upped container cost to 1,500 euros-2,000 euros per day. Following the trade barrier lift, the UE states it recognizes and appreciates efforts made by the Indonesian authorities to improve their monitoring and control processes.

Indonesia largest potato producer in SE Asia

Indonesia is the largest potato-producing nation in Southeast Asia with an annual production of 1.1 million tons, a minister said. "Indonesia is the largest potato-producing country in Southeast Asia. The prospects for potato production in the world market are quite good because it supports the global food security," Agriculture Minister Anton Apriyantono said when opening the 2008 National Potato Week in Lembang district, West Java..The event is one of the efforts to support the activities of the UN which has declared 2008 "The Year of Potato" to strengthen the global food security following a drop in the global production of foodstuffs including cereals.The condition has prompted the UN to launch worldwide campaigns to increase the role of potato as a foodstuff besides rice, corn and wheat.

Government challenged to control inflation in 2009

The Indonesian Chamber of Commerce and Industry (Kadin) said that the government`s major challenge in 2009 was to take inflation under control owing to the fact that oil and commodity prices in the world market are still difficult to predict until the beginning of 2009."If the government is unable to control inflation, the purchasing power of the middle will also drop. At present, domestic demand is still relatively good because the middle class has been able to maintain the level of its purchasing power," Bambang Soesatyo, chairman of Kadin`s permanent committee for monetary and fiscal affairs, said here on Tuesday.

ILO: Indonesia`s 2008 economy shows sound improvement

Indonesia`s economy has been growing positively but the labour market has not yet developed significantly, according to a report of the International Labour Organization (ILO) on Labour and Social Trends in Indonesia 2008.While the unemployment rate has fallen to 9.1 percent followed by a rise in involuntary underemployment, such as that the share of those "fully employed" is actually bellow the level in 2002, the report said adding that looking ahead, it forecast unemployment to fall to 7.0 per cent by 2009.

Wednesday, 20 August 2008

Central Sulawesi offers their best commodities

Central Sulawesi province will be presenting their best commodities in plantation and agriculture sectors to potential local and foreign investors at the Sulawesi Expo 2008 from August 21 - 24 at the Jakarta International Expo, Kemayoran, Jakarta Pusat. Head of Agriculture, Plantation, and Livestock Service of Central Sulawasi, Kabul, said that they will expose their best products such as cacao, crude palm oil, coconut, rice, corn, and onion in order to attract the investment.

Tin exports jump 95% from Bangka Belitung province

Bangka Belitung Province's tin exports in April 2008 jumped 95.3% to $167.1 million from the same period last year, Asia Pulse reported. Tin exports to Singapore climbed 104.95% to $152.7 million in April from $74.5 million a month earlier, Head of the Bangka Belitung Provincial Office of the Central Bureau of Statistics (BPS) Syafril Said said. "Cumulatively, tin exports in the January-April 2008 period climbed 388.88% to $776.8 million from $158.9 million in the same period last year," he said. Bangka Belitung is one of the main tin-producing provinces.

Businesses begin weekend shifts to save power

More than 300 manufacturers have complied with the government's new energy-saving regulations on weekend work since July 31, with state power firm PT PLN expecting the figure to pass 3,000 by mid-August, The Jakarta Post reported. The regulation, which requires manufacturers to shift up to two working days a month to the weekend, will also incorporate requirements for hotels and malls to use their own power generators for 10 hours per week, an official said. PLN director for Java and Bali, Murtaqi Syamsuddin, said 302 manufacturers made changes to their working days from July 31, as scheduled by the government. The changes had saved 95 megawatts of power on the first day of the new system, and 112 MW the following day. "The amount of power saved (on July 31 and August 1) was lower than our target, but we are optimistic this will continue to increase," Syamsuddin said. PLN aims to save between 150 and 180 MW of power per day through implementation of the decree. The regulation, which was issued in the form of a joint decree signed by five ministers, is designed to reduce the power load during peak hours. Companies that operate 24 hours a day or seven days a week are exempt from the regulation. Murtaqi said PLN had 6,800 manufacturing companies among its clients in Java and Bali, but only 3,052 of these met the criteria set by the decree. PLN's ideal power reserve in Java and Bali is 40% of 16,500 MW, the total power consumption in the region during peak hours.

Indonesia to propose limitation on foodstuffs for energy at the UN’s general meeting

Indonesia will propose a limitation on the use of foodstuffs for energy sources at the United Nations’ general meeting in September. This limitation is aimed at anticipating the food crisis and Indonesia will urge the UN to put the issue of food crisis on priority. Foreign Affairs Minister Hassan Wirajuda said that a limitation of a maximum of 30 percent of total food production to be used for energy making could be tolerated. “Morally, it would be contradictory to use food for energy while people are hungry,” said Wirajuda in Bandung yesterday (6/8). Indonesia will also propose increased investment in the agricultural sector in line with the surplus enjoyed by oil-exporting due to the fuel price hike.

Government opens tender for 2009 subsidized fuel distribution

The government has opened a tender to procure and distribute subsidized fuel in 2009, Tubagus Haryono, head of the downstream oil and gas regulator BPH Migas, said,quoted by Thomson Financial. Haryono said his office has sent invitations to 27 companies to take part in the tender, including Pertamina, Malaysia's Petronas, Royal Dutch Shell, AKR, Medco Sarana Kalibaru and Barito Energy. BPH Migas will pick the winner after assessing the tender participants' readiness in terms of, among other criteria, their distribution network, fuel storage facilities and financial capability.Over the past three years, state-run oil and gas company PT Pertamina, as mandated by the government, has been distributing subsidized fuel given a lack of readiness on the part of private companies. Pertamina ended its monopoly of the distribution of subsidized fuel as a public service obligation (PSO) at the end of 2005. The government still subsidizes about 60% of nationwide fuel consumption.

Amended income tax law

The following amendments in the Income Tax Law have recently been approved by the House of Representatives Special Committee on Taxation. The New Income Tax Law is expected to be ratified in August 2008 and to take effect starting January 2009.
1. Corporate taxpayers:
a. Tax rates
♦ For ordinary companies
- Corporate income tax will be reduced to 28% in 2009, and to 25% in 2010.
- A reduced rate of 50% from the normal rate in the case of businesses with gross turnovers

of Rp. 4.8 billion or less for Small Medium Enterprise
♦ For listed companies
- A 5% reduction off the normal tax rate will be granted, subject to the requirement that at

least 40% of their shares are held by the public.

b. Holding companies
♦ Passive holding companies can enjoy exemption from withholding Tax on dividend.

c. Deductible expenses
♦ Costs arising from the provision of infrastructure, educational facilities, and

donations/contributions to sport, the victims of natural disasters, and scholarships will be
allowed as deductible expenses.

2. Individual taxpayers
a. Tax rates
♦ On dividend - 10% and final in nature.
♦ On income tax - 30% max. for taxable income of more than Rp 500 million.
♦ The 10% tax layer has been eliminated.
♦ For individual taxpayers that use calculation norms, the ceiling will be increased from Rp 1.8

billion per year to less than Rp 4.8billion per year.
♦ For non-NPWP individual taxpayers, a higher rate shall be applied, with the following

- 20% higher than normal rate for personal income tax, and
- 100% higher for article 22 and article 23 income tax.

b. Exemption
♦ The tax-free allowance for individual taxpayers will be increased to Rp 15,840,000 per year.
♦ Individual taxpayers with NPWP will be exempt from paying departure tax (“fiskal”) starting

2009, and such obligation will be abolished in 2011.

3. Others
• The income on interest and discounts on bonds received or obtained by mutual fund companies
are now subject to income tax.

The draft amendment to the Income Tax Law is considered to be more pro-business and pro- taxpayers because many incentives are provided. There have been claims from the Directorate General of Taxation that these incentives will reduce tax revenue of up to Rupiah 40 billion, but in fact, that it is only based on statistical calculation. Looking at the country’s current dynamic economic condition, the potential loss from the tax incentives given in the new income tax law will be covered by the gradual increase in income brought about by the improvement in the economy.
Based on dynamic calculation, the potential income from tax will be bigger because compliance will increase due to the lower tax rates. For instance, the tax on dividend payments will be reduced from 20% to a maximum of 10%. Those who earn dividends and previously have never reported will now feel free to report because there will be no more benefit to hide it. Besides, the tax office will find out about it during the tax audit and this will create more problems for them.

West Java to build design centre for small enterprises

The regional government in West Java will build a design center for small- and medium-size enterprises (IKM). Head of the training program at the Industry and Trade Department for West Java, Hani Yuhani, Bandung, Thursday (31/7), said the first phase of the design center will cover three industries. They are the shoe industry in Cibaduyut, Bandung; the rattan-based furniture industry in Cirebon; and the ceramic industry in Plered, Purwakarta. Hani explained the design center will be adapted from the unit of technical service at the Industry and Trade department. The unit has stopped operating since regional autonomy applied. “While the unit is actually a place for people to gain information, it connects the Industry and Trade Department with the community,” she said.

IPB to develop soy bean seed development center

The Faculty of Agriculture at the Bogor Institute of Agriculture (IPB) is developing a center for seeding soy beans outside Java. This will mean that farmers from outside Java will have easier access to quality soy bean seeds. “There is a long distribution channel that reduces the soy seed quality,” said IPB researcher, Didi Sopandhie, in a national workshop about Soy Beans at Brawijaya University, Malang,East Java, on Saturday (26/7) last week. IPB is working together with the Soy Bean Consortium, which was set up by the Agricultural Department, to develop two programs in two regencies in Lampung. Each program will have 100 hectare of land for seeding soy beans.

Belawan will implement NSW in December

Belawan harbor in Medan is scheduled to implement the National Single Window (NSW) system at the end of this year in order to anticipate the integrated customs system in South East Asia which will be implemented in 2009. The administrator of Belawan Port, Jimmy Abubakar Nikijuluw, said that after Tanjung Priok, Jakarta and Tanjung Perak, Surabaya, the NSW will be implemented in Belawan, Medan.

Fuel price impact to inflation ended

Statistic Central Bureau (BPS) recorded that there are no more impact of the fuel price hike to the inflation rate following the decreasing of monthly inflation rate in July 2008. The head of BPS, Rusman Heriawan, said that the inflation rate is mostly caused by the increasing of food price following the supply shock. Month-to-month inflation in July 2008 reached 1.37% while the year-on-year inflation has reached 11.9%.

New power plants to be built in South Sumatra

A consortium of state and private companies will build two steam-powered electricity generating plants, at Banjarsari power plant (2x100 megawatts) in Lahat and at Central Bangko power plant (4x600 megawatts) in Muara Enim. These two new power plants are to provide additional electricity supply in Sumatra. Director of PT Bukit Asam, Sukrisno, explained that the Banjarsari power plant is being built by the PT Bukit Pembangkit Innovative consortium.

Monday, 4 August 2008

Nusa Tenggara Barat needs extra generator up to 60 MW

Nusa Tenggara Barat needs extra electricity generator with the capacity of 60 MW to avoid the electricity blackout and to meet the demand of new customers. Manager of PLN in Mataram, Wasito Adi, said that PLN Mataram will receive electricity generator as part of the National Programme of 12.000 MW in order to speed up the supply of geothermal electricity. (Bisnis Indonesia, July 24, p. M8)

Tanjung Perak harbor will implement NSW in December

Tanjung Perak harbor in Surabaya is scheduled to implement the National Single Window (NSW) system at the end of this year. After Tanjung Priok, NSW system is hoped to implement in Tanjung Perak at December 2008, said the head of implementation of NSW, Susiwijono Mugiharso. Prior to Tanjung Perak, the NSW system will be implemented in Tanjung Emas harbor in Semarang in August.
(Bisnis Indonesia, July 25, p. M5)

OECD urges Indonesia to lift growth

Indonesia has been urged by the Organisation for Economic Co-operation and Development to overhaul its labour laws, remove foreign investment restrictions and cut its subsidy bill by linking increases in domestic fuel prices to world energy markets. The country’s central bank was also advised to act “resolutely” and “preemptively” to raise rates and combat inflation, which hit a 21-month high of more than 11 per cent in June.
The recommendations were made in the OECD’s first comprehensive study of the Indonesian economy, which it expects to grow by more than 6 per cent this year. The report was released on Thursday.

To have a brief look on the OECD’s survey result, ” Economic Assessment of Indonesia 2008”, please visit:

Government’s commitment to boost up investment is still low

Up to now most of the regions in Indonesian have not shown improvement in the economic management performance. Among the obstacles are the physical infrastructure management, access to the area and licenses that still become the problems of investment climate.
This is the result of survey which was carried out by the Regional Autonomy Implementation Observer Committee (KPPOD), USAID, and The Asia Foundation in 2007 with 12.187 business people in 243 regions in 15 provinces as respondents.

Business people are not ready to transfer working days

“We asked that this be delayed until the end of August as there are still many unfinished problems in the provinces¨, said Indonesian Chamber of Commerce and Industry (KADIN) chairman, Mohamad S. Hidayat, yesterday (22/7). Hidayat went on to say that up to now, business people still have not received any official letter from the Manpower Minister regarding the schedule transfer. According to him, such a letter would serve as a guideline when negotiating with workers. “If there is no letter, the workers will insist even harder on making Saturdays and Sundays as holidays, thus allowing overtime¨, said Hidayat. (http://www.tempointeraktif.com/)

Monday, 28 July 2008

National industry policy promulgated

Although it takes almost twenty five years after the enactment of Law No. 5/1984, Indonesia finally has a comprehensive national policy on the country’s industry. The policy is contained in Presidential Regulation No. 28 of 2008 regarding National Industry Policy. The details of the National Industry Policy (“NIP”) are set forth in the Attachment to the Presidential Regulation No. 28 of 2008. The Regulation imposes on the Minister of Industry the task of compiling a “Road Map” that sets out the direction for master industries such as manufacturing, agro-business, electronics, and telematics, creative industries, as well as certain small and medium scale industries. It opens the possibility for the provision by the government of fiscal or non-fiscal facilities to priority industries, pioneer industries, industries located in remote areas, innovative industries, industries carrying out infrastructure development, industries that are focused on technology transfers, and industries that open up job opportunities The NIP also foresees a fundamental change in the structure of the Indonesian economy from traditional agriculture being the most significant contributor to a more diverse and high technology agribusiness cluster, among others. It sees a shift in the country’s major exports from textile and forest products to stainless steel, motors and motor vehicles, electronics, and basic chemicals. With the NIP, it is hoped that by 2025 the country will have a competitive, world class manufacturing sector of unabated growth that will be the prime mover of the economy. The Regulation has become effective since the day of its issue on 7 May 2008.

West Java proposes five new geothermal sites

West Java Mining and Energy Office proposes five new geothermal sites to be considered as power plants. They are located at Mount Papandayan, Ciremai, Cikuray, Guntur Masigit, and Malabar. “Mount Papandayan and Ciremai are still under Pertamina’s management,” West Java Mining and Energy Office chief, Tb. Hisni, in Bandung. For these two sites in particular, Hisni said it needed to be discussed with the Mining and Energy Department. Previously, Pertamina agreed to hand over these sites to the government. “The government will then hand them over to the West Java Regional government.” (http://www.tempointeraktif.com/)

An energy self-sufficient village in NTB to be built

The West Nusa Tenggara Mining and Energy Office is developing an energy self-sufficient village to cope with electricity shortages. The project will exploit water falls in seven locations to construct the Teras Genit micro hydro power plant in West Lombok. West Nusa Tenggara Mining and Energy Office deputy-chief, Heryadi Rahmat, said the power plant will be able to produce 30 KW of electrical power. The project is expected to become an example in exploiting new, untapped energies. “The potential is huge”, said Heryadi in Mataram yesterday. Besides the waterfalls, the energy self-sufficient village will make use of geothermal energy source in Sembalun, East Lombok. Based on a study by the Geological Agency, geothermal sources can generate 65 MW of energy. The same goes for the geothermal source in Dompu regency. Meanwhile, garnering energy from under-sea current sources in East Lombok will be one of three similar projects in the world. (http://www.tempointeraktif.com/)

Investment promotion will be focused on eight provinces

The Investment Coordinating Board (BKPM) is giving priority to eight provinces in order to attract foreign investments in Indonesia this year. These eight provinces are Riau, Bengkulu, West Kalimantan, Central Java, Central Sulawesi, Gorontalo, North Maluku, and Papua. The potential investment projects of these provinces are still large according the BKPM. The potential investment projects are 5.15 milliard hectare land for palm oil processing in Riau, coal 160 km railways in Bengkulu, bauxite mine in West Kalimantan, textile, shoes, and automotives industry in Central Java, petrochemical industry in Central Sulawesi, corn and sugar plantations in Gorontalo, and nickel mine in North Maluku. (Bisnis Indonesia, July 18, p. 2)

Change of operating hours applicable only in Java and Bali

The policy to change industrial work hours from Monday-Friday to Saturdays and Sundays starting July 21, will only be applied in Java and Bali. Industry minister Fahmi Idris said that to facilitate implementation, the policy will be divided based on four major areas: West Java and Banten, West Java and Yogyakarta area, East Java and Bali. “There are 12.000 industrial plants in the four areas,” said Fahmi. “They use 38 percent of the total electricity required,¨ he added. (http://www.tempointeraktif.com/)

State electricity company (PLN) and entrepreneurs discuss rates for industry

The State Electricity Company (PLN) began negotiations with the Indonesian Chamber of Commerce and Industry (Kadin) about the electricity rates for industry. “We want the rates on weekdays to be Rp1,300 kilowatt per hour,” said PLN's director Fahmi Mohtar yesterday. He said that by using this, rates on weekends will be cheaper than weekdays. Fahmi explained that PLN has divided work hours into 12 clusters based on the distribution region. The cluster will shift work hours every month. Earlier, the entrepreneurs preferred to have higher rates than it does with shifting the work schedule to weekends. According to Kadin's head, Mohammad S. Hidayat, around 40 percent of 120 members of Kadin's members support the rate rise. “We are being realistic about the electricity supply,” he said. (http://www.tempointeraktif.com/)

Fuel oil consumption to be only 20 percent in 2025

The government is trying to reduce the consumption of crude oil to 20 percent in 2025. Luluk Sumiarso, Director General for Oil and Gas from the Energy and Mineral Resources Department said that this was an initiative for developing a green oil and gas industry. “We need to secure fuel and gas supply,” he said yesterday (14/7). It is also aimed at encouraging gas consumption, increasing public and industrial awareness to save energy, and to reduce oil and gas waste that could damage the environment. There are supply and demand perspectives in this policy. (http://www.tempointeraktif.com/)

Shell plans to build storage tanks by 1Q 2009

Royal Dutch Shell Plc plans to build its first terminal and six tanks in Indonesia to store fuels imported to meet the country's rising demand, a company spokeswoman said, Dow Jones reported.Three of the 5,000-kilolitre tanks in Gresik, East Java, are expected to be ready by the first quarter of 2009, said Fathia Syarif, spokeswoman for Shell Indonesia.
The remaining tanks with the same capacity "will be made available in stages in 2Q 2009", she said. She declined to say how much the project will cost.
Shell plans to store gasoline and gasoil at these tanks, Syarif said. The oil major is currently renting storage facilities in West Java.

New procedures for the employment of foreign workers

The Minister of Labor and Transmigration on 28 March 2008 issued Regulation No. PER.02/MEN/III/2008 regarding Procedures for the Employment of Foreign Workers (the “Regulation”). The new Regulation was issued to replace a number of regulations regarding the same subject matter, in light of the development of regional autonomy. The Regulation also serves as the implementation regulations for Article 42(1) and Article 43(4) of Law No. 13 of 2003 regarding Manpower Article 2 of the Regulation stipulates that the Regulation applies to the employment of expatriates in Indonesia by the following employers:i. foreign trade representative offices;ii. foreign private companies;iii. foreign contractors;iv. companies established under Indonesian law;v. institutions involved in social, educational, cultural and religious activities; as well as those involved in entertainment.As a general rule, the Regulation stipulates that all of the above employers must possess a Plan for the Utilization of Foreign Workers (Rencana Penggunaan Tenaga Kerja Asing /”RPTKA”). The RPTKA is the basic document that is required to be attached to the application for the Permit to Employ Foreign Workers (Izin Mempekerjakan Tenaga Kerja Asing / IMTA). The Regulation also requires these employers to register their foreign workers in an employee social security program and / or provide them with life insurance.One important feature of the Regulation is the requirement stipulated by the Regulation that has to be met by the employees in the employment of the expatriates i.e. the expatriate employee must have at least a suitable education and / or five years experience in the field in which they are to be employed; are ready to transfer knowledge and skills they have to an Indonesia colleague, and the expatriate must also be able to communicate in Indonesian.As the Regulation concerns with the mechanics of employing expatriates in Indonesia, the remaining articles of the Regulation contains procedures in RPTKA and IMTA including extension of RPTKA and IMTA and official in charge in issuing them. The Regulation has been in force since the day of its issue on 28 March 2008.

Geothermal projects are targeted to operate by 2013

The government will decide 19 geothermal working areas as part of the second phase of the electricity power plant development. The geothermal projects will be starting in 2009. Director of Ground Water Management and Geothermal Possession of the Energy and Mineral Resources Ministry, Sugiharto Harsoprayitno, explained that these 19 geothermal projects will be stipulated by the presidential decree (keppres).
(Kompas, July 9, p. 17)

Industry is requested to cut electricity usage by 50 percent

The State Electricity Company (PLN) suggested large consumer like industries and offices to reduce the electricity usage by 50 percent. “We can economize more,” said PLN's General Manager for distribution in Jakarta-Tangerang, Purnomo Willy yesterday. He claimed large industries and offices consume most of the electricity supply in Jakarta.

Power supply will be increased by 10,000 megawatts

The government is targeting an additional electrical power supply of 10,000 megawatts to cover national needs. The current supply of 50,000 megawatts is considered insufficient for the needs of the general public and industrial sectors. The additional power supply will be built gradually, said President Yudhoyono when signing a cooperation agreement for the construction of four steam-powered electricity generating plants in Kutai Kartanegara, today (7/7).
The President said that the insufficient power supply resulted in electrical blackouts in various regions in Kalimantan and Sumatra. Director of the State Electricity Company (PLN), Fahmi Muchtar, confirmed the power deficit. He said that all of Kalimantan and North Sumatra were of high concern for PLN. The energy crisis is the worst there. They need additional power supplies as soon as possible, said Fahmi.

Verification procedures for industries utilizing import duty reduction/exemption facilities

To ensure that the granting of import duty reduction/exemption facilities to certain national industries is correctly made to the ‘target industries’, the Minister of Industry has issued a regulation as on verification of the industries that are making use of these facilities, and the verification procedures. The regulation is Regulation of the Minister of Industry No. 27/M-IND/PER/5/2008 (the “Regulation”)The Regulation basically requires that all industrial companies utilizing import duty reduction and exemption facilities be verified. Each of such companies must have what is referred to as an Industry Verification Certificate (Surat Keterangan Verifikasi Industri) which is issued by an independent surveyor appointed by the Minister.The verification process is divided into three main stages, respectively the preliminary, production, and final stage, each of which comprises further phases of inspection by the surveyor. The Regulation has been in force since the day of issue on 15 May 2008

West Java is ready to manage geothermal power plants

The Governor of West Java, Ahmad Heryawan, said his province is ready to supply electricity from geothermal power plant. He made this statement after meeting Vice President Jusuf Kalla yesterday (30/6). The government is planning to build several new power plants to meet the electricity demand of 10,000 megawatts. Construction of these new power plants is targeted to be finished in 2010.

President inaugurates east Kalimantan project

President Susilo Bambang Yudhoyono will inaugurate infrastructure projects for energy and public works in East Kalimantan. The projects are gas and condensation field; 150 kV transmission line (SUTT) in Tenggarong; 150kV relay station in Embalut; 150kV relay station in Tenggarong; a Manggar dam in Balikpapan; low cost rental flats in Nunukan; water supply system in Sepaku Penajam Paser Utara, Melak in West Kutai, South Malinau, and Loa Janan Kutai Kartanegara. The inauguration of these energy projects will be followed by the steam power plant projects in Bangka Belitung, Papua, South Kalimantan, and South Sulawesi.

Year-end inflation could reach 10 – 11%

The annual inflation rate rose to 11.03% in June as the full impact of the fuel price increasing. The annual rise in June is the highest since September 2006 when the CPI rose to 14.55%. The government predicted that the year-end inflation rate could hit 10% to 11%, higher than the government's previous forecast of 6.5%,
(Kompas, July 2, pg 17)

Power plant utilization only 6 percent

The potential of water by power plants can be utilized to cope with the electricity crisis, said Djoko Kirmanto, Minister for Public Works. He hopes that the 7.000 megawatt out of the 10.000 megawatt electricity project will use water. “Indonesia is the country to have the fifth largest water surface in the world¨ he said yesterday. The State-owned electricity company (PLN) director, Fahmi Mochtar, said that from the 70.000 megawatt Water-Generated Power Plant (PLTA) potential in Indonesia, only 6 percent or 3.529 megawatt has been utilized. He also mentioned that the operational cost of water-generated power plant per kilowatt per hour is Rp140 and it is the lowest compare to other power plants elsewhere.
(Kompas, July 3, p.22)

Haga and Hagakita banks merged into Rabobank Indonesia

Netherlands-based Rabobank Group will officially merge Haga and Hagakita, two small banks it has acquired into its subsidiary PT Rabobank International Indonesia on June 30, Asia Pulse reported.
With the merger PT Rabobank Indonesia will have a total asset of Rp11 trillion ($1.22 billion), a bank official Alimhamzah said, adding the central bank already given its approval for the merger.
The Rabobank Group acquired Haga and Hagakita two years ago from the Djarum Group, one of the country's largest cigarette makers.
Alimhamzah said despite the merger the core business in retail banking of the two units will be maintained.
Last year, Haga reported a net profit of Rp206.88 billion ($22.3 million) and Hagakita Rp45.06 billion, but Rabobank Indonesia suffered a loss of Rp10.14 billion, the newspaper Bisnis Indonesia reported.
Source: www.ekon.go.id

Fifty four investors interested in developing CBM

Around 54 energy investors have made requests to the government to develop CBM (coal bed methane) in Indonesia.
Acting Director of Oil and Gas Upstream Business Development Heri Poernomo revealed data by the Directorate General of Oil and gas as of June 2008 showed there were 54 requests made to develop CBM. "CBM potential in Indonesia is huge and CBM is an alternative to oil," he said in Jakarta yesterday.
According to him, of several investors making requests to the government, four had completed their joint evaluations, three were conducting joint evaluations, and one was conducting a joint study.
One consortium that has signed a CBM development partnership contract is the PT Medco CBM Sekayu and South Sumatera Energy Inc consortium.
CBM is gas fuel contained in coal. CBM is extracted from coal layer through drilling, which will not reduce the coal content.
Despite strong interests in CBM development, the government still has to face many obstacles. As quoted from the Directorate General of Oil and Gas website, one of the obstacles was not all investors interested in CBM development had understood requirements made by the government.
Another obstacle was the widespread issuance of mining concessions by regional governments.
Concerning the obstacle, the government will revise the Minister of Energy and Mineral Resources Regulation No. 33/ 2006 on CBM Procurement
(Bisnis Indonesia, p. T1)

Jakarta targets reducing energy by 20 percent

This is based on Presidential Instruction 2/2008 regarding energy and water reductions. This was mentioned during the socialization of the Energy and Mineral Resources (ESDM) Department’s energy reduction program today (25/6) at Jakarta City Hall. According to Mining Office Head Peni Susanto, Jakarta would be a model for national energy conservation. “The target is 20 percent,” he said. Peni explained that energy consumption in the capital city was huge with 18 percent of national electricity being consumed in Jakarta.

Trans-Kalimantan to be connected to Borneo Highway by 2009

Ministry of Public Works targets that the international Pan Borneo Highway to be connected to the trans-Kalimantan road at the end of 2009.
Director General of highway construction and maintenance at the Department of Public Works Hermanto Dardak said the connection between the trans-Kalimantan and Malaysia and Brunei was part of the sub-regional agreement between Brunei, Indonesia, Malaysia, the Philippines and the East Asia Growth Area (BIMP EAGA).
The Department of Public Works previously signed a contract on the construction of 3,200 km long trans-Kalimantan road, which is targeted to start operation by the end of 2009. The trans-Kalimantan road will be connected to Kuching (Malaysia) and Brunei.
(Bisnis Indonesia, p. 5)

Government plans 10% mandatory biofuel mix by 2010

Indonesia plans to start its mandatory biofuel blending program in September with a 2.5% mix of either bioethanol or biodiesel, a senior industry executive said, Dow Jones reported. The blend will gradually be raised to 10% by 2010 in a bid to reduce reliance on fossil fuels, said Erwin Duma, biofuel business development manager of PT Molindo Raya Industrial.
Many ethanol plants are being built to meet the targeted production capacity of 4 million kiloliters of bioethanol by 2010. Indonesia currently produces around 160,000 kiloliters a year, while consumption of ethanol for industry and biofuel purposes is currently around 150,000 kiloliters.When biofuel blends reached 10%, Duma estimates that around 2 million kiloliters of bioethanol will be required every year.
PT Molindo is currently the sole supplier of bioethanol to state-owned oil and gas company PT Pertamina, which has been tasked by the government to sell biodiesel since 2006. "Most of the ethanol plants will use cassava as feedstock," said Duma. PT Molindo is in the midst of constructing two more ethanol plants in Sumatra and Java with a combined capacity of around 100,000 kiloliters a year that will use cassava to make bioethanol.
Duma expects the export price of bioethanol, currently at $550-$620 a metric ton, free-on-board, to rise 20%-30% in the second half of the year due to rising international prices of gasoline and feedstock such as molasses and cassava.
Source: www.ekon.go.id

Government proposes to cut tax rate on dividends

The government plans to lower the tax rate on dividends to 15% from 20% in an effort to improve the investment climate and encourage the development of financial markets, the tax chief said, reported Reuters.
The government is keen to develop the country's young financial market by improving regulations and providing tax incentives for people still wary of investing in the stock market.
"We want to attract more people to invest and not only put their money in banks ...The substance of the new tax bill is to improve our investment climate," Darmin Nasution said. "The discussion is whether a tax rate of 15% would provide a sufficient incentive."
The government is hoping to draw more people to put their funds in the market by cutting the tax rate on dividends which currently is the same as that on bank interest. The plan is one of a string of measures in a new tax law being drafted by the parliament aimed at tackling widespread tax evasion and providing tax incentives to investors in the country.
The parliament is expected to pass the tax bill in the third quarter. The bill also proposes to cut income tax levels for individuals and corporations in a bid to attract investors to open businesses.
Source: www.ekon.go.id

Government sets deadline for tax evaders

The government will fine unregistered taxpayers 20% of their total taxes if they fail to register by the end of this year, as part of efforts to increase tax collections, a legislator said, quoted by Reuters Indonesia has a population of 230 million, but only four million people are on the tax register and just one third of those actually pay tax. Parliament is expected to pass a new tax bill in the third quarter in an effort to step up tax collections and tackle widespread evasion by providing incentives for people to be registered and taking stronger measures against tax dodgers.
"Starting next year, unregistered taxpayers will be fined," Melchias Markus Mekeng, the head of a parliamentary commission drafting the new tax law, said.
Mekeng said registered taxpayers will also be exempted from paying a departure tax paid for overseas travel from next year as incentive for people to register as taxpayers.
Under the current scheme, Indonesians and foreigners working in the country have to pay Rp1 million as departure tax at the airport for every overseas trip.
"The departure tax will be lifted in 2011, but in the transition period, starting 2009, people who have a tax ID will be relieved from paying the country's departure tax." Darmin Nasution, the Director General of Tax, said in an interview in August that he expected the number of registered taxpayers to reach 10 million by the end of 2008. Indonesia has set a tax revenue target of 609.2 trillion rupiah, or about 70% of the total budget revenue, this year. The finance ministry has forecast tax revenue will rise by 19% to 723.9 trillion rupiah in 2009.
Source: www.ekon.go.id

Government to re-evaluate regional funding

The central government may next year cease general allocation funds (DAU) to regions enjoying hefty windfall profits from the soaring prices of natural resources, The Jakarta Post reported. Finance Minister Sri Mulyani Indrawati said the central government was seeking to allocate more funds to regions with limited or no natural resources. The proposal is slated to be submitted to the House of Representatives during the upcoming 2009 state budget discussion. "We will ask for the House's approval on this soon," she said.
DAUs account for an average of more than 50% of a province's or regency's annual revenues. Should the House approve the proposal, profiting regions could establish autonomous administrations while underdeveloped regions would receive more funds. Wealthy Riau and East Kalimantan provinces, for example, may no longer receive any DAUs, the Finance Ministry's Director General of Fiscal Balance Mardiasmo said. With abundant gas, gold, rubber and palm oil resources, Riau province is one of the richest in Indonesia, while East Kalimantan is endowed with coal, gold and oil and gas. For this year, the central government has allocated Rp179.50 trillion for DAUs, up from Rp164.78 trillion last year.

Western Sulawesi highway to open in 2009: Official

The Western Sulawesi Highway will be fully functional in 2009 with construction already underway and 80% of land already acquired, said the Public Works Ministry directorate general Hermanto Dardak.
The four-lane, 1,000-km highway starts in Makassar, South Sulawesi, and continues north to Maros, Takalar, and Pare-Pare. The highway then travels north to Polewali and Mamuju, West Sulawesi, continuing east to Donggala and Toli-Toli, Central Sulawesi, before winding up in Gorontalo province and ending in Bitung, on the northern tip of North Sulawesi.
"The highway will increase shipping which should also increase economic growth two-and-a-half fold," said Hermanto in a report from Antara.
Sulawesi will be the third major area in the country to build a trans-island highway after the Java Northern Coastal Highway, known by its local acronym Pantura, and the Sumatra Eastern Highway.

Non-performing loans reach 50%

The chairman of the Industrial-Trading & Cooperating Agency (Disperindagkop) for Banyuwangi, I Nyoman Wirayatsa, said the non-performing loans of small-to medium-sized firms and enterprises have reached an average of 50% in 2003 to 2008. Credit reached Rp152 million for small-to medium-sized firms from loans of Rp600 million, while there is no return from total loans of Rp150 million given to small-to-medium-sized enterprises. The community-based cooperation also has a non-performing loan of Rp313 million from a total loan of Rp800 million. “Most of them are bankrupt,” he told Tempo today (6/6). He said the entrepreneurs having difficulty with the fuel price rise that occurred three times since 2005. Nyoman said that the departments sent warning letters many times to them to pay back their loans. (http://www.tempointeraktif.com/hg/nasional/2008/06/06/brk,20080606-124623,uk.html)

Government plans second series of 10.000 MW plants

The government is drawing up a program to build a second series of power plants with a combined capacity of 10,000 MW across the country to keep up with the mounting public need for electricity according to Energy and Mineral Resources Minister Purnomo Yusgiantoro
Some aspects of the program were disclosed by Yusgiantoro following a meeting on acceleration of the first 10,000-MW power plants project at the vice presidential office in Jakarta on Wednesday.
The government had decided to set up another series of power plants with a total capacity of 10,000 MW because domestic demand for electricity was growing fast. "In a number of regions outside Java, the need for electricity is now growing at almost 10% per year," the minister said.
While the first series of power plants were all coal-fired, the second series would only consist of 30% of coal-fired plants. The remainder would be made up of geothermal, hydropower and other types of power generating facilities, he said. The geothermal power plants would have a total potential of 27,000 MW and the hydropower facilities 60,000 MW with the rest to be provided by plants running on new and renewable energy sources.
About the time it would take to build the additional power plants, the minister said it would be a 'multi-year project' that would transcend the five-year term of any single administration. The project was estimated to require a total investment of between $8 and 9 billion, he added.

Credit insurance corporation for SMEs

In order to assist the financing of the SMEs, the government of Klaten will establish a credit insurance corporation this year. The government hopes that the low interest credit could be granted to help SMEs following the increasing of fuel price. (Kompas, Tue June 3, p. 23)

Entrepreneurs raise food and transport allowances

The Indonesian Employers Association (Apindo) stated that the entrepreneurs have eventually followed the government's suggestion about helping reduce the burden on employees after the fuel price rises by increasing their meal and transportation allowances. “The allowances will be realized this month (June),” Manpower and Transmigration Minister Erman Soeparno told Tempo in Jakarta. Erman acknowledged that he had met with the entrepreneurs to confirm the raises. PT. Indofood Sukses Makmur Tbk. will raise the allowances by 25 percent for transport and 20 percent for meals, while PT Djarum will raise both by 15 percent.

Inflation reached two digits

The Indonesian Bureau of Statistics (BPS) reported the increasing of year-on-year inflation in May has reached 10.38% following the increasing of goods and services prices. The chairman of the BPS, Rusman Heriawan, said that this is the highest rate since October 2005. (Bisnis Indonesia, Tue June 3, p. 1)

Drinking water projects need investment Rp. 86 trillion

Public Works Ministry will prepare the tender for the connection of 10 million drinking water supply pipes project that worth Rp. 86 trillion, following the approval to write off the debt of the Drink Water Regional Company (PDAM). Directorate General of Cipta Karya, Department of Public Works, Budi Yuwono Prawirosudirdjo, said that they are still calculating the cost to connect the 10 million water pipes. The preliminary prediction is Rp. 86 trillion. (Bisnis Indonesia, Mo June 2, p. 5)

North Sumatra will become the center for electronic industry

Ministry for industry would develop the North Sumatra province to become the center of national electronic components industry. Directorate general of telematics and transportation of Ministry for Industry, Budi Darmadi, said that North Sumatra has natural resources, international market access, and many businessmen from the electronic industries. Those will be the capital for this province to become the center of national electronic industry. (Bisnis Indonesia, May 31, p. F11)

SMEs get more problems by the increasing of fuel price

The impact of the increasing of fuel price about 28.7% has made the SMEs get more problems. The increasing of production cost and product value is not as bad as in 2005, but this still become big problems for the SMEs. This study from Cooperation and SMEs Ministry together with Central Bureau of Statistics (BPS) is published by Cooperation and SMEs Minister, Suryadharma Ali. (Kompas, Fri 30 May, p. 17)

Port investment limited only for terminal

The government limits the port investment by only offering the development and management of the terminal. Directorate General of Sea Transportation of the Ministry of Transportation, Effendy Batubara, said that this limitation is also valid to the shareholder by foreign investor at national port companies, with maximum amount 49%. According to regulation No. 17/2008 about shipping, the new investment is focusing to the management of new terminal. (Bisnis Indonesia,May 30, p. 1)

Export volume will decrease

Entrepreneurs think export growth for non-oil and gas this year will be only at 10% maximum. The Secretary General for Indonesian Exporters Association, Totok Dirgantara, said that last year Indonesian export volume can survive as the international commodities price improved. “But it is likely stagnant for this year while our export volume decreased,” he told Tempo. He explained it is caused by the weakened global economy and fuel price hike that reduces the demand. “Many countries now limit their imports to secure their food stock,” he said. Totok asked the government to stabilize the local currency. “If the rupiah reaches Rp.10,000 for one dollar, Indonesia will be in the same situation such as ten years ago when it was hit by the monetary crisis.” (http://www.tempointeraktif.com/hg/nasional/2008/05/30/brk,20080530-123987,uk.html)

Tender for airport railway project

The government finally open the tender for new investors that are interested to build and to manage the airport railway project at Soekarno-Hatta International Airport, Cengkareng, that worth Rp. 4.6 trillion with concession period 30 years. Directorate General of Railway from the Ministry of Transportation, Wendy Aritenang Yazid, said that this tender would be open in July this year. (Bisnis Indonesia, Wed May 28, p. R1)

The poor increased by 4.5 million

National Institute of Sciences (LIPI) said the number of poor this year will increase by 4.5 million people after the fuel price rise. In total, there will be 41.7 million or 21.92% of the total population. It is higher than the government's prediction of 14.8 % to 15%. According to Adi Wijaya, LIPI researcher, without a direct cash aid program, the number of poor would be more grave equaling 53.7 million, or an increase of 16.5 million people. “The direct cash aid program helps three million families from near-poor groups,” he said in a press conference in Jakarta. (http://www.tempointeraktif.com/hg/nasional/2008/05/29/brk,20080529-123900,uk.html)

Simeulue has potential of billion barrel hydrocarbon

The government of Simeulue, Nanggroe Aceh Darusalam asked the Ministry of Energy and Mineral Resources to follow up the finding of Agency for the Assessment and Application of Technology (BPPT) about the potential of oil and gas at that area. The researchers from BPPT unintentionally found that location when they studied the impact of tsunami in 2004. Head of Economic Section of Simeulue government, Haili Syamsuddin said that they hope the government will follow up this research as soon as possible. (Bisnis Indonesia, Wed May 28, p. R1)

Export of 10 major products would be interfered

Ministry of Trade predicted that the growth target of 10 major export products would be corrected, especially products with the highest energy components. Chairman of the National Export Development Board, Bachrul Chairi, said that the impact of the increasing of fuel price would influence the export performance of the major export products. (Bisnis Indonesia, Wed May 28, p. 4)

Foreigners could become railway operator

The government gives the opportunity to the foreign companies to invest in railway sectors following the end of operator monopoly of railway by PT Kereta Api (KA). The government has a new regulation for the railway sectors (UU No. 23/2007). Directorate General of Railway from the Ministry of Transportation, Wendy Aritenang, said that according to the regulation, the foreign private sectors are allowed to invest as railway operators. (Bisnis Indonesia, Tue May 27, p. R5)

Batam economic growth corrected with 7.1%

The increasing of labor cost and transportation tariff following the increasing of fuel price would decrease the competitiveness of Batam as Free Trade Zone. Assistant of Economic and Development of Batam, Syamsul Bahrum, said that the increasing of labor cost will influence the production process, the price, and the competitiveness in the world market. Furthermore, Batam also has electricity crisis problem because PLN has decreased their electricity supply to Batam. (Bisnis Indonesia, Tue May 27, p. R1)

148 oil palm plantations are inactive

About 148 oil palm plantation companies in Riau province, about 95,261 ha, can not realize their investment. As the result, that plantation is inactive, said Akmal J.S., deputy of agriculture agency. That amount reached almost 50% of plantation companies in Riau. Governor of Riau, Rusli Zaenal, said that Riau government will continuously improve the oil palm industry and they have prepared Rp. 450 billion to replanting the 1.6 million ha oil palm plantations. (Bisnis Indonesia, Mo May 26, p. T1)

World Bank considers Indonesia has succeeded in budget reform

The World Bank said it considers Indonesia has succeeded in reforming the budget in the last 10 years. “Indonesia has been working hard in reforming the budget,” said the World Bank's country director for Indonesia Joachim von Amsberg during the seminar of 'Budgeting for Performance; Modernizing Public Financial Management' at the Grand Hyatt Hotel in Jakarta. According to Joachim, this achievement was extremely surprising. There were significant changes in the budget reform that encouraged economic development. Joachim said he considered that the budget reform would be asset for the Indonesian government to improve its economic work performance by creating more employment opportunities, reducing poverty, increasing investment levels and public services. Successful budget reform is a sign of good governance. (http://www.tempointeraktif.com/hg/nasional/2008/05/26/brk,20080526-123726,uk.html)